Harwell v. Mutual Ben. Health & Acc. Ass'n

• Decision Date: 17 August 1945
• Docket Number: 15768.
• Parties: HARWELL v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.
• Court: South Carolina Supreme Court

35 S.E.2d 160

207 S.C. 150

HARWELL v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.

No. 15768.

Supreme Court of South Carolina

August 17, 1945

Thomas, Cain & Black, of Columbia, and G Badger Baker, of Florence, for appellant.

McEachin & Townsend, of Florence, for respondent.

FISHBURNE, Justice.

This action was brought for the recovery of damages for the alleged wrongful and fraudulent refusal of appellant to accept a renewal premium on an accident insurance policy issued and delivered by it to the respondent. It is alleged that such conduct on the part of the appellant was part of a scheme or design to defraud respondent in his rights under the policy. The trial of the case resulted in a verdict and judgment against appellant in the sum of $46.50, actual damages, and $1250, punitive damages. From this judgment the appeal is taken.

The insurance policy in question is styled 'Special Automobile Accident Policy,' and was issued by appellant Mutual Benefit Health and Accident Association, to the insured, who is respondent herein, on March 5, 1934. It was terminated by the appellant on May 1, 1943, by its refusal to accept further annual premium payments.

The main contention of appellant is that the trial Court erred in holding that the policy was terminated without lawful authority, whereas it should have held that the appellant had the right under the terms of its policy to decline to accept such renewal premium; and erred in refusing to grant appellant's motions for a nonsuit and for a directed verdict.

Under the policy, the insurance coverage is confined exclusively to injury or loss of life arising out of automobile accidents and the contention of respondent is that the provisions of the policy are so ambiguous, and so equivocally expressed that it should not be construed as term insurance but as a continuous non-cancellable contract.

At the top of Page 1 of the Policy, this promise is held forth:

'Death Benefit

'Without Increase .... $1 000.

'Death Benefit

'With Full Increase .. $2 000.'

The figures are printed in heavy black type so as not to escape attention.

On the bottom of Page 1, under Part B, the policy provides:

'Annual Increase One Hundred Dollars Per Year. After the first year's premium has been paid, each year's renewal premium paid in advance on this policy shall add One Hundred Dollars to the death benefit until the same amounts to Two Thousand ($2000.00) Dollars.'

There is nothing on the first page of the policy, in big print or small type, to put the insured upon notice that the insurance company reserved any right to refuse the acceptance of any renewal premium. Following the above quoted portion of the policy, on the second page, provision is made for double death benefit, total accident disability, partial accident disability, medical attendance, financial aid if injured on automobile trip, special coverage, and additional benefits if confined to hospital. These various clauses are followed by the policy's standard provisions. This is all that appears on Page 2.

It is not until Page 3 is reached, at the end of the policy, under the casual heading, 'Additional Provisions,' do we find any suggestion that the acceptance of an annual renewal premium shall be optional with the Association. Under this heading, in fine type, it is provided, in Section (c):

'The copy of the application endorsed hereon is hereby made a part of this contract and this policy is issued in consideration of the statements made by the Insured in the application and the payment in advance of Six Dollars and Fifty Cents ($6.50) the first year; and the payments in advance of Five ($5.00) Dollars annually thereafter, beginning with Mar. 1, 1935, is required to keep this policy in continuous effect. If such dues be unpaid at the office of the Association in Omaha, Nebraska, this policy shall terminate on the day such payment is due. The mailing of notice to the Insured at least fifteen days prior to the date they are due shall constitute legal notice of dues.' (Emphasis added.)

At no point in the foregoing provision is there any intimation that appellant reserves any right to refuse the acceptance of a premium. An ambiguous reservation of this kind appears for the first time in small type as a second paragraph in Section (c). It reads as follows:

'The acceptance of any renewal premium on this policy shall be optional with the Association, and should the premium provided for herein be insufficient to meet the requirements of the Association it may call for the difference as required.'

It is further provided, in section (d):

'The term of this policy begins at 12 o'clock noon, Standard Time, on date of delivery to and acceptance by the Insured and ends at 12 o'clock noon on date any renewal is due.'

Appellant takes the position that the insurance involved here was term insurance only, for the term for which the premium was paid in advance; that acceptance of any renewal premium was optional with the Association; and that it rightfully exercised this option and rejected the premium tendered after May 1, 1943.

Respondent contends that the quoted provisions of the policy worked such a change in the insurance, by reason of their equivocal and inconsistent terms, that it ceased to be term insurance, and became in effect assimilated to lifetime insurance, terminable like life insurance only upon failure to pay the premiums as they fell due. The trial Court, in a well reasoned order, overruled a motion non obstante veredicto, or in alternative, for a new trial, and adopted the view of the respondent. After a careful examination of the policy provisions, we reach the same conclusion.

It is true that the policy does provide, in fine print at its end, that the acceptance of any renewal premium shall be optional with the Association, but too much has gone before which, to our mind, conflicts with this provision, and conflicts to such an extent as to justify the construction that the policy was a continuous, non-cancellable contract.

It appears to us that the optional clause itself is not free from ambiguity. After providing that the acceptance of any renewal premium shall be optional, it continues, in the same sentence, 'and should the premium provided for herein be insufficient to meet the requirements of the Association it may call for the difference as required.' This clause can reasonably be construed to mean, as contended by respondent, that the Association could refuse the five doller premium and demand an adjusted premium based upon its needs. In the light of the contradictory provisions of the policy, this is one of the meanings which may be assigned to the optional clause so as to keep the insurance in 'continuous effect,' and effectuate the intention of the parties.

The trial Court, discussing the provisions relating to the annual cumulative benefits under Part B, soundly reasoned as follows:

'This provision is made conspicuous by its designation as one of the major portions of the policy, and by its prominence on Page 1 with the above-quoted heading in heavy black type. The prominence of the clause is made even more striking by the following stipulation at the top of Page 1, in which the figures are emphasized in very large type:

"Death Benefit Without Increase .. $1 000.00

"Death Benefit with Increase ..... 2 000.00'

'Two points, I think, are significant in connection with this portion of the policy. The annual increase in death benefits was in the first place, at the inception of the contract, held out to the insured by the defendant as an inducement to not only purchase the insurance, but more particularly as an incentive to maintain it in force over a period of years. It is also noteworthy that if it were the intention of the defendant to invoke the absolute right now claimed by it to reject annual renewal premiums, that right could have been made manifest by the insertion following the words 'paid in advance' of the words 'and accepted by the Association.' The language of Part B as it stands may be fairly construed as showing the intention on the part of the defendant of conferring upon the insured the right to maintain the insurance in continuous effect for the specific purpose of increasing the death benefit protection from year to year. In this connection it is of more than passing interest that the insured in this case, over a period of seven years by successive annual renewals, had increased the death benefit value of the policy from One Thousand ($1 000.00) Dollars to One Thousand Seven Hundred ($1 700.00) Dollars.'

We recognize, of course, the general rule that the ordinary insurance policy covering accident is generally regarded as a species of term insurance, not renewable except with the consent of the insurer. But this formula is not so rigid that it may not undergo modification when the particular provisions of a policy require it. The policy contract in the case at bar must be considered as being of a dual nature, having incongruous elements in its composition. It is not only so phrased as to be deemed term insurance, but it reaches further and is susceptible of the construction that it is continuous insurance, provided only that the premiums be paid.

Policies carrying substantially the same optional clause, reserving the right to refuse the acceptance of premiums, have been up for construction in quite a number of other jurisdictions. Mutual Ben. Health & Accident Ass'n v. Caver, 169 Miss. 554, 152 So. 897; Massachusetts Bonding & Ins. Co. v. McConnel, 50 Ga.App. 87, 176 S.E. 911; Davis v. Mutual Ben. Health & Accident Ass'n, 168 Okl. 514, 34 P.2d 579. See Annotation, 119 A.L.R. 530.

In the foregoing cases, it was held to be not entirely inconsistent with the...