Harvey v. Union Central Life Ins. Co.

• Decision Date: 13 January 1931
• Docket Number: No. 3027.,3027.
• Citation: 45 F.2d 78
• Parties: HARVEY v. UNION CENTRAL LIFE INS. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

45 F.2d 78 (1930)

HARVEY v. UNION CENTRAL LIFE INS. CO.^*

No. 3027.

Circuit Court of Appeals, Fourth Circuit.

October 21, 1930.

Rehearing Denied January 13, 1931.

Randolph Murdaugh, of Hampton, S. C., for appellant.

Morris Lumpkin and Pinckney L. Cain, both of Columbia, S. C. (Thomas & Lumpkin, of Columbia, S. C., on the brief), for appellee.

Before PARKER, Circuit Judge, and WATKINS and SOPER, District Judges.

WATKINS, District Judge.

In order to understand and determine the issues in this case, it is necessary to set out a detailed and somewhat lengthy statement of facts. Appellant was named as the beneficiary upon a policy of insurance issued by appellee upon the life of her father, Willie Lawrence Brant. The application was dated October 22, 1918, was approved November 7, 1918 and the policy signed on November 9, 1918. The policy provided for a premium of $151.60 to be paid annually on October 22. The first premium was paid on the date of the application, and a receipt, incorporated in and forming a part thereof, was issued by the company's agent containing, inter alia, the following:

"It is agreed and understood that if said application is received and is approved on the plan and for the amount applied for, by said company at its home office, the said applicant will be insured from the date of such approval subject to the terms and conditions of the policy contract of said company; otherwise, there will be no liability upon the part of the company," etc.

This application was made a part of the policy contract. The insured died on June 25, 1929, having paid all premiums up to the one falling due October 22, 1928. Meanwhile, he had procured on June 26, 1926, a loan of $700 and evidenced the same by his policy lien note. He had also borrowed on October 22, 1927, for the purpose of meeting the premium then due the sum of $94.22, evidencing the same by his premium lien note. The aggregate amount due on October 22, 1928 on these two notes, including interest, was $825.36. He defaulted in the payment of the 1928 premium. On that date the policy value in excess of the indebtedness was, excluding from consideration the dividend of 1928, $42.64, and it is admitted that this amount was applied by the company in accordance with the provisions of the policy to the purchase of extended term insurance for a period of 237 days. It is admitted further that an additional sum of $33.48 accrued on the 1928 anniversary of the policy as an annual dividend. Appellant contends that this sum should have been applied to the purchase of extended term insurance upon the lapse of the policy, while appellee contends that it was payable only in cash. So far as the record shows, the company held this dividend and made no offer to pay it in cash until July 16, 1929, some weeks after the insured's death. Meanwhile, on December 6, 1928, the insured was notified by the company through its state manager as follows:

"You have a premium unpaid on policy #585106 of $151.60 less dividend of $33.48, leaving a net premium of $118.12 which was due October 22.

"Because of the indebtedness on the policy we can only offer to accept a note for $180.51 which will leave a balance in cash of $31.83, plus interest on note of $5.65, making a total of $37.48.

"Please let us hear from you and arrange a settlement to keep your policy in force. We inclose a note for your signature and trust it is convenient at this time to send us the cash necessary, also ask that you fill out and return the blank 356 inclosed."

This letter was followed by another letter from the home office, dated January 15, stating that the policy had been allowed to lapse and urging the importance of continuing the policy. Again on February 2, the home office wrote the insured renewing the offer to make a new loan for $906 upon the payment of $37.48 in cash, stating that this arrangement would provide for the payment of the premium and include all other indebtedness on the policy and provide for all payments up to the following October. This letter contained the following paragraph:

"If the policy is not reinstated, its present value, in excess of the indebtedness, will be applied to the purchase of extended insurance in accordance with the terms of the policy. This extended insurance will expire and the policy will be absolutely null and void on June 16, 1929."

Following this and other correspondence, the appellant on March 12 wrote the company as follows:

"Inclosed you will find ck $40.00 amount asked with dividend to reinstate W. L. Brant's life insurance policy. Your letter to my father has just reached me and as you know I am trying to carry this for him. Please send Drs. certificate to him at once."

This letter, with inclosures, was referred to the state manager of the company in South Carolina, who on April 18 wrote Mrs. Harvey, forwarding form for the completion of the transaction and requesting that the insured call on one of the company's medical examiners. Following this, several letters were written by the company's manager to Mrs. Harvey urging the completion of the transaction. Thereafter the insured was examined by one of the company's physicians who testified at the trial that he examined the insured on June 11, 1929, and reported on June 15, 1929, that he was not "a standard risk now."

Notwithstanding the above negotiations, the secretary of the company on June 24 forwarded to the insured an acknowledgment of a partial payment of interest on loan, stating: "Your remittance of $40.00 has been applied as partial payment of interest on the loan on your policy. There is a balance of $43.37 payable." Although this was signed in the name of the secretary, the assistant secretary of the company testified that this acknowledgment was made by the remittance clerk through error because of his failure to note that the policy was in a lapsed condition and that it was sent because it was the customary notice of the company acknowledging receipt of interest payments where the policy is in good standing. It must be observed, however, that previous acknowledgment of the receipt of the $40 had been made and that the check had been held pending negotiations for the reinstatement of the policy and that this receipt was made out and forwarded to the insured after the receipt of the medical examiner's certificate which was forwarded under date of June 15 and at a time when the company had in its hands all the data upon which to reinstate or deny reinstatement of the policy.

It will be observed further that the evidence shows that with all the facts before it the company did not offer to return this $40 until July 25, one month after insured's death, when the assistant secretary advised the appellant that the $40 was accepted under the condition that satisfactory evidence of good health should be furnished, and therein returned the amount by check which bore date July 3, 1929. The company had been notified of the insured's death by letter of June 25, 1929.

Briefly stated, the contention of the appellant at the trial was, and is now: First, that the effective date of the policy being November 7, the extended term insurance purchased by the admitted reserve of $42.64 ran for 237 days from that date and carried the insurance beyond the date of the death of the deceased; second, that the dividend accruing on the anniversary date of the policy in 1928 in the sum of $33.48 should have been applied to the purchase of extended term insurance, thus carrying the policy forward for an additional period of approximately 186 days; third, that the company's receipt and application of the $40 remittance to the reduction of the loan thereby increased the reserve on the policy to an amount sufficient to extend the insurance for an additional period of approximately 222 days, and that in any event there was a substantial question of fact as to the application of these amounts which the court erred in not submitting to the jury.

Appellee contends: First, that the extended term insurance purchased by the $42.64 reserve ran from October 22 and expired on June 16; second, that the 1928 dividend of $33.48 was payable under the terms of the policy only in cash; and, third, that the application of the $40 to the payment of interest on the loan was through error, without right, and that it cannot be held, therefore, to have reduced the loan or extended the term of its insurance.

A further outlining of the facts in stating the provisions of the policy will be necessary, but will be more appropriately discussed in considering the law of the case.

At the conclusion of the testimony the trial judge sustained the contention of the appellee and directed a verdict in its favor.

The appeal is based upon some fourteen exceptions, including subdivisions; but these may be comprehensively discussed under the three issues above set out.

Preliminary to a discussion of the specific issues involved, we call attention to the fact that an insurance policy, such as here under consideration, is a contract for life, that forfeitures are not favored by the law, and that ambiguous clauses should be construed most favorably for the insured, and that in case of repugnant clauses, that favorable to the insured must be adopted. And it is a fact universally recognized that policies of insurance are prepared by the companies and that if ambiguity exists in their provisions so that either one of two views may be reasonably adopted by the courts, that view will be sustained which is most favorable to the insured. First National Bank v. Insurance Co., 95 U. S. 673, 24 L. Ed. 563; Moulor v. American Life Ins. Co., 111 U. S. 335, 4 S. Ct. 466, 28 L. Ed. 447; Liverpool, etc., Ins. Co. v. Kearney, 180 U. S. 132, 21 S. Ct. 326, 45 L. Ed. 460; Hunt v. Springfield, etc., Ins. Co., 196 U. S. 47, 25 S. Ct. 179, 49 L. Ed. 382; Kelsey v. Union Central Life Ins. Co. (C. C. A.) 196 F. 195.

Bearing these general principles in mind, we...