Johnson v. American Life & Accident Ins. Co.

• Decision Date: 19 December 1940
• Docket Number: No. 25480.,25480.
• Citation: 145 S.W.2d 444
• Court: Missouri Court of Appeals
• Parties: JOHNSON v. AMERICAN LIFE & ACCIDENT INS. CO.

145 S.W.2d 444

JOHNSON v. AMERICAN LIFE & ACCIDENT INS. CO.

No. 25480.

St. Louis Court of Appeals. Missouri.

December 19, 1940.

Rehearing Denied January 4, 1941.

Appeal from St. Louis Circuit Court; Charles B. Williams, Judge.

"Not to be reported in State Reports."

Action on a life insurance policy by Roosevelt Johnson against the American Life & Accident Insurance Company. Judgment for defendant, and plaintiff appeals.

Affirmed.

John P. Griffin, of St. Louis, for appellant.

Claude K. Rowland and Thos. E. Gillespie, both of St. Louis, for respondent.

Williams, Nelson & English and Robert A. Schlafly, all of St. Louis, and Frank W. McAllister, of Kansas City, amici curiae.

BENNICK, Commissioner.

This is an action upon a policy of insurance which was issued on June 18, 1923, by the now defunct Quick Payment Old Line Life Insurance Company upon the joint lives of plaintiff, Roosevelt Johnson, and his wife, Effie Johnson, and by which, in consideration of the payment of a weekly premium of thirty-five cents, the company agreed, upon the death of either of the insured, to pay the survivor a death benefit of $462.

On February 8, 1927, the Quick Payment Old Line Life Insurance Company changed its name to First National Life Insurance Company of America, following which, on August 18, 1931, the policy in suit, along with others, was taken over and reinsured by the Mississippi Valley Life Insurance Company.

Thereafter, at the instance of one of the policyholders of the latter company, a receivership suit was brought against such company in the Circuit Court of the City of St. Louis, and two receivers were appointed by the court, one of whom was the then Superintendent of the Missouri Insurance Department. In the course of such suit, an order for the dissolution of the corporation was entered on April 25, 1932.

During the progress of the receivership, the defendant herein, American Life and Accident Insurance Company, entered into negotiations with the receivers of the Mississippi Valley Life Insurance Company with a view to the reinsurance of certain of the latter's outstanding policies, and on May 14, 1932, the court entered an order approving a reinsurance agreement which had been tentatively prepared as between defendant and the receivers, and authorizing its receivers to execute the same.

The fourth paragraph of such agreement, which is the portion of it of principal concern on this appeal, was as follows:

"As part of the consideration for this contract of reinsurance there shall be established and placed against each policy on which liability is assumed hereunder by the American Life and Accident Insurance Company, a lien equal to one hundred per cent of the legal reserve thereon, as it has been established and carried on the books and records of Mississippi Valley Life Insurance Company, on the date to which premium has been paid to said Mississippi Valley Life Insurance Company, such lien to bear interest at the rate of six (6%) per cent per annum compounded annually. Both lien and interest thereon shall be deducted from any payment made by American Life and Accident Insurance Company, pursuant to the terms of said policy, and from any settlement thereunder, or from the value used to purchase any paid-up or continued insurance except as otherwise hereinafter provided. American Life and Accident Insurance Company agrees that in the event of the death of any insured within ten years from May 14th, 1932, while his or her policy is in force, it will waive the aforesaid lien, or any balance thereunder remaining, and all interest accumulated thereon, but if death occurs after ten years from May 14th, 1932, the amount of the lien unpaid shall be deducted from any death benefit on such policy."

The lower court found in its findings of fact in the case that neither plaintiff nor his wife was ever formally notified of the reinsurance agreement. Indeed, according to plaintiff's own testimony, the first he learned of the reinsurance was in September, 1932, four months after the agreement had been effected, when defendant's collecting agent, accompanied by the district supervisor, called at his home and advised him, among other things, that defendant had taken over his policy from the other company. Plaintiff thereupon paid the agent two weeks' premiums on his policy, receipt for which was noted upon the card that had originally been issued to plaintiff by the Mississippi Valley Life Insurance Company to which he had of course been paying his premiums after such company had taken over the policy from the First National Life Insurance Company of America.

Plaintiff further testified that towards the latter part of the same month, he went to defendant's office in the City of St. Louis and had a conversation with the president of the company, Mr. S. B. Hunt, relative to whether his policy was "good", and whether defendant was "giving it the same backing that the Mississippi Valley did". According to plaintiff, Hunt assured him that "there wasn't any lien on the policy", and that "it had all the reserve, all the paid-up value, and everything"; and when asked about the extended insurance value of the policy, Hunt replied that "it was carrying the same with his company".

Hunt, for his part, had no recollection of any such conversation, which he thought, if it had taken place, would have been with some minor official or representative of the company; and he testified positively that he at no time advised plaintiff or any other policyholder of the former company that his company "would assume the responsibility and obligation of the reserves that were lost through the failure of this former company".

As to this feature of the case, the trial court merely found that "plaintiff knew of the insolvency of the Mississippi Valley Life Insurance Company, such knowledge having been obtained in a conversation with the president of the defendant company with respect to the reserve values and extended insurance that defendant would give the holders of policies it had assumed".

Thus it is to be observed that while the court found that plaintiff had had a conversation with Hunt, it did not find that Hunt had given him the assurances respecting the reserve and extended insurance values of the policy to which plaintiff had testified, and which Hunt, for his part, had denied.

At any rate, following the conversation which the court found that plaintiff had had with Hunt, plaintiff continued paying defendant the premiums on the policy until January 30, 1933, when the policy was allowed to lapse for the nonpayment of further premiums.

Plaintiff's wife died on January 23, 1934, almost a year after the date of the lapse of the policy; and thereafter plaintiff made proof of death upon forms for that purpose which he had obtained from defendant.

At the time plaintiff made proof of his wife's death, the policy was surrendered to defendant; and it thereafter remained in defendant's possession until it was subsequently produced in court with an assumption certificate attached to it referring to the reinsurance agreement and the limited liability that defendant had assumed thereunder. While defendant's witnesses could not be positive about the matter, their belief or recollection was that such certificate had been attached to the policy when it was turned in to the company and submitted to the claims committee. However, plaintiff had evidence to the contrary; and upon such controverted feature of the case, the lower court found that "there was no sticker attached to the policy before or at the time of its delivery to the defendant".

It was admitted that absent the lien provided by the reinsurance agreement, the policy, at the date of lapse, would have had a reserve value sufficient to have purchased extended term insurance up to and including the time of the death of the insured, and it seems also to be admitted, as the lower court found, that if the lien provided by the reinsurance agreement was to be given effect, the reserve value available under the policy was insufficient for extended insurance to embrace the date of the death of the insured.

Defendant denied liability upon the policy, and in due course this action was instituted, in which issue was joined upon the questions, first, of whether plaintiff was bound by the terms and conditions of the reinsurance agreement in the absence of actual notice thereof and an opportunity to appear and be heard in connection therewith; and, second, of whether, in any event, defendant had not waived any lien it might have had upon the policy by allegedly requiring plaintiff, when he notified defendant of his wife's death, to deliver the policy to it, make proof of death upon forms submitted to him, and execute a waiver of privilege so as to permit defendant to examine the hospital...