Friend v. S. States Life Ins. Co.

• Decision Date: 10 October 1916
• Docket Number: Case Number: 4672
• Citation: 1916 OK 868,58 Okla. 448,160 P. 457
• Parties: FRIEND v. SOUTHERN STATES LIFE INS. CO.
• Court: Oklahoma Supreme Court

1916 OK 868

160 P. 457

58 Okla. 448

FRIEND v. SOUTHERN STATES LIFE INS. CO.

Case Number: 4672

Supreme Court of Oklahoma

Decided: October 10, 1916

Syllabus

¶0 1. INSURANCE -- Action on Life Policy -- Pleading -- Exhibits. Where an action is brought on a policy of life insurance, and a copy of the policy is attached to the petition and made a part thereof, such copy should be considered as a part of the petition when construing the allegations thereof on demurrer.

2. SAME--Contract--Nature. A policy of life insurance, without any qualifying provisions, is not a contract of insurance for a single year, with a privilege of renewal from year to year by paying the annual premiums. It is an indivisible and continuous contract of insurance for life, subject, when so stipulated, to discontinuance and forfeiture for nonpayment of any installment of premium. Such premium installments are not intended as the consideration for the respective years for which they are paid, but each installment is part consideration of the entire insurance for life.

3. SAME--Premiums--Effect of Default. The consequence of a default in payment of one annual premium, due under an indivisible and continuous contract of insurance, is determined by common-law principles, where the contract does not otherwise provide.

4. SAME. Ordinarily the payment of an annual premium on a policy of life insurance, after the policy has become effective by payment of the first year's premium, is not a condition precedent to the continuance of the policy, but, on the contrary, is a condition subsequent only, the nonperformance of which may incur a forfeiture of the policy, or may not, according to the circumstances.

5. SAME. A clause in a policy of life insurance which provides only that "this policy is incontestable after one year from date of the breach of any of the provisions thereof, except failure to pay premiums as required," and which further provides that upon payment of the policy the company may deduct any sum or sums due the company, does not forfeit the policy for failure to pay the annual premium when due; but the insurance continues in force, subject to the right of the company to terminate it, if after due notice the insured shall fail to pay the premium in arrears with interest, and the further right to retain out of any settlement arising under the policy the unpaid premium and interest thereon.

6. INSURANCE--Contract--Construction--Forfeiture. Forfeitures are looked upon by the courts with ill favor, and will be enforced only when the strict letter of the contract requires it. On the question of forfeiture of a life insurance policy, which is so framed as to be fairly open to construction, the view should be adopted, if possible, which will sustain rather than forfeit the contract of insurance.

Error from District Court, Oklahoma County; George W. Clark, Judge.

Action by Julia A. Friend against the Southern States Life Insurance Company. From a judgment sustaining a demurrer to the petition and dismissing the cause of action, plaintiff brings error. Reversed and remanded, with instructions to overrule the demurrer and set aside the order of dismissal with leave to defendant to answer.

Everest, Smith & Campbell and Hunt C. Hill, for plaintiff in error.

Wilson & Tomerlin and E. E. Buckholts, for defendant in error.

SHARP, J.

¶1 This case presents error from the district court of Oklahoma county, and involves the sufficiency upon demurrer of plaintiff's petition, charging liability to her of the Southern States Life Insurance Company upon a policy of insurance issued by it on the life of Joseph A. Friend September 7, 1907. The policy provided that in consideration of $ 483.90, and the annual payment of a like sum at or before noon on or before the 7th day of September in every year during its continuance, the company covenanted to pay at its general office in the city of Atlanta, Ga., $ 10,000, less any sum or sums due it, to Julia A. Friend, wife of the insured, immediately upon receipt and approval of proofs of death of the insured, Joseph A. Friend, of Tulsa, Ind. T., while said policy was in full force, provided, however, that if no beneficiary should survive the insured, then such payment should be made to the executors, administrators, or assigns of said insured. It was provided that the policy should be incontestable after one year from the date of the breach of any of the provisions thereof, except failure to pay premiums as required. A clause of the policy provided that it should be automatically nonforfeitable; that, if any premium thereon should not be paid when due, any withdrawable surplus should first be applied to pay the same, and the remainder of the premium, if any, should be charged against the policy as a loan if the respective loan value was sufficient to enable such advance after providing for the existing loans and accrued interest, provided that, if not sufficient to cover the entire remainder, a premium for a shorter period, but not less than a monthly premium, should be provided for, if the available loan value was sufficient; that notice of such application of surplus and advance should be mailed to the insured, and at any time while the policy was thus sustained in force the payment of premiums might be resumed. Another clause made the benefits, privileges, or provisions written or printed on other pages of the policy a part thereof. These benefits, privileges, and provisions found on the additional pages of the policy concern different subjects pertaining to said insurance policy, under appropriate headings as follows: (1) Account with policy holder; (2) policy paid up by surplus; (3) policy matured as an endowment by surplus; (4) policy paid up with sum insured; (5) withdrawal of surplus; (6) change of beneficiary; (7) assignment of policy; (8) errors of age; (9) time and place of payment of premiums; (10) occupation, travel, residence, mode, and place of death; (11) authority of agents; (12) distribution of surplus; (13) loans and surrender privileges; (13a) surrender; (13b) table of cash loans, paid-up insurance, and period of extension, at different anniversaries of said policy, referred to in the policy and in sections 13 and 13a.

¶2 The petition charged that, notwithstanding the failure of the insured to pay the second year's premium, still the policy by its terms was in full force on March 1, 1909, the date of the death of the insured. A copy of the policy was attached to the petition as an exhibit, and made a part thereof by reference. The judgment of the trial court was that the petition failed to state facts sufficient to constitute a cause of action. The limit of our inquiry therefore is: Did the court err in sustaining the demurrer?

¶3 At the outset it may be said that, where suit is brought on an instrument in writing for the payment of money, and a copy of such instrument is attached to the petition and made a part thereof, such instrument should be considered as a part of the petition when construing the allegations thereof on demurrer. Grimes v. Cullison, 3 Okla. 268, 41 P. 355; Whiteacre v. Nichols, 17 Okla. 387, 87 P. 865; Long v. Shepard, 35 Okla. 489, 130 P. 131; Davis et al. v. Board of County Com'rs, ante, p. 77, 158 P. 294.

¶4 As the court's action in sustaining the demurrer is defended upon the ground that the nonpayment of the premium for the second year automatically worked a forfeiture of the policy, it is proper that we consider the nature and character of a policy of insurance made payable at the death of the insured, as is the policy before us. The leading case wherein the rule defining the character of a contract of insurance is stated is New York Life Ins. Co. v. Statham, 93 U.S. 24, 23 L. Ed. 789, where the court said, speaking through Mr. Justice Bradley:

"We agree with the court below that the contract is not an assurance for a single year, with a privilege of renewal from year to year by paying the annual premium, but that it is an entire contract of assurance for life, subject to discontinuance and forfeiture for nonpayment of any of the stipulated premiums. Such is the form of the contract, and such is its character. It has been contended that the payment of each premium is the consideration for insurance during the next following year, as in fire policies. But the position is untenable. It often happens that the assured pays the entire premium in advance, or in five, ten, or twenty annual installments. Such installments are clearly not intended as the consideration for the respective years in which they are paid; for, after they are all paid, the policy stands good for the balance of the life insured, without any further payment. Each installment is, in fact, part consideration of the entire insurance for life. It is the same thing where the annual premiums are spread over the whole life. The value of assurance for one year of a man's life, when he is young, strong, and healthy is manifestly not the same as when he is old and decrepit. There is no proper relation between the annual premium and the risk of assurance for the year in which it is paid. This idea of assurance from year to year is the suggestion of ingenious counsel. The annual premiums are an annuity, the present value of which is calculated to correspond with the present value of the amount assured, a reasonable percentage being added to the premiums to cover expenses and contingencies. The whole premiums are balanced against the whole insurance."

¶5 The doctrine of the Statham Case was reaffirmed in Thompson v. Knickerbocker Life Ins. Co., 104 U.S. 252, 26 L. Ed. 765, 26 L. Ed. 765, and McMaster v. New York Life Ins. Co., 183 U.S. 25, 22 S. Ct. 10, 46 L. Ed. 64. In the former case it is announced that the court did not accept the position that the payment of the annual premium was a condition precedent to the continuance of the policy, but, on the contrary, said that the payment constituted a condition...