Kampf v. Franklin Life Ins. Co., Springfield, Ill., C--1532

• Decision Date: 05 June 1959
• Docket Number: No. C--1532,C--1532
• Citation: 56 N.J.Super. 185,152 A.2d 162
• Parties: Jean D. KAMPF, Plaintiff, v. FRANKLIN LIFE INSURANCE COMPANY, SPRINGFIELD, ILLINOIS, a corporation of the State of Illinois, Defendant.
• Court: New Jersey Superior Court

Page 185

56 N.J.Super. 185

152 A.2d 162

Jean D. KAMPF, Plaintiff, v. FRANKLIN LIFE INSURANCE COMPANY, SPRINGFIELD, ILLINOIS, a

corporation of the State of Illinois, Defendant.

No. C--1532.

Superior Court of New Jersey, Chancery Division.

June 5, 1959.

Max Klayman, Newark, for plaintiff.

McCarter & English, Newark, for defendant.

COLIE, J.S.C.

This matter is before the court for determination on cross-motions of plaintiff and defendant, which cross-motions present the question of whether or not the death of the insured on April 22, 1958 was within the 31-day grace period for the payment of premiums. Stated another way, the primary question is whether or not the policy had lapsed on April 22, 1958, the date the insured died.

Franklin Life Insurance Company insured the life of Morton Kampf for 20 years, with a provision for payment of $100 monthly income to the named beneficiary. The application for insurance was made on September 5, 1956, and the description of the policy therein read: 'a. Plan of Policy Home Protector--20.' It provided that premiums were to be paid quarterly. At the bottom of the application (Part 1) it read:

'It Is Hereby Agreed: * * * (2) that any policy issued hereon shall not take effect unless and until the policy has been delivered to the undersigned and the first premium paid during the lifetime and good health of the Proposed Insured (except as provided in the Receipt bearing the same number and date as this application if the entire first premium has been paid and acknowledged above and such receipt issued) in which event such policy shall be deemed effective as of the beginning of the first policy year as shown on such policy; * * *.'

The first premium was paid and the policy delivered to the insured on September 24, 1956. The policy, in part and so far as pertinent to the issue here presented, reads as follows:

'Consideration: The insurance is granted in consideration of the application herefor and of the payment in advance of the premiums as herein provided. The first premium in the amount specified on the first page, is payable at the beginning of the first policy year and subsequent premiums are payable on the anniversary of said date in every year thereafter until premiums have been paid for the period specified on the first page.

'Premiums: This Policy is based upon the payment of premiums annually in advance but premiums for the first and subsequent policy years may be paid semi-annually or quarterly in advance or, at the option of the Company, they may be paid monthly in advance. Each semi-annual, quarterly or monthly premium shall be in accordance with the rates in use by the Company at date of issue hereof. * * * Failure to pay any premium when due shall cause this Policy to cease and determine except as herein otherwise provided, and all payments made hereon shall remain the property of the Company.

'Grace Period: A grace period of thirty-one days, without interest charge, will be allowed for the payment of every premium after the first, during which period this Policy shall remain in force. If death occurs within the grace period, the premium, if unpaid, will be deducted from the amount payable hereunder.

'Entire Contract: This Policy and the application therefor, a copy of which is hereto attached and made a part hereof, constitute the entire contract between the parties. * * *'

The face of the policy reads:

'Premiums Payable during 20 years or until prior death of the Insured

'First Policy Year Begins September 21, 1956

'Expiry Date September 21, 1976'

and below that the face of the policy reads:

'This Policy is issued and accepted subject to all the conditions, benefits and privileges set forth on the subsequent pages hereof, which are hereby made a part of this contract.

'20 Year Reducing Term Insurance--Non-Participating

'Monthly Income Payable from Death of Insured until Expiry Date

'Premiums Payable for 20 Years or until Prior Death of Insured'

The first premium was paid and the policy delivered to the insured on September 24, 1956. Thereafter, the quarterly payments were paid by the insured, his last check being dated December 31, 1957. On April 22, 1958 the insured died. In May 1958 the company received at its home office a check from the father of the plaintiff to its order for $18.30, dated April 19, 1958. The envelope containing the check was dated May 1, 1958. The defendant company returned the check to the plaintiff May 6, 1958.

Defendant contends that the grace period had expired on April 21, 1958, and asserts that the 31-day grace period is to be computed from March 21, 1958; whereas the plaintiff contends that the grace period is to be computed from March 24, 1958.

The question for decision is novel in this State, and in other jurisdictions there is a conflict of opinion. See 44 A.L.R.2d 472. On the one hand, a number of courts have held that under life insurance contracts providing a specific date (usually the date of 'issuance') from which the period of coverage shall be calculated and upon the anniversary of which subsequent premiums will be due, but also stipulating that the insurer shall not be liable until the occurrence of some later validating act (usually the delivery of the policy and payment of the first premium), the courts in a majority of the cases have held that the policy provision as to the premium due date should be given controlling effect in determining whether the insured was covered at the time of his death. On the other hand, the minority of courts hold that where a life insurance contract which stipulates a date from which the policy shall be effective and from which premium periods shall be calculated also provides that the insurer shall not be liable until the date of some later validating event, such as the delivery of the policy and the payment of the first premium, an ambiguity arises which, in the absence of circumstances requiring a different result, will be resolved in favor of the insured, so that in determining the date when a policy lapses for non-payment of premiums, the premium period will be calculated from the date when the coverage actually became effective, rather than from the earlier date mentioned in the policy.

In determining the questions here presented, certain principles must be constantly borne in mind. The primary one...