Bumpus v. Life & Cas. Ins. Co. of Tenn.

• Decision Date: 31 March 1934
• Citation: 70 S.W.2d 30,167 Tenn. 412
• Parties: BUMPUS v. LIFE & CASUALTY INS. CO. OF TENNESSEE.
• Court: Tennessee Supreme Court

70 S.W.2d 30

167 Tenn. 412

BUMPUS v. LIFE & CASUALTY INS. CO. OF TENNESSEE.

Supreme Court of Tennessee.

March 31, 1934

Appeal from Chancery Court, Rutherford County; Thos. B. Lytle Chancellor.

Action by Nadine Y. Bumpus against the Life & Casualty Insurance Company of Tennessee. From a decree for complainant defendant appeals.

Reversed and rendered.

McKINNEY and COOK, JJ., dissenting.

M. S Ross, of Nashville, for appellant.

M. P Estes, of Nashville, for appellee.

SWIGGART Justice.

The question for decision on this appeal is whether the complainant, as beneficiary named in the contract of life insurance in suit, is entitled to enforce the contract as one of paid-up insurance, the value of which is $182.50, or as a contract of extended insurance, the value of which is $833.33. The facts are stipulated by the parties.

Default was made by the insured in the payment of the ninth annual premium, and he died within sixty days of the date of such default. The insured made no election or choice of any one of the nonforfeiture values of the contract, but, after his death, and within ninety days of the default, the beneficiary notified the insurer that she claimed the right to a settlement on the basis of extended insurance, as provided in paragraph 3 of the options stated in the contract.

We quote the material provisions of the contract:

"Non-Forfeiture Provisions. After three full premiums shall have been paid, the Insured may, within ninety days after default in the payment of any premium, surrender this Policy, and

(1) Receive its cash surrender value, less any indebtedness to the Company hereon. The cash surrender value shall be the reserve on this Policy at the date of default, less a surrender charge, which in no case shall be more than two and one-half per cent. of the sum insured, or

(2) Receive paid-up insurance, as provided below, payable at the same time and on the same conditions as this Policy. If no other option is selected this Policy will be continued in force under this option without any action on the part of the Insured; or

(3) Receive extended insurance for an amount equal to the face of this Policy, provided there is no indebtedness to the Company hereon, and for such term in years and days from the date of default as is provided below, but without the right to loans and cash surrender values."

The statute of Tennessee, Code, § 6179, subsec. 8, to which the contract conforms, contains no language discriminating between paid-up insurance and extended term insurance, but requires only that the contract shall secure to the owner of the policy "a stipulated form of insurance, the net value of which shall be at least equal to the reserve at the date of default," etc.

The contention of the insurer is that upon the death of the insured, within the ninety-day period from the date of default, no contrary choice having been indicated or expressed, its liability to perform the contract as one for paid-up insurance, under the self-executing language of the quoted paragraph 2, became fixed, and no right of election to alter that liability survived to the beneficiary. This contention is sustained by the courts of Kentucky and Pennsylvania. Michigan Mut. Life Ins. Co. v. Mayfield's Adm'r, 121 Ky. 839, 90 S.W. 607; Balthaser v. Illinois Life Ins. Co., 110 S.W. 258, 33 Ky. Law Rep. 283; McDonald v. Columbian Nat. Life Ins. Co., 253 Pa. 239, 97 A. 1086, L. R. A. 1916F, 1244.

For the beneficiary it is contended that the right of election was a property right in the insured, and upon his death within the stipulated period, without having exercised such right, it passed to the beneficiary as the then owner of the contract or policy. Cases cited as supporting this contention are: Bartholomew v. Security Mut. Life Ins. Co., 140 A.D. 88, 124 N.Y.S. 917, affirmed 204 N.Y. 649, 97 N.E. 869; New York Life Ins. Co. v. Noble, 34 Okl. 103, 124 P. 612, 45 L. R. A. (N. S.) 391; Knapp v. John Hancock Mut. Life Ins. Co., 214 Mo.App. 151, 259 S.W. 862; Nielsen v. Provident Savings Life Assurance Society,

139 Cal. 332, 73 P. 168, 169, 96 Am. St. Rep. 146, affirming 6 Cal. Unrep. 804, 66 P. 663; Wheeler v. Connecticut Mut. Life Ins. Co., 82 N.Y. 543, 37 Am. Rep. 594; State Mut. Life Ins. Co. v. Forrest, 19 Ga.App. 296, 91 S.E. 428; McEachern v. New York Life Ins. Co., 15 Ga.App. 222, 82 S.E. 820; Veal v. Security Mut. Life Ins. Co., 6 Ga.App. 721, 65 S.E. 714, 717.

As applied to the contract in this case, there is no necessary or absolute conflict in the two groups of cases cited, with one exception. In each of the cases of the first group, from Kentucky and Pennsylvania, the contract stipulated, or a controlling statute directed, that, if no election were made, the provision for paid-up insurance would be automatically effective, and because of that it was ruled that the beneficiary, after the contract had matured by the death of the insured, could not claim extended insurance. The contract here involved contains such a stipulation for automatic paid-up insurance.

The cases cited in the second group, with the exception of the Missouri case (Knapp v. John Hancock, etc., Co.), deal with contracts containing no stipulation for automatic paid-up insurance. In those cases, no election having been made by the insured, the courts were confronted with the alternative of permitting the insurer to choose for itself under which plan it would settle, after the death of the insured, or of holding that the beneficiary might exercise the choice which, by the terms of the contract, belonged to the insured. They rightly sustained the right of the beneficiary under such contract. But these cases do not seem to us to control the decision here, on principle. It is one thing to deny an insurer the right to make an ex post facto choice between alternative plans of settlement, under circumstances not expressly covered by its contract, and quite another thing to rule that, if the insured dies without making a choice, effect must be given to the stipulation of the contract that in such event a designated plan of settlement shall be followed.

Counsel for the beneficiary point to Nielsen v. Provident Savings Life Assurance Society, supra, as being on "all fours" with the case before us. The contrary is true. The contract enforced in that case stipulated that upon default the cash value "will be applied to extend this insurance, or, if application be made therefor while this policy is in full force and effect, to purchase paid-up insurance." This is the exact reverse of the stipulation in the contract here involved, and, as pointed out in the brief concurring opinion of the Chief Justice of the California court, the right of the beneficiary to the extended insurance was apparent under the self-executing clause quoted.

In Veal v. Security Mut. Life Ins. Co., cited above as supporting the contention of the beneficiary, the insurer's position was that, since the...