De Long v. Jefferson Standard Life Ins. Co.

• Decision Date: 15 March 1940
• Docket Number: No. 9239.,9239.
• Citation: 109 F.2d 585
• Parties: DE LONG v. JEFFERSON STANDARD LIFE INS. CO.
• Court: U.S. Court of Appeals — Fifth Circuit

109 F.2d 585 (1940)

DE LONG v. JEFFERSON STANDARD LIFE INS. CO.

No. 9239.

Circuit Court of Appeals, Fifth Circuit.

February 19, 1940.

Rehearing Denied March 15, 1940.

Charles Cook Howell and Charles Cook Howell, Jr., both of Jacksonville, Fla., and Stafford Caldwell, of Tallahassee, Fla., for appellant.

Giles J. Patterson, of Jacksonville, Fla., and C. R. Wharton, of Greensboro, N. C., for appellee.

Before HUTCHESON, HOLMES, and McCORD, Circuit Judges.

HOLMES, Circuit Judge.

This appeal presents for review the rulings of the trial court in denying the motion of appellant, and granting the motion of appellee, for a directed verdict in an action by appellant, as beneficiary, to recover on a life insurance policy issued by appellee on January 23, 1924.

Insured paid all premiums due thereon until January 23, 1935, but never paid the premium due on that date, nor did he pay the interest then due on the outstanding loans against the policy. He died on February 25, 1935, thirty-three days after the due date of the unpaid premium. On January 23, 1935, the cash value of the policy was $6,000. The indebtedness (principal and interest) outstanding against it on that date totalled $5,936.40, leaving a net cash value of $63.60, which was sufficient to keep the policy in force beyond the date of death, if applied to the purchase of extended insurance, unless interest on the loans continued to accrue from January 23, 1935, until the insured died.

Appellee contends that the case should be affirmed on either or both of two grounds: First, that the premium loan clause of the policy automatically continued the policy in force for the portion of the year that $63.60 bore to the full annual premium, which would be only twenty-five days after default; and, second, that interest continued to accrue under the policy provisions on the loans secured thereby up to and until the date of the insured's death; that, after deducting said accrued interest from the net cash value, only $34.79 could be applied to the purchase of extended insurance; that said sum would only purchase extended insurance for twenty-five days, or to February 17th; and that, therefore, the policy lapsed at the expiration of the grace period, which was February 23rd, two days prior to insured's death.

Our jurisdiction is predicated solely upon diversity of citizenship. This is a Florida contract, and the law of that state must be applied in construing the relevant portions thereof. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487; Jacobs v. Merchants Fire Assurance Corp., 5 Cir., 99 F.2d 655; Stanford v. Atlantic Life Insurance Company, January, 1940, 5 Cir., 109 F.2d 428. The policy contained nonforfeiture provisions¹ which, when read together, show that the insured, upon nonpayment of the premium due January 23, 1935, had sixty days from that date within which to elect one of three different disposals of the surrender value: cash, extended insurance, or paid-up nonparticipating insurance. Omaha National Bank v. Mutual Benefit Life Insurance Co., 3 Cir., 84 F. 122; Joyner v. Jefferson Standard Life Insurance Co., 5 Cir., 53 F.2d 745. Insured did not make an election, but died within the sixty-day election period, and the law immediately selected the option most beneficial to him. Equitable Life Insurance Company v. Germantown Trust, 3 Cir., 94 F.2d 898; Afro-American Insurance Company v. LaBerth, 136 Fla. 37, 186 So. 241. This election reverted to the time the unpaid premium was due, and excluded the automatic premium loan clause.

Appellee relies upon the case of Afro-American Life Insurance Company v. LaBerth, supra, as decisive of the Florida law, and cites other cases as follows: Willingham v. Equitable Life Insurance Co., 5 Cir., 86 F.2d 72; Mayers v. Massachusetts Mutual Life Insurance Company, D.C., 11 F.Supp. 80; Smith v. John Hancock Mutual Life Ins. Co., 195 Ark. 699, 114 S.W.2d 15. These latter cases may be distinguished in that in them the death of insured did not occur during the election period. It is true that, in the LaBerth case, interest was computed on the outstanding loans against the policy from the date of the unpaid premium down to the date of the insured's death; but the case was submitted upon an agreed...