Armstrong v. Kansas City Life Ins. Co.

• Decision Date: 13 November 1935
• Docket Number: No. 1208.,1208.
• Parties: ARMSTRONG v. KANSAS CITY LIFE INS. CO.
• Court: U.S. District Court — Northern District of Texas

12 F. Supp. 817

ARMSTRONG v. KANSAS CITY LIFE INS. CO.

No. 1208.

District Court, N. D. Texas, Abilene Division.

November 13, 1935.

Johnson, Moore & Stockdale, of Fort Worth, Tex., for plaintiff.

McBride, Hamilton, Lipscomb & Wood, of Dallas, Tex., for defendant.

WILSON, District Judge.

This is a suit by Lila Armstrong, a widow, on a life insurance policy issued by the defendant to her husband, Carl Q. Armstrong, on the 23d day of March, 1925. The amount sued for is $3,000, the face of the policy, with 6 per cent. interest from the 18th day of September, 1934, 12 per cent. as statutory damages, and a reasonable attorney's fee alleged to be $1,000. The annual premium on the policy was $57.78.

A general history of the matter is: From the time the policy was issued up to March 23, 1931, there were many defaults in the payment of the premiums, and as many reinstatements on applications, and showings of an insurable state of health, etc. The premium due March 23, 1931, was not paid, nor within the grace period, and the company, as a mere matter of indulgence, continued the policy in effect, while it negotiated with the insured with respect to payment, and some weeks thereafter accepted a note dated back to March 23, 1931, for the full amount of the premium, payable November 15, 1931.

The insured made default in the payment of the note also. The note, among other provisions, had the following: "But if this note is not paid by me when due, according to its terms, then this note shall immediately and automatically cease to be an obligation or claim against me." And further provided that the insured's rights, and the rights of his beneficiary, or any one claiming under the policy, and the rights and liabilities of the company thereunder, would be the same, if not paid, as if said note had not been given. At this juncture, the company, as it had a right to do under the policy and said provisions of the note, declared the policy canceled as of date, the 23d day of March, 1931, the due date of the premium. That was done under the second paragraph in the policy, under the heading "General Provisions and Privileges," as follows: "Upon failure to pay a premium on or before the date when due, this Policy will become null and void without any action or notice by the Company, and all rights shall be forfeited to the Company, except as hereinafter provided."

One of such exceptions, so provided for in this paragraph, was as to extended, nonparticipating term insurance, for such periods as the reserves to the credit of the policy might purchase. The policy had a cash surrender or loan value after the payment of three full premiums or more, and there was a table on the face of the policy giving the periods of any such extended insurance for any year from the third to the twentieth.

Under the heading "Table of Loan and Surrender Values" was the following: "This table will apply if this policy be free from indebtedness, but any existing indebtedness may be paid in cash and the table will then apply; or if not so paid, the loan and cash values will be reduced by the indebtedness and the amount of paid-up or the term of extended insurance will be such as the reduced cash value will purchase. If default occurs after a fractional part of the current year's premium has been paid, the values will be proportionately adjusted."

Under the general heading "Non-Forfeiture and Loan Features" is the following:

"After payment of premium for three or more full years the following options shall become effective:

"1st. Extended Insurance — Automatic. If any premium on this policy shall not be paid when due, without action upon the part of the insured the Company will extend and continue in force, from such due date, the full amount of this policy as non-participating term insurance for the term of years and months as provided in the accompanying table."

It is not necessary to quote the other options, being immaterial, since they provide, only upon request of the insured however, one for paid-up insurance in such amount as the cash surrender value will purchase, and the other for the payment of such surrender value in cash. The record shows no request was made by the insured.

On March 23, 1931, at time default in payment of premium occurred, such cash surrender value of the policy was $175.23. There was, however, a loan against the policy of $132.43; this left only $42.80 to buy such extended insurance, which, according to the table, would carry the amount of the policy as term, nonparticipating insurance, for a period of 1 year and 213 days, or to October 22, 1932. The company during this period notified the insured several times that the amount of the policy was being carried as such extended insurance, and that same would expire on the 22d day of October, 1932.

Under the heading "Protection in Event of Total Disability" is the following: "Section A. After one full annual premium has been paid and before default in the payment of any subsequent premium, if the insured shall furnish satisfactory proof of total permanent disability caused by bodily injuries or disease and will be continuously and wholly prevented thereby, for life, from pursuing any and all gainful occupations, and if such proof of disability is received by the Company prior to the insured having attained the age of sixty years, the Company by an indorsement in writing upon this policy, will agree to pay for the insured the premiums, if any, which shall thereafter become payable during the continuance of such total disability."

During the running of such period of 1 year and 213 days, no premiums were paid, nor applications for reinstatement presented, nor were proofs of any such permanent and total disability...