Burk v. Mutual Ben. Health & Acc. Ass'n of Omaha

• Decision Date: 03 September 1963
• Citation: 388 S.W.2d 628,54 Tenn.App. 108
• Parties: William D. BURK, Appellee, v. MUTUAL BENEFIT HEALTH & ACCIDENT ASSOCIATION OF OMAHA, Appellant.
• Court: Tennessee Court of Appeals

Page 628

388 S.W.2d 628

54 Tenn.App. 108

William D. BURK, Appellee, v. MUTUAL BENEFIT HEALTH & ACCIDENT ASSOCIATION OF OMAHA, Appellant.

Court of Appeals of Tennessee, Western Section, at Jackson.

Sept. 3, 1963.

Certiorari Denied by Supreme Court Dec. 5, 1963.

Emmett W. Braden, Elmore Holmes, III, and Armstrong, McCadden, Allen, Braden & Goodman, Memphis, for appellant.

W. B. Rosenfield, Richard H. Kremer, and Rosenfield, Borod, Fones & Bogatin, Memphis, for appellee.

CARNEY, Judge.

Upon the trial below the Chancellor held that a health and accident policy No. 68-35942 issued October 29, 1927, in favor of the complainant, William D. Burk, was in full force and effect and would continue in full force and effect throughout the life of the insured, William D. Burk, so long as the annual premiums are paid in advance in accordance with the terms and provisions of the policy. The Chancellor allowed the complainant, Burk, the recovery of the sum of $199.09 representing hospitalization and disability benefits under the policy. He also held null and void a new policy numbered 133399-57M dated 4/1/57 and ordered refunded to the complainant premiums paid thereunder less certain premiums due and owing under old policy No. 68-35942 in the net amount of $921.20 making a total judgment of $1,120.29. The defendant, Mutual Benefit Health & Accident Association, has appealed and assigned error. Complainant's testimony is undisputed.

On October 29, 1927, the defendant, generally referred to as Mutual of Omaha, issued its health and accident policy No. 68-35942 to the plaintiff, William D. Burk, a certified public accountant who was then 36 years of age. The policy provided for an initial payment in advance of $78.00 for the first year and 'the payment in advance of premiums of $68.00 annually or $17.00 quarterly thereafter, beginning with April 1, 1928, is required to keep this policy in continuous effect.' Mr. Burk paid the premiums of $68.00 per year continuously through March, 1956.

Sometime shortly prior to April 1, 1957, a local agent of the defendant, Mr. B. J. Glick, called upon Mr. Burk at his office in Memphis, Tennessee, and notified him that the old policy No. 68-35942 which had been in effect for almost 30 years would be cancelled as of April 1, 1957, because Mr. Burk had reached the age of 65. He offered Mr. Burk a new policy with much less benefits which provided for an annual premium of $221.60 per year. Mr. Burk refused the offer of the new policy and went down to the defendant's local office in Memphis and attempted to pay the premium on the old policy which would be due on April 1, 1957. The local office rejected the premium and Mr. Burk wrote the following letter to the home office of defendant:

'March 1, 1957

Mutual Benefit Health & Accident Association

Omaha, Nebraska

Gentlemen:

Enclosed is my check in amount of $68.00 dated March 1, 1957 issued to your Company in payment of annual premium due April 1, 1957 on Policy #68-35942 issued October 29, 1927. This check was offered to your Memphis Office today, and they did not accept it.

Recently a representative of the Company called on me and stated that the policy was to be cancelled since I had reached the age of 65 years during the past year. The only alternative offer was that a new policy could be issued calling for a premium of $108.00 per year for $100.00 per month benefits. The new policy in effect would cost (including benefits when in the hospital) almost five times the premium on the present policy. This action is so contrary to my conception of the Company's policy that it is difficult for me to accept it unless it is approved by the Home Office. As a matter of fact there is a provision in the policy to the effect 'no change in this policy shall be valid unless approved by an executive officer of the association, and such approval must be endorsed hereon'. There is attached to the policy also the following endorsements:

'Non-Cancellable Endorsement

The Association cannot cancel this policy during any period for which the premium has been paid.

It is further understood and agreed that this policy cannot be cancelled by the Association during any period of disability of the Insured.

IN WITNESS WHEREOF, MUTUAL BENEFIT HEALTH & ACCIDENT ASSOCIATION has caused this endorsement to be signed by its President and its Treasurer.

P. P. Priss, Treasurer

H. S. Weller, President'

Your record of this policy will show that in the 27 years no claim has ever been made for the benefits accruing while in a hospital and only a few small claims have ever been made.

There is no provision in the policy to cancel at any specific age, and I am offering this payment in the belief that it is not your desire to cancel the policy.

This policy was acquired when you and I both were much younger, and in those years I had many opportunities to defend your Company and its policies because of my pleasant relationship with the Company and its local manager, Mr. A. W. Heuertz.

Yours very truly,

/s/ W. D. Burk

W. D. Burk

WDB/b

encl.

cc: Memphis Office'

He received in return the following letter from the defendant company:

'March 8, 1957

Mr. W. D. Burk,

448 Angelus,

Memphis, Tennessee.

Policy 68-35942

Dear Mr. Burk:

Thank you for your letter of March 1, 1957, regarding the continuance of your 68 policy. We appreciate your writing us, Mr. Burk, so that there will be no misunderstanding regarding cur action.

As you may know, Mr. Burk, most insurance companies automatically discontinue the type of coverage which you have at age 55,60 or 65. Mutual of Omaha has always attempted to provide protection as long as possible under these policy forms. Changing conditions, however, have now made it necessary that your insurance program be adjusted. Since you were first insured with Mutual, many different types of insurance protection have been developed and it was felt that you would be interested in continuing your membership under one of these new contracts. It was for this reason that our representative called on you to discuss this new plan with you.

This is strictly in accordance with the provisions of your policy, since it is like the majority of such policies in force throughout the country today, a renewable term contract. By this we mean that both the insured and the insurer may allow this policy to expire at the end of any given term.

In this connection, may we respectfully refer you to paragraph C of the Additional Provisions of your policy, which states 'acceptance of any premium shall be optional with the Association.' This type of coverage was not designed to provide guaranteed renewable protection, but was introduced on the market to provide maximum coverage at the lowest possible premium, in contrast to the true noncancellable policies which carry a higher premium which many people cannot afford. Then, too, the great majority of these noncancellable and guaranteed renewable forms provide for automatic termination at a specified age, usually 60 or 65. A person who has carried a term policy past the normal automatic termination age of noncancellable and guaranteed renewable policies, has received the benefits of smaller premium payments and extended coverage.

The noncancellable endorsement to which you refer provides that the Association cannot cancel this policy during any period for which the premium has been paid. This applies to the cancellation of your policy within the term for which the premium has been paid and accepted or during a period of disability. It does not, however, affect the Association's right to accept or refuse a renewal premium at the expiration of any term. This endorsement was placed on your policy at no charge by the Association to clarify for the policyowner his right to continue his policy during the term for which the premium had been paid and accepted, and so that he would have the assurance that his policy could not be canceled during any disability.

Your long membership in the Association has been very much appreciated Mr. Burk, and we certainly want to continue your membership under one of our new forms. We urge you to again contact our local office and discuss your insurance program with them so that you might accept the coverage for which you are now aualified.

Since your 68 policy will not be continued beyond the April 1, 1957, renewal date, we are returning to you your personal check in the amount of $68.00.

Sincerely,

R. J. McMahon,

MB Policy Service Department.

RJMcM:AS

Enc.

cc: A. W. Heuertz'

After the home office refused to continue the old policy in force and to accept Mr. Burk's check for the premium he signed the application for and received the new policy No. 133399-57M at the new annual premium of $221.60. Just prior to April 1, 1958, and prior to April 1 of each year thereafter Mr. Burk tendered to the defendant the sum of $68.00 as the renewal premium on the old policy No. 68-35942 and each time the company has refused such tender of the premium by returning the check to the complainant.

In May, 1959, Mr. Burk sustained a herniated esophagus requiring surgery. He was hospitalized from May 14 through May 23, 1959, and was partially disabled through June 8, 1959. He made timely claim for payment of benefits under the old policy which was refused. On September 9, 1959, complainant filed his original bill in this cause in which he sought recovery of the hospitalization and disability benefits under the old policy No. 68-35942; cancellation of the new policy No. 133399-57M and return of premiums thereunder.

On September 18, 1959, defendant filed a demurrer to the original bill, on the ground that the bill showed on its face that policy No. 68-35942 had been rightfully and effectively terminated as of April 1, 1957, by defendant's exercise of its option to refuse to accept the renewal premium. By interlocutory decree of January 29, 1960, the Court overruled this demurrer, for the reasons stated...