Cox v. Brookings Intern. Life Ins. Co.

• Decision Date: 23 March 1983
• Docket Number: No. 13777,13777
• Citation: 331 N.W.2d 299
• Parties: Raymond COX, Plaintiff and Appellant, v. BROOKINGS INTERNATIONAL LIFE INSURANCE COMPANY, Defendant and Appellee.
• Court: South Dakota Supreme Court

Page 299

331 N.W.2d 299

Raymond COX, Plaintiff and Appellant, v. BROOKINGS INTERNATIONAL LIFE INSURANCE COMPANY, Defendant and Appellee.

No. 13777.

Supreme Court of South Dakota.

Argued Nov. 15, 1982.

Decided March 23, 1983.

Reed C. Richards of Richards & Richards, Deadwood, for plaintiff and appellant.

G.J. Danforth, Jr. of Danforth, Danforth & Johnson, Sioux Falls, for defendant and appellee; Robert L. Mabee of Danforth, Danforth & Johnson, Sioux Falls, on the brief.

MORGAN, Justice.

This appeal arises from an action to recover the proceeds of an insurance contract brought by the beneficiary, Raymond Cox appellant (Cox), against Brookings International Life Insurance Company, appellee (Company). After both sides had rested, the trial court directed a verdict in favor of Company and Cox appeals. We affirm in part, reverse in part, and remand.

In April of 1975, Cox's wife applied for and received a life insurance policy on their son, Steven, from Company. Mrs. Cox had, as a regular practice, assumed the responsibility to gather the monthly bills and write checks for payment of the family expenses, including insurance premiums. Upon her death in October of 1977, Cox succeeded to ownership of the policy as he was the sole surviving beneficiary. From that time he also assumed responsibility for payment of the family bills which included premiums on thirteen various types of insurance policies. Cox testified that he depended upon receiving notice in the mail from the insurance companies that premiums were due in order to know when to pay the premiums. On June 10, 1978, Steven was killed in a car accident. After Cox notified Company of Steven's death, he received a letter from Company advising him that coverage under the policy had lapsed due to nonpayment of the premium which was due on April 1, 1978. Cox initiated this action to recover on the policy and, at trial, at the close of all the evidence on motion of the Company the trial court directed a verdict for Company. This appeal follows.

In reviewing a directed verdict, this court views the evidence in a light most favorable to the nonmoving party and gives that party the benefit of all reasonable inferences; if there is enough evidence to allow reasonable minds to differ, then the directed verdict was inappropriate. Smith v. Halverson, 273 N.W.2d 146 (S.D.1978); Lytle v. Morgan, 270 N.W.2d 359 (S.D.1978); Beck v. Wessel, 237 N.W.2d 905 (S.D.1976).

The threshold issue on this appeal is whether notice is necessary and if so what constitutes adequate notice to an insured that an insurance premium is due. Company first argues that since the policy of insurance, which contains the premium amounts and the due dates, makes no further provision to require notice to the policyholders, no notice is due because the policy owner has actual knowledge of both the amount and due date thereof. This argument is unsupportable. Insurance companies generally are interested in collecting premiums. They send out notices, usually well in advance of the due date. Such notices almost universally furnish policyholders not only a "tickler" reminder of the upcoming due date but a return envelope properly addressed and a coupon or other memo to be returned with the payment to insure proper accounting.

We note the general rule that the necessity for an insurance company to give notice to an insured of a premium due even absent a policy provision may be based upon the practice of the particular insurer. 5 Couch on Insurance § 30:128 at 661 (1960); 43 Am.Jur.2d Insurance § 849 (1982); Seavey v. Erickson, 244 Minn. 232, 69 N.W.2d 889 (1955); Pester v. American Family Mutual Insurance Co., 186 Neb. 793, 186 N.W.2d 711 (1971); Carfagnini v. Service Life Insurance Co. of Omaha, 113 N.J.Super. 469, 274 A.2d 303 (1971). Cf. Presentation Sisters, Inc. v. Mutual Ben. Life Ins. Co., 85 S.D. 678, 189 N.W.2d 452 (1971) (no notice required to an assignee of policies assigned as collateral security for liabilities). As stated by the Minnesota Supreme Court in Seavey, supra, this rule is:

Where it has been established that it is the custom and practice of the insurer to give notice of the time for payment of a renewal premium and knowledge of such custom is acquired by an insured in dealings with the insurer, the insurer has a right to rely on such notice, and, in the absence thereof, the policy may not be terminated or forfeited without giving the insured some notice that such custom has been abandoned.

244 Minn. at 243-44, 69 N.W.2d at 897 (footnote omitted).

The life insurance policy insuring Steven was entered into on April 1, 1975, when Steven was fourteen years of age. The policy provided for quarterly premiums and each quarter Company notified the Cox' in advance that the $10.50 premium would be due. Cox testified at trial that he relied on such notice that a premium due date was forthcoming in order to pay the premium. Accordingly, because Company notified Cox each quarter that the premium on this policy was due, Company was required to continue this practice unless it specifically notified Cox that it would discontinue such notification.

Company next asserts its strongest point, that in fact proper notice of the premium due was given to Cox. This is the view that the trial court adopted in directing the verdict. Company contends that it mailed a premium notice to Cox; however, Cox testified that he did not receive it.

It is well established that proof of mailing by depositing a letter in a proper mail receptacle, properly addressed and stamped, raises a presumption of delivery to the person addressed; however, it is only a rebuttable presumption. See Ebert v. Fort Pierre Moose Lodge # 1813, 312 N.W.2d 119 (S.D.1981); Bank of Ipswich v. Harding County, Etc., Ins. Co., 55 S.D. 261, 225 N.W. 721 (1929). At the trial, Company went to great lengths to establish proper mailing. There was testimony from a company official and a mailroom employee as to the procedure, and mail logs that demonstrate mailing of the particular piece in question. From the record before us we cannot say that the trial court erred in finding that there was a presumption of delivery. Cox, however, not only testified that he had not received the notice but further went to some lengths to demonstrate his own household procedures for handling incoming mail, including bills and premium notices. Cox also demonstrated that during the period from early February to late June, during which time the lapse occurred, he had sent checks in payment of premiums on thirteen other policies; five of which were paid in the month of May. While concededly the mere denial of receipt alone would not be enough, since Cox presented other substantial evidence we agree with what this court stated in Bank of Ipswich:

This rebuttable presumption, with supporting evidence on behalf of [Company] and denial of receipt with its supporting testimony on the part of [Cox], was such, in our opinion, as to make the question of receipt a subject for the determination of the trier of fact.

55 S.D. at 268, 225 N.W. at 723 (citation omitted).

In reviewing this directed verdict, this court must view the evidence in a light most favorable to Cox. Smith v. Halverson, supra; Lytle v. Morgan, supra; Beck v. Wessel, supra. Since there is enough evidence to allow reasonable minds to differ the directed verdict was inappropriate. The trial court should have permitted the trier of fact to determine the issue of receipt.

Although we are remanding this case, we address the second issue since, on remand, the trial court may have to reconsider this question. The second issue on appeal is the admissibility of testimony as to Cox's reputation for veracity. The trial court here refused to permit this testimony and Cox appeals from the refusal.

Cox contends that he did not receive notice that the insurance premium was due. Accordingly, he attempted to introduce testimony of a minister, a banker, and a neighbor as to his good reputation in the community for veracity. Cox contends the trial court could have admitted the testimony under SDCL 19-16-25. That rule adopted from Federal Rule of Evidence (F.R.E.) 803(21), provides: "Reputation of a person's character among his associates or in the community is not excluded by § 19-16-4, even though the declarant is available as a witness." SDCL 19-16-4 is the general rule providing that hearsay evidence is inadmissible. ¹

At trial, the court ruled that, while the evidence could be admitted under SDCL 19-16-25, there are two statutes limiting that provision, SDCL 19-12-4 and 19-14-9. SDCL 19-12-4 (F.R.E. 404(a)) provides, in pertinent part:

Evidence of a person's character or a trait of his character is not admissible for the purpose of proving that he acted in conformity therewith on a particular occasion, except:

....

(3) Evidence of the character of a witness, as provided in §§ 19-14-8 to 19-14-16, inclusive.

SDCL 19-14-9 (F.R.E. 608(a)) provides:

The credibility of a witness may be attacked or supported by evidence in the form of opinion or reputation, but subject to these limitations:

(1) The evidence may refer only to character for truthfulness or untruthfulness, and

(2) Evidence of truthful character is admissible only after the character of the witness for truthfulness has been attacked by opinion or reputation evidence or otherwise.

According to 3 Weinstein's Evidence 608-3 (1981), the purpose of F.R.E. 608 (SDCL 19-14-9) is to develop the exception stated in F.R.E. 404(a) (SDCL 19-12-4) that character evidence is admissible only as bearing upon the credibility of a witness. Under F.R.E. 608 (SDCL 19-14-9), character evidence of credibility is admissible only after the witness' character has first been attacked. 3 Weinstein's Evidence 608-5 (1981). This is as the case has been at common law. McCormick § 49, p. 105 (1972); 4 Wigmore § 1104 (1972).

Consequently, for the trial court to admit the testimony...