Halliday v. Equitable Life Assur. Soc.

• Decision Date: 27 July 1926
• Docket Number: No. 4946.,4946.
• Citation: 54 N.D. 466,209 N.W. 965
• Parties: HALLIDAY v. EQUITABLE LIFE ASSUR. SOC.
• Court: North Dakota Supreme Court

54 N.D. 466

209 N.W. 965

HALLIDAY

v.EQUITABLE LIFE ASSUR. SOC.

No. 4946.

Supreme Court of North Dakota.

June 25, 1926.

Rehearing Denied July 27, 1926.

Syllabus by the Court.

A fifteen-year term policy in standard form as prescribed by section 6635, C. L. 1913, does not accord the privilege of extended insurance, and is not within the purview or purpose of section 4886, C. L. 1913, providing automatic insurance in case of default.

In the absence of facts or circumstances showing a waiver, express or implied, of a stipulation in the policy for annual payment of the premium, the insurer cannot be compelled to accept payment of less than the installment agreed to be due and payable on a named date; and where the insured had the privilege of paying premiums quarterly, semiannually, or annually, and has elected to pay annually, until that stipulation is abandoned or waived, either expressly by agreement, or impliedly by custom or the course of conduct of the insurer, it is incumbent upon the insured to pay the premium in full when due, or within the period of grace.

Custom or an insurer's course of conduct may afford a basis for a reasonable excuse for not paying the premium at the time or in the manner stated in the policy, when such custom or course of action is not within the terms of the contract.

When the insurer applies a dividend upon the premium, due the same day as the dividend, it cannot declare the policy forfeited for nonpayment of the premium during the time that such dividend is sufficient to pay the premium.

Appeal from District Court, Ward County; Geo. H. Moellring, Judge.

Action by Mary J. Halliday, otherwise known as Polly Halliday, against the Equitable Life Assurance Society. From a judgment for plaintiff, defendant appeals. Affirmed.

Fisk & Nash, of Minot, for appellant.

B. H. Bradford, of Minot, for respondent.

JOHNSON, J.

This is an appeal from a judgment of the district court in favor of the plaintiff as beneficiary under a life insurance policy.

The facts are stipulated as follows: Two policies of insurance Exhibits A and B, dated May 12, 1914, were, some days thereafter, delivered to Dr. James Halliday at Mohall, N. D.; the premiums were due according to the face of the instruments, on May 12, each year with 31 days of grace. The insured paid the premiums from 1914 to 1920, inclusive. The premium on Exhibit A was $61.32 and on Exhibit B $40.88, both due May 12, 1921, according to the face of the contract; the dividend on the former policy, due at the same time, was $11.58, and on the latter $7.72. During the existence of the policies, the dividends were applied upon the premiums as they fell due and the balance was paid by the insured. The insured made a written election for the payment of dividends in this manner for the years 1915, 1916, 1917; for 1918, 1919, and 1920, it appears that the insured sent a check for the balance, after deducting the dividend, without a written election, and this mode of payment was accepted by the insurer. About May 10, 1921, the insured made arrangements with the cashier of a bank at Mohall to transmit the premiums to the defendant; this was not done. Thereafter, on June 21, 1921, the insured died at Grand Forks, N. D., and on June 23, notice of death was received by the defendant. It is stipulated that immediately after the insured had arranged for the payment of the premium as above stated he became ill and unable to attend to his business. On July 28, following, the defendant issued its dividend checks payable to the insured, and transmitted them addressed to him at Mohall; and on August 6, the checks were returned by the plaintiff. On August 8, 1921, the beneficiary plaintiff herein, widow of the insured, sent two bank drafts to cover the premium due on the policies, but the defendant refused to accept payment, claiming that the policies had lapsed prior to the death of the insured.

It is stipulated that the amount of dividends due on the policies on May 12, 1921, “if applied to the payment of premium of one policy, would be sufficient to pay one quarterly premium thereon at the society's rate, leaving a balance equal to or greater than the pro rata portion of the annual premium for the period intervening between May 12, 1921, and June 21, 1921, if such balance under the terms of the policy could be applied for less than a quarterly premium.” It was stipulated, likewise, that the quarterly premium upon Exhibit A would be $16.25, and the quarterly premium upon Exhibit B would be $10.33. Exhibit A is for $3,000, and Exhibit B for $2,000.

[1] The policy is a 15-year “term” policy, “nonrenewable-convertible.” It is either the form of policy standardized in section 6635, C. L. 1913, and which appears on page 1556 of the Compiled Laws, or the standard policy prescribed in section 6635, beginning on page 1558 of the Compiled Laws. The policies in suit do not strictly comply with either of the forms adverted to; the first is an ordinary term insurance form, without the privilege of renewal or conversion; the second is substantially the same as the first, except that it contains a clause permitting the insured either to renew or convert the policy. Both policies in suit contain the conversion privilege, but neither gives the right to renew. We think that the policies must be construed to be term policies of the first type, with the privilege of conversion and exchange within seven years.

Each policy contains the following:

“Except as herein provided the payment of a premium or installment thereof shall not maintain the policy in force beyond the date when the next premium or installment thereof is payable.”

This is the language of the statutory form. See section 6635, p. 1556, C. L. 1913. Defendant contends that this is a forfeiture clause.

Each policy provides that the insured shall participate in the distribution of the surplus, that dividends are payable in cash, in the absence of election, and that it may be reinstated at the request of the insured at any time within the period of 15 years, being, in this respect, more liberal than the statutory form which limits the right of reinstatement to the first three years of the term; and which also provides that in no event need the privilege of reinstatement be granted in policies for terms of less than 20 years.

The policy provides, substantially in the language of section 6635c, subd. 3, C. L. 1913, that it shall constitute the entire contract between the parties; that the application is a part of the contract; and that the insurance “is granted in consideration of the payment in advance of (the premium) and the payment annually thereafter of a like sum upon each 12th day of May, during the term of 15 years, or until the prior death of insured.” The contract expressly states that it is “based upon the payment of premiums annually; but premiums may be paid, subject to the society's written approval, in semiannually or quarterly installments. * * *” The application, which is a part of the contract, contains the following clause:

“I hereby agree that the policy issued hereon shall not take effect until the first premium has been paid during my good health.”

The court found that the premium was paid and the policy delivered some days after the date it bears, namely, May 12, 1914; but the record does not show the date on which the premium was paid and the insurance policy became effective as protection to the insured.

It was the contention of the plaintiff below, and is here: (1) That there is no forfeiture clause in the policy, and that therefore the policy was in full force at the time of the death of the insured; (2) that if it be held that the policy contains a forfeiture clause, the defendant is liable notwithstanding, because: (a) It appears that the policy does not take effect until the payment of the first premium and that the first premium was paid sometime after the 12th of May, 1914. From this it follows, the argument runs, that the 31 days of grace must be calculated, not from the date of the policy, May 12, but from the date when the premium was paid and the policy became operative as a contract of insurance. (b) The defendant had in its possession money in the form of dividends and $1 overpayment which should have been applied to prevent a forfeiture. (c) That under the law, section 4886, C. L. 1913, the insured was entitled to extended insurance, notwithstanding the absence of such a provision in the policy.

In behalf of the defendant and the appellant the contention is that the insured was not entitled to extended insurance, either under the contract or under the statutes; that the provision for extending insurance is not required to be inserted in term policies, or in term policies with a right to renew and change; that section 6635, pp. 1557 and 1560, expressly exempts term insurance policies of less than 20 years' duration from the requirement that the contracts shall include a clause providing for continuance of insurance in case of lapse; and that subdivision 8, § 6635c, C. L. 1913, evinces a like intention...