Carter v. Mutual Ben. Life Ins. Co.

• Decision Date: 16 May 1935
• Docket Number: 5 Div. 196
• Citation: 161 So. 446,230 Ala. 389
• Parties: CARTER v. MUTUAL BENEFIT LIFE INS. CO.
• Court: Alabama Supreme Court

161 So. 446

230 Ala. 389

CARTER v. MUTUAL BENEFIT LIFE INS. CO.

5 Div. 196

Supreme Court of Alabama

May 16, 1935

Appeal from Circuit Court, Chilton County; F. Loyd Tate, Judge.

Action on a policy of life insurance by Pearlie E. Carter against the Mutual Benefit Life Insurance Company. From a judgment for defendant, plaintiff appeals.

Affirmed.

G.C Walker, of Clanton, and Huddleston & Jones, of Wetumpka, for appellant.

Lawrence F. Gerald, of Clanton, and Martin, Turner & McWhorter and J.C. Blakey, all of Birmingham, for appellee.

FOSTER Justice.

This is a suit by the beneficiary of a life insurance policy. The insured died after making default in the full payment of the second premium. By its terms the policy became null and void upon such default, except as provided in it. Upon such default, two alternatives were open to insured, both conditioned upon a surrender of the policy within one month from default, and thereupon he could receive either (1) its cash surrender value, or (2) a paid-up policy. A table showed the minimum amount of the cash surrender value guaranteed at the end of the first year to be $7.26 per thousand, which would be $14.52 for this policy for $2,000. The table also showed that the minimum amount of a paid-up policy at that time would be $15 per thousand or $30, for this policy.

The surrender value must be computed as stated in another paragraph, so that it would be equal to the entire reserve less a surrender charge of l per cent. of the amount insured but which surrender charge would be diminished proportionately so as to be eliminated at the end of the third policy year, and which was made manifest also by the table referred to. There should also, of course, be deducted the amount of any indebtedness owing by insured.

Another provision is predicated upon a failure to surrender as provided for in one or the other of the alternatives above mentioned. In the event of such failure to surrender, with an exercise of the election provided for, the insurance is automatically extended for the amount of the policy (to wit $2,000); the term not there defined. The amount of the paid-up policy (conditioned upon a surrender of the policy) and the term of the extended insurance (not conditioned upon its surrender) are each controlled by the amount of the cash surrender value. A preceding paragraph provided how the cash surrender value was to be ascertained. When that is done, the term of the extended insurance is computed upon that basis.

The fact that extended insurance exists without a surrender of the policy, and the right to the cash surrender value exists only upon its surrender, in no respect affect the manner in which the surrender value is computed. Its computation is in a separate and distinct policy provision, and not dependent upon whether the policy is surrendered. If the policy is surrendered, the surrender value thus computed is available for one of two alternatives. If it is not surrendered, that same amount fixed by the same method is computed for a different purpose (extended insurance).

The term "surrender charge" is not defined in the policy, nor by the evidence. Nor does it appear what service or circumstance is its justification. We think it is immaterial that it is called a surrender charge, rather than that no term should be applied. We have read many cases where policies are considered which provide for such a deduction without naming it. In some the evidence was that it is an actuarial term, and in them all it is so calculated whether so called. Inter-Southern Life Ins. Co. v. Zerrell (C.C.A.) 58 F. (2d) 135, 137; Moss v. AEtna Life Ins. Co. (C.C.A.) 73 F. (2d) 339; Lamar Life Ins. Co. v. Minor, 170 Miss. 223, 154 So. 542; Mutual Benefit Life Ins. Co. v. O'Brien (Ky.) 116 S.W. 750. We may as well conjecture that it is intended to care for the initial expenses of the company incident to the procurement and issuance of the policy, and which is amortized by the payment of the first three annual premiums, as to conjecture, as appellant does, that it was intended to compensate the company for services made necessary by physical surrender of the policy. But whatever may be the reason for it, it is distinctly provided that the term of the extended insurance shall be controlled by the amount of the cash surrender value (though the policy is not surrendered), and it is also...