Givens v. Washington Nat. Ins. Co.

• Decision Date: 30 November 1936
• Docket Number: 16554
• Citation: 170 So. 810
• Court: Court of Appeal of Louisiana — District of US
• Parties: GIVENS v. WASHINGTON NAT. INS. CO

170 So. 810

GIVENS v. WASHINGTON NAT. INS. CO

No. 16554

Court of Appeal of Louisiana, Orleans.

November 30, 1936

Rehearing denied Dec. 14, 1936. Writ of certiorari refused Jan. 4, 1937.

Cabral Lenfant & Villere and Harry R. Cabral, all of New Orleans for appellant.

H. W. &amp H. M. Robinson and J. I. McCain, all of New Orleans, for appellee.

OPINION

JANVIER, Judge.

On September 16, 1929, defendant, Washington National Insurance Company, issued a policy of insurance to Percy Givens, a resident of the state of Louisiana, then thirty-three years of age. The policy stipulated that, in consideration of the specified premium, in the event of the death of Givens while the policy remained in effect, the company would pay to his designated beneficiary, Mary Ida Givens, his wife, a cash "benefit" of $ 135, and that, in the event of his being disabled by sickness or accident while the policy remained in effect, it would pay to him a weekly disability benefit at a rate fixed in the policy.

It stipulated for a premium of 50 cents, payable each Monday. This premium was regularly paid each week until June 26, 1933, but after that time no further premiums were paid. So that, at the time of Givens' death, which occurred on October 14, 1934, there had elapsed a period of fifteen months and eighteen days, during which no premiums had been paid.

After the death of Givens, his designated beneficiary made demand on the insurer for the proceeds of the policy, contending that, because of the provisions of Act No. 193 of 1906, the said policy had been automatically extended by the application to that purpose of the reserve which, at the time of the default, had accumulated.

Defendant company refused to make payment, maintaining that the statute in question had no application to this contract of insurance, it being a term policy for less than twenty years, and on this question the matter is now before us; the court a qua having agreed with plaintiff that the statute in question has application and that the reserve which had accumulated at the time of the default was sufficient to purchase extended insurance for a term even longer than would be necessary to include the date of Givens' death.

The act in question, which has been considered by the courts of this state on many occasions, provides that no policy of life or endowment insurance issued by any legal reserve life insurance company on the life of a resident of Louisiana, unless it be a term policy for twenty years or less, shall, after being in force three full years, lapse or become forfeited for the nonpayment of premiums until the reserve accumulated on the policy has been applied either in accordance with one of the options granted the insured, or, upon his failure to exercise one of the options, to the continuance in force of the full amount of the insurance for so long a period as the accumulated reserve will purchase at a net single premium rate at the age which the assured has attained at the time of the discontinuance of premium payments.

As we have stated, it will be noted, by reference to that act, that policies which are written for a fixed term of twenty years or less are exempted from the provisions of the statute. Therefore, before considering several defenses based on the contention that the plaintiff has not adopted the proper method in computing the reserve, it becomes first necessary that we determine whether the policy is one for a fixed term of twenty years or less, because, if it is, then there can be no recovery, since, obviously, it had been permitted to lapse because of failure to pay premiums, and plaintiff, if she is to recover, can do so only if the policy can be said to be not a term policy for a period of twenty years or less, and, therefore, automatically extended by the operation of the statute of 1906.

Defendant, conceding that it is a legal reserve life insurance company within the meaning of the statute and that the policy was written on the life of a resident of the state of Louisiana, maintains that the policy was written for the fixed term of one week and that, though it was renewable each week, if the company should consent to each such renewal, the right on the part of the company to refuse at any time to agree to such renewal rendered each week's contract a new one and not a mere continuation of the old. Strangely enough, we do not find the policy itself in the record, but, fortunately, the parties are not in disagreement as to the actual wording of its terms and conditions, the pertinent portions of which are set forth in the various briefs.

Counsel for defendant confidently point to the stipulation which provides that "all insurance hereunder is weekly term insurance, beginning the date this contract is dated, and renewable at the option of the company," and they argue that there is nothing to prevent the parties to a contract from agreeing to any terms and conditions so long as they do not offend against good morals, or otherwise contravene public policy, and that there is nothing so offensive in the stipulation that a policy is written for a very limited time and is renewable only at the option of the insurer.

There can be no doubt of the general rule that persons may freely contract and that, no matter how onerous their contracts may be, they may enter into them so long as public policy does not interfere. But here plaintiff points to various provisions in the contract which she contends are inconsistent with the theory that it was written for the limited term of one week, and her counsel maintain that, if the policy contains irreconcilable and inconsistent provisions, the courts must interpret the contract as a whole and, in doing so, must attempt to discover the intention of the parties thereto.

In one paragraph we find reference not only to the first premium, but to the payment of further premiums "thereafter." This seems to contemplate that there will be other premiums than the one stipulated for as consideration for the first week's protection, for, if the policy is for only one week, there would be no necessity for stipulating for the payment of weekly premiums thereafter. There would be one premium and only one. Thus the company appears to agree that, so long as the premiums are paid, the protection afforded by the policy shall continue. That this was the interpretation placed on the policy by Mr. Huff, the district manager of defendant company, is made evident by the following testimony elicited from him:

"Q. You would say then, that as long as the insured pays his premiums and as long as there are no unusual circumstances, the company will continue to accept the premium and keep the insured on the books? A. Yes, sir.

"Q. Mr. Huff, assuming that there are no unusual conditions and the insured paid his premiums promptly and that he was not sick and submitted no sick claims and wanted to pay his premiums, is it not a fact that this policy would have continued for an indefinite time? (3)5C A. Yes, sir."

The policy also contains a provision reading as follows:

"This policy shall not lapse for non-payment of premiums until the premiums for four (4) Mondays are in arrears; (3)5C"

If the policy was written for the limited term of one week, it seems to us most inconsistent that it should contain a provision that it will not be considered as having lapsed until four weekly premiums are in arrears.

But, more important still, and even more indicative of the fact that in reality the company intended to issue a policy for life subject to the continued payment of premiums and not for a limited term subject to renewal, is the fact that the premium rate stipulated for was to remain the same from week to week so long as the policy should be continued in force. It is entirely irreconcilable with the actuarial theory on which term insurance is written, that the premium for which a term policy is issued in the early life of an insured shall be the same as that at which it would have been written had the insured been in his declining years.

Mr. Copeland, an expert actuary, testified on behalf of defendant as follows on this subject:

"Q. Mr. Copeland, what I am interested in is, is it not normal actuarial soundness for the premium on a term policy to increase as the age increases? A. That is true in ordinary business, yes sir." Obviously, when a policy is written in early life, even if nominally for a limited term, if it provides for renewals from time to time at the same premium it is contemplated by the insurer that the policy will continue for a long, and in fact indefinite, period, and that, thus, the additional risk which attaches at old age and which would ordinarily require the assessment of a higher premium rate, will be compensated for by the fact that the fixed rate will, during the early years, produce an accumulation of reserve to provide for the additional risk during the later years. We recognized this in Johnson v. Life Insurance Company of Virginia, 169 So. 159, 164. In that case we quoted...