Berry v. Acacia Mutual Life Association

Decision Date26 April 1937
Docket NumberCivil 3819
Citation49 Ariz. 413,67 P.2d 478
PartiesNEWTON JOHN BERRY, Appellant, v. ACACIA MUTUAL LIFE ASSOCIATION, a Corporation, Appellee
CourtArizona Supreme Court

APPEAL from a judgment of the Superior Court of the County of Maricopa. Howard C. Speakman, Judge. Judgment reversed and cause remanded with instructions.

Mr. H S. McCluskey, for Appellant.

Mr Theodore G. McKesson, for Appellee.

OPINION

LOCKWOOD, J.

This is an appeal by Newton John Berry, hereinafter called plaintiff, from a judgment of the superior court of Maricopa county in favor of Acacia Mutual Life Association, a corporation, hereinafter called defendant, dismissing the action. The action is founded upon a contract of insurance issued by defendant to plaintiff, which was set up by the latter in his amended complaint, together with allegations claiming that he was entitled to recover thereon for total and permanent disability. Defendant demurred on the ground that the complaint did not state a cause of action and the demurrer being sustained by the court, and plaintiff electing to stand on the complaint, judgment was entered for defendant. The question therefore, presented to us is one of law only, as the facts stated in the complaint must, for the purpose of this appeal, be considered as true. We summarize these facts as follows:

On the 1st day of June, 1930, defendant issued to plaintiff a policy of life insurance to which was attached as a part thereof a supplement providing for certain benefits in the case of disability. The parts of the policy, including this supplement, which we need to consider in passing upon the appeal read as follows:

"After a member has paid one annual premium, or an installment thereof, a grace period of one month (not less than 31 days), without interest, will be allowed for the payment of subsequent premiums or installments as they fall due. During this period the insurance shall continue in force, but if the policy shall become a claim the unpaid premiums for the then current policy year shall be deducted from the amount of insurance payable. If any premium be not paid when due as specified herein, or during the grace period, this policy shall lapse and be void except as to the provisions for surrender options printed herein."

"In consideration of an additional annual premium of $42.10, payable at the same time and under the same conditions as the regular premium under the above numbered policy, the Acacia Mutual Life Association hereby agrees:

"To waive the future premiums as the same become due during total and permanent disability;

"To pay the member an income of One Hundred & 00/100 ($100.00) dollars each month during total and permanent disability, until the policy becomes payable by death or maturity; provided,

"The member, or, if he is incapacitated, his personal representative, furnishes the Association at its Home Office, before default in the payment of premium, satisfactory proof of the member's total and permanent disability (as defined below) and provided further that such disability originated after the policy to which this agreement is attached became effective and before the anniversary of said policy nearest the member's sixtieth (60th) birthday, subject to all of the following terms and conditions: ...

"Benefit starts from the date proof of such disability is received at the Association's Home Office, if such proof is accepted as satisfactory, and continues during such total and permanent disability. In the event of the inability of the member to receive the income due to the nature of his disability, the income payments shall be made to his legally appointed representative....

"The provisions of the above numbered policy headed 'Payment of Premiums,' 'Grace in Payment, 'Premium Loan,' 'Reinstatement,' 'Assignment,' and 'Admission and Correction of Age,' not inconsistent with the provisions of this supplementary contract, shall also apply hereto."

By the terms of the policy the premiums were payable quarterly, and one quarterly premium became due on the 1st day of February, 1931. It was not paid at that time, but by the provisions of the policy above set forth, since two regular quarterly installments had been paid thereon, it automatically remained in force for thirty-one days; the last day of the period of grace being March 3, 1931.

On February 28th, and before the payment of the quarterly premium then due, plaintiff was stricken by acute encephalitis, and from that day until some time in May, he was either wholly unconscious or suffered such recurring periods of consciousness, semiconsciousness, and unconsciousness that he was totally disable not only physically but mentally, to such an extent that he was unable to give notice of his disability before the period of grace had expired. Plaintiff had not appointed any personal representative to perform any business on his behalf, but during the last week of May his wife did notify defendant, in writing, of his total disability as aforesaid, and furnished proof thereon. Defendant, however, on the 5th day of August denied any liability whatever on the insurance, on the ground that a failure to give notice on or before the 3d day of March caused the policy to lapse, so that nothing was due on it. There were the further allegations of total and permanent disability continuing from the 28th of February until the commencement of the suit, and a prayer for recovery in the amount set forth in the policy as total disability payments, and that all future premiums be waived thereon during the continuance of such disability.

There are four legal questions presented to us on this appeal. They may be stated as follows: (1) Does a policy of insurance such as that involved in this case entitle the policyholder to recover under the disability provisions thereof when he had failed to make the payment of the quarterly premium on or before the day it first became due, even though by the terms of the policy a grace period of thirty-one days was allowed thereon, if his disability did not occur until after the commencement of the grace period; (2) is the payment of the quarterly premium a condition precedent to the insured's right to disability benefit when he becomes totally disabled during the grace period, or is it waived by the terms of the policy; (3) when the policy requires that notice be given of a claim of disability before default in the payment of the premium, is such notice within the time prescribed a condition precedent to recovery upon the policy; (4) if the disability commences during the grace period, but by reason of mental incapacity arising from such disability, the policyholder is unable to give notice of the disability until after such grace period has elapsed without payment of the premium, does such inability extend the time during which he may give such notice for a reasonable period and continue the policy in force?

We consider the first question, whether a failure to pay the premium on the day it was first due destroys the right of the policyholder to any recovery under the policy, unless and until such premiums is actually paid. A similar contention was made in the case of Minnesota Mut. Life. Ins. Co. v. Marshall, (C.C.A.) 29 F.2d 977, 979. The court, in passing on this contention, said:

"An obligation is due during the entire period during which it may be paid, whether that period extends over one day, three days, or thirty days. The premium was not really due, in the sense that the failure to pay it would result in a forfeiture of the policy, until the grace period had expired."

The same rule has been applied in many...

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