Colonial Life and Accident Insurance Co. v. Wilson

• Decision Date: 18 September 1957
• Docket Number: No. 16290.,16290.
• Parties: COLONIAL LIFE AND ACCIDENT INSURANCE COMPANY, Appellant, v. Sarah Ethel WILSON, Appellee.
• Court: U.S. Court of Appeals — Fifth Circuit

246 F.2d 922 (1957)

COLONIAL LIFE AND ACCIDENT INSURANCE COMPANY, Appellant, v. Sarah Ethel WILSON, Appellee.

No. 16290.

United States Court of Appeals Fifth Circuit.

July 19, 1957.

Rehearing Denied September 18, 1957.

Sam Rice Baker, Montgomery, Ala., S. Augustus Black, Columbia, S. C., and R. E. Steiner, III, Montgomery, Ala., Steiner, Crum & Baker, Montgomery, Ala., and McKay, McKay, Black & Walker, Columbia, S. C., of counsel, for appellant.

Truman Hobbs, Montgomery, Ala., Frank J. Tipler, Jr., Andalusia, Ala., and Godbold, Hobbs & Copeland, Montgomery, Ala., for appellee.

Before BORAH, RIVES and BROWN, Circuit Judges.

JOHN R. BROWN, Circuit Judge.

The principal question is whether an insurance company may, and did, permit the Assured to keep the policy in force by the mailing of premium checks never shown to have been actually received. Subsidiary to this main question which raises the sufficiency of the evidence to support the jury verdict for the beneficiary are procedural matters relating to the charge to the jury.

George Wilson, owner of a business and apparently regarded as a sufficiently responsible and substantial business man to qualify for the Insurer's "Executive and Professional Accident Policy," died from accidental means June 28, 1955. He had carried this policy since July 31, 1951, when he was then 36. Except for nonpayment of premiums, it was expressly declared to be "non-cancellable and guaranteed renewable to age eighty * * *." Under optional premium payment plans (annual, semiannual, quarterly or monthly), it was written for the period of the premium payment, in this case one month. While this denominated it a monthly policy, the Insurer, for the premium payment plan, treated the anniversary date as July 31 of each year. There is no dispute that for the years 1951-1952, 1952-1953, 1953-1954 (ending July 31, 1954) the premium was promptly paid in full by the method soon described. The question narrows down to whether, in July or August 1954, a sufficient "payment" of the next twelve months' premium was made to keep it in force for the eleven months up to the time of the Assured's death.

It was stipulated that no payments were made by the Assured in cash subsequent to the premium payment of June 30, 1954, and the beneficiary (Mrs. Wilson) does not have and cannot produce any cancelled check or premium receipt representing payments subsequent to June 30, 1954, or any bank statement reflecting payment as premiums on the policy subsequent to June 30, 1954.

On it the Insurer claimed, and now reiterates, that the policy lapsed or terminated by its own terms for failure to pay premiums. Underlying this was the persistent demand that the policy term¹ required cash with an official receipt which "according to the law of the Medes and Persians * * * altereth not," Cargill, Inc., v. Compagnie Generale Transatlantique, 5 Cir., 235 F.2d 240, 242, 1956 A.M.C. 1545, 1547. With this as the major theme, recurring from time to time as the structure develops, the Insurer, urging² what is in reality not in dispute, that the policy was for one month and would not be effective unless, for the next month, the premium were paid becomes almost transfixed by its preoccupation with another principle of universal acceptance — that ordinarily, in the absence of a clearly expressed intention to the contrary, payment by check is conditional only until honored and paid on presentment.³ From this it presumably argues that since the check is not payment until cashed, it could under no circumstance constitute such payment as would keep the policy in force if never received, or if received, never acknowledged by the official⁴ receipt, note 1, supra.

But this ignores altogether what the Insurer did and what Alabama considers an insurer may do or lead an assured to think it has done, Travelers' Ins. Co. v. Brown, 138 Ala. 526, 35 So. 463. Undoubtedly the Insurer could have insisted on strict literal, formal, punctilious compliance with the policy provisions, note 1, supra. But it did not. And this was neither inadvertent nor the result of careless or slovenly business habits. It was the result of an adoption of a comprehensive plan by which, as far as possible, the thousands of routine recurring items of an insurance company could be performed by or through the miraculous capacity of IBM machines.

If not altogether, at least as to the Executive and Professional Accident Policy, it was of acknowledged benefit to the Insurer for the Assureds to pay, not in cash, but by check. And it facilitated it further for the Assured to use the postdated "Series Checks" prepared and transmitted by the Insurer to the Assured for that purpose. Thus, 12 days prior to the anniversary date (here July 31, 1954), almost as though this Artzybasheffian marvel has reached down to pluck it out of the file, a First Notice was mailed to the Assured. This notice, as well as the Second Notice and the third, Final Notice, were prepared in manifold form from punch cards by the IBM printer and sorter. The "Series Checks" were likewise printed from punch cards by IBM on paper with punch holes at each end permitting processing in these machines. The machine automatically printed on the check the policy date, name of the Assured's bank on which the check was drawn, the predetermined postdate for each of the successive twelve checks and the amount. All was done save the Assured's signature as the drawer. These "Series Checks" were sent with the First Notice, and, when returned signed by the Assured, were placed in a file from which as each month rolled around, that month's check was removed, more cards were punched to show payment of the premium, credit to the writing agent's account, and a deposit to the Insurer's bank account. With 500 to 1,000 pieces of mail on an average day and twice as many on Mondays or following holidays, two-thirds of which were premium payments, it was of great advantage, if not necessity, to the Insurer that this all be as routine as possible. The more that checks were used, and indeed, the more the "Series Checks" plan was followed, the more fixed was the routine, the greater the savings in personnel time, and the less chance there was of error. And, of course, the system was keyed to the handling of it once each year on an annual basis.

When the First Notice was sent just prior to the anniversary date, a set of twelve "Series Checks" was enclosed for the next year. In the plainest of simple English words, this Notice told⁵ the Insured that if he would sign and return the "Series Checks," it was assurance "that your policy will be kept in force for another twelve months' period * * *." Not only that, the Notice left it to the Assured to exercise the option of using the check plan devised by the Insurer or, as indicated, the alternative annual or semiannual premium.

Under the "Series Check" plan, if, by the anniversary date, the "Series Checks" were not received from the Assured properly signed and ready for filing for later serial deposit, a Second Notice⁶ (without another set of checks) was sent. Again, by simple, plain words the Assured was informed that all that was needed was to sign and return the checks for it stated, "By signing and returning these checks today you can be assured that your future is protected." And, of great importance, the Assured was informed that if he had done these things, no further action was required for, "If these checks have already been mailed please disregard this notice."

If, by the fourth or fifth day after the anniversary date, the checks had not yet been received by the Insurer, the third and Final Notice was sent specifying the expiration of the grace period by date. Another set of "Series Checks" was enclosed and by this Final Notice,⁷ it again directed that "if you have already mailed a series of checks on this policy please disregard this notice." This was repeated by the very last words on the reverse side which contained another statement of decisive significance that "Payment of this premium must be tendered, and if mailed, your remittance must be post-marked not later than the last day of grace." It was a geographical fact beyond dispute, categorically admitted in the plainest of testimony from a highranking executive officer of the Insurer, that a check mailed with a postmark not later than the last day of grace obviously could not clear and be cashed within the grace period, so that the mailing, at least if subsequently received, of that check was sufficient "payment" to keep the policy in force.

Since this language was so simple, so direct, so oft repeated in various ways, to inform the Assured that use of the "Series Checks" by mail would enable the Assured to keep the policy alive, it was, if not as a matter of law, certainly as a fact issue, adequate, if followed, to make the mailing of the check a sufficient payment to keep the policy in force, note 10, infra.

There was ample evidence from which the jury could and presumably did, find that in the latter part of July, or first few days of August 1954, the Assured, George Wilson, was seen to have in his possession a group of "Series Checks" which he then and there signed and which were almost instantaneously mailed in a nearby United States Postal Mail Box, properly stamped and addressed to the Insurer. To be sure the evidence of the Insurer, in the operation of its mail room and IBM procedures, was impressive that it was almost impossible to lose a check and none had ever been lost, but this of necessity came from the records, not personal knowledge of each of the millions of transactions occurring since the system was instituted in 1940. And the evidence did show that, though unlikely, access could be had to the mail by unauthorized persons at least at one stage. And the experience of this case demonstrated that, as with the perfect crime, there was one place where the intricate procedure was not...