Atlantic Life Ins. Co. v. Bender

• Decision Date: 25 February 1926
• Court: Virginia Supreme Court
• Parties: ATLANTIC LIFE INSURANCE COMPANY v. MARGARET M. BENDER.

Page 312

146 Va. 312

ATLANTIC LIFE INSURANCE COMPANY v. MARGARET M. BENDER.

Supreme Court of Virginia, Richmond.

February 25, 1926.

1. LIFE INSURANCE — Payment of Premiums — Application of Dividends — Inconsistent Positions — Case at Bar. — In the instant case, an action on insurance policies, the insurance company claimed that the policies had lapsed. Plaintiff claimed that the dividends earned upon the policies, and applied to the purchase of nonforfeitable insurance, should have been changed so that the policies would have been kept inforce. The dividends had been applied according to the terms of the policies, to the purchase of nonforfeitable in surance. The plaintiff sued to recover the additional insurance thus purchased and when the amount thereof was tendered into court accepted the same.

Held: That the plaintiff could not occupy the inconsistent position of claiming that the dividends should have been used by the insurer to keep alive the contracts of insurance.

2. LIFE INSURANCE — Policies Construed Against Insurer. — It is a truism in the construction of insurance contracts that they are construed most strongly against the insurer and in favor of the insured where the meaning is doubtful. This, however, does not authorize a construction not justified by the language or intent of the parties.

3. LIFE INSURANCE — Payment of Premiums — Agreement to Accept Note and Check in Payment — Return of Check Unpaid — Case at Bar. — In the instant case, an action on life insurance policies, defendant company claimed that the policies had lapsed for nonpayment of premiums. When the premiums became due the company had no funds of the insured in its hands. Insured's dividends of the past years had been used to buy paid-up nonforfeitable additional insurance, and he had borrowed the full cash or loan values of the policies. One of the company's agents wrote insured agreeing to accept in lieu of the premiums and interest on the loan, all due in cash, a sum in cash and notes. The insured sent his check for the sum due in cash and the notes, but the check was returned unpaid on account of insufficient funds. The notes in terms declared that they were given to extend the time of payment of the premiums, and the premiums should not be considered paid until the notes were paid. The notes imposed no personal obligation on the insured to pay the same. On their due date the insured could refuse to pay them without liability and the policies would have lapsed as of the date when the premiums were payable.

Held: That this agreement could not be considered as a payment, or an acceptance of the check and notes as payment of the premiums, and the policies were not extended to the date of the maturity of the notes.

4. LIFE INSURANCE — Dividends and Surrender Value Cannot be Anticipated to Pay Premiums — Case at Bar. — In the instant case, an action on life insurance policies, defendant company claimed that the policies had lapsed. After the expiration of the time for the payment of the premiums the company had agreed to accept a certain cash payment and notes of the insured. Insured sent the company his check for the cash payment and the notes. The check was returned unpaid by the bank for lack of funds. Plaintiff claimed that by virtue of the acceptance of the notes the right to dividends accrued to the policies, which with the notes more than paid the premiums for the year.

Held: That plaintiff's claim was not tenable.

5. LIFE INSURANCE — Dividends and Surrender Value Cannot be Anticipated to Pay Premiums. — Dividends and reserve or surrender value cannot be anticipated to pay the premiums, the payment of which is the condition precedent by the very terms of the policies to the creation of the same. Dividends and cash or loan values of life insurance policies do not belong to insurance unless created by statute or granted by the policies, and in the latter instance are subject to the terms and conditions contained therein.

6. LIFE INSURANCE — Reinstatement of Policies — Certificate as to Insured's Health — Case at Bar. — In the instant case, an action upon life insurance policies, after the policies had lapsed, the company agreed to hold certain notes of insured and to reinstate the policies, if the insured would send a certified check for a certain sum and a satisfactory certificate of his health. Insured sent the certified check and the certificate but the latter was unwitnessed and after some delay returned for proper execution. This was done, but insured died the next day.

Held: That the certified check and notes were not accepted in payment of the premiums, but were held by the company subject to his reinstatement, and insured could not be reinstated without satisfying the company that his health was as good as when the policies were first issued.

7. LIFE INSURANCE — Reinstatement — False Health Certificate — Case at Bar. — On an application for the reinstatement of life insurance policies which had lapsed for failure to pay the premiums, the insurance company required a certificate of health from insured. The certificate contained a question as to whether insured had been sick or had been attended by a physician since the issuance of the policies. To this insured gave an untrue answer.

Held: That the answer to this question was material, and being untrue, the reinstatement if effected was invalid.

Error to a judgment of the Circuit Court of Northampton county, in a proceeding by motion for a judgment for money. Judgment for plaintiff. Defendant assigns error.

The opinion states the case.

Andrew D. Christian, for the plaintiff in error.

J. Warren Topping and J. Brooks Mapp, for the defendant in error.

CHRISTIAN, J., delivered the opinion of the court.

The Atlantic Life Insurance Company, a Virginia corporation, on August 30, 1917, issued to Fred W. Bender two contracts of insurance for $1,000.00 and $5,000.00, 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 $384.00 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 $6,384.00, 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 no conflict 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 be 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 three and one-half per centum per year. Unless the insured shall elect otherwise, within three 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 alloted 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 $384.00 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 $888.00. 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 that 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...