Knott v. Security Mut. Life Ins. Co.

• Decision Date: 19 February 1912
• Citation: 161 Mo. App. 579,144 S.W. 178
• Parties: KNOTT et al. v. SECURITY MUT. LIFE INS. CO.
• Court: Missouri Court of Appeals

144 S.W. 178

161 Mo. A. 579

KNOTT et al. v. SECURITY MUT. LIFE INS. CO.

Kansas City Court of Appeals. Missouri.

February 19, 1912.

1. INSURANCE (§ 124) — LIFE — "ASSESSMENT POLICY" — DISTINGUISHED FROM "OLD-LINE POLICY."

A contract of life insurance which does not unalterably fix the payments to be made by the insured, and which makes the benefit to be paid dependent upon the collection of such assessments as may be necessary, is an assessment policy, an old-line policy being one in which the premiums and the liability incurred by the insurer are fixed and unalterable.

2. INSURANCE (§ 124) — LIFE — NATURE OF POLICY.

The character of a policy of insurance must be determined by the nature of the contract it expresses, not by the name given it.

3. INSURANCE (§ 141) — LIFE — NATURE OF POLICY — DEFENSE OF ULTRA VIRES.

Though an insurance company be organized as an assessment company and has no authority to issue old-line policies, it may not, after its execution and the receipt of premiums thereunder, interpose the defense of ultra vires to an action on an old-line contract written.

4. INSURANCE (§ 124) — LIFE — NATURE OF POLICY.

The rights and duties of parties to an insurance contract must be measured by the terms of the policy, and, where no express authority is given to raise the rate of premium, the policy must be considered as a regular old-line life insurance contract.

5. INSURANCE (§ 150) — LIFE — NATURE OF POLICY — STIPULATIONS ON BACK.

Where the face of a policy of insurance shows a clear old-line contract, a stipulation on the back which provides for the levy of additional assessments is nugatory.

6. INSURANCE (§ 193) — LIFE — NATURE OF POLICY — STIPULATIONS ON BACK.

A stipulation on the back of a policy of life insurance, which on its face is a regular old-line policy, that it is "subject to the provision that, by action of the board of directors, the amount required for mortuary purposes may be varied to conform to the actual mortality experience of the association," and which immediately proceeds to deal with the "mortuary fund," providing that any surplus in excess of $100,000 and beyond the amount necessary to provide for increased age shall be credited to the reduction of premiums, and that any deficiency therein may be made good from the reserve fund, etc., means only that the mortality fund may be increased or diminished at the expense of the reserve fund, and in view of the further stipulation giving the policy holder the option, after the lapse of ten years, to surrender the policy and receive therefor a nonparticipating commuted policy, there was no power reserved to make additional assessments, and the policy is an old-line contract, so that an attempt to raise the rate of premiums was a violation of its terms and void.

7. INSURANCE (§ 150) — LIFE — NATURE OF POLICY — CONSTRUCTION OF STIPULATION.

Ambiguity in a stipulation on the back of a policy of life insurance which is old-line on its face, which it is claimed renders the policy one of assessment, must be resolved in favor of the insured, and the right to raise the premiums thereon.

8. INSURANCE (§ 360) — LIFE — CONTRACT — BREACH — RAISE IN RATES — NECESSITY OF TENDER.

Where an insurance policy was a contract of assurance for life, subject to discontinuance and forfeiture for nonpayment of any of the stipulated premiums, and was not a mere contract of assurance from quarter to quarter with privilege of renewal, it could only be forfeited upon a breach by the insured, so that a tender of the amount of premiums due under its terms after a wrongful raise of rates was sufficient to prevent its forfeiture so long as the insurer persisted in its wrongful course.

9. INSURANCE (§ 360) — LIFE — CONTRACT — BREACH — RAISE IN RATES — NECESSITY OF TENDER.

And the insured was not required to do the vain and useless thing of renewing his tender at each subsequent quarter.

10. INSURANCE (§ 306) — LIFE — CONTRACT — BREACH — RAISE IN RATES — NECESSITY OF TENDER.

Where, upon a wrongful raise of the rate of premium due on an old-line life insurance policy, the insurer notified the insured that nothing less would be accepted than payments of premiums at the increased rate, no tender was necessary to preserve the rights of the insured.

Appeal from Circuit Court, Carroll County; John P. Butler, Judge.

Action by Thomas Knott, administrator of Alfred S. Porter, deceased, and others, against the Security Mutual Life Insurance Company. From a judgment for plaintiffs, defendant appeals. Affirmed.

James R. Page, H. D. Hinman, and Conkling, Rea & Sparrow, for appellant. Busby Bros. & Withers, for respondents.

JOHNSON, J.

This suit is on a policy of life insurance, and was tried without the aid of a jury. The court filed findings of facts and declarations of law and rendered judgment for plaintiffs in the sum of $4,496.10. After the overruling of the motions for a new trial and in arrest of judgment, defendant made formal application for an appeal to the Supreme Court, but was allowed an appeal to this court. We certified the cause to the Supreme Court on the ground that a proper solution of the issues involved the determination of certain constitutional questions, but the Supreme Court took a different view of the case, and retransferred it.

One of the important issues is whether or not the policy in controversy should be treated as an old-line or an assessment policy. It is the contention of defendant that it belongs to the latter class and of plaintiffs that it is an old-line policy, and therefore subject to the provisions of sections 5856 and 5858, Rev. Stat. 1889, relating to extended insurance. We shall state the facts in evidence that have a material bearing on this issue.

The policy was issued in this state June 28, 1894, to Alfred S. Porter, a resident of Carroll county, who died in that county January 9, 1908. The face of the policy, omitting merely formal parts, is as follows: "In consideration of the application for this policy, which is made a part of this contract, and the payment in advance of fifty-five dollars and eighty cents, and of the further advance payment of fifty-five dollars and eighty cents, to be made on or before the twenty-eighth day of September, December, March and June in every year during the continuance of this contract, the Security Mutual Life Association, does hereby receive Alfred S. Porter, of Carrollton, county of Carroll, state of Mo., as a member of said association, and issues this policy subject to the conditions and with the benefits hereon indorsed, which are made a part of this contract, and within thirty days from the receipt of satisfactory evidence to the association of the death of the above named member, during the continuance of this policy in full force and effect, promises to pay to Mary J. Porter his wife and surviving children, one-fifth, share and share alike; remainder to his estate if living at the time of his death; otherwise, to the legal representatives of the deceased, the sum of five thousand dollars upon presentation and surrender of this policy, properly receipted, less the balance (if any) of the advance payments for the current year of the death of the insured, and any indebtedness of the insured or beneficiary to the association. Provided, that if the payments required to be made by the insured under this policy shall not be made when due, then this policy shall become null and void, and the association shall not be liable to pay the sum assured, or any part thereof, and in such event all payments theretofore made hereon shall be forfeited to and become the property of the association."

Among the stipulations printed on the back of the policy are the following:

"This contract of insurance is renewable at the option of the insured, before expiration, upon payment of the advance premiums at the time and in the manner herein provided, subject to the provisions, that by action of the board of directors, the amount required for mortuary purposes may be varied to conform to the actual mortality experience of the association. Any surplus in the mortuary fund in excess of one hundred thousand dollars, and beyond the amount deemed necessary to provide for increased age, shall be credited in reduction of premiums. Any deficiency in the mortuary fund may be made good from the reserve fund.

"After ten years from date of this policy, and while it is in full force, the association will annually thereafter determine and credit the insured with an equitable proportion of the surplus in the reserve fund, in excess of the amount required to be held by law, which amount shall not be less than one hundred thousand dollars. The dividends so apportioned shall be available as follows:

"1st. — In reduction of current premiums.

"2nd. — At any time after ten full years' payments have been made, and while this policy is in full force, the insured may, upon giving the association ninety days written notice of his intention so to do, surrender this policy and receive therefor a nonparticipating commuted policy, payable at death out of the reserve fund, for such an amount as the dividend then apportioned and standing to his credit will purchase on the basis of the American Table of Mortality, and 4 per cent. interest.

"3rd. — After ten years from the date of this policy, and while it is in full force, the insured, may, upon giving the association ninety days' written notice, surrender this policy, and in full settlement thereof receive the amount apportioned and then standing to his credit in cash. * * *

"This contract shall be governed by and construed only according to the laws of the state of New York. The place of this contract is expressly agreed to be the home office of the association, in the city of Binghamton, Broome county, N. Y."

The Security Mutual Life Association was organized as an assessment company under the laws of New York (chapter 175, Laws 1883), and it and its...