Ibs v. Hartford Life Ins. Co.

• Decision Date: 10 May 1913
• Citation: 121 Minn. 310,141 N.W. 289
• Parties: IBS v. HARTFORD LIFE INS. CO.
• Court: Minnesota Supreme Court

121 Minn. 310

141 N.W. 289

IBS

v.HARTFORD LIFE INS. CO.

Supreme Court of Minnesota.

May 2, 1913.

Order of Affirmance Modified May 10, 1913.

Appeal from District Court, Ramsey County; Frederick N. Dickson, Judge.

Action by Eliza Ibs against the Hartford Life Insurance Company. From an order denying defendant's motion for judgment notwithstanding the verdict or for a new trial, defendant appeals. Affirmed.

Syllabus by the Court

Action to recover on a benefit certificate, or policy of life insurance upon the assessment plan; the defense being that the insured had failed to pay an assessment and an installment of dues, and that the policy had therefore been forfeited. Evidence considered, and held to show conclusively that there was no necessity to levy an assessment to pay any part of the death claims, to pay which the assessment in question was levied; the mortuary fund on hand available for the payment of death claims being more than sufficient in amount to pay all such claims.

The policy does not authorize the levy of an assessment to pay losses that may be anticipated to occur in the future, and in the absence of such authorization an assessment, that is unnecessary to pay accrued losses, but which is really levied to create a fund out of which to pay future losses, is illegal, and the failure to pay such assessment is not ground for a forfeiture of the policy.

Though keeping a balance in the mortuary fund for convenience in the prompt payment of losses may be warranted by the contract, yet when such balance is sufficient in amount to pay all losses that have accrued, an assessment to pay such losses is illegal to the extent that a forfeiture cannot be predicated upon the nonpayment of such assessment.

The assessment in question, though nominally levied to pay specified death claims that had accrued, was in reality levied to create or replenish a fund out of which to pay future losses.

It having been the long-continued and uniform custom of defendant to give the insured notice of each demand for expense dues, thus giving the insured the right to believe that such notice would be continued to be given, defendant cannot forfeit the policy for a failure to pay dues is to which no notice has been given.

The notice given in this case, demanding payment of a single amount, which included the illegal assessment and the quarterly dues, and notifying the insured that, unless such amount was paid by a day stated, his policy would be forfeited, made it clear that a tender of the dues alone would have been a vain and idle ceremony, and the law does not require a tender under such circumstances. Such notice was not a sufficient notice as to the dues.

It was not error to exclude from evidence certain decrees of a Connecticut court, neither the issues nor the parties being the same as in the case at bar. Nor did the court, in excluding such decrees, violate either the full faith and credit clause of the United States Constitution, or the provisions of such Constitution forbidding any state to pass any law impairing the obligation of contracts. Durment, Moore & Sanborn, of St. Paul, and Jones, Hocker, Hawes & Angert and Geo. F. Haid, all of St. Louis, Mo., for appellant.

O. E. Holman, of St. Paul, for respondent.

BUNN, J.

This is an action to recover upon a certificate of membership, or policy of life insurance upon the assessment plan, issued by defendant to Herman Ibs, in which policy plaintiff was designated as the beneficiary. At the close of the evidence the trial court directed a verdict in favor of plaintiff for the full amount of the policy, with interest. Defendant appeals from an order denying its motion for judgment notwithstanding the verdict or for a new trial.

The case was before us at the April, 1912, term on an appeal by plaintiff from an order denying a new trial after a dismissal. Without determining the questions argued on that appeal, we held that there ought to be a new trial, to ‘clarify the claims of the respective parties, and enable the court to determine the case upon the merits as then presented.’ Ibs v. Insurance Co., 119 Minn. 113, 137 N. W. 289. The case is before us now after such a determination on the merits by the trial court. It is not claimed that there was any question in the case for the jury to pass upon, and clearly either plaintiff or defendant was entitled to a directed verdict.

[1] As stated in our opinion on the former appeal, the defense to the action was the failure of the insured to pay the dues and a certain assessment, which were due and payable June 20, 1910. Plaintiff admitted this failure to pay these dues and this assessment, but claimed that the assessment was unlawful under the terms of the contract, and that the failure to pay the dues did not forfeit the policy, because the ‘call’ for the same was coupled with the demand for the illegal assessment, and also because defendant had in its possession at the time of the alleged default money derived from accumulated interest on its safety fund, which the contract provided should be distributed among the policy holders in reduction of their dues.

This question of the duty of the defendant to apply the insured's proportion of the safety fund in payment of his dues in order to save a forfeiture is not presented on this appeal. The main questions now before us for decision are: (1) Was the nonpayment of the assessment ground for forfeiture of the policy? (2) If it was not, was the failure of the insured to pay the dues payable June 20th a sufficient ground? To determine the legality of the assessment in question, we must look to the language of the contract, and to the facts relating to the purpose for which the assessment was levied.

By the terms of the certificate or policy, issued by defendant to Ibs April 4, 1885, he agreed to pay and was required to pay assessments proportioned to the maximum indemnity provided for by the policy, which assessments, in the language of the policy, are to be ‘levied against the herein named member to form a mortuary fund for the payment of all indemnity matured by deaths of members, which assessments, to be levied upon all members in the department wherein this certificate is issued, whose certificates are in force at the dates of such deaths, shall be made according to the table of graduated assessment ratios given herein, and as further determined by their respective ages and the aggregate maximum indemnity at the dates of such deaths, with due allowance for discontinuance of membership.’ It is further provided in the policy that the member ‘also agrees to pay said company, upon all certificates that shall mature by death, within 30 days from day on which notices bear date, all assessments determined as within set forth, the proceeds of which, after deducting 10 cents on each assessment for cost of collection, shall form said mortuary fund.’

The facts relating to the levy of the assessment, for the nonpayment of which the policy was declared forfeited, are as follows: The call for the assessment was sent to the insured May 2, 1910. The notice states that the assessment ‘is made to meet 145 deaths (as shown by accompanying list), benefits $323,919.95.’ The list accompanying the notice contained the names of 145 deceased members, the claims of whose beneficiaries were included in the call and aggregated the exact amount of the assessment, together with the dates of their deaths, beginning September 28, 1909, and ending February 13, 1910. The assessment was based upon conditions and data existing as of the date March 31, 1910, and its preparation was begun April 1st. On March 31st, the mortuary fund, made up from the accumulations of prior assessments, amounted to the sum of $168,473.58. Of the death losses, to pay which the assessment was levied, and stated in the call, aggregating $323,919.95, there had been paid prior to March 31st $198,994.19, leaving $124,925.76 unpaid, a sum less by $43,547.82 than the balance then in the mortuary fund.

It is plain, therefore, that all of the death losses, to pay which the assessment in question was levied, could have been paid out of this mortuary fund, without levying the assessment, and a balance of over $43,000 left in the fund. We think it clear that the necessity for this assessment and its validity must be determined by the condition of the so-called mortuary fund on March 31st, and the amount of the death losses to pay which the assessment was levied, according to the notice sent to members. There were some death losses at that date which, though not used as a basis for arriving at the amount of the assessment, and not mentioned in the call, had been reported to defendant, and part of them approved. We hold that these should not be considered. The assessment was not levied to pay such losses, but only the losses stated in the list accompanying the notice. Death losses not included in this list were included in subsequent assessments.

1. We have, then, this situation: There was no necessity to levy an assessment to pay any part of the losses included in the list attached to the notice. They could all have been paid out of the balance in the mortuary fund, and a balance left in that fund. Was it legal for defendant to forfeit a contract of a member for the nonpayment of an assessment, made nominally to pay specified death losses that had already occurred, but in reality to create or replenish a fund out of which future death losses could be paid?

[2] 2. We have hereinbefore stated the provisions of the contract that relate to the purposes for which assessments may be levied, and have italicized the language which is pertinent on the question before us. It is true that it is provided that assessments shall be levied ‘to form a mortuary fund’; but it is stated that this fund is for the payment of ‘all indemnity matured by deaths of members,’ and that the assessment is to be levied upon all members ‘whose certificates are in...