Atl. Life Ins. Co v. Bender

• Citation: 131 S.E. 806
• Parties: ATLANTIC LIFE INS. CO. v. BENDER.
• Decision Date: 25 February 1926
• Court: Supreme Court of Virginia

131 S.E. 806

ATLANTIC LIFE INS. CO.

v.BENDER.

Special Court of Appeals of Virginia.

Feb. 25, 1926.

Error to Circuit Court, Northampton County.

Action by Margaret M. Bender against the Atlantic Life Insurance Company. Judgment for plaintiff, and defendant brings error. Reversed, and judgment for defendant ordered to be entered.

Andrew D. Christian, of Richmond, for plaintiff in error.

J. Warren Topping, of Cape Charles, and J. Brooks Mapp, of Keller, for defendant in error.

CHRISTIAN, J. The Atlantic Life Insurance Company, a Virginia corporation, on August 30, 1917, issued to Fred W. Bender two contracts of insurance for $1,000 and $5,000, respectively. Margaret M. Bender, his wife, was named as beneficiary in both contracts. Fred W. Bender, the insured, died suddenly on November 14, 1923. Mrs. Bender asked for payments under the contracts. The company refused payment, except $3S4 nonforfeitable additional insurance, upon the ground that the contracts had lapsed and were not in force at the time of Bender's death. Suit was brought on the policies by the beneficiary; there was a trial by jury, that returned a verdict for $4,775.45, which was the face value of the policies, plus the nonforfeitable insurance, amounting to $6,-384, less certain credits due to the company. The defendant moved the court to set aside the verdict and grant it a new trial, which motion was overruled, and judgment entered in favor of the plaintiff, whereupon the case has been brought before this court for review.

The evidence in the case consists mainly of the policies, correspondence between the agents of the insurer and the insured, the acts of the parties, and the checks and notes given by the insured. There is practically noconflict in the evidence, and the correct decision of the case is the legal effect of the contracts of the parties.

The insured duly paid the premiums to he paid in the two contracts, including the premiums due to be paid on August 30, 1922. He procured a part of the sums so paid by borrowing against the values in the contracts. At the end of each contract year, provided that the premiums for the next succeeding year had been paid, the insured became entitled to receive a portion of the surplus earnings of the company allotted to these contracts as their share of the surplus earnings of the company. These allotments are styled "Dividends." Upon the accrual of the right of the insured to a dividend, notice of the amount of the dividend was sent to him with the notice of the next premium, and he had several options, as follows: (1) Paid in cash; or (2) applied toward the payment of any premium; or (3) to the purchase of nonforfeitable additional insurance; or (4) left with the company to accumulate to the credit of his contract at 3 1/2 per centum per year. Unless the insured shall elect otherwise, within 3 months after the mailing by the company of a written notice requesting such election, it shall be construed as an election on the part of the insured to continue this contract under option No. 3. Prior to August 30, 1923, there had been allotted to the Bender policies $192.18 in dividends, which Bender failed to elect how they should be applied, and the company, under the contract, purchased [therewith $384 additional nonforfeitable paid-up insurance.

Under policy contracts, there was a "cash surrender or loan value" on each policy, which, after the payment of the premiums due August 30, 1922, amounted to $888. Pursuant to his right, Bender borrowed September 12, 1922, the full loan value of each policy, and executed two loan agreements for the amount of loan value of each policy, respectively, and assigned the policies for the loans. Had the loan values been available on August 30, 1923, it would have been the duty of the company, upon nonpayment of premiums due them, to have used them under the automatic nonforfeitable clauses of the two contracts to pay these premiums.

It will be observed that, according to the contention of the company, on August 30, 1923, when the 1923 premiums became due, the company had no funds of the insured in its hands. Bender's dividends of the past years had been used to buy paid-up nonforfeitable additional insurance, and he had actually borrowed back the full cash or loan values. Premiums amounting to $308.04 and 53.28 interest on the loans, were due on August 30, 1923, in order to keep the policies alive, and extend the loan for another year, but 30 days' grace was given in the policies in which to pay the premiums before the pol icies lapsed. Bender had not paid the premiums or interest up to September 24, 1923, when one of the company's agents wrote him a letter agreeing to accept on or before September 30, 1923, in lieu of the premiums, and interest, all due in cash, the sum of $89.36 in cash and notes payable November 30, 1923, for the balance due. The notes in terms declared their purpose to extend the time for payment of the premium, and said premium shall not be considered paid until this note shall have been paid. Bender sent his check for $89.36, and subsequently a check for $1.09, to correct an error in interest calculation, and the two notes aggregating $275.

The checks were duly deposited for collection and returned unpaid, on account of insufficient funds. On October 12, 1923, the company wrote Bender that, by reason of the nonpayment of the checks, his policies had lapsed, and requested him to fill in, sign, have his signature witnessed to the inclosed application for reinstatement, and return it with certified check for $90.45. The former notes were held as part settlement of premium when policies were reinstated. Bender sent the certified check, the application for reinstatement filled in and signed, but failed to have same witnessed as required. The company sent the application for reinstatement back to Bender, who filled it in, signed, had same properly witnessed, and returned on November 13, 1923, to the company for action. Bender died suddenly on November 14, 1923. The company contended that the policies had lapsed and never been reinstated; therefore refused to pay the beneficiary anything except the $384 nonforfeitable insurance, which was paid into court and accepted by the plaintiff. So that the issue to be decided by the court was whether the policies were in effect when Bender died.

There are a great many interesting questions discussed in the briefs of counsel in this case, but they bear more or less remotely upon the main issue, and the rules of construction of insurance contracts and the incidental collateral and subsequent agreements have become so well settled, either by statute or decision, that no good purpose can be served by discussing in detail the errors assigned.

The theory of the plaintiff's case is based upon that rule of law applied by the courts to lapses of life insurance policies for failure to pay premiums, that, where the insurer is in any way indebted to the insured, or has any fund which can be used to keep the policy in force, it must do so, and prevent a forfeiture of the insured rights.

It is earnestly contended in this court that the dividends, amounting to $192.18, which had been applied to purchase of nonforfeitable insurance, should have been...