American Nat. Ins. Co. v. Ingle, 2358-7616.

CourtSupreme Court of Texas
Citation152 S.W.2d 1098
Docket NumberNo. 2358-7616.,2358-7616.
PartiesAMERICAN NAT. INS. CO. v. INGLE.
Decision Date30 April 1941

Mrs. Billie Griffin Ingle, as plaintiff, instituted this suit in the District Court of Dallas County against the American National Insurance Company, as defendant. The parties will be designated as in the trial court.

Plaintiff is the surviving wife of Andrew J. Ingle, who died August 24, 1935. Prior to his death Andrew J. Ingle held a life insurance policy issued by defendant and had paid three full years' premium. Under the policy he became entitled to claim benefit of the nonforfeiture provisions of the contract. Under these provisions he could take the cash surrender value as shown by the table of guaranteed values. This he did not do. The other provision was as follows:

"Paid-Up Insurance

"If the Cash Value is not selected this policy shall be automatically continued as Non-Participating Paid-Up Endowment Insurance payable in a single sum at the same time and under the same conditions as this policy, except as to premium payments for the amount as shown in the `Table of Guaranteed Values.' But any indebtedness on the policy will reduce the amount of Paid-Up Insurance in such proportion as the indebtedness bears to the Cash Value at the due date of the premium defaulted."

The policy contained loan provisions which will hereinafter be more fully noted.

It is undisputed that in October, 1934, Ingle was by force of circumstances required to make application to the company for a loan to pay the semi-annual premium due November 15, 1934. Such application was made upon a regular form furnished by the company, and the sum of $20.59 was advanced, which paid the premium to May 15, 1935. At the time of the loan the reserve value of the policy was about $34, and after deducting the loan approximately $14 of the reserve was left. On May 15, 1935, Ingle was still unable to pay premiums. He apparently took no action indicating an election to claim any specific option under the policy, and died August 24, 1935.

The defendant company admitted liability in the amount of $37. This was based on application of the paid-up-insurance provision of the policy set out above. Its contention was and is that as the insured failed to accept the cash surrender value of the policy within thirty-one days after default in payment of the premium, towit, May 15, 1935, the policy automatically continued as non-participating paid-up-endowment insurance in the sum of $37. It seems to be conceded that if this provision of the policy governs that sum would constitute the amount of such paid-up insurance.

The trial court rendered judgment in favor of plaintiff for the full amount of the policy, together with interest, statutory penalties and attorney's fees. This judgment was affirmed by the Court of Civil Appeals. 129 S.W.2d 426.

The Court of Civil Appeals held, among other things, that the provision in the contract which gave the company the right, in the event the insured failed to accept the cash surrender value within thirty-one days after default, to continue the policy as non-participating paid-up-endowment insurance, was in derogation of Article 4732 of the Revised Statutes of 1925, and was void. Judge Bond dissented upon this point, and because of this holding the Supreme Court granted the writ of error.

It is now definitely settled that a provision which automatically secures to the insured "paid-up insurance" is not in contravention of the statute and is not void. American Nat'l Ins. Co. v. Foster, 133 Tex. 588, 130 S.W.2d 287, and authorities cited.

It also seems to be settled that in absence of a specific provision in the policy to that effect, an insurance company is not required to automatically apply a reserve to extended insurance. Great Southern Life Ins. Co. v. Wester, 127 Tex. 274, 92 S.W.2d 238; Dillehay v. Texas Life Ins. Co., Tex.Com.App., 107 S.W.2d 369; State Reserve Life Ins. Co. v. Carter, Tex.Civ.App., 109 S.W.2d 781. However, we know of no law which prevents an insurance company, in the application of doubtful provisions of a contract, from applying the reserve to extended insurance, when to do so does not injuriously impair the rights of the insured or beneficiary. The policy in this instance, under the head of "Loan Provisions," contained the following: "After three full years premiums have been paid hereon, and no nonforfeiture value has been taken, if requested by the Insured in the application for...

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