Davis v. United Am. Life Ins. Co., s. 20582

• Decision Date: 09 October 1959
• Docket Number: Nos. 20582,20583,s. 20582
• Citation: 111 S.E.2d 488,215 Ga. 521
• Parties: Jeanne R. Hunter DAVIS v. UNITED AMERICAN LIFE INSURANCE CO. UNITED AMERICAN LIFE INSURANCE CO. v. Jeanne R. Hunter DAVIS.
• Court: Georgia Supreme Court

Page 488

111 S.E.2d 488

215 Ga. 521

Jeanne R. Hunter DAVIS v. UNITED AMERICAN LIFE INSURANCE CO.

UNITED AMERICAN LIFE INSURANCE CO. v. Jeanne R. Hunter DAVIS.

Nos. 20582, 20583.

Supreme Court of Georgia.

Oct. 9, 1959.

Adhered To On Rehearing Nov. 4, 1959.

Second Motion for Rehearing Denied Nov. 19, 1959.

Syllabus by the Court

1. Equity will not reform a contract because of a mistake unless the mistake is mutual, or a mistake by one and fraud by the other party thereto. Where, as here, the intention of both the insurer and the insured as to the amount of the premium is expressed in the application--as corrected by the insurer as therein authorized--to be $302.90 per quarter, a mistake of the scrivener of the insurer in writing into the policy at another place the amount of the premium as being $750.48 per year, instead of what the insurer claims to have been intended, to wit: $750.48 per quarter, is obviously the unilateral mistake of the insurer alone, and there is neither mutuality nor fraud that would authorize reformation to conform with what the insurer claims to have been intended.

2. Construction of ambiguous contracts is the duty of the court, and it is only after application thereto of the pertinent rules of construction, and they remain ambiguous, that extrinsic evidence is admissible to explain the ambiguity. An applicable pertinent rule for construing an insurance contract that is ambiguous because it contains contradictory clauses as to the amount and method of payment of the premium is that the clause most favorable to the insured must be adopted. When this pertinent rule is applied to the conflicting clauses in the present policy, the clause fixing the premium at $302.90 per quarter must prevail, and by it the intention is clear, and extrinsic evidence is inadmissible to explain it. By the terms of the policy the admitted payments of this premium made available extended term insurance of more than a year from the date the premium payment was defaulted, and hence the full amount of the policy was in force when the insured died on April 24, 1957, after the default on February 1, 1957.

This action arises out of a contract of insurance, and this court has jurisdiction by reason of the cross-bill of exceptions, which assigns as error the order of the trial court sustaining general demurrers to an amendment to the answer, which constituted an equitable cross-action. The plaintiff in error in the main bill brought her action, as beneficiary, against the insurance company, the defendant in error, on a contract of life insurance in the amount of $100,000 which she alleges was in full force and effect at the time of the death of her husband, the insured, and for interest from the date of demand, which was refused. The insurer answered denying liability, because the policy had lapsed for nonpayment of premiums; and by way of cross- action alleged and prayed for equitable relief to have the policy reformed to correct an error of the scrivener, which was allegedly a mutual mistake of the parties resulting from a clerical error, the policy as written showing the due date as August 1 of each year, whereas the due dates should have been August 1, November 1, February 1, and May 1 of each year, and the premium as shown on the face of the policy, $750.48 as the quarterly premium instead of the annual premium. Demurrers were filed to the equitable cross-action, and, after a hearing, sustained. The cross-bill of exceptions of the insurance company, as plaintiff in error, excepts to this judgment.

The case proceeded to trial, and at the conclusion thereof the court directed the verdict for the insurer, and the plaintiff filed her motion for new trial, which was thereafter amended, and after a hearing was denied. The exception in the main bill is to this judgment.

It is unnecessary to set forth the contentions of the amended motion for new trial. However, a concise statement of the material portions of the policy is necessary for an understanding of the opinion. The application for insurance, signed by the insured and attached to and made a part of the policy, which is also attached as an exhibit to the defendant's answer, shows an application for $100,000 of life insurance under plan 'A. S. P.', with a premium of $294.33 payable quarterly, with an automatic premium loan, and acceptance of the policy constituting a ratification by the insured of any correction or addition to the application by the company. The company had corrected this application by changing the kind of policy to 'APC', with no automatic premium loan, a premium of '$302.90,' payable quarterly, and issued 'on ACL Basis.' The ratification of these changes by the insured reads as follows: 'My acceptance of any policy issued on this application will constitute a ratification by me of any correction in or addition to this application made by the company.' The entire policy was submitted in evidence, and, under the policy loans provisions for automatic cash loans, is found the following excerpt: 'Upon request made in the application or upon subsequent written request received by the Company * * * the Company will lend, on the sole security of this Policy, a sum not exceeding the then cash value as determined from the Table of Non-Forfeiture Values, less any existing indebtedness on account of this Policy and accrued interest thereon, if any.' The Table of Non-Forfeiture Values for each $1,000 of insurance for one year at age 39, which applied to the insured, showed the following: Cash or Loan--$17.59; Paid-Up Insurance--$40; Extended Insurance--2 years 79 days. Under Non-Forfeiture Values, are found the following excerpts: 'Values given in the Table of Non-Forfeiture Values are for a Policy free of indebtedness and for lapses occurring with premium paid for completed policy years, proportionate allowance being made in determining values from said table for the fractional part of a policy year's premium that has been paid.' * * * 'Non-Forfeiture Options. Any one of the following non-forfeiture options, the values of which are stated [in the Table] * * * may be elected by written request received by the Company at its Home Office not later than sixty days after the due date of any premium in default and prior to the death of the Insured: Cash Value. The cash value of the Policy will be paid upon surrender of the Policy; or * * *Extended Term Insurance. The Amount of Insurance will be continued as extended term insurance from the due date of the premium in default. Automatic Option. If no election is made within sixty days after the due date of a premium in default, the Policy will be automatically continued as extended term insurance.' Under Effect of Indebtedness on Non-Forfeiture Options is found the following: 'Any indebtedness under this Policy shall be deducted from the cash surrender value otherwise payable and from the amount of insurance extended under the extended insurance option. The amount of paid-up insurance and the term of extended insurance shall be reduced to such as the cash surrender value less indebtedness will provide at the attained age of the insured.'

Powell, Goldstein, Frazer & Murphy, Robert E. Coll, Atlanta, for plaintiff in error.

Smith, Field, Doremus & Ringel, Sam F. Lowe, Jr., Alex W. Smith, Jr., Atlanta, for defendant in error.

DUCKWORTH, Chief Justice.

1. On rehearing this opinion is, by the court, being substituted for the opinion originally filed. The confusing manner in which it was attempted to reform this policy as well as the arguments in support thereof require, we think, a fuller treatment than our original opinion gave it. There we briefly said that the alleged mistake was not mutual, and pointed out that the policy fixed the amount of premium at $750.48 until age 65 and thereafter at $655.88, due August 1 each year, while the application which is a part of the policy fixed the amount of the premium at $302.90 payable quarterly, and the only reformation sought was to make the first part read $750.48 to age 65 and $655.88 thereafter, due August 1, November 1, February 1 and May 1 of each year, with no mention of the premium fixed in the application. We assumed that the alleged mistake was so obviously that of the company alone and in no manner connected with the insured that discussion by he court was unnecessary to demonstrate...