Magers v. Northwestern Mut. Life Ins. Co.

• Decision Date: 18 April 1941
• Docket Number: No. 37211.,37211.
• Citation: 152 S.W.2d 148
• Parties: W.L. MAGERS, Trustee, v. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Corporation, Appellant.
• Court: Missouri Supreme Court

152 S.W.2d 148

W.L. MAGERS, Trustee, v. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, a Corporation, Appellant.

No. 37211.

Supreme Court of Missouri.

Division One, April 18, 1941.

Rehearing Denied, June 12, 1941.

Appeal from Jackson Circuit Court. — Hon. Thomas J. Seehorn, Judge.

REVERSED.

Maurice H. Winger and George J. Winger for appellant; Norman L. Baker and Winger, Reeder & Barker of counsel.

(1) The proper legal method of computing the net value of a life insurance policy under the Missouri nonforfeiture statutes is upon a basis of net premiums and not by the use of gross premiums. (a) Preliminary considerations. Fox v. Mutual Ben. Life Ins. Co., 107 Fed. (2d) 715; Rose v. Franklin Life Ins. Co., 153 Mo. App. 90, 132 S.W. 613; Principles and Practice of Life Ins. (The Spectator Co., New York, 1912), pp. 24, 25, 26, 29, 55, 56; Notes on Life Ins. by Edward B. Fackler (The Spectator Co., New York, 1907), p. 65; An Introduction to the Mathematics of Life Ins., Menge and Glover (The MacMillan Co., New York, 1935), pp. 72-73; Sec. 6151, R.S. 1919; Sec. 5741, R.S. 1929. (b) Under Section 5720, Revised Statutes of Missouri, 1929, the Superintendent of the Insurance Department is required to value outstanding policies upon net premiums. To construe "net value," as used in the nonforfeiture statute, in accordance with plaintiff's gross premium theory would be to force an insurance company to discriminate against continuing policyholders and in favor of those whose policies have lapsed for failure to pay premiums, would be unreasonable and contrary to the plain intent of the Missouri insurance statutes. Sec. 5720, R.S. 1929; Laws 1933, Ex. Sess., p. 74; Principles and Practice of Life Ins. (The Spectator Co., New York, 1912), p. 24; Sec. 5741, R.S. 1929; Langan v. United States Life Ins. Co., 121 S.W. (2d) 268; Art. 2, Chap. 37, R.S. 1929; Secs. 5704, 5706, 5707, 5720, 5729, R.S. 1929. (c) The authorities hold that net value must be determined by the use of net premiums, not gross premiums. Therefore, plaintiff's method of computing net values is wrong and defendant's is correct; and the extended insurance provided by the policies in suit had expired prior to the death of the insured. Sec. 6151, R.S. 1919, and as amended June, 1923, now Sec. 5741, R.S. 1929; Liebing v. Mut. Life Ins. Co., 269 Mo. 509, 191 S.W. 250; Rose v. Franklin Life Ins. Co., 153 Mo. App. 90, 132 S.W. 613; New York Life Ins. Co. v. Rositzky, 45 Fed. (2d) 758; Lindsey v. Prudential Ins. Co., 16 Fed. Supp. 880; Westerman v. Supreme Lodge Knights of Pythias, 196 Mo. 670, 94 S.W. 470; Mutual Reserve Life Ins. Co. v. Roth, 122 Fed. 853; Connecticut Ins. Co. v. Commonwealth, 133 Mass. 164; Fox v. Mut. Benefit Life Ins. Co., 107 Fed. (2d) 715; Lindsey v. Prudential Ins. Co., 16 Fed. Supp. 880; Hay v. The Meridian Life & Trust Co. (Ind., 1913), 101 N.E. 651; Jefferson v. New York Life Ins. Co., 151 Ky. 609, 152 S.W. 780.

Harry A. Hall, Goodwin Creason and Carl E. Kimpton for respondent.

(1) The net values of the policies computed under Section 5741 were sufficient to continue them as extended insurance beyond the insured's death. Moore v. Northwestern Mutual, 87 S.W. 988; Rose v. Franklin Life Ins. Co., 132 S.W. 613; Boulware v. Mo. State Life, 159 S.W. 761; Connecticut Ins. Co. v. Commonwealth, 133 Mass. 161; Lindsey v. Prudential Ins. Co., 16 Fed. Supp. 880; Columbia Natl. Life v. Griffith, 73 Fed. (2d) 244; Spink v. U.S. Life, 96 S.W. 889. (2) Plaintiff is entitled to the most favorable construction of net value. McKinney v. Fidelity Mut. Life, 193 S.W. 564; Gooch v. Met. Ins. Co., 61 S.W. (2d) 704; Matthews v. Modern Woodmen, 139 S.W. 151.

E.R. Morrison, W.B. Cozad and Morrison, Nugent, Berger, Byers & Johns, amici curiae.

(1) The retrospective gross premium method advocated by Mr. Magers violates the fundamental concepts of life insurance computations. Chart 1, whole-life policy issued at age 49 (Actuaries Table 4%); Chart 2, whole-life policy issued at age 49 (Actuaries Table 4%); Chart 3, cost of year by year term insurance beginning at age 49 (Actuaries Table 4%); New York Life Ins. Co. v. Statham, 93 U.S. 24, 23 L. Ed. 789. (2) There is no authority for determining net value on the so-called retrospective gross premium basis advocated by plaintiff. Secs. 5720, 5741, R.S. 1929; Principles and Practice of Life Ins. (8 Ed.), The Spectator Co., 1912, p. 29. (3) History of policy valuation. A brief sketch of the life and works of Elizur Wright (The American Conservation Co.), pp. 83, 87-89. (4) Net value and reserve are equivalent terms and under the express provisions of Section 5720, Revised Statutes of Missouri, 1929, and under the decisions of the courts of this State, both must be determined under the net premium method. Secs. 5720, 5741, R.S. 1929; Fox v. Mut. Benefit Life Ins. Co., 107 Fed. (2d) 715; Liebing v. Mut. Life Ins. Co. of N.Y., 269 Mo. 509, 191 S.W. 250; Rose v. Franklin Life Ins. Co., 153 Mo. App. 90, 132 S.W. 613; Cleaver v. Central States Life Ins. Co., 142 S.W. (2d) 474.

Watson, Ess, Groner, Barnett & Whittaker and Douglas Stripp, amici curiae.

The term "net value" as used in Section 5741, Revised Statutes of Missouri, 1929, contemplates only the excess of the net premiums and interest thereon over the predicted mortality cost, as of any given time. It does not contemplate the entire or gross premium collections of a life insurer with interest less only the mortality claims. Connecticut Ins. Co. v. Commonwealth, 133 Mass. 164; Elms v. Mut. Benefit Life Ins. Co., 211 Mo. App. 514, 231 S.W. 653; Fox v. Mut. Benefit Life Ins. Co., 107 Fed. (2d) 715; Jefferson v. New York Life Ins. Co., 151 Ky. 609, 152 S.W. 780; Liebing v. Mut. Life Ins. Co., 269 Mo. 509, 191 S.W. 250; Lindsey v. Prudential Ins. Co., 16 Fed. Supp. 880; Moore v. Northwestern Natl. Life Ins. Co., 112 Mo. App. 696, 87 S.W. 988; Mutual Reserve Life Ins. Co. v. Roth, 122 Fed. 853; New York Life Ins. Co. v. Statham, 93 U.S. 24, 23 L. Ed. 789; Payne v. Minn. Mut. Life Ins. Co., 195 Mo. App. 512, 191 S.W. 695; Prange v. International Life Ins. Co., 329 Mo. 651, 46 S.W. (2d) 523; Rose v. Franklin Life Ins. Co., 153 Mo. App. 90, 132 S.W. 613; State ex rel. Elms v. Allen, 242 S.W. 679; State ex rel. Supreme Lodge K. of P. v. Vandiver, 213 Mo. 187, 111 S.W. 911; Westerman v. Supreme Lodge K. of P., 196 Mo. 670, 94 S.W. 470; Cleaver v. Central States Life, 142 S.W. (2d) 474; Laws 1933, Ex. Sess., p. 14; Secs. 5720, 5741, R.S. 1929.

Henry I. Eager and Kenneth E. Midgley for Metropolitan Life Insurance Company and The Prudential Insurance Company of America, amici curiae.

HYDE, C.

This is an action, in two counts, upon two insurance policies. Plaintiff had verdicts on both counts. Judgment was entered for the total sum of $21,253, from which defendant has appealed.

[1] Plaintiff has filed a motion to dismiss the appeal. He claims that defendant's statement violates our Rule 15; that its assignments of error are broader than the grounds stated in its motion for new trial; and that its points and authorities are abstract statements of law insufficient to present anything for review. Upon careful consideration, we find defendant's statement to be sufficient. While defendant makes assignments of error concerning admission of evidence, giving of plaintiff's instructions, and refusal of its instructions, we find these to be abandoned by failure to mention them in its points and authorities. [Clay v. Owen, 338 Mo. 1061, 93 S.W. (2d) 914; Homan v. Missouri Pac. Railroad Co., 334 Mo. 61, 64 S.W. (2d) 617, and cases therein cited.] However, defendant assigns as error the refusal of its "Instruction B in the nature of a demurrer to the evidence at the close of all the evidence." This ground was stated in its motion for new trial. We will, therefore, consider only this assignment, as to which we find that defendant's points and authorities and argument make its contentions clear. (From the extensive briefs filed, we note that this issue is fully understood by plaintiff.) We, therefore, overrule the motion to dismiss.

[2] The sole question actually presented is: What is the meaning of the term "net value" as used in the Missouri nonforfeiture statute? [Sec. 5852, R.S. 1939; Sec. 5741, Mo. Stat. Ann. 4388.] Both parties agree as to the meaning of the term "reserve," as used in life insurance; but they do not agree as to whether the term "net value" is the same thing or has a different meaning.

The applicable part of this nonforfeiture statute (Sec. 5852) is, as follows:

"No policies of insurance on life hereafter issued by any life insurance company authorized to do business in this state shall, after payment upon it of three or more annual payments, be forfeited or become void by reason of nonpayment of premiums thereon, but it shall be subject to the following rules of commutation, to-wit: The net value of the policy, when the premium becomes due and is not paid, shall be computed upon the actuaries' or combined experience table of mortality with four per cent interest per annum, and after deducting from three-fourths of such net value the unpaid portion of any notes given on account of past premium payments on said policy and any other indebtedness to the company secured by said policy, which notes and indebtedness shall then be canceled, the balance shall be taken as a net single premium for temporary insurance (extended insurance)." (The rest of the section relates to the amount and term of the temporary insurance.)

The following facts were conceded as to the insurance policies, issued in this case by defendant. James McQuenny (hereinafter called the insured) was issued an ordinary life policy for $12,000, at age 49, on May 16, 1923. The annual premium (in quarterly payments) was at the gross rate of $45.76 per $1000 insurance. (It was $44.43 in one annual payment in advance.) This premium was paid in quarterly payments of $137.28. Insured borrowed $2761.44...