Kimball v. N.Y. Life Ins. Co.

• Decision Date: 11 October 1924
• Citation: 126 A. 553
• Parties: KIMBALL v. NEW YORK LIFE INS. CO.
• Court: Vermont Supreme Court

126 A. 553

KIMBALL

v. NEW YORK LIFE INS. CO.

Supreme Court of Vermont. Chittenden.

Oct. 11, 1924.

Exceptions from Chittenden County Court; Julius A. Willcox, Judge.

Action by Frank H. Kimball against the New York Life Insurance. Company. Judgment for defendant, and plaintiff excepts. Affirmed.

See, also, 96 Vt. 19, 116 A. 119.

Argued before WATSON, C. J., and POWERS, TAYLOR, SLACK, and BUTLER, JJ.

Charles H. Darling, of Burlington, for plaintiff.

Theodore E. Hopkins, of Burlington, for defendant.

SLACK, J. The action is contract on a life insurance policy. The defendant had a verdict and judgment below, and the case is here on plaintiff's exceptions.

The first question for review is whether the court erred in overruling plaintiff's motion for judgment non obstante veredicto. The ground of the motion, which is somewhat prolix, is that after this court held that the defendant was entitled to correct any error it might have made in computing the term of extended insurance, to wit, on August 17, 1920, the plaintiff tendered to the defendant the amount of a loan it had made to the insured and himself on this policy with interest thereon, which loan and interest then due the defendant, in making such computation deducted from the amount otherwis available to purchase extended insurance, and thereafter pleaded such tender by way of replication; that the subsequent pleadings of the defendant admitted the making of the tender, but denied the right to make it at that or any other time, and the motion asserts the right, both at law and in equity, to apply such tender in payment of the loan at the time of, and in connection with, any recomputation necessary to ascertain the term of extended insurance.

In considering the question thus presented, certain provisions of the loan agreement and of the policy, and the status of the insured respecting them, must be borne in mind. The plaintiff is beneficiary under life insurance policy No. 7,017,722, issued by defendant to one Charles B. Kimball, February 5, 1908. The polity provides that:

"At any time after three full years' premiums have been paid and while this Policy is in full force, the Company will advance, on pledge of the Policy and on the sole security thereof, an amount which, with interest thereon to the end of the current Policy year and with any unpaid portion of said year's premium, shall, at the option of the owner, be equal to or less than the Cash Surrender Value at the end of such Policy year; interest on the loan will be at the rate of five per centum payable annually; and if interest is not paid when due, it shall be added to the principal and bear interest at the same rate. Failure to repay any such advance or to pay interest shall not avoid this Policy unless the total indebtedness hereon to the Company shall equal its Cash Surrender Value, nor until one month after notice of such fact shall have been mailed by the Company to the last known address of the Insured and of the Assignee of record at the Home Office of the Company, if any."

On November 2, 1910, the defendant loaned to the insured and the plaintiff $64 under an agreement, the material parts of which are:

"Pursuant to the provisions of Policy No. 7,017,722 issued by the New-York Life Insurance Company on the life of Chas. B. Kimball said Company has this day advanced to the undersigned, and the undersigned have this day received from said Company, the sum of Sixty-four and no-100 Dollars ($64.00), and pledged said Policy with said Company as sole security therefor.

"In consideration of the premises, the undersigned hereby jointly and severally agree with said Company as follows:

"1. To pay said Company, on the next anniversary of said Policy, interest on said advance at the rate of five per centum per annum from this date to said anniversary, and annually thereafter on each anniversary of said Policy.

"2. To pledge, and do hereby pledge, said Policy as sole security for the repayment of said advance and interest, and herewith deposit said Policy with said Company at its Home Office, reserving, however, the right to reclaim said Policy by repayment of said advance with interest, at any time before due, said repayment to cancel this agreement without further action.

"3. That the sum so advanced shall become due and payable either—

"(a) If any premium on said Policy is not paid on the date when due, in which event the sum so due and payable, with interest, shall, without demand or notice of any kind, every demand and notice being hereby waived, be satisfied in the manner provided in said Policy; or

"(b) On the maturity of the Policy as a death-claim or as an endowment, or on the surrender of the Policy for a cash value. In any such event the amount so due and payable shall be deducted from the sum to be paid or allowed under the Policy.

"4. If interest is not paid when due it shall be added to the principal and bear interest at the same rate. Whenever the principal of said loan with overdue interest added thereto shall equal the Cash Surrender Value of said Policy, then the Policy shall become void and of no effect at the time and upon the conditions provided in said Policy for such contingency."

The policy provides that the payment of a premium shall not maintain the policy in force beyond the date when the next premium is payable, but that the policy may be reinstated within a specified time upon certain conditions, and that if reinstated "any loan which exists at the date of default, together with interest in accordance with the loan provisions of this Policy to the date of reinstatement to be, at the option of the insured on application for such reinstatement, either paid in cash or continued as an indebtedness against this Policy."

The premiums were payable semiannually, on February 5th and August 5th. The premium due August 5, 1912, was not paid. Later the insured attempted to get the policy reinstated, but all negotiations to that end ceased November 5, 1912, because of his failure to meet other payments then due. See 96 Vt. 19, 116 A. 119. Thereafter, so far as appears, he paid no attention to the policy or to the loan, nor did the plaintiff, until after the insured's death, which occurred January 13, 1916. Thus by the express terms of the policy it terminated on account of default in payment of premiums, and the loan, under the terms of the loan agreement, became due at the same time. This was a situation which the parties foresaw might arise and undertook at the outset to provide for. They agreed that if the loan became due through failure of the insured to pay premiums on the policy, it should be "satisfied in the manner provided in said policy." And the policy provides that "the owner may elect within three months after any default in payment of premiums, but not later, either (a) to accept the cash surrender value; or (b) to have insurance for the face amount of this policy plus any outstanding dividend additions and less any indebtedness to the company hereon continued in force from the date of default for such term as is hereinafter provided, but without future participation and without the right to loans or cash surrender value; or (c) to purchase nonparticipating paid-up insurance payable at the same time and on the same conditions as this policy." It further provides that the term for which such insurance will be continued under option (b) will be such as the cash surrender value of the policy will purchase at a net single premium, etc., and that if the insured shall not, within three months from default, surrender the policy for cash under option (a), or for paid-up insurance under option (c), "the insurance will be continued as provided in option (b)." The cash surrender value is made up of the reserve on the policy and on any dividend additions thereto at the date of default, computed according to the American Table of Mortality, with interest at the rate of 3 per cent. per annum, less the amount of any indebtedness to the company, and less a surrender charge, the amount of which depends upon the length of time the policy had been in force at the time of default.

The insured having failed to elect to take under options (a) or (c), the defendant, on or about August 4, 1913, without previous demand or notice, undertook to ascertain the amount and term of extended insurance to which he was entitled under option (b). The computation then made showed that he was entitled to have insurance for $1,479 continued to May 6, 1916. That fact was indorsed on the policy, which was returned to the insured and retained by him to the time of his death. After the happening of the latter event, the defendant claimed to have discovered a mistake in its computation due, as appears in 96 Vt. 19, 116 A. 119, to its having given the insured credit for certain dividends to which he was not entitled as a matter of right; and it claimed that, in fact, the insurance was not in force at the time of his death, and refused to pay the claim, whereupon this suit was brought. After we held that the defendant had the right to correct any error it made in the computation (see 94 Vt. 100, 108 A. 921), plaintiff made the tender which is the basis of his motion.

It is contended that defendant held the policy as a mere pledge to secure the payment of the loan and therefore could not lawfully liquidate the loan out of the proceeds of the policy without previous demand and notice; that the waiver provision contained in paragraph 3, subdivision (a), of the loan agreement is void; and that since the defendant proceeded without demand or notice, the insured had the right during his lifetime, and the plaintiff now has the right, to repay the loan and thereby leave the entire reserve on the policy available to purchase extended insurance, which in this case would be sufficient to carry such insurance beyond the date of insured's death. In support of this contention plaintiff calls attention to a...