Ill. Bankers Life Assur. Co. v. Cutlip, Case Number: 26121

• Decision Date: 25 September 1935
• Docket Number: Case Number: 26121
• Citation: 173 Okla. 563,49 P.2d 1051,1935 OK 858
• Parties: ILLINOIS BANKERS LIFE ASSUR. CO. v. CUTLIP
• Court: Oklahoma Supreme Court

1935 OK 858

49 P.2d 1051

173 Okla. 563

ILLINOIS BANKERS LIFE ASSUR. CO. v. CUTLIP

Case Number: 26121

Supreme Court of Oklahoma

Decided: September 25, 1935

Syllabus

¶0 Insurance--Life Policy--Default in Payment of Premium Extension Note Effecting Forfeiture of Policy.

Where a life insurance policy grants a period of 31 days' grace for the payment of premiums and provides that default in payment of any premium or any note given therefor shall work a forfeiture of the policy and that no forfeiture shall be waived or time for payment of any premium extended except by written consent of the insurance company, and where an extension note is executed during a grace period which extends the time of a premium payment and also provides that default in payment of same on due date shall work a forfeiture of the policy and recites that same is not given in payment of the premium, the failure to pay said note when due forfeits the policy in the absence of a waiver or of a reserve to apply on extended insurance.

Appeal from District Court, Oklahoma County; Claude Weaver, Judge.

Action by Nina G. Cutlip against the Illinois Bankers Life Assurance Company. Judgment for plaintiff, and defendant appeals. Reversed and dismissed.

Everest, McKenzie & Gibbens, for plaintiff in error.

Keagy & Williams, for defendant in error.

PER CURIAM.

¶1 Herein plaintiff in error will be referred to as defendant and defendant in error as plaintiff, as they appeared in the trial court, where plaintiff brought this action, as the assured, on a $ 1,000 20-payment life insurance policy written by defendant, against defendant for damages for the wrongful forfeiture of the policy. This case involves the right of the defendant to forfeit the policy, and if it had, then whether defendant waived such right, where the September, 1933, quarterly premium of $ 10.32, with interest, became due November 1, 1933, under an extension agreement note, and was mailed to defendant November 2nd and received by defendant November 4, 1933, the defendant retaining $ 7.20, the earned premium to November 1st, and returning the remainder.

¶2 Plaintiff by her amended petition alleged that the policy was issued to her on March 1, 1931, as of June 1, 1918, in exchange for another policy in another company; that on November 4, 1933, all premiums due had, been paid and said policy was in full force and effect, and defendant, without the consent and against the will of plaintiff, declared said policy forfeited and canceled same, and, although plaintiff was in good health, told plaintiff she was no longer an insurable risk; and plaintiff alleged she was thereby damaged in the sum of $ 1,000, for which she prayed judgment. Defendant by answer admitted the execution of the policy of insurance, but denied the policy was in force on November 4, 1933, and alleged same was forfeited by failure of plaintiff to pay said premium on November 1, 1933; and further alleged that said premium became due September 1, 1933, for which a premium extension note and agreement was executed by plaintiff by the terms of which the policy would become void if said note was not paid when due on November 1, 1933; that said note was not paid on November 1, 1933, and thereafter plaintiff made application for reinstatement wherein she admitted the policy had lapsed, and alleged that the policy was never reinstated. Plaintiff's reply was a general denial. Upon the issues so joined trial was had to a jury. At the close of plaintiff's evidence defendant demurred, and at the close of all the evidence moved for a directed verdict and saved its exceptions to adverse rulings. Then by agreement of the parties and consent of court, the jury was discharged for the purpose of permitting the court to determine the question of law and render judgment. The court found for and rendered judgment in favor of the plaintiff for the sum of $ 470.70 with interest. To indicate the theory upon which the court rendered judgment, we quote therefrom:

"Of course, if the forfeiture clause in said premium extension agreement which I have just read should be enforced literally by its harsh terms the judgment must be for the defendant. It is not disputed in the evidence that on November 2, 1933, perhaps in the gray dawn after the solemn hour of midnight when the great bell had tolled the death of this policy, this widow woman, out of a pitiful and meager pension allowance bought a money order for $ 10.32, plus the interest, or total of $ 10.38, and mailed it to the defendant herein, the insurance company, at its office in Monmouth, Ill. and they received it on November 4, 1933.

"The pleadings in this case have not been drawn with that care as to present clearly to a court of equity the issues. Counsel for plaintiff are not to be censored for failure to come into court and pray for the cancellation of a premium extension agreement of which they perhaps had no notice whatever, same being in the possession of the defendant and not brought to light until the trial of this case."

¶3 And at another place in the judgment, the trial court said:

"The insurance company got this money, the $ 10.38, and kept it. They notified the plaintiff that they had received the money order and notified her that the policy was dead--dead as a door nail midnight November 1, and exacted of her at the critical period in a woman's life at the age of 46 years that she should take a medical examination for which their doctor got paid, and divers other sources of revenue that I know not what it might be. If there ever was a more unconscionable proposition in a court than this, I don't know what it is, and for that reason I hold that such an unconscionable contract should not be upheld, and I further find from the evidence that when Nina G. Cutlip signed this premium extension agreement she thought she was signing a note, and when she signed it she thought that the due date of it was November 4, and from her standpoint, according to what she thought, she had paid it. But if it was a note, then it is just a matter of collecting the note whether she paid it or not. If they accepted the note that is a payment and would have kept the policy in full force and effect until the last day of November, and having this view, and so finding, I must render judgment in favor of the plaintiff."

¶4 According to the evidence the plaintiff, in 1931, was a member of the Illinois Bankers Life Association, an assessment life insurance association, and held its certificate of $ 1,000, dated May 18, 1914, payable upon the death of assured. Said policy carried no reserve, assessments were to be paid during the life of assured, and it provided for lapse upon failure to pay assessments when due. Defendant company, in 1929, reinsured said association, and members of the association had the right without medical examination, to exchange their certificates therein for life insurance policies written by defendant company upon adjustment of premiums and reserves. Plaintiff exercised this right, and in March, 1931, applied for and received the policy involved herein, a 20-payment life policy for $ 1,000, with March 1, 1931, as the effective date of transfer. As an adjustment of premiums and reserves, said policy was dated as of June 1, 1918, so that plaintiff would have the benefit of premium at age 31, and of the policy becoming fully paid up on June 1, 1938, or 7 1/4 years from date of exchange, and plaintiff signed and delivered to defendant company a certificate of loan for $ 329.78, which bears interest from March 1, 1931, at the rate of 6 per cent. per annum, and which sum represented the reserve that would have accumulated on the policy had all premiums been paid from July 1, 1918, to March 1, 1931. This was necessary for the reason that the former certificate carried no reserve. No part of this certificate of loan or interest thereon has ever been paid, and with $ 52.76 interest, the amount owing thereon November 1, 1933, was $ 382.54. It was provided in the policy that same should be incontestable after two years from date provided premiums were paid; that all premiums would be due and payable at the home office in Monmouth, Ill., on or before date due, and that upon default in payment of any premium, or any note or interest thereon, whether such note be given for the first or subsequent premium, the policy would be null and void and all premiums forfeited to the company. A clause of the policy provided that a grace of 31 days (without interest) would be granted for the payment of every premium or installment thereof after the first premium, during which time the policy would remain in force. Another clause provided for reinstatement of the policy at any time after any default in premium payment upon written application of assured and evidence of insurability satisfactory to the company. Another clause provided for a cash loan on the policy when no premium be in default, in the amount shown in the Table of Values set forth in said policy, but that from such loan would first be deducted any existing indebtedness to the company secured by the policy. Said Table of Values shows that on November 1, 1933, this policy had a loan value of $ 354, less $ 382.54, the amount of said loan certificate. Another clause styled "Non-Forfeiture Provisions," provided that assured might during the period of 31 days following the due date of any unpaid premium, select one of three options: The first option provided for a cash value of the policy equal to its cash loan value; the second option provided that a policy of paid-up insurance would be issued for such amount as the cash value of the policy would purchase as a net single premium at the age attained by assured, but that the amount of paid-up insurance would be reduced by deducting from the cash value of the policy any indebtedness to the company on account of or secured by the policy; the third option provided that the assured may have the policy continued...