McCutchen v. All States Life Ins. Co.

Decision Date18 October 1934
Docket Number6 Div. 584.
Citation229 Ala. 616,158 So. 729
CourtAlabama Supreme Court

Rehearing Denied Jan. 24, 1935.

Appeal from Circuit Court, Jefferson County; John Denson, Judge.

Action on a policy of insurance by Annie Mae McCutchen, as guardian against the All States Life Insurance Company. From a judgment of nonsuit, plaintiff appeals.

Transferred from Court of Appeals under section 7326, Code of 1923.


Harsh Harsh & Hare, of Birmingham, for appellant.

Benners Burr, McKamy & Forman and Grady W. Patterson, all of Birmingham, for appellee.

This court in two recent cases has dealt with policy provisions of similar import to those here involved.

The first of these (New England Mut. Life Ins. Co. v Reynolds, 217 Ala. 307, 116 So. 151, 152, 59 A. L. R. 1075) dealt with a stipulation in a policy of life insurance, saying: ""'If the insured, after payment of premium for one full year and before default in the payment of any subsequent premium, and before attaining the age of 65 years, and while this policy is in full force, shall furnish due proof to the company, at its home office in the city of Boston, that he has become wholly disabled by bodily injury or disease so that he is and will be permanently and continuously prevented from performing any work for compensation or profit or from following any gainful occupation, the company will waive payment of each premium as it thereafter becomes due during the continuance of such disability.""'

We held that, under such provision, "furnishing proof of disability to the insurer is made a condition precedent to the waiver of premium payments."

This holding is now questioned as unsound, and we are asked to reconsider same.

We have examined with care the cases cited in briefs on both sides.

We review briefly the late cases, decided since the Reynolds Case, supra, involving waivers of premiums upon proof of disability; several of them disability due to insanity.

Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 52 S.Ct. 230, 76 L.Ed. 416, was an action for life and disability benefits. The policy contained the usual stipulation: "If any premium is not paid on the date when due, this policy shall cease and determine." It then stipulated:

"'Upon receipt by the Company of satisfactory proof that the Insured is totally and permanently disabled as hereinafter defined the Company will
"'1. Pay for the Insured all premiums becoming due hereon after the receipt of such proof and during the continuance of the total and permanent disability of the Insured and will also
"'2. Pay to the Insured a Monthly Income for life of 1% of this Policy; The first payment of such income to be paid immediately upon receipt of such proof. * * *
"'3. * * * To entitle the Insured to the above Total and Permanent Disability Benefits this policy at the time of making claim for such benefits must be in full force and all premiums becoming due prior to the time of making claim must have been duly paid. * * *"'

The evidence supported a finding "that the insured was totally and permanently disabled from a time before the premiums first became in arrears, and that this condition continued until his death; but no proof thereof was furnished to the company."

Said the court: "Here the obligation of the company does not rest upon the existence of the disability; but it is the receipt by the company of proof of the disability which is definitely made a condition precedent to an assumption by it of payment of the premiums becoming due after the receipt of such proof. The provision to that effect is wholly free from the ambiguity which the court thought existed in the Marshall policy."

The "Marshall policy" referred to was that presented in Minnesota Mut. Life Ins. Co. v. Marshall (C. C. A.) 29 F. (2d) 977. The two cases were differentiated, and the soundness of the Marshall Case, therefore, not questioned.

Egan v. New York Life Ins. Co. (D. C.) 60 F. (2d) 268, was strictly analogous to our Reynolds Case. Disability by insanity had intervened while the policy was in force, but no proof thereof had been furnished. Said the court:

"The condition is not, 'if the assured becomes disabled,' but is, if 'the company receives due proof' of the disability, it will waive payment of premiums. To give this any other meaning than the notice of disability was the requisite would be to twist and torture language.
"The promise of the company was to do something if this condition precedent were complied with, viz. to waive payment of premiums. Until such condition was complied with, no such obligation existed." Egan v. New York Life Ins. Co. (D. C.) 60 F. (2d) 268, 269.

This case was affirmed by the Circuit Court of Appeals, Fifth Circuit, in an opinion by Judge Foster, concluding thus: "The contract clearly contemplates that, if for any reason the insured is unable to promptly make proof of his disability warranting the suspension of premiums and the payment of the annual installments, some one else in interest must do so for him. This is a condition precedent necessary to be complied with to fix liability under the policy. It is very material to the risk that proof of total disability be furnished promptly and while the policy is kept in force by the payment of premiums. The provisions of the policy so requiring are not to be considered waived or rendered inoperative simply because of misfortune overtaking the insured. Bergholm v. Peoria Life Ins. Co., 284 U.S. 489, 52 S.Ct. 230, 76 L.Ed. 416." 67 F. (2d) 899, 900.

Berry v. Lamar Life Ins. Co., 165 Miss. 405, 142 So. 445, 145 So. 887, was also strictly analogous to our Reynolds Case. The decision was the same in effect and upon similar reasoning, expressly reaffirming New York Life Ins. Co. v. Alexander, 122 Miss. 813, 85 So. 93, 15 A. L. R. 314, cited in the Reynolds Case.

Smith v. Missouri State Life Ins. Co., 134 Kan. 426, 7 P.2d 65, likewise presented the same situation as in our Reynolds Case, supra, a similar stipulation, for waiver of premiums, and disability from insanity. The court reviews the cases, pro and con, and quotes with approval from the Reynolds Case. Says the Kansas court: "It is impossible to entirely reconcile the two lines of authority. We think, however, that there is a distinction, in that in the one line of cases the courts have gone far afield to find an ambiguity in the contract, and have overlooked the fact that the contract does not pretend to insure against disability, but merely makes disability, when coupled with proof or notice to the company, a settlement or waiver of the premium. The contract is made for the benefit of the insured. On the one hand, the company obligates itself, in the event of total disability, to carry the insurance without charge to the insured, and, on the other hand, the insured obligates himself to furnish, while the policy is in force, proof of such disability. The contract is neither unreasonable nor harsh." Smith v. Missouri State Life Ins. Co., 134 Kan. 426, 7 P.2d 65, 69.

Much more is said to justify this holding.

Again, Reynolds v. Travelers' Ins. Co. (Wash.) 28 P.2d 310, decided the present year, was an action for the life benefit and also for disability benefits. The stipulation as to waiver of premiums was to like effect as in our Reynolds Case, supra, and total disability from insanity intervened, incapacitating the insured to personally make proof while the policy was in force.

The Washington court first notes that, under the well-settled law of life insurance, insanity will not excuse the payment of the required premiums to prevent a lapse of the policy according to its terms. The opinion proceeds: "Now, if insanity does not excuse the failure to pay premiums, then there can be no good reason why it should excuse the failure to furnish proof of disability. It is the proof of disability that excuses the failure to pay the premiums. The very purpose of disability insurance is to provide an income during such disability, not to accumulate a fund for the benefit of a third party beneficiary. Such disability includes insanity and other forms of mental incompetency. Hence,...

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