First Nat. Bank of Malden v. Farmers New World Life Ins. Co.

• Decision Date: 25 May 1970
• Docket Number: No. 8885,8885
• Citation: 455 S.W.2d 517
• Parties: FIRST NATIONAL BANK OF MALDEN, a National Bank, Plaintiff-Appellant, v. FARMERS NEW WORLD LIFE INSURANCE COMPANY and Floyd Hampton, Defendants-Respondents.
• Court: Missouri Court of Appeals

Page 517

455 S.W.2d 517

FIRST NATIONAL BANK OF MALDEN, a National Bank, Plaintiff-Appellant, v. FARMERS NEW WORLD LIFE INSURANCE COMPANY and Floyd Hampton Defendants-Respondents.

No. 8885.

Springfield Court of Appeals, Missouri.

May 25, 1970.

As Modified on Court's Own Motion and Motion for Rehearing

or for Transfer to

the Supreme Court Denied June 18, 1970.

O'Herin & Newberry, Malden, for plaintiff-appellant.

Jack O. Knehans, Finch, Finch, Knehans & Cochrane, Cape Girardeau, for defendant-respondent Farmers New World Life Ins. Co.

Dalton, Treasure & Bullard, Kennett, for defendant-respondent Floyd Hampton.

HOGAN, Judge.

Plaintiff, as the insured creditor under a group credit life insurance policy, made a claim for benefits upon the death of one of its debtors, a Mr. James F. King. The defendant insurer denied the claim. Plaintiff then filed this action against the insurer and its resident agent, defendant Floyd Hampton, alleging that the insurer had wrongfully denied the claim, and in a separate count that defendant Hampton had negligently failed to insure Mr. King properly, to plaintiff's detriment. A trial to the court without the intervention of a jury has resulted in a judgment against the plaintiff and in favor of both defendants, and the plaintiff appeals.

A Mr. Jim Zimmerman, executive vice-president of the plaintiff bank at the time the policy was issued, testified that the bank had difficulty in finding reasonably priced credit life policies for its debtors, particularly farmers who wanted crop loans. Since it offered level term insurance and decreasing term policies at the same rate, he decided to do business with Farmers New World. Mr. Zimmerman discussed the subject several times with the insurer's representatives--Mr. Hampton and another man whom Mr. Zimmerman remembered only as 'Stan.' In April 1965, Mr. Zimmerman made written application to the defendant insurer for the issuance of a creditor's group life insurance policy. The policy was issued, effective April 1, 1965.

The policy opens with the recital that '* * * (t)his Creditor's Group Life Insurance Policy No. 920185 shall be construed in accordance with the laws of Missouri, where it is delivered, and is a contract between the Company and 1st National Bank of Malden (Herein called the Creditor).' The basic insuring agreement is that '(t)he Company hereby agrees to pay to the Creditor, immediately upon receipt of due proof of the death of any debtor occurring while insured hereunder, the amount for which such debtor's life is insured as determined in accordance with the terms of this Policy.' Under the heading 'General Provisions,' it is specified that the policy '* * * and the application of the Creditor, a copy of which is attached hereto and made a part hereof, constitute the entire contract. * * *' Under the same heading, it is provided that the contract may be amended or changed without the consent of the insured debtors by written agreement between the creditor and the insurer, but the insurance provided under the policy is specifically made non-assignable.

The group requirements are stated in that part of the policy denominated 'Specifications Provisions.' Seven classes of debtors are listed as eligible for insurance; in the policy proper, the seventh class is denominated simply '(g) Level Term.' Four classes of debtors are specifically excluded. Debtors whose indebtedness is not repayable in periodic installments are excluded, as are debtors whose indebtedness is repayable in installments over a period of more than five years. This section also specifies that '(e)xcept as provided under Grace Period-Termination of Policy, each eligible debtor will be insured automatically with respect to indebtedness contracted on or after the Date of Issue, on the date such indebtedness is contracted.' ¹ The plaintiff's application for the policy is attached, and there is an endorsement dated March 7, 1966, which recites that '(e)ffective March 1, 1966, the name of the Insured under Group Credit Life Policy Number 920185 is changed from the 1st National Bank of Malden to Floyd Hampton.'

The plaintiff made extensive use of the policy. When a particular debtor wanted or was required to obtain coverage, the plaintiff bank prepared an individual certificate, called a 'Statement of Life Insurance Protection,' on a form supplied by the insurer. The debtor was not required to make any oral or written application for the coverage. Premiums were charged to the debtor and credited to the bank's 'Insurance Premiums' Account. At the end of the month, the individual certificates were transmitted to Mr. Hampton with a remittance for fifty per cent of the premiums collected; the other fifty per cent was retained as a commission by the bank. Mr. Hampton then furnished the insurer with the information given him by the plaintiff, and the individual certificates were returned to the plaintiff bank. As noted, the policy was amended or modified by endorsement on March 7, 1966, to provide that Mr. Hampton, rather than the bank, was the 'insured.' There is no indication that a different insuring procedure was followed after the policy was so endorsed.

In the summer of 1966, Mr. King and his wife decided they wanted to buy a tract of land from Mr. Hampton and his brother, Felix. Mr. King had some net worth, but no ready cash, and the bank was hesitant to make the loan. Finally the bank agreed to lend Mr. King and his wife $7,500 with which to buy the property, on condition that Mr. King and his wife: (a) secure the loan with an additional tract of land; (b) guarantee the loan in part with a certificate of deposit for $1,000; and (c) that, as Mr. Zimmerman put it, '* * * we (plaintiff) write life insurance to cover the loan.' Mr. King agreed to these terms, and on August 22, 1966, made and delivered to the plaintiff a promissory note in the amount of $7,575, payable in installments of $80 per month. The sum of $75, representing the premium charged for the life insurance, was added to the principal of the note. Then, again according to Mr. Zimmerman, '(w)e insured Mr. King for $7,500.00 for a twelve month period beginning August 22nd, '66,' and the bank then prepared an individual certificate for Mr. King. Mr. King made five payments on the note and died suddenly on January 25, 1967. Asserting that Mr. King was ineligible for insurance because his indebtedness was not repayable within five years, Farmers New World refused the plaintiff's claim for benefits. This action followed.

No findings of fact were requested in this case, none were made, and with deference to able counsel for the bank, he has not made his theory of liability very clear in this court. Generally, the bank's theory seems to be that Mr. King was properly included in the group insured, even though some ten years would have been required to amortize his loan and the policy specifically excludes debtors whose indebtedness is not repayable within five years. As between the bank and the defendant insurer, the essential questions tendered are questions of policy construction, and we take the case as it is presented by the appellant. It is true that this is a court-tried case, and under Rule 73.01(d), V.A.M.R., it is our duty to review the case upon both the law and the evidence, but even so we perform our appellate function only with respect to the specific matters urged by the appealing party; it is not our duty, and we will not voluntarily review the whole case on our own initiative to determine what result we would have reached if we were sitting as a trial court. Schlanger v. Simon, Mo., 339 S.W.2d 825, 828(1--3).

The policy, though we will not set out the pertinent provisions at length, looks to the automatic insurance of all the bank's debtors whose indebtedness to the bank falls in one of seven specified categories. The criterion of insurability, in other words, is not the debtor's age or the state of his health, but the nature of his loan agreement with the bank. One of the categories listed in that part of the policy which defines insurable risks is stated simply and without qualification as 'level term.' The appellant bank's first briefed point is that the exclusory provision noted--prohibiting insurance of any debtor whose indebtedness is not repayable in five years--does not apply to 'level term' insurance. In arguing this point, the bank implicitly but unmistakably assumes that the master policy constituted the bank an agent for the insurer, so that it had the 'right to write level term coverage on one of its borrowers.' In this connection, the plaintiff draws an elaborate distinction between the types of life insurance policies which are used as credit life policies. According to the bank, and the authorities which counsel cites, ² both 'level term' policies and 'decreasing term' policies are used as credit life policies. By plaintiff's definition, the words 'level' (fixed) and 'decreasing' refer to the benefit payable upon the insured debtor's death; therefore a 'level term' policy is a life insurance policy for a specified term which pays a fixed benefit ratably to the debtor's creditor and the estate of the insured or other beneficiary if the debtor dies during the term; a 'decreasing term' policy is a term policy written so that the death benefit is originally equal to the debtor's full debt, but declines as the obligation decreases through periodic installment payments. Calling our attention to Mr. Zimmerman's testimony that he was motivated to deal with Farmers New World because the insurer '* * * would offer level term insurance and reducing term insurance for the same cost,' counsel asserts that the policy gave the bank the right to include Mr. King for one year because the policy at one point includes the two words 'level term.'

While some of the premises upon which plaintiff bases its argument may be true, some are definitely not, and we do not agree with plaintif...