Coons v. Home Life Ins. Co. of New York

• Decision Date: 16 February 1938
• Docket Number: No. 24388.,24388.
• Citation: 13 N.E.2d 482,368 Ill. 231
• Parties: COONS v. HOME LIFE INS. CO. OF NEW YORK.
• Court: Illinois Supreme Court

368 Ill. 231

13 N.E.2d 482

COONS

v.HOME LIFE INS. CO. OF NEW YORK.

No. 24388.

Supreme Court of Illinois.

Feb. 16, 1938.

Action on a life policy by Sarah E. Coons against the Home Life Insurance Company of New York. A judgment for plaintiff was affirmed by the Appellate Court, 291 Ill.App. 313, 9 N.E.2d 419, and defendant appeals.

Judgments reversed, and judgment entered for defendant.Appeal from Third Division Appellate Court, First District, on Appeal from Municipal Court of Chicago; Charles F. McKinley, Judge.

Winston, Strawn & Shaw, of Chicago (Benjamin R. C. Low, of New York City, George B. Christensen and Gerard E. Grashorn, both of Chicago, of counsel), for appellant.

Nicholas J. Mascha, of Chicago, for appellee.

JONES, Justice.

The Appellate Court for the First District affirmed a judgment of the municipal court of Chicago for $3,614 in favor of appellee, beneficiary in an insurance policy issued by appellant on the life of appellee's husband, William P. Coons. The trial was by the court without a jury. The cause is here on leave granted to appeal. The question is whether or not the policy was in force at the time of the death of the insured.

The policy was denominated an ordinary life policy. It was issued March 27, 1914, in the face amount of $5,000. The premiums were payable quarterly, in advance, on the 25th day of June, September, December, and March, in the sum of $43.15, each.

Other pertinent provisions of the policy are:

(a) The payment of a premium or installment thereof did not maintain the policy in force beyond the due date of the next premium or installment.

(b) A grace period of one mouth (but not less than thirty days) for the payment of each premium after the first.

(c) ‘This policy shall participate in the surplus of the company and the proportion of the divisible surplus accruing hereon shall be ascertained and distributed annually by the company.’

(d) At the option of the insured ‘such dividends on the 25th day of March of each year’ might be: (1) Paid in cash; (2) applied toward premium; (3) applied to purchase paid-up additions; or (4) left to accumulate at interest.

(e) ‘After this policy shall have been in force three full years, the owner, within three months after any default in payment of premium, but not later, may elect (a) to surrender the policy for its cash value; or (b) to have the insurance continued in force as term insurance from the date of such default [non-participating] * * * for an amount equal to the face amount of this policy * * * less any indebtedness to the company hereon; or (c) to purchase participating paid-up life insurance.’

(f) ‘Automatic extended insurance. On default in the payment of any premium hereon the insurance shall be continued, without action on the part of the insured, as paid-up non-participating term insurance as provided in option (b) aforesaid if the insured shall not within three months after such default surrender this policy * * * for its cash value, or paid-up insurance.’

(g) ‘In lieu of automatic extended insurance the company will, on receipt of satisfactory request from the owner * * * advance the amount of any unpaid premium as a lien on the policy with interest in advance at the rate of six per cent, * * * if, after deducting from the cash value all existing indebtedness and interest, * * * the balance shall equal or exceed the overdue premium with interest. Subsequent premiums will in like manner be advanced from time to time * * * until the cash value * * * is not sufficient to cover the accumulated indebtedness and advance the premium. If the cash value * * * be * * * insufficient to pay an entire quarterly premium any excess of the cash value hereon over the indebtedness shall be used to purchase extended term insurance as aforesaid.’

(h) ‘Table of minimum loan and surrender values. The figures in the following table give the minimum values available at the end of complete policy years if there be no indebtedness against the policy and provided premiums have been paid in full for the number of years stated. These values will be increased on account of any dividends which have been allotted and have not been withdrawn in cash up to the date of surrender or loan. If there be any indebtedness to the company the figures will be modified as hereinbefore provided.’

The premiums were regularly paid prior to September 28, 1923. On that day the insured obtained from the insurance company a loan of $838 on the policy. The loan was never paid. Thereafter, up to September 25, 1932, the premiums totaled $1,294.50. During that period the insured made some payments on account and paid some premiums, in all aggregating $309.53. All other premiums were advanced by the company under the automatic lien provision of the policy. This amounted, in effect, to paying them out of the equity in the policy.

When the September 25, 1932, premium became due, the loan and interest amounted to $1,869.27. The premium due on that date was paid by a further automatic loan, increasing the total amount to $1,913.71. When the December 25, 1932, premium became due, the loan was credited with unearned interest which reduced the amount to $1,885.39, leaving the face of the policy, less the debt, $3,114.61. At that time the cash value of the policy was only $11.36 over the amount of the loan. This sum of $11.36 was insufficient to permit a further charge under the automatic premium lien provision. Under the terms of the policy it was used to purchase $3,115 worth of non-participating term insurance for one month, expiring January 25, 1933. The assured died February 21, 1933.

For the period prior to March 25, 1932, the applicable dividends for each policy year were added to the value of the policy. The last dividend so applied was in the sum of $49.55 at the end of the policy year on March 25, 1932. Plaintiff claims that a dividend of $40.75 for the fiscal year ending March 25, 1933, had been declared prior to December 25, 1932, and, therefore, must be applied to the premium due on that date, and, if so applied, would extend the life of the policy beyond the date of the assured's death. She also claims that the period of the extended insurance purchased should begin after the grace period of thirty days, with a like result. Defendant claims that the dividend can be applied to pay a premium only at the end of the policy year and is not available or apportionable at any earlier period. It also claims there is no grace period following a term policy, including those resulting from extended insurance, and that the policy had lapsed. Other questions in controversy will be noticed later on.

To a written iterrogatory of the plaintiff as to whether the $40.75, shown by exhibits in a deposition, was the amount allotted to the policy for the year 1932, defendant answered that the amount was the recorded preliminary calculation of a dividend which would have been allotted and became due and payable on March 25, 1933, if, on that date, the assured had been alive and the policy had been in full force and all premiums due had been paid. The paragraph entitled ‘Tables of minimum loan and surrender values' imposes such limitations. An employee of defendant in charge of the dividend division testified that as notices for premiums due in January must be mailed in December, it is the practice of the board of directors, in October or November, to tentatively apportion dividends for the first three months of the next calendar year. This apportionment is generally approved at the following January meeting for the balance of the calendar year. In apportioning divisible surplus, consideration is given to the fact that certain policies, because of termination as active participating contracts before their policy anniversary dates, will not receive a dividend. Dividends are payable annually on the policy anniversary date if the premiums have been paid in full to that date, but not otherwise, nor any portion thereof. This testimony shows that the tentative apportionment may not be the same as the total of possible dividends, and is made in accordance with the policy limitations. The resolution of the board was not introduced in evidence and defendant was not requested to produce it. It was under no duty to do so. The burden was upon plaintiff to establish her cause of action. If she desired to prove the terms of the resolution, she could have done so by the interrogatories or by a notice to produce it. The interrogatory pertaining thereto was fully answered by defendant and there is no testimony that tends to contradict the answer. No unfavorable inference can be drawn from the fact that defendant did not introduce the resolution in evidence. The only testimony in the record shows the action of the board was not a declaration of a dividend, but a mere tentative apportionment subject to later adjustment, applicable only to policies in force at the end of the policy year on which all premiums were paid to that date. We note, here, the provision of the policy that all premiums are payable in advance and that payment of a premium or installment thereof does not maintain the policy in force beyond the date when the next premium or installment is payable. The reason for this provision is apparent. In order to do business and survive, every insurance company must necessarily collect enough money to promptly pay mortuary losses, managerial expenses, rents, taxes, and advertising costs, and to make numerous other outlays. To meet these it must depend upon the advance payment of premiums and the income from investments. Because such losses and expenses cannot be known in advance, an approximation is made, and the amount collected is the gross premium charged. For safety, this is ordinarily fixed high enough to meet possible...