Bank of Commerce & Trust Co. v. Northwestern Nat. Life Ins. Co.

• Decision Date: 05 April 1930
• Parties: BANK OF COMMERCE & TRUST CO. v. NORTHWESTERN NAT. LIFE INS. CO.
• Court: Tennessee Supreme Court

26 S.W.2d 135

160 Tenn. 551

BANK OF COMMERCE & TRUST CO. v. NORTHWESTERN NAT. LIFE INS. CO.

Supreme Court of Tennessee.

April 5, 1930

Appeal from Chancery Court, Shelby County; D. W. DeHaven, Judge.

Suit by the Bank of Commerce & Trust Company, administrator of the estate of Murrell Parker Cowling, deceased, against the Northwestern National Life Insurance Company. Decree for complainant, and defendant appeals.

Affirmed.

Metcalf Metcalf & Apperson, of Memphis, for plaintiff in error.

Sivley Evans & McCadden, of Memphis, for defendant in error.

SWIGGART J.

This is an action by the administrator of the estate of Murrell Parker Cowling, deceased, to recover the face value of a contract of life insurance. From a decree awarding a recovery to the complainant, the insurance company has appealed.

The contract of insurance was issued September 20, 1926, premium for one year having been paid at the date of issuance. The defense interposed is that the policy lapsed for nonpayment of the second annual premium, due September 20, 1927. The death of the insured occurred on January 25, 1928.

Prior to default in the premium, the insurance company executed and delivered to the insured an agreement for the extension of the time for its payment, which expired by its own limitations on December 20, 1927. Before the expiration of the first extension agreement another agreement was executed and delivered, whereby the insurance company agreed to accept payment of the premium for the second year on or before January 20, 1928, referred to in the agreement as the "extension date." The agreement contained the stipulated condition:

"If the premium is not paid on or before the extension date, all rights under said policy shall be the same as if the extension had not been granted and the policy will automatically terminate as of the premium due date."

Unless payment of the premium was waived, the stipulated condition for the automatic termination of the policy upon the failure to receive the premium on or before the "extension date" is valid and enforceable. Ressler v. Fidelity Mutual Life Ins. Co., 110 Tenn. 411, 75 S.W. 735, 736.

In the case just cited it was held that "questions of waiver out of the way," a forfeiture for nonpayment contained in a premium note will be as strictly enforced as a similar forfeiture contained in the policy itself. In decreeing an enforcement of the forfeiture in that case, the court expressly referred to the fact that there had been no waiver of the premium for which the note was executed.

The chancellor in the cause at bar sustained the contention of the administrator that the premium payment, for which the extension was granted by the insurance company, was waived under the terms of the original policy. It seems to us to follow logically that if the payment was waived, the provision for forfeiture based upon nonpayment was also waived and is unenforceable.

The stipulated facts are that the insured, a resident of Memphis, was taken ill with pneumonia on January 16, 1928, while in the state of Mississippi; that he was confined to his bed on that day, where he remained until the morning of January 20th, on which day, under the advice of his physician, he was carried in an automobile to Memphis, in order that he might there be placed in a hospital. Upon his arrival in Memphis, about 3 p. m., he immediately went to his bed and was attended by a physician at 4 p. m. His condition was then serious, and doubt was expressed by his physician whether he would survive the night. He continued in this condition until the morning of January 25, 1928, when he died. These facts support and sustain the finding of the chancellor that the insured was totally disabled from January 16th, four days before the "extension date" for the payment of the premium, and continued so disabled until his death, which was five days after the "extension date."

It is contended for the administrator that, under these facts, the insured was "totally and permanently disabled" at and before the agreed time for the payment of his premium; and that payment of the premium was waived under provisions of the policy which we here quote:

"If the Insured shall become totally and permanently disabled before the anniversary of this policy nearest age sixty and while it is in full force and effect, the Company will waive the payment of future premiums and will also pay to the Insured a monthly income of one per cent of the face amount of the policy, without reducing the guaranteed values or the amount payable at death or maturity, in accordance with the following provisions:

a. Proof. The Insured shall furnish due proof to the Company at its Home Office that he has become totally and permanently disabled by bodily injury or disease, so that he is, and will be thereby permanently, continuously and wholly prevented from performing any work for compensation, gain or profit, or from following any gainful occupation, and that such disability has then existed for not less than sixty days.

b. Payments. Upon receipt of such proof, the Company will waive payment of each premium as it thereafter becomes due and will pay to the Insured (or, if the Insured is insane, to the Beneficiary instead of to the Insured) a monthly income of one per cent of the face amount of the policy during such disability until the death of the Insured or the maturity of the policy as an endowment, the first such monthly payment being due upon receipt of such proof. Such income payments shall not reduce the amount payable in any settlement under the policy and the guaranteed values shall be the same as though the premiums waived had been paid when due. The interest of any indebtedness on the policy shall be deducted from each income payment."

It is contended for the insurance company that the above-quoted provisions of the policy provide for the waiver of a premium payment only when the disability commences prior to the anniversary date of the policy on which the premium first becomes due and payable; that the waiver cannot be demanded by the insured until after proof of disability has been furnished to the company at its home office; and that such proof cannot be furnished until the disability has existed for as much as sixty days. In other words, it is the contention of the insurance company that a premium payment first becoming due upon an anniversary date of the policy is not waived on account of the total and permanent disability of the insured unless the disability shall have been in existence as much as sixty days prior to such anniversary date, and unless proof of the fact shall have been furnished the company.

The quoted provisions are not incorporated in the contract of insurance but are attached thereto and made a part of the contract, a stipulated portion of the premium being assigned thereto.

The first paragraph of the disability provisions expresses the object and purpose of the supplementary contract of insurance, and obligates the company to "waive the payment of future premiums" upon the insured becoming totally and permanently disabled. The subsequent paragraphs of the quoted provisions are expressly made subordinate to the first or contracting clause. If they must be construed as postponing the contractual obligation to waive premiums until sixty days after the commencement of total and permanent disability, they are manifestly repugnant to the principal clause which contains no such limitation. This being true, it would clearly be the duty of the court to hold that the first and principal clause is controlling and that the subsequent limitations, being repugnant thereto, are void and unenforceable. Bean v. Aetna Life Ins. Co., 111 Tenn. 186, 78 S.W. 104; Laurenzi v. Atlas Ins. Co., 131 Tenn. 645, 660, 661, 176 S.W. 1022.

It is, however, the well-accepted rule that all the provisions of a contract should be construed as in harmony with each other, if such construction can be reasonably made, so as to avoid repugnancy between the several provisions of a single contract. Laurenzi v. Atlas Ins. Co., supra. Can the provision of the first paragraph, that future premiums will be waived if the insured become totally and permanently disabled, be harmonized with the provision of the third paragraph that, upon the receipt of proof of total and permanent disability of sixty days previous duration, "the company will waive payment of each premium as it thereafter becomes due?"

The first paragraph of the quoted disability provision does not state the time of commencement nor the duration of the monthly benefit payments. It provides that the company "will also pay to the Insured a monthly income *** in accordance with the following provisions." Then follow the provisions of the second and third paragraphs with regard to proof of disability of sixty days' duration, upon the receipt of which the first monthly payment is due, to be continued during disability until the death of the insured or until the maturity of the policy as an endowment. And it is provided that "upon receipt of such proof the Company will waive payment of each premium as it thereafter becomes due."

In so far as the waiver of premiums is...