McCain v. Lamar Life Ins. Co

• Decision Date: 15 February 1937
• Docket Number: 32497
• Citation: 178 Miss. 459,172 So. 495
• Court: Mississippi Supreme Court
• Parties: McCAIN et al. v. LAMAR LIFE INS. Co

172 So. 495

178 Miss. 459

McCAIN et al. v. LAMAR LIFE INS. Co

No. 32497

Supreme Court of Mississippi

February 15, 1937

Division B

Suggestion Of Error Overruled March 15, 1937.

APPEAL from chancery court of Hinds county Hon. V. J. STRICKER Chancellor.

Action by Cecil McCain and others against the Lamar Life Insurance Company. From an adverse decree, plaintiffs appeal. Reversed and remanded, with directions.

Reversed and remanded.

Lotterhos & Travis, of Jackson, for appellants.

Appellants submit in this case that under the general terms of the indorsement, read in connection with the terms of the policy, which are incorporated 'by reference in the indorsement, the said indorsement became effective only on September 30, 1935, and not at. any date prior thereto. The word "continue" as used in the indorsement and in the policy has a definite meaning, which is that the thing continued will thereby extend beyond the date at which it would otherwise expire. Applying that meaning to the case at bar, we say that when it was agreed that the policy should be "continued" for a less amount than the amount payable in event of death according to the terms of the policy, it was meant and intended that the full amount of the policy should remain in effect according to the policy terms until September 30, 1935, and after that date the insurance would be extended or continued in the less amount.

Googin v. Lewiston, 68 A. 694; Grand Lodge v. Mass. Bonding Co., 25 S.W.2d 783; American Ind. Co. v. School Dist., 47 S.W.2d 682; Engmann v. Immel, 18 N.W. 182; Philadelphia v. R. R. Co., 58 Pa. 253.

The premium date of the policy was August 30th. Therefore, under the terms of the grace clause the assured was fully covered by the policy to and including September 30th of each year, whether or not She had within that time paid the current premium.

Couch on Insurance, page 2032; McMaster v. N. Y. Life Ins. Co., 183 U.S. 25, 46 L.Ed. 64.

Referring back to the definition of the word "continue" and tying this to the fact that the policy was in full force and effect for the full face amount to and including September 30, 1935, we submit that the indorsement must be construed as reducing the amount of insurance only at and after September 30th.

Couch on Insurance, sec. 848, page 2101; Morgan v. Inter-Southern Life Ins. Co., 299 S.W. 186; Burner v. Wells, 289 U.S. 670, 77 L.Ed. 1439.

The policy could not be forfeited for nonpayment of the fifteenth premium prior to September 30, 1935, and was in full force through that date.

Mitchell v. Southern Union Life Ins. Co., 218 S.W. 518; Clappenback v. New York Life Ins. Co., 118 N.W. 245; Pacific Mutual Life Ins. Co. v. Harris, 68 S.W.2d 1062; Burns v. Banker's Life Co., 24 F.2d 714; Millsaps v. Merchants & Planters Bank, 71 Miss. 361, 13 So. 903.

Equity has the power to reform an instrument which is designed to carry into effect an existing binding agreement, but which through mistake fails to do so. Hendrickson v. Lyons, 209 P. 1095. In the same way where an indorsement becomes a part of an existing insurance policy and expressly refers to the terms of the original policy, it cannot be said that the insurance policy as it previously existed has been in part destroyed by the indorsement, and if the indorsement should apparently have that effect, a court of equity would exercise its powers to correct the mistake.

Without extensive quotation, we call the court's attention, and rely upon, that well established rule of construction of insurance policies that if there is doubt as to the meaning of the contract, this doubt will be resolved in favor of the assured and against the insurance company which prepared and drafted the contract. See the following authorities:

Couch on Insurance, sec. 188; Aetna Ins. Co. v. Steamship Co., 273 F. 55; Weaver v. Home Life & Acc. Co., 221 S.W. 299; Harvey v. Union Central Life Ins. Co., 45 F.2d 78; 32 C. J., Insurance, sec. 270; 14 R. C. L. 926.

Even if the said indorsement could be construed as contended by appellee, we respectfully submit that it could not be binding in this case, because of absence of legal consideration.

Owen Tie Co. v. Bank of Woodland, 136 Miss. 114, 101 So. 292; Pritchard v. Hall, 167 So. 629; Clappenback v. New York Life Ins. Co., 118 N.W. 245; Leggett v. Vinson, 155 Miss. 411, 124 So. 472; American Nat. Ins. Co. v. Teague, 237 S.W. 248; Highland v. Iowa Life Ins. Co., 171 N.W. 587; Metropolitan Life Ins. Co. v. Lillard, 248 P. 841.

A construction of a contract by the parties will be adopted by the court as the true meaning where the contract will permit of this construction.

Ramsay v. Brown, 25 So. 151, 77 Miss. 124; Powell v. Russell, 41 So. 5, 88 Miss. 549; Spengler v. Stiles-Tull Lbr. Co., 48 So. 966, 94 Miss. 780; Brooklyn v. Dutcher, 95 U.S. 269, 24 L.Ed. 410.

Another reason why appellee cannot contend that there was consideration for a surrender of rights by the insured, in its act in issuing the indorsement when there was an indebtedness, is that consideration, when contractual in nature, cannot be relied upon unless it is stated in the contract as a term thereof.

Baum v. Lynn, 72 Miss. 932, 18 So. 428; Fire Ins. Assn. v. Wickham, 141 U.S. 564, 35 L.Ed. 860; Old Colony Ins. Co. v. Berryman, 234 S.W. 748, 21 A. L. R. 292.

The indorsement is invalid because of misrepresentations.

Reliance Life Ins. Co. v. Cassity, 173 Miss. 840, 163 So. 508; Love Petroleum Co. v. Atlantic Oil Producing Co., 169 Miss. 259, 153 So. 389.

After fourteen premiums paid, decedent was entitled to paid-up insurance for $ 3,945 rather than for $ 3,045.

Wells, Wells & Lipscomb, of Jackson, and L. A. Smith, Jr., of Holly Springs, for appellee.

The authorities uniformly hold that the form of the agreement or modification of the contract is not material.

6 Couch on Insurance Law, sec. 1384.

The indorsement of the policy by appellee on September 23, 1935, as a paid-up policy on the application of appellants and insured constituted a new contract.

3 Williston on Contracts, secs. 1865, 1826; 20 R. C. L. 359.

It is admitted that all coupons were attached to the policy and that premiums had been paid for fourteen full consecutive years but it is also undisputed that at the time of election by the insured and the beneficiaries for paid-up insurance there was a loan or indebtedness against the policy created in 1931, and on September 23, 1935, when the new contract for paid-up insurance was made, the indebtedness amounted to $ 1127.87, plus interest for one year, which interest under the loan contract was payable in advance and had been in default since August 30, 1935.

There being an indebtedness against the policy as shown above, there was no option or right given under the policy to convert the policy from a premium paying basis to a paid-up policy, and, therefore, the action of the parties on September 23, 1936, in extinguishing the obligations of both parties under the old contract and executing and delivering and accepting the indorsement for paid-up insurance created an entirely new and independent contract, and the rights of all parties under the new contract became fixed and established on September 23, 1935.

The new agreement bears date of September 23, 1935, and that is the effective date of the new contract. Therefore, the rights of all parties dated from that date, the new contract not specifying that it would be effective from any other date.

We have made an exhaustive search of the authorities and the universal weight of authority is to the effect that where a new agreement is made between the parties conferring on the insured and beneficiaries new rights not granted in the old policy, a new contract is created and the parties thereafter bound under the terms and provisions of the new contract.

Murphree v. National Life & Acc. Ins. Co., 150 So. 534; Lockwood v. New York Life, 175 A.D. 24, 161 N.Y.S. 700, 223 N.W. 714, 120 N.E. 867; Couch Cyc. of Insurance Law, sec. 1384; Fidelity Mutual Life Ins. Co. v. Heltsley, 71 S.W.2d 1017; Mutual Life Ins. Co. of New York v. Breland, 78 So. 362.

We submit that the application of Mrs. McCain and the appellants for a paid-up policy, constituted an offer, and the issuance of the indorsement by the Lamar Life Insurance Company resulted in a completed contract. The insured had no such right under and by virtue of the policy contract since there was an indebtedness against same, and, therefore, it was an offer to make a new and independent contract, and the acceptance of same resulted in the consummation of the contract.

The insured and appellants in having the policy endorsed as a paid-up policy exercised an option contained in the policy and are bound by the election.

Lipman v. Equitable Life Assurance Society, 58 F.2d 15; Pacific States Life Ins. Co. v. Bryce, 67 F.2d 710; Pequot Mfg. Corp. v. Equitable Life Assur. Soc., 170 N.E. 514; Northwestern Mut. Life Ins. Co. v. Joseph, 103 S.W. 317; Fidelity Mutual Life Ins. Co. v. Heltsley, 71 S.W.2d 1017; Murphree v. National Life & Acc. Ins. Co., 150 So. 534; Cooper v. West, 190 S.W. 1085; Tucker v. Equitable Life Assn. Soc., 141 So. 71; Lofaro v. John Hancock Mut. Life Ins. Co., 265 N.Y.S. 724; Lauer v. Michigan Life Ins. Co., 256: N.W. 567; Lovell v. St. Louis Mutual Life Ins. Co., 111 U.S. 264.

Argued orally by Fred Lotterhos, and Vardaman Dunn, for appellant, and by L. A. Smith, Jr., for appellee.

OPINION

Griffith, J.

On Angst 30, 1921, appellee life insurance company issued and delivered its policy of insurance, No. 23331, on the life of Mrs. Ruby S. McCain, payable to appellants as beneficiaries. The policy was a 20-pay special coupon premium policy, and was for the nominal face amount of $ 3,000, but,...