Life Ins. Co. of Virginia v. Newell

• Decision Date: 08 October 1931
• Docket Number: 6 Div. 949.
• Parties: LIFE INS. CO. OF VIRGINIA v. NEWELL.
• Court: Alabama Supreme Court

137 So. 16

223 Ala. 401

LIFE INS. CO. OF VIRGINIA v. NEWELL.

6 Div. 949.

Supreme Court of Alabama

October 8, 1931

Appeal from Circuit Court, Jefferson County; Gardner Goodwyn, Judge.

Action on a policy of life insurance by Carlos W. Newell against the Life Insurance Company of Virginia. From a judgment for plaintiff, defendant appeals. Transferred from Court of Appeals.

Reversed and remanded.

Cabaniss & Johnston and L. D. Gardner, Jr., all of Birmingham, for appellant.

Huey Welch & Stone, of Bessemer, for appellee.

BOULDIN J.

The action is to recover the death benefit under a policy of life insurance.

The policy is of the class known as "Industrial Insurance."

The insured was Clara Eloise Newell, an infant under 2 years of age. The weekly premium 15 cents, and benefit $150.

The insurance was negotiated and premiums paid by appellee plaintiff below, the father of insured. The application was signed by the mother of insured.

Appellant by appropriate assignments of error, challenges the right of the father to maintain the suit; insists that an action can be maintained only by an administrator of the estate of the insured.

The pertinent provisions of the policy on this issue are these:

"The Life Insurance Company of Virginia.

"*** In consideration of the weekly premium stated in the schedule below, which it is agreed shall be paid in advance to the Company, or to its authorized representative, on or before every Monday during the continuance of this contract,

"Agrees to pay at its Home Office, in the City of Richmond, Virginia, in accordance with the provisions of Article Third on the second page hereof, the amount of benefit provided for in the said schedule, within twenty-four hours after acceptance at its Home Office of satisfactory proofs of the death of the Insured, named below, during the continuance of this Policy. ***

"3rd. Facility of Payment:-The Company may make any payment provided for in this Policy, to husband or wife, or any relative by blood, or lawful beneficiary, or connection by marriage of the Insured, or to any other person who may appear to be equitably entitled to the same by reason of having incurred expense on behalf of the Insured for his or her burial, and the production by the Company of a receipt signed by any or either of said persons, or of other sufficient proof of such payment to any or either of them shall be conclusive evidence that such benefits have been paid to the person or persons entitled thereto, and that all claims under this Policy have been fully satisfied."

The construction of such contracts is new to this court.

"Facility of Payment" clauses in varying forms of policies have been frequently considered by the courts of other states. These decisions are quite fully reviewed in notes found in 28 A. L. R. 1350, supplemented in 49 A. L. R. 939.

The cases most frequently considered involved policies payable to executors and administrators, or to a named beneficiary, with an added "Facility of Payment" clause similar to that here involved. With practical unanimity such policies are construed as conferring no right of action other than upon the personal representative or named beneficiary.

The "Facility of Payment" clause is held to be for the benefit of the insurer in effecting speedy settlement, and, in the absence of some matter of estoppel, to be made available at the option of the insurer. Williard v. Prudential Ins. Co., 276 Pa. 427, 120 A. 461, 28 A. L. R. 1348, and notes supra.

In Lewis v. Metropolitan Life Ins. Co., 178 Mass. 52, 59 N.E. 439, 86 Am. St. Rep. 463, the policy taken out and premiums paid by the insured, contained the usual clause for the naming of the beneficiary, but the name of no beneficiary was inserted. This was followed by the "Facility of Payment" clause. Held, this latter clause conferred no right of action, that suit could be maintained only by the personal representative of the insured, the person to whom the promise was made.

This case was followed in Marzulli v. Metropolitan Life Ins. Co., 79 N. J. Law, 271, 75 A. 473.

In some cases the doctrine is broadly stated that, where no beneficiary is named, the personal representative must sue; that no right of action accrues under the facility of payment clause.

Dealing with the exact contract before us, in our opinion, it does name the beneficiary to whom the benefit shall be paid. The promise is to pay "in accordance with" the facility of payment clause. There is no promise to pay to any one else. The facility of payment clause is thus made the beneficiary clause. The option feature is in the selection of one of the class therein named.

In small industrial policies of this class, taken out by parents upon the life of an infant child, probably having no estate, both delay and consuming expense must attend the appointment of an administrator.

We are impressed the present form of policy is designedly framed for such insurance. The naming of an executor or administrator as payee would surely hinder the sale of such contracts.

Appellant does not insist that because of a right of election among the classes named no right of action accrues to any one.

Payment made within the terms of the policy constitutes a complete acquittance, and bars an action by any other.

Construing the policy as a bona fide contract of insurance, a right of action must needs accrue upon refusal to pay to some one designated therein. Otherwise the option to pay to one of a class would become an option to pay no one.

The father, who procured the insurance, negotiating therefor through the insurer's agent, and, paying the premiums thereon, is a proper party to bring suit. So far as appears, no other claimant has demanded payment.

In Pate v. Insurance Co. of Virginia, 19 Ga.App. 597, 91 S.E. 883, the Georgia Court of Appeals has given a like construction to this identical form of policy. To similar effect is Western & Southern Life Ins. Co. v. Galvin (Ky.) 68 S.W. 655. See, also, O'Hara v. Metropolitan Life Ins. Co., 73 Pa. Super. Ct. 434; Williard v. Prudential Ins. Co., supra.

The harshness of a rule denying recovery on small industrial policies of the class except...