Aetna Life Ins. Co. v. Kepler

• Decision Date: 02 January 1941
• Docket Number: No. 11762.,11762.
• Citation: 116 F.2d 1
• Parties: ÆTNA LIFE INS. CO. v. KEPLER.
• Court: U.S. Court of Appeals — Eighth Circuit

116 F.2d 1 (1941)

ÆTNA LIFE INS. CO. v. KEPLER.

No. 11762.

Circuit Court of Appeals, Eighth Circuit.

January 2, 1941.

Berkeley Cox, of Hartford, Conn., and Ralph M. West, of Omaha, Neb. (Norris Brown and Robert A. Fitch, both of Omaha, Neb., on the brief), for appellant.

Wymer Dressler, of Omaha, Neb. (Robert D. Neely, of Omaha, Neb., on the brief), for appellee.

Before SANBORN and THOMAS, Circuit Judges, and DEWEY, District Judge.

SANBORN, Circuit Judge.

The Aetna Life Insurance Company on September 20, 1921, issued to James Paul Kepler, then a resident of Omaha, Nebraska, a yearly renewable, noncancellable disability policy, which called for an annual premium of $60 and provided for benefits of $300 a month in case of total and permanent disability. The insured brought this action in 1939 to recover such benefits, upon the claim that he became totally and permanently disabled in April, 1937, and that, by the terms of its policy, the insurer was obligated to pay him $300 a month from July 1, 1937, but had refused to do so.

The insurer's defense was that the policy was not in force in 1937; that it had lapsed for the nonpayment of the annual premium due September 20, 1933, and had never been reinstated. The insured admitted that the annual premium due September 20, 1933, was tendered to the insurer after the expiration of the 31-day grace period allowed by the policy for the payment of premium, and had been refused; but he asserted that the tender was made in accordance with a custom or course of dealing of the insurer, and that it was estopped to claim either the lapse of the policy or that the insured had failed to reinstate it. The issues were tried to the court, which found in favor of the insured. From the ensuing judgment, the insurer has appealed.

The essential facts are not in substantial dispute. The policy was a Nebraska contract. By its terms, payment of the annual premium on or before October 21 in each year was a condition precedent to the renewal of the policy. There was no default by the insured in the payment of premium from the date of the policy until 1926. The record of the insurer's General Agent at Omaha, through whose agency this policy was written, shows that the premium for 1926 was received on October 22, the day following the expiration of the grace period. The insured was then residing in Omaha, and it was customary for the soliciting agent who sold the policy to him, to collect the annual premium and turn it over to the General Agent. The evidence does not show when, if ever, the soliciting agent collected the premium for the year 1926. The insured had no recollection of there being any default in the payment of premium for that year. The trial court found that the premium was paid October 22, 1926. That finding was justified by the evidence. In 1927, the insured, according to the record of the General Agent, paid $25 of the annual premium on October 15 (within the grace period) and the balance on November 30. In the years 1928 and 1929, premiums were paid on time. In 1930, the General Agent's record shows that he received the premium on November 6. No default occurred in the payment of premium in the years 1931 and 1932. On October 23, 1933, two days after the expiration of the grace period, the insured, who was then and for several years had been a resident of California, attached his check for $60 to the premium notice which he had received from the General Agent and which advised the insured that his annual premium was due on September 20, 1933, and mailed the check and notice to the General Agent at Omaha. The General Agent received them on October 26, and mailed them to the Home Office of the insurer for advice. The insurer directed him to return the insured's overdue payment. The General Agent returned the check to the insured, and advised him that his policy had lapsed for his failure to pay within the grace period the premium due September 20, 1933. The insured mailed the check back to the General Agent with a protest. The General Agent again returned it to the insured, at the direction of the insurer. Again the insured sent it back to the General Agent, demanding that it be accepted and that his policy be kept in force, but the check was again returned to him. No further tenders of premium were made by the insured, but he would have paid premiums if the insurer had been willing to accept them.

In 1938 the insured wrote the General Agent stating that he had become totally and permanently disabled, and asking if there was not some way in which his policy could be reinstated. He was again advised that it had lapsed. Thereafter he brought this suit.

The policy contained the following provisions relative to reinstatement: "After any default in payment of premium this policy may be reinstated as provided in Standard Provision Number 3 at any time within six months from the date of such default on written application by the Insured to the Home Office of the Company and the payment of the defaulted premium, provided the Insured shall with such application submit evidence of insurability satisfactory to the Company."

Standard Provision Number 3 read: "If default be made in the payment of the agreed premium for this Policy, the subsequent acceptance of a premium by the Company or by any of its duly authorized agents shall reinstate the policy but only to cover accidental injury thereafter sustained and such sickness as may begin more than ten days after the date of such acceptance."

The court below found as facts: (1) that the insured became totally and permanently disabled in April, 1937; (2) that the insured in the years 1926, 1927 and 1930 paid, and the insurer accepted, premiums after the expiration of the grace period, and that this amounted to a course of dealing between the insured and the insurer whereby the insured "was induced to believe that his rights were not being jeopardized by being a few days late in tendering the premium in the year 1933"; (3) that the insurer "declared said policy cancelled" and did not afford the insured any opportunity to reinstate his policy; (4) that the insured has been ready, willing and able to pay all premiums as they fell due.

The court below concluded: (1) that the insurer was estopped to claim a forfeiture of the policy for nonpayment of the premium due in 1933; (2) that the insurer was estopped to make any defense on the ground that the conditions of the policy relative to reinstatement were not complied with by the insured; (3) that the insured was entitled to the relief prayed for by him, including costs and attorney's fees.

The insurer challenges the trial court's determination (1) that the insurer was estopped from claiming that the policy had lapsed for nonpayment of premium and (2) that the insurer was precluded from asserting that the policy had not been reinstated.

The finding of the trial court that the insurer could not defend upon the ground that there had been no reinstatement of the policy is so clearly erroneous as to require no discussion. If the insured was claiming the reinstatement of the policy after lapse for the admitted default in the payment of premium, the burden was upon him to prove that the policy was reinstated. The insurer was not required to prove that the policy had not been reinstated. The insured, at the time his tender of the overdue premium was refused by the insurer, was advised by it that his policy had lapsed for nonpayment of premium. He was not told that his policy was cancelled or that it could not be reinstated or that any application for reinstatement which might be made would be rejected. His own testimony is that he did not apply for reinstatement in compliance with the policy; that he was not advised by the insurer that he could apply for reinstatement; and that what he was endeavoring to do, after his overdue premium was rejected, was to induce the insurer to accept it and thus restore his policy. The evidence conclusively shows that the insured was not misled into believing that the policy was reinstated; and further shows that the insurer did not voluntarily relinquish any of its rights with respect to reinstatement.

If the policy in suit was in force in 1937 it was because the insurer, by accepting overdue premiums in 1926, 1927 and 1930, had engaged in a course of dealing with the insured which in the year 1933 caused him reasonably to believe that the insurer would not declare a forfeiture if his premium was received by the General Agent on or before October 26, 1933; and because the existence of that belief on the part of the insured produced the default upon which the insurer relies to defeat the insured's claim. The court below, in effect, found that the acceptance of the overdue premiums by the insurer in years prior to 1933 was a course of dealing which caused the default of the insured in the year 1933. The insurer contends that this finding is clearly erroneous. The insured contends that it is a finding of fact which should not be set aside by this Court.

Prior to the effective date (September 16, 1938) of the Rules of Civil Procedure, the findings of fact of a trial court, in an action at law tried without a jury, were as conclusive, upon review, as a verdict of a jury, and could not be set aside by the reviewing court if there was any substantial evidence to support them.¹ A different rule prevailed in equity cases. The findings of fact of the trial court in such cases were presumptively correct, and, unless clearly against the weight of the evidence or induced by an erroneous view of the law, would not be disturbed by a reviewing court.²

Rule 52(a) of the Rules of Civil Procedure, 28 U.S.C.A. following section 723c, provides: "* * * Findings of fact shall not be set aside unless clearly erroneous, and due regard shall be given to the opportunity of the trial court to judge of the credibility of the witnesses. * *"

The effect of Rule 52(a) was to...