Lipman v. Equitable Life Assur. Soc. of the United States

• Decision Date: 12 April 1932
• Docket Number: No. 3210.,3210.
• Citation: 58 F.2d 15
• Parties: LIPMAN v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.
• Court: U.S. Court of Appeals — Fourth Circuit

58 F.2d 15 (1932)

LIPMAN v. EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES.

No. 3210.

Circuit Court of Appeals, Fourth Circuit.

April 12, 1932.

Edward H. Burke, of Baltimore, Md. (Leonard Liepman and Bowie & Burke, all of Baltimore, Md., on the brief), for appellant.

S. Ralph Warnken and Vernon Cook, both of Baltimore, Md. (Cook & Markell, of Baltimore, Md., on the brief), for appellee.

Before PARKER, NORTHCOTT, and SOPER, Circuit Judges.

PARKER, Circuit Judge.

This is an appeal in an action at law instituted in the court below for recovery on a policy of life insurance issued by the defendant insurance company on the life of plaintiff's wife. The company defended on the ground that insured had exercised an option granted in the policy to surrender it and accept its cash surrender value, and that the company was not liable for any greater amount than this. The case was tried by the court without a jury; and, from a verdict and judgment for defendant, plaintiff has appealed. The only question presented by the appeal is as to the correctness of the holding of the court below that there was no evidence in the case upon which plaintiff was entitled to recover.

The facts may be briefly stated. Plaintiff's wife held a policy of life insurance, which she had been carrying for a number of years, and upon which more than three annual premiums had been paid. This policy provided for the payment of premiums on October 5th of each year, which was designated as the "register date" of the policy. On September 24, 1929, insured wrote the company that she desired to cancel the policy and asked that she be sent check for the cash reserve and dividend. This letter was referred to a local solicitor, who informed insured that, if she desired to surrender the policy and obtain its cash surrender value, she should send it in to the company. On October 8th an employee in the company's local office wrote insured that the solicitor had advised that she would return the policy for cancellation, and that before the local office would be in position to place the matter before the home office it would be necessary that the policy be returned. On October 10th insured returned this letter to the company's local office with the following notation thereon: "Policy enclosed as per above request. Kindly send me check for cash surrender value, together with dividend due me." The policy was inclosed with the letter.

On October 11, the local office forwarded the policy to the home office, together with a letter showing that premiums had been paid thereon to October 5, 1929, and that insured desired the cash value. The policy and letter were not received at the home office until October 14th, however, as October 12th was a legal holiday and October 13th was Sunday; and on the very day that they were received, and within a short time afterward, insured was killed in an automobile accident. The company was notified of her death, and a few days later duly tendered check for the cash surrender value of the policy with current dividend, which was refused.

Plaintiff's contention is that there was no right on the part of the insured to surrender the policy and receive the cash surrender value thereof until there should be a default in the payment of premium; that there could be no default until the days of grace allowed for the payment of premiums had expired; that these had not expired when insured returned the policy and requested that the cash surrender value be paid to her; that her letter, for that reason, constituted, not the acceptance of an option, but the making of an offer to the company; and that, because her death occurred before her offer was accepted by the company, no contract to accept the cash surrender value resulted. The company, on the other hand, contends that the letter of insured and the return of the policy constituted the acceptance of an option contained in the policy; that there was a default within the meaning of the policy authorizing insured to exercise the option when the premium was not paid on the date when it became due; and that, as creating a default was a matter within the control of insured, she had the right to exercise the option in advance of the default.

In view of these contentions, it becomes important to examine carefully the exact provisions of the policy. On the second page thereof appears a table showing in one column the loan and cash values of the policy for each policy year, and, in another, the paid-up insurance values. Above the loan and cash value column, it is stated: "The loan value is the cash value less interest to the premium anniversary date." Opposite this table is the provision relating to loans and surrender values, the pertinent provisions of which are as follows:

"Provisions Relating to Loans and Surrender Values.

"Loans. At any time, while this policy is in full force, after three full years' premiums have been paid, the Society will advance to the insured (or assignee if any), on proper assignment and delivery of this policy, and on the sole security hereof a sum which, with interest, shall not exceed the cash value at the end of the then current policy year (as stated in the opposite table), less any indebtedness to the Society hereon, provided all premiums or instalments of the same have been fully paid to the end of the then current policy year. * * *

"Options on Surrender or Lapse. After three full years' premiums have been paid hereon, upon any subsequent default in the payment of any premium or instalment thereof, and within three months after such default, this policy may be surrendered by the insured (or assignee if any) who may elect either of the following options:

"(a) To receive the cash surrender value of this policy; or

"(b) To purchase non-participating paid-up life insurance payable at the same time and on the same conditions as this policy, but without total and permanent disability benefits.

"In the event of default in the payment of any premium or instalment thereof after this policy has been in force three full years, if the insured (or assignee if any) does not select either of said options within three months of such default, the policy shall become automatically paid-up under option (b). * * *

"Basis of Computation. The reserve for which funds are to be held upon this policy shall be computed upon the American experience table of mortality with interest at 3½% by the net level premium method.

"The values stated in the opposite table are mathematical equivalents and each is equal to the full reserve at the end of the then current policy year, on the basis stated in the preceding paragraph, less a surrender charge of not more than 2½% of the face of this policy, except that fractions of a dollar are not allowed. There is no surrender charge under option `A' after the twenty-fifth policy year.

"Payment of Surrender Value. The granting of any surrender value under this policy may be deferred by the Society for a period not exceeding ninety days after receipt of application therefor." (Italics ours.)

On the third page of the...