Doty v. American Nat. Ins. Co.

• Decision Date: 10 November 1942
• Docket Number: 38184
• Citation: 165 S.W.2d 862,350 Mo. 192
• Parties: E. L. Doty, Assignee of Rosa C. Boswell, v. American National Insurance Company, a Corporation, Appellant
• Court: Missouri Supreme Court

165 S.W.2d 862

350 Mo. 192

E. L. Doty, Assignee of Rosa C. Boswell, v. American National Insurance Company, a Corporation, Appellant

No. 38184

Supreme Court of Missouri

November 10, 1942

Appeal from Audrain Circuit Court; Hon. Frank Hollingsworth, Judge.

Reversed and remanded.

Kenneth I. Fligg and Fry & Edwards for appellant Wayman & Kleinecke of counsel.

(1) Where a policy of insurance does not provide for extended insurance upon default in the payment of premiums, the Missouri nonforfeiture statutes do not warrant the use as a net single premium for the purchase of extended insurance of the values of "free policies" available on written application while the policy is in force. Secs. 5852-55, R S. 1939; State ex rel. Adams v. Allen, 125 S.W.2d 854; Magers v. Northwestern Mut. Life Ins. Co., 152 S.W.2d 148; Lindsey v. Prudential Ins. Co., 16 F.Supp. 880; Sec. 40-420, Gen. Statutes Kansas, 1935; Prange v. International Life Ins. Co. of St. Louis, 46 S.W.2d 523; Finnegan v. American Natl. Ins. Co., 137 S.W.2d 698; Wells v. Metropolitan Life Ins. Co., 125 S.W.2d 86; Gooch v. Metropolitan Life Ins. Co., 333 Mo. 191, 61 S.W.2d 704; Prudential Ins. Co. of America v. Pearson, 24 F.Supp. 311; Brannaker v Prudential Ins Co. of America, 150 S.W.2d 498; Davis v. Mutual Life Ins. Co., 119 S.W.2d 488; State ex rel. Clark v. Becker, 73 S.W.2d 769; Clark v. John Hancock Mutual Life Ins. Co., 58 S.W.2d 484; Fidelity Natl. Bank & Trust Co. v. Metropolitan Life Ins. Co., 12 F.Supp. 524; Trapp v. Metropolitan Life Ins. Co., 70 F.2d 976. (2) Courts are without authority to rewrite insurance contracts or to disregard valid policy provisions, and the first year preliminary term provision of the policy sued on must be given effect in determining the net value of said policy. Lindsey v. Prudential Ins. Co., 16 F.Supp. 880; Sec. 5831, R. S. 1939; Williams v. Union Central Life Ins. Co., 291 U.S. 170, 78 L.Ed. 711; Davis v. Mutual Life Ins. Co., 234 Mo.App. 748, 119 S.W.2d 488; Bramble v. Kansas City Life Ins. Co., 160 S.W.2d 746; LeGrand v. Central States Life Ins. Co., 235 Mo.App. 329, 132 S.W.2d 1105; Cleaver v. Central States Life Ins. Co., 346 Mo. 548, 142 S.W.2d 474; The Principles and Practice of Life Insurance, 8th Edition. Originally prepared by Nathan Willey, Actuary. Explanatory Text and Additions by Henry Moir. Fellow Actuarial Society of America. Published by The Spectator Company, New York, p. 28; Life Insurance by Joseph B. MacLean, Associate Actuary. The Mutual Life Insurance Company of New York. Fifth Edition published by McGraw Hill Book Company, Inc., New York -- London, pp. 141-162; The Essence of Life Insurance by William Breiby, Consulting Actuary. Published by The Spectator Company, New York, pp. 90-98; Horton v. Atlantic Life Ins. Co., 187 S.C. 155, 197 S.E. 512; Felderman v. Inter-Southern Life Ins. Co., 325 Pa. 389, 190 A. 723; Atlantic Life Ins. Co. v. Pharr, 59 F.2d 1024; Prange v. International Life Ins. Co. of St. Louis, 329 Mo. 651, 46 S.W.2d 523; Vail v. Midland Life Ins. Co., 108 S.W.2d 147; Lacy v. American Central Life Ins. Co., 232 Mo.App. 1132, 115 S.W.2d 193; Tabler v. General American Life Ins. Co., 324 Mo. 726, 117 S.W.2d 278; Hussey v. Ohio Natl. Life Ins. Co., 119 S.W.2d 455; Illinois Revised Statutes, 1941 (State Bar Association Edition), Chap. 73, Sec. 835 (3); Revised Statutes of New Jersey, 1937, Title 17, Sec. 34-23; Page's Annotated Ohio General Code (1926) Sec. 9419; Gooch v. Metropolitan Life Ins. Co., 61 S.W.2d 704; Moore v. Northwestern Life Ins. Co., 112 Mo.App. 696, 87 S.W. 988; Rose v. Franklin Life Ins. Co., 153 Mo.App. 90, 132 S.W. 613; Horton v. N. Y. Life Ins. Co., 151 Mo. 604, 52 S.W. 356; Fidelity Natl. Bank v. Metropolitan Life Ins. Co., 12 F.Supp. 524. (3) Double indemnity benefits should not have been allowed by the trial court since under the provisions of the policy sued on herein double indemnity benefits were available only "while this policy is in force and while there is no default in the payment of premiums." The allowance of double indemnity benefits was directly contrary to the policy provision and not warranted by the provisions of the nonforfeiture statutes which limit extended insurance to the straight life insurance benefits and do not include accidental insurance benefits. Secs. 5852-55, R. S. 1939; Smith v. Equitable, 107 S.W.2d 195; Cleaver v. Central States Life Ins. Co., 142 S.W.2d 474; Valenti v. Prudential Ins. Co., 71 F.2d 229; Fletcher v. Metropolitan Life Ins. Co., 137 S.W.2d 621; Salamone v. Prudential Ins. Co., 103 S.W.2d 506; Rositzky v. New York Life Ins. Co., 45 F.2d 758; Smith v. Equitable Life Ins. Co., 107 S.W.2d 191; Rose v. Franklin Life Ins. Co., 153 Mo.App. 90, 132 S.W. 613.

C. C. Franklin for respondent.

(1) The net value of the policy was sufficient to continue the insurance in force beyond the date of insured's death. Finnegan v. American Natl. Ins. Co., 137 S.W.2d 698; Westerman v. Supreme Lodge, 196 Mo. 760, 94 S.W. 470; Boulware v. Mo. State Life Ins. Co., 159 S.W. 761; Spink v. United States Life, 96 S.W. 889, 13 L. R. A. 1053. (2) The purpose of the Legislature in enacting the nonforfeiture statute was to secure to the policyholders substantially what the excess of premiums paid over the cost of insurance will buy in the way of extended or paid-up insurance. Under the law of Missouri the statute must be so construed as to effectuate this purpose. Secs. 5852-55, R. S. 1939; Secs. 5741-44, R. S. 1929; Finnegan v. American Natl. Ins. Co., supra; Gooch v. Metropolitan Life Ins. Co., 61 S.W.2d 704; Lacy v. American Life Ins. Co., 115 S.W.2d 193; American Natl. Ins. Co. v. Foster, 130 S.W.2d 287; Cravens v. New York Life, 148 Mo. 583, 50 S.W. 519, affirmed, 178 U.S. 389, 20 S.Ct. 962, 44 L.Ed. 1116; Smith v. Mutual Benefit Life Ins. Co., 173 Mo. 329; Rose v. Franklin Life Ins. Co., 132 S.W. 613, 153 Mo.App. 90; Union Brewing Co. v. Ehlhardt, 120 S.W. 1193, 139 Mo.App. 129; Shohoney v. Q., O. & K. C. R. Co., 132 S.W. 1059, 231 Mo. 1131; Westerman v. Supreme Lodge, 196 Mo. 670, 95 S.W. 470; Stoner v. New York Life, 85 S.Ct. 276; Erie R. Co. v. Tompkins, 58 S.Ct. 817, 304 U.S. 61, 114 A. L. R. 1487. (3) The plaintiff would be entitled to recover on this policy under the statutory method of valuation. Secs. 5852-55, R. S. 1939; Secs. 5741-44, R. S. 1929; Finnegan v. American Natl. Life Ins. Co., supra; Lacy v. American Natl. Life Ins. Co., supra; Gooch v. Metropolitan Life Ins. Co., supra; Moore v. Northwestern Life Ins. Co., 112 Mo.App. 696, 87 S.W. 988; Rose v. Insurance Co., 153 Mo.App. 90, 132 S.W. 613; Horton v. Insurance Co., 151 Mo. 604; LeGrand v. Central States Life, 132 S.W.2d 1105. (4) Under the terms of the policy when construed with the statute, accidental death benefits as well as the face amount of the policy are payable. Secs. 5852-5844, R. S. 1939; Fletcher v. Metropolitan Life Ins. Co., 137 S.W.2d 621; Rositzky v. New York Life, 45 F.2d 758; Salamone v. Prudential Ins. Co. of America, 103 S.W.2d 506; Logan v. Fidelity & Casualty Co., 146 Mo. 114.

Watson, Ess, Groner, Barnett & Whittaker and Douglas Stripp amici curiae.

(1) The source of net value and the function of rates of mortality and interest in determining net premiums and net values. Magers v. Northwestern Mutual Life Ins. Co., 152 S.W.2d 148; Westerman v. Supreme Lodge K. of P., 196 Mo. 670, 711, 94 S.W. 470; Willey, Principles and Practice of Life Insurance (8 Ed.), 360, 361. (2) Life insurance on the preliminary term plan is valid. Prange v. International Life Ins. Co., 329 Mo. 651, 46 S.W.2d 523; Bramble v. Kansas City Life Ins. Co., 160 S.W.2d 746. (a) The purpose of the nonforfeiture statute was to prevent the forfeiture of the actual net value which necessarily accumulates in some types of life insurance. It was not intended to create net value. Westerman v. Supreme Lodge K. of P., 196 Mo. 670, 94 S.W. 470; State ex rel. Supreme Lodge K. of P. v. Vandiver, 213 Mo. 187, 111 S.W. 911; Sec. 7897, R. S. 1899. (b) The nonforfeiture statute does not fix an arbitrary net value applicable to all plans of life insurance; rather, it recognizes the necessary effect of the plan of insurance in this respect. Mutual Reserve Life Ins. Co. v. Roth, 122 F. 853; Rose v. Franklin Life Ins. Co., 153 Mo.App. 90; New York Life Ins. Co. v. Rositzky, 45 F.2d 758; State ex rel. v. Vandiver, 213 Mo. 187, 111 S.W. 911; Legrand v. Central States Life Ins. Co., 235 Mo.App. 323, 132 S.W.2d 1105. (c) Life insurance written upon the preliminary term plan is based upon a legitimate purpose. It is not intended to, and does not, evade the nonforfeiture statute and there is no reason for refusing to recognize the effect of such a plan upon the net value of insurance so written. Bankers Life Ins. Co. v. Howland, 73 Vt. 1, 48 A. 435; Bankers Life Ins. Co. v. Fleetwood, 76 Vt. 297, 57 A. 239; Sec. 5831, R. S. 1939. (d) Horton v. New York Life Insurance Company is not in point. Horton v. New York Life Ins. Co., 151 Mo. 604; Cravens v. New York Life Ins. Co., 148 Mo. 583; Rose v. Franklin Life Ins. Co., 153 Mo.App. 90.

Douglas, P. J. All concur except Hays, J., absent.

OPINION

DOUGLAS

This is an action on a policy of life insurance bearing a principal sum of $ 300 with weekly premiums of ten cents. The policy was issued by defendant on the life of Dorothy Boswell whose mother, Rosa Boswell, is beneficiary. The plaintiff is the latter's assignee.

Premiums were paid for more than five years until March 18, 1935, when the policy lapsed for nonpayment. The insured died on November 8, 1937, as the result of an accident. The policy is described as whole life insurance and contains a provision that the first year's insurance is term insurance.

The petition is in two counts. The first is to recover the death...