Johnson v. Central Life Assurance Society of United States

• Citation: 246 N.W. 354,187 Minn. 611
• Decision Date: 13 January 1933
• Docket Number: 29,161
• Parties: MARIE E. F. JOHNSON v. CENTRAL LIFE ASSURANCE SOCIETY OF THE UNITED STATES
• Court: Supreme Court of Minnesota (US)

246 N.W. 354

187 Minn. 611

MARIE E. F. JOHNSON v. CENTRAL LIFE ASSURANCE SOCIETY OF THE UNITED STATES

No. 29,161

Supreme Court of Minnesota

January 13, 1933

Action in the district court for Ramsey county to recover under the double indemnity provision of two insurance policies issued by defendant upon the life of Howard Martin Johnson. Plaintiff is the assignee of the beneficiary of the policies. The facts were stipulated. The court, Loevinger, J. found for plaintiff, and defendant appealed from an order denying its motion for a new trial. Reversed with directions to amend conclusions of law so as to order judgment for defendant.

SYLLABUS

Insurance -- life -- default -- extended insurance -- double indemnity benefits.

1. Provisions in a life insurance policy, that upon lapse of the policy for nonpayment of premiums after the policy has been in force for three years and failure of the insured to elect to receive cash payment or paid-up insurance for its reserve value the insurance shall be automatically extended for such time as the net reserve value will pay for, but without the benefit of the double indemnity for death of the insured caused directly by accident, are not prohibited or rendered invalid by our statutes governing insurance.

Insurance -- life -- standard form.

2. Such a policy is not one of the standard forms set forth in G.S 1923 (1 Mason, 1927) § 3399. But the statutes permit other policy forms, under the limitations stated in other sections, and the form of policies here used is permissible and not prohibited or rendered invalid by our statutes governing life insurance.

Stearns Stone & Mackey and Fred P. Carr, for appellant.

Patrick J. Ryan, for respondent.

Alexander & Green and Kellogg, Morgan, Chase, Carter & Headley, amici curiae, filed a brief in behalf of Equitable Life Assurance Society of the United States.

Doherty, Rumble, Bunn & Butler, amici curiae, filed a brief in behalf of Minnesota Mutual Life Insurance Company and New York Life Insurance Company.

Oppenheimer, Dickson, Hodgson, Brown & Donnelly and George W. Jansen, amici curiae, filed a brief in behalf of Prudential Insurance Company of America.

Byron K. Elliott, Ralph H. Kastner, and Maurice E. Benson, amici curiae, filed a brief in behalf of American Life Convention.

OPINION

OLSEN, J.

The defendant appeals from an order denying its motion for a new trial.

The action is one to recover what is known as the double indemnity in case of death caused by accident, under two life insurance policies, issued on May 24, 1923, upon the life of Howard Martin Johnson. The plaintiff is the assignee of the beneficiary named in said policies. The facts are stipulated. Howard Martin Johnson was killed in an automobile accident on May 17, 1931. Due proof of accidental death was furnished to defendant. Each policy provides that the defendant company agrees to pay $1,000 to H. Martin Johnson, the beneficiary, upon due proof of death of the insured, or $2,000 if such death is caused directly by accident, subject to the terms and conditions on the third page of the policy. There is also a disability benefit provided, not here in question. The consideration for each policy is the payment of an annual premium of $29.18, then paid, and the payment of a like amount on the 24th day of May each year thereafter until 20 full-year payments had been made or until the prior death of the insured. There is a provision for payment of premiums semi-annually. The premium includes in each payment $1.75 annually for the double indemnity. The policies are Minnesota contracts, governed by our insurance statutes. The defendant has duly paid on each policy the $1,000 agreed to be paid as straight life insurance, but not the $1,000 additional to be paid in case of death caused by accident.

The insured paid the premiums on the policies until and including the semi-annual premium due May 24, 1929. He paid no further premiums, and the policies lapsed November 24, 1929, except as to the policy provisions hereinafter considered. At the time the policies lapsed, the cash or surrender value of each thereof was sufficient to keep both the single life feature and the double indemnity feature in force for a term beyond the date of the death of the insured, but not up to the end of the 20-year payment term.

The policy provisions directly involved read as follows:

"Options on Surrender or Lapse.

"After this policy shall have been in force three full years, the owner, within one month after any default, may surrender this policy and may elect:

"(a) to accept the value of this policy in cash, or

"(b) to have the insurance continued in force from date of default, without the right to loans, for its face amount and outstanding dividend additions less any indebtedness to the Company hereon but without total and permanent disability or double insurance benefits, or

"(c) to purchase non-participating paid-up insurance, payable at the same time and on the same conditions as this policy but without total and permanent disability or double insurance benefits.

* * *

"The term for which the insurance will be continued or the amount of the paid-up policy will be such as the cash value will purchase as a net single premium at the attained age of the insured according to the American Experience Mortality Table and interest at the rate of three and one-half per centum per annum. Such continued and paid-up insurance shall be non-participating.

* * *

"If the owner shall not, within one month from default, surrender this policy to the Company at its Home Office for its cash surrender value or paid-up insurance, as provided in options (a) or (c), the insurance will be continued as provided in option (b)."

Under the head of "Double Insurance Benefit" the policies read as follows:

"If the death of the insured, before a disability claim has been allowed, and before attaining age sixty, results directly and independently of all other causes from bodily injuries effected solely through external, violent and accidental causes within ninety days from the occurrence of such accident, of which, except in the case of drowning or of internal injuries revealed by an autopsy there is a visible contusion or wound on the exterior of the body, the Company will pay double the face of the policy provided premiums have been duly paid and this policy is then in force and is then surrendered properly released.

"This agreement to pay an increased amount in event of death from bodily injury does not cover death from suicide, whether sane or insane, nor from military or naval service in time of war, nor from an aeronautic or submarine expedition, nor directly or indirectly from disease in any form, including ptomaine poisoning.

"In event of non-payment of the premium due on this policy this benefit automatically ceases and no further premiums are payable.

"Upon the assured's attaining age sixty this provision shall cease and determine and no further premiums shall be payable.

"In event any premium on this benefit remains unpaid the Company will cancel this provision."

We have then clear provisions in the policies, the contracts entered into by the parties, that the double indemnity, the $1,000 to be paid in case the insured died from accident, should cease and not be included in the extended insurance resulting upon lapse of the policies for nonpayment of premiums. The insured did not elect to take the cash surrender value or paid-up insurance, and the extended insurance automatically went into effect. Counsel have stipulated that the only question to be decided by the trial court is whether the double indemnity feature of the policies was extended and continued in force because of the requirements of the insurance laws of this state, notwithstanding the contrary provisions of the policies; in other words, whether the policy provisions that the double indemnity benefit of the policies would cease and not be included in the extended insurance after the policies lapsed are contrary to and invalid under our laws governing insurance contracts. If not prohibited or rendered invalid by our statutes governing insurance, the parties could lawfully make the contracts here in question, and the courts could not change or invalidate the contracts so made except on the ground of fraud or other grounds not here involved.

Plaintiff relies on G.S. 1923 (1 Mason, 1927) §§ 3392 and 3393, reading as follows:

"3392. In event of default in payment of any premium due on any policy, provided not less than three full years' premiums shall have been paid, and provided further, such policy shall not be continued in force by virtue of an automatic loan provision therein, there shall be secured to the insured without action on his part, either paid or extended insurance as specified in the policy, the net values of which shall be at least equal to the entire net reserve held by the company on such policy, less two and one-half per centum of the amount insured by the policy and dividend additions, if any, and less any outstanding indebtedness to the company on the policy at time of default. There shall be secured to the insured the right to surrender the policy to the company at its home office within one month after date of default for the cash value otherwise available for the purchase of the paid-up or extended insurance as aforesaid. Such cash payment to be made within six months after demand therefor.

"3393. No agreement between the company and the policyholder or applicant for insurance shall be held to waive any of the provisions of this act."

These sections are sections 4 and 5 of L. 1907, p. 225, c. 198 entitled: "An act to require an annual apportionment and accounting of surplus of life...