Kelly v. New England Mut. Life Ins. Co.

• Decision Date: 19 March 1929
• Docket Number: No. 12638.,12638.
• Citation: 32 F.2d 611
• Parties: KELLY v. NEW ENGLAND MUT. LIFE INS. CO.
• Court: U.S. District Court — Western District of Pennsylvania

32 F.2d 611 (1929)

KELLY v. NEW ENGLAND MUT. LIFE INS. CO.

No. 12638.

District Court, E. D. Pennsylvania.

March 19, 1929.

George J. Edwards, Jr., of Philadelphia, Pa., for plaintiff.

Fraley & Paul, of Philadelphia, Pa., for defendant.

KIRKPATRICK, District Judge.

The plaintiff's position in this case is that the words, "the holder of this policy," and "the holder," in the nonforfeiture provisions of the policy, mean the beneficiary, or, as she is called in this policy, the annuitant; that inasmuch as the nonforfeiture provisions give certain options in case of default in the payment of premiums, if the right to such options were to be of any value, the beneficiary was entitled to receive notice of such default; and that, not having such notice, she is now, after the death of the insured, entitled to exercise the right of election between the options referred to.

A consideration of the policy makes it clear, however, that the plaintiff's interpretation of the words, "the holder," which is the basis of her whole case, cannot be sustained. The plaintiff does not contend, and could not successfully contend, that, as beneficiary, she was entitled to notice of default in payment of premiums. New England Mutual Life Ins. Co. v. Clinchfield Coal Corp. (C. C. A.) 9 F.(2d) 46, 51. Her rights, if any, in this respect, must depend upon whether she is included in the provisions of the nonforfeiture clause relating to the holder. But these words plainly refer to that person who at any particular time has an interest in the contract of insurance as distinguished from the proceeds; in other words, the person who is paying the premiums, or, more definitely, the insured or his assignee.

If the policy be read carefully, it will be seen that the word "insured" appears twelve times, and the word "annuitant," referring to the person to whom the proceeds are payable, nine times. Thus, the two parties whom the insurance company, whose language it is, had in contemplation at the time of issuing the policy, were precisely named and distinguished. The policy might, however, be assigned later on, and in the nonforfeiture provisions the parties had to deal with a situation which might arise under an assignment. The person paying the premiums at that time might be the insured, or some one else. Obviously, "holder" was adopted as an apt and convenient word to describe either of these persons who might be paying the premiums at that time.

Much of the plaintiff's argument is directed to the point that the beneficiary of a policy of insurance has certain rights in the proceeds which vest at the time when the designation is made in accordance with the terms of the contract. There is no doubt about that proposition. The contract of insurance is in this respect sui generis, but the beneficiary's rights do not in any sense make her the owner of the contract. In Chase National Bank et al. v. United States, 278 U. S. 327, 49 S. Ct. 126, 73 L. Ed. ___, Mr. Justice Stone points out what the rights of the persons paying the premiums are, and leaves no doubt that such person is the real owner of the contract. To such a person, the word "holder" may be more aptly applied than to one who has an interest in the proceeds, no matter how well fortified that interest may be.

In Entwistle v. Travelers' Ins. Co., 202 Pa. 141, 51 A. 759, the case most strongly relied upon by the plaintiff, the policy did not contain any provision that, in order to surrender the policy and receive its cash value, the holder had to obtain the written consent of the beneficiary. The court in that case was therefore faced with the alternative of either...