Chastang v. Mutual Life Ins. Co. of N.Y.
| Decision Date | 29 January 1947 |
| Docket Number | 30735. |
| Citation | 71 N.E.2d 270,147 Ohio St. 341 |
| Parties | CHASTANG v. MUTUAL LIFE INS. CO. OF NEW YORK. |
| Court | Ohio Supreme Court |
Syllabus by the Court.
1. A life insurance policy providing for the payment of both death and disability benefits and stipulating a single premium covering both features constitutes one integral contract, where the provisions for disability benefits will not stand alone independently of those pertaining to life insurance.
2. An insured holding a plain life policy and an insured holding a life policy with added benefits for disability are not of the same class within the contemplation of Section 9403 General Code, which prohibits any distinction or discrimination in the payment of dividends by an insurer among policyholders of the same class.
3. An insurer may properly compute and distribute dividends to its insureds holding life policies with disability benefits based on the contributions of such policies as a class or group to the insurer's divisible surplus, notwithstanding the insurer formerly pursued a different course.
4. Representations in a booklet issued by an insurer that the values of its policies with disability benefits are the same as those policies without such benefits, which representations are not relied on by one applying for insurance and are not mentioned in the application for an insurance policy or in the policy itself, do not preclude the insurer from adopting a plan whereby dividends on its life policies with disability benefits are reduced.
Certified by Court of Appeals, Franklin County.
This action for a declaratory judgment was brought in the Court of Common Pleas of Franklin county by Charles J. Chastang, on his own behalf and on behalf of others similarly situated, as plaintiff, against The Mutual Life Insurance Company of New York, a New York insurance corporation authorized to do and doing business in the state of Ohio, as defendant.
By agreement the cause was submitted to the trial court as a class action upon the pleadings, interrogatories, answers thereto, stipulation and exhibits.
It appears from the record that early in the year 1929, pursuant to plaintiff's application therefor and upon the payment of the first semi-annual premium, the defendant issued and delivered to plaintiff at the city of Cincinnati its 'Limited Payment Life Policy With Double Indemnity for Death by Accident and Increasing Total and Permanent Disability Benefits.'
The policy bore the date of January 19, 1929, was in the face amount of $5,000, insured plaintiff's life and also insured him against total and permanent disability.
For a period of seven years after plaintiff had purchased the insurance policy described, or until 1936, the defendant paid to plaintiff and to others holding like policies, dividends at the same rate as it paid to those holding plain life policies without any provisions for disability benefits.
For the year 1937 and for all subsequent years, the defendant paid dividends at a smaller rate on its life policies providing disability benefits than it paid on its life policies containing no such provisions.
This, the plaintiff claims, constituted unlawful discrimination and violated the provisions of Section 9403, General Code. In his petition he asked for an adjudication to that effect.
In its judgment entry, the Court of Common Pleas denied a declaration as prayed for by plaintiff and determined that the defendant had proceeded properly in apportioning and distributing dividends from its divisible surplus on the policy of insurance held by plaintiff and on all similar policies.
An appeal on questions of law to the Court of Appeals resulted in an affirmance of the declaration and judgment of the trial court. The judges of the Court of Appeals, finding the judgment upon which they had agreed, to be in conflict with the judgment pronounced by another Court of Appeals in the case of Baxter v. Old National-City Bank, 46 Ohio App. 533, 189 N.E. 514, certified the cause to this court for review and final determination.
Schorr, Chastang, Edwards & Stanley, for appellant.
Louis W. Dawson, of New York City, Bullitt & Middleton, of Lexington. Ky., and Wright, Harlor, Purpus, Morris & Arnold, of Columbus, for appellee.
Under the policy of insurance in issue the defendant agreed to pay the insured's beneficiaries the sum of $5,000 upon receipt of due proof of the insured's death, or $10,000 upon due proof that such death resulted from bodily injury effected solely through external, violent and accidental means. The policy provides further that if the insured is totally and presumably permanently disabled before the age of 60 years, the insurer will pay the insured $50 monthly during such disability, increasing after five and ten years continuous disability, etc.
It is stated in the policy: 'This policy is issued in consideration of the application and of the payment of the first premium of sixty-six and 00/100 dollars, receipt of which is hereby acknowledged, and of the payment to the company of sixty-six and 00/100 dollars (of which two and 80/100 dollars is the premium for the double indemnity benefit and seven and 95/100 dollars the premium for disability benefits) on each nineteenth day of July and January hereafter until forty-three full years' premiums shall have been paid or until the prior death of the insured.'
In support of his case the plaintiff makes the principal contentions:
1. That Section 9403, General Code, applies and should be read as a part of his insurance contract.
2. That Section 9403, General Code, requires defendant to pay annually to the holders of its life policies with disability benefits dividends at the same rate as it annually pays dividends to the holders of its life policies without such benefits.
3. That defendant is bound by the practical construction which it gave plaintiff's insurance policy and other like policies over a period of years, during which time it paid dividends to those holding life policies including disability provisions on the same basis as it paid to those holding life policies lacking such benefits.
On the other hand, the defendant argues:
1. That plaintiff's policy containing death and disability benefits constitutes a single integral insurance contract.
2. That policies of life insurance are not 'of the same class' within the meaning of Section 9403, General Code, where some contain disability benefits and others do not.
3. That the payment of dividends on an insurance policy must be based upon the contribution of that policy as a whole to the insurer's divisible surplus.
4. That the apportionment of the defendant's divisible surplus to plaintiff and to the holders of similar policies was fair and equitable and was so determined by both the lower courts.
As already suggested, plaintiff's action is founded on the claim that defendant can make no differentiation in the payment of dividends between its policies of life insurance containing disability benefit provisions and its life policies where no such provisions are included.
In our opinion, the solution of the problem presented turns on whether a policy such as plaintiff's is to be treated as two separate and distinct agreements of insurance--one covering death benefits and the other disability...
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