Bankers Reserve Life Co. v. Rice

• Decision Date: 13 May 1924
• Docket Number: Case Number: 12604
• Citation: 1924 OK 533,226 P. 324,99 Okla. 184
• Parties: BANKERS RESERVE LIFE CO. v. RICE.
• Court: Oklahoma Supreme Court

1924 OK 533

226 P. 324

99 Okla. 184

BANKERS RESERVE LIFE CO. v. RICE.

Case Number: 12604

Supreme Court of Oklahoma

Decided: May 13, 1924

Syllabus

¶0 1. Contracts--Enforcement of Harsh Terms.

Contracts as made between parties, if within the law, will be given effect according to their provisions, even though they contain harsh terms.

2. Insurance--Construction of Contracts--Insured Favored.

Contracts of insurance will be liberally construed in favor of the object to be accomplished, and conditions and provisions of every contract of insurance will be construed against the assurer who proposes and prepares the policy. If a policy of insurance and provisions in connection therewith are capable of being construed in two ways, that interpretation should be placed upon them which is most favorable to the insured.

3. Same--Payment of Premium Note as Condition of Policy--Waiver.

If a note is given in payment of the first premium and a condition of the policy is that the insurance shall not become effective until the prior or contemporaneous payment is made, the payment of the note is a condition precedent. Failure to pay the note will render the policy void ipso facto, without any act on the part of the assurer. But the latter may waive such forfeiture by acts and conduct on its part indicating a purpose to do so.

4. Same--Payment of Note not Condition of Policy.

After the payment of the first premium on the policy, which requires such payment by its terms, in order to become effective, if the assurer accepts a note in payment of a premium, containing a condition that failure to pay the note shall render the policy void, failure to pay the note at maturity does not, ipso facto, render the policy void, unless there is a like provision in the policy.

5. Same--Condition Subsequent.

The payment of the note is a condition subsequent, and the failure to pay the note at maturity creates an option in favor of the assurer to cancel the policy, if it elects to do so.

6. Same--Cancellation of Policy--Notice to Insured.

If the assurer elects to and does cancel the policy, it must cause clear and unequivocal notice of the action to be given the insured in order to effect the forfeiture.

7. Same--Forfeiture of Policy--Retention of Premium Notes.

No action on the part of the assurer will operate to forfeit the policy, so long as it retains a note or notes accepted by it in payment of a premium, covering an unearned portion of the premium on the policy and is calling on the insured to pay both earned and unearned portions.

8.Same--Failure of Insurer to Exercise Option.

The question is more one of failure to exercise its option to forfeit, rather than the waiver of forfeiture, as in the condition subsequent, the default in payment merely creates an option in favor of the assurer to forfeit the policy. The burden is on the assurer to effect the cancellation, and its failure to do so continues the contract in full force.

9.Same--Proof of Forfeiture.

Whether the defendant has effected a forfeiture of the policy is determined, principally, from the facts in the particular case, rather than from some general rule of law.

10. Same--Cancellation--Nesessity for Notice.

The formal cancellation of the policy on the records of the assurer or its intention to do so is not binding without notice to the insured.

11.Same--Policy Upheld.

Record examined; held, the assurer failed to effect a forfeiture of the policy sued on herein in the lifetime of the insured.

Commissioners' Opinion, Division No. 4.

Error from District Court, Oklahoma County; Frank Mathews, Assigned Judge.

Action by Lola Rice for debt against the Bankers Reserve Life Company on an insurance policy. Judgment for plaintiff. Defendant brings error. Affirmed.

Keaton, Wells & Johnston, for plaintiff in error.

Twyford & Smith, for defendant in error.

STEPHENSON, C.

¶1 This case involves the question of forfeiture of the policy sued on herein by the acts of the insured, who was the husband of the plaintiff. The defendant based its claim for forfeiture on the conditions of the policy and a provision for forfeiture contained in notes given by the insured to the defendant in payment of a premium. The provision in the notes reads as follows:

"If this note is not paid at maturity, policy No. 45795 issued by the Bankers Reserve Life Co. of Omaha, Nebr., for which it is given, shall be ipso facto null and void, without notice to the maker thereof, and without any acts on the part of the company and shall remain so until restored as provided by the terms of said policy."

¶2 The policy was issued to the insured on March 19, 1919, and provided that an annual premium should be paid thereafter in advance on March 19th. The policy provided that if the annual premium was not paid when due, it should operate to lapse the policy. The insured was given three years after the lapse of the policy to reinstate the same by paying all due premiums and interest, and furnishing a certificate of good health. The insured failed to make cash payment of premium on March 19, 1920, and the company accepted three promissory notes on March 31, 1920, in payment of the premium, each being in the sum of $ 120.37. The terms of the policy do not render the same null and void for failure to pay any note at maturity, given in satisfaction of a premium. The condition urged by the defendant for forfeiture of the contract is not found in the policy sued on. It is important to bear in mind the distinction between policies containing a condition providing for the forfeiture of the policy if notes given for the payment of premiums are not paid at maturity, and policies which do not contain such forfeiture provisions. If the policy contains a provision to the effect that failure to pay notes given in satisfaction of any premium should operate to render the policy void, the default of the insured operates to render the policy null and void without any act on the part of the assurer, or the giving of notice to the insured. Iowa Life Ins. Co. v. Lewis, 187 U.S. 335, 47 L. Ed. 204; Natl. Life Association v. Brown, 103 Ga. 382, 29 S.E. 927. If the policy contains a provision for forfeiture for failure to pay the notes, to allow the forfeiture is merely giving effect to the terms of the contract. Natl. Life Association v. Brown, supra. This case should also be distinguished from cases involving notes given in payment of the first premium. If the policy provides it shall not become effective until the first premium is paid, the payment of the note is deemed a condition precedent. Arnold v. Empire Mutual Annuity and Life Ins. Co. (Ga.) 60 S.E. 470. But in the absence of fraud or mistake, the delivery of a contract of insurance absolute and unconditional is a waiver of the stipulation for prior or contemporaneous payment of the first premium. Kendrick v. Ins. Co., 124 N.C. 315, 32 S.E. 728, 70 Am. St. Rep. 592; Murphy v. Lafayette Mutual Life Ins. Co. (N. C.) 83 S.E. 461. The assurer may waive the cash payment and accept a promissory note in payment of the premium. The acceptance of the note constitutes payment of the obligation as fully as if the payment had been made by cash. Farmers & Merchants Ins. Co. v Wiard (Neb.) 81 N.W. 312; Stuart v. Union Mutual Life Ins. Co., 155 N.Y. 257; Mass. Benefit Life Association v. Robinson, 104 Ga. 256; Ark. Ins. Co. v. Cox, 21 Okla. 873, 98 P. 552, 129 Am. St. Rep. 808. If the insured makes payment of the first premium as required by the terms of the policy; this operates to place the contract into effect between the parties. Hipp v Fid. Ins. Co., 128 Ga. 491, 57 S.E. 892; Perry v. Tweedy. 128 Ga. 402, 57 S.E. 782. The payment of notes given in satisfaction of subsequent premiums is a condition subsequent. In the absence of a condition in the policy providing that nonpayment of notes shall operate to forfeit the policy, even though a forfeiture provision be in the note, the failure of the insured to pay the note does not, alone, operate to render the contract of insurance ipso facto null and void. The condition for forfeiture not being in the contract, the company may waive the provision contained in the note or enforce the same according to its choice. Arnold v. Empire Mutual Annuity and Life Ins. Co., supra. Thompson v. Ins. Co., 104 U.S. 252, 26 L. Ed. 765.

¶3 When the defendant in this case accepted the three notes in payment of the annual premium due on March the 19th, the acceptance operated as a complete payment of the premium and continued the policy in force for an additional year's time. However, the continued force of the policy depended on the insured paying the notes at maturity, unless the assurer elected to waive the provision contained in the notes. The annual premium required to be paid in advance on this policy was in the sum of $ 361.11. The first note was due and payable on September 19th, and represented the payment of the earned premium to July 19th. The second note was due and payable on September 19th, and represented the payment of the earned premium to November 19, 1920. The acts of the insured and defendant mainly relied on for the forfeiture of this policy, occurred during the period of time and prior to the expiration of the period of time represented by the premium as paid by the first note. In other words, the first note satisfied the premium to July 19th, subject to the right of the assurer to declare a forfeiture of the policy, if the note was not paid on June 19th. The insured failed to pay the note when it became due on June 19th. The insured requested the company to extend the time for payment and several letters passed between the parties in relation to the payment. The insured, who was president of a bank, accidentally lost his life on September 10th. An unsealed letter was found on his desk on the morning following his death, addressed to the assurer, enclosing cashier's check for $ 400 in payment of the three notes and accrued interest. This letter was...