Federal Life Ins. Co. v. Warren

• Decision Date: 14 January 1916
• Citation: 167 Ky. 740,181 S.W. 331
• Parties: FEDERAL LIFE INS. CO. v. WARREN.
• Court: Kentucky Court of Appeals

181 S.W. 331

167 Ky. 740

FEDERAL LIFE INS. CO. v. WARREN.

Court of Appeals of Kentucky.

January 14, 1916

Appeal from Circuit Court, Webster County.

Action by Richard P. Warren against the Federal Life Insurance Company. From a judgment for plaintiff, defendant appeals. Reversed.

Dorsey & Dorsey, of Henderson, and C. A. Atkinson, of Chicago, Ill for appellant.

G Givens Dixon, of Henderson, for appellee.

TURNER J.

On the 4th of August, 1904, the Interstate Life Assurance Company of Indiana issued to appellee a policy on his life called a 20-year cash return policy. At the date of the policy appellee was 41 years of age, but it was antedated 5 years so that he might have the benefit of the rate at the age of 36 and the insurance began under the terms of the contract at that date. Thereafter the policy was assigned to, and its obligations assumed by, appellant, Federal Life Insurance Company. Simultaneously with the issual of the policy on August 4, 1904, the Interstate Life Assurance Company loaned to appellee $261.20, with interest at the rate of 5 per cent., payable annually, which loan was a lien on the policy. The annual premiums on the policy were paid up to the 4th of August, 1912, at which time appellant accepted from appellee his note, payable in five months thereafter, with interest at 5 per cent., with the recitation therein that it was given as evidence of the extension of time of payment of the annual premium due on the policy at that time, and that the nonpayment of the note when due would void the policy without notice, except as otherwise provided in the policy. Neither of these notes having been paid, either in whole or in part in November, 1913, appellee brought this suit to require appellant to issue to him a "paid-up" policy of insurance under the terms of the contract, and the only question in the case is at to the amount of the paid-up policy to which he is entitled. The lower court entered a judgment directing the appellant to issue a paid-up policy of $913.73, payable at the death of appellee, and from that judgment this appeal is prosecuted.

At the expiration of the thirteenth year the company took appellee's note, payable in five months, for the amount of the fourteenth premium, with the recitation herein above given; but upon the failure to pay the same on its maturity, the company did not return the note to him, but retained the same, and still held it when this suit was filed in November, 1913, thereby treating it as an indebtedness against the policy. So that, treating that note as the payment of the fourteenth premium, the policy lapsed for nonpayment of premium at the expiration of the fourteenth year on the 4th of August, 1913. Sou. Mutual Life Ins. Co. v. Montague, 84 Ky. 655, 2 S.W. 443, 8 Ky. Law Rep. 579, 4 Am. St. Rep. 218; Montgomery v. Ph nix Mutual Life Ins. Co., 14 Bush, 58.

Appended to the policy in this case is a table of loans and of surrender values, either in cash or its equivalent in extended or paid-up insurance, and that table shows that at the end of the fourteenth year the cash value of the policy was $660.20, and that $1,400 was the amount of the paid-up life policy to which appellee was then entitled if the policy lapsed for nonpayment of premium and he elected to accept a paid-up policy. Immediately following this table there is in the policy the following language, to wit:

"Any indebtedness on account of this policy outstanding at the time of settlement as provided by the terms of paragraph 7 of Privileges and Conditions will correspondingly reduce the surrender value specified in the above table."

Th...