Hardee v. Penn Mut. Life Ins. Co. of Philadelphia

• Decision Date: 04 May 1949
• Docket Number: 16211.
• Citation: 53 S.E.2d 861,215 S.C. 1
• Parties: HARDEE v. PENN MUT. LIFE INS. CO. OF PHILADELPHIA.
• Court: South Carolina Supreme Court

53 S.E.2d 861

215 S.C. 1

HARDEE v. PENN MUT. LIFE INS. CO. OF PHILADELPHIA.

No. 16211.

Supreme Court of South Carolina

May 4, 1949

Royall & Wright, Florence, Emil T. Cannon Florence, for appellant.

Willcox, Hardee, Houck & Palmer, Florence, Woods & Woods, Marion, for respondent.

BAKER, Chief Justice.

On August 27, 1935, appellant-insurer issued two identical policies of insurance upon the life of the respondent-Hardee each policy providing for a base $2500 Ordinary Life insurance, plus additional 20 Year Term insurance of $3420. Each of the policies provided for waiver of premium both on the Life and Term portions thereof in case the insured, prior to reaching the age of 60 years, should become totally disabled for a continuous period of six months or more, and during the continuance of such disability.

We will hereafter refer to only one policy of insurance since they are identical in every respect, and any conclusion herein reached will be applicable to both. They were so treated in the trial Court and on appeal to this Court.

The contract of insurance, or policy, is made up of two parts forming the one contract, to wit, the Ordinary Life for a base of $2500, and a 'Supplemental Agreement attached to and made a part of (the) Policy,' for the 20 Year Term insurance of $3420, commencing on page 9 of the contract or policy.

On page 1 of the policy and typed at the bottom thereof is the following:

'Convertible Income Agreement Providing for $3,420.00 Term Insurance Making Total Insurance $5,920.00 Disability Waiver.'

Beginning near the bottom of the first page of the Supplemental Agreement, but page 9 of the contract or policy of insurance is this stipulation:

' Privileges of Conversion

'At any time within ten years from the Original Date and when no default in premium payment exists, this Agreement may be exchanged upon proper surrender, but without evidence of insurability, for a Life or Endowment policy for an amount (in multiples of $1000) not greater than the amount of Term Insurance then in force under this Agreement. One of the two following based may be chosen in effecting this exchange:----

'(1) Provided the age of the Insured at the date of exchange does not exceed the insuring age of 65 the new Policy may be made effective from the date of surrender of this Agreement, on the policy form then used by the Company and at the premium rate of the Company then in force for the age attained by the Insured. The first year's premium will be reduced by the reserve on the amount of Term insurance so exchanged computed in accordance with the American Experience Table of Mortality with 3 per cent interest;

'or (2) The new Policy may be made effective from the Original Date, on the policy form then used by the Company and at the premium rate of the Company then in force for the age of the Insured at that Date, conditioned upon payment of the difference in premiums for the two plans of insurance on the amount of insurance converted, and for that part of the Term which has already elapsed, with compound interest at the rate of 6 per cent per annum.

'If it is desired to have the new policy include a provision for Double Indemnity Benefits or for Total and Permanent Disability Benefits, evidence of the Insured's good health and insurability in all other respects satisfactory to the Company must be furnished.'

At the foot of page 9 of the contract, appearing in bold and large type--is: Convertible Income Agreement,' and immediately thereunder is printed in smaller type, 'Term Insurance for Twenty Years,' the word 'Twenty' having been inserted by typewriter. And on page 11 of the contract or policy, at the foot thereof, appearing in large bold type is:

'Total And Permanent Disability Waiver of Premium.'

On August 24, 1944 (within approximately nine years from the 'Original Date' of the policy), the respondent-Hardee requested the appellant-Insurance Company to convert the $3420 Term portion of insurance to an Ordinary Life policy in the same amount, offering to pay the difference in the premiums as calculated by the appellant-Insurance Company. The latter named refused to convert the Term portion of the insurance into an Ordinary Life policy such as was the $2500 portion of the policy, embodying a premium waiver clause if the insured should become totally disabled for a continuous period of six months or more, and during the continuance of such disability, unless the respondent-Hardee would furnish it with evidence of his good health and insurability. The insured was unable to furnish such evidence, and to the contrary frankly admitted that he was not an insurable risk, and could not obtain other insurance. The position of the insurer was and is that waiver of premium is a 'Disability Benefit,' and that under its contract or policy, it had the legal right to refuse to issue a new policy containing such a waiver clause. The appellant-Insurance Company was willing to convert the Term insurance to Ordinary Life insurance without the waiver of premium benefit. Of course the policy as was then in force (and so far as the record discloses is still in force) contains such a waiver clause both as to the Life and Term insurance.

On November 21, 1944, the respondent-Hardee instituted actions against the appellant-Insurance Company in the Civil Court of Florence, in each action demanding damages actual and punitive in the sum of $3000.00, for the alleged fraudulent breach of its contracts, and finally resulting in verdicts for nominal actual damages, practically by direction of the Court, in the sum of $12.00, and $1500.00 punitive damages, in each case.

The complaint alleged that the appellant-Insurance Company fraudulently breached its contract to convert the Term insurance of the policy to Life insurance, without the respondent-Hardee being required to furnish evidence of his insurability. Appellant-Insurance Company, in its answer and throughout the trial denied any fraud and denied any breach whatever, asserting that the contract involved provided for conversion of the Term insurance to Life insurance without requiring evidence of insurability, only if the conversion should be to Ordinary Life or endowment insurance without any disability benefits; and that the contract specifically required evidence of insurability if the converted insurance should include disability benefits in the form of waiver of premiums; and that the respondent-Hardee, while failing to furnish evidence of his insurability, had demanded that the converted insurance include certain disability benefits, to-wit: disability waiver of premiums to which he was not entitled under the contract.

At the close of all the testimony the appellant-Insurance Company moved for the direction of a verdict in its favor generally, or failing in that, for a direction of verdict as to punitive damages. These motions were overruled as appears from what we have hereinbefore stated.

Both the Appellant-Respondent-Insurance Company, and the Respondent-Appellant-Hardee have appealed from the holdings and rulings of the trial Judge, the former alleging error in the construction of the insurance policy to the effect that the Term insurance provided was convertible without evidence of insurability, and the latter alleging error in charging the jury to the effect that the insured could only recover nominal actual damages.

The trial Judge held that the contract was plain and unambiguous and that the appellant-Insurance Company breached its contract in refusing to convert the Term insurance to Life insurance with premium waiver clause unless furnished by the respondent-Hardee with evidence...