Mutual Life Ins. Co. v. Nelson

• Citation: 186 So. 837,184 Miss. 632,184 So. 636
• Decision Date: 06 March 1939
• Docket Number: 33419
• Court: United States State Supreme Court of Mississippi
• Parties: MUTUAL LIFE INS. Co. v. NELSON

184 So. 636

186 So. 837, 184 Miss. 632

MUTUAL LIFE INS. Co. v. NELSON

No. 33419

Supreme Court of Mississippi

March 6, 1939

(Division A.)

1 INSURANCE.

Under life policy providing for automatic paid-up nonparticipating term insurance on default and failure to select other options, and providing that term for which insurance would be continued would be such as the net cash value obtainable would purchase if applied as a net single premium, and defining "cash value" as the reserve for the face amount of the policy and dividend additions less the surrender charge, insurer in determining cash value of policy for purpose of determining term insurance was authorized under terms of the policy to deduct the surrender charge (Code 1930, section 5171).

2 INSURANCE.

Under life policy providing that, in default of payment of premium policy, if not surrendered for cash value or paid up insurance, would be automatically continued as term insurance such as the net cash value would purchase at date of default when applied as a net single premium, and authorizing deduction of a surrender charge in arriving at cash value which was definitely determined by a table, insurer was authorized to deduct surrender charge in determining term of paid-up term insurance on default in premium payment, as against contention that such provision permitted insurer to discriminate between policyholders of same class as forbidden by statute (Code 1930, section 5171).

ON SUGGESTION OF ERROR. (Division A. March 6, 1939.)

APPEAL AND ERROR. A suggestion of error based on ground that decision had overruled two prior cases was overruled where those cases were substantially distinguishable.

Division A

November 28, 1938

APPEAL from the Circuit Court of Hinds county HON. J. P. ALEXANDER Judge.

Action on a life policy by Mrs. Ella L. Nelson against Mutual Life Insurance Company. From a judgment for he plaintiff, defendant appeals. Reversed and rendered. On suggestion of error. Suggestion of error overruled.

The agreed statement of facts referred to in the opinion follows:

It is hereby agreed by and between the plaintiff and defendant that, for the purpose of a trial of the above styled cause, the following matters are to be taken by the Court as true:

The defendant issued the 20-Payment Life Insurance Policy No. 3358127 in the face amount of $ 1000, to Waiter A. Nelson on September 16, 1924, which policy is attached to the declaration as Exhibit A. The plaintiff herein was named as beneficiary in said policy. The insured paid the annual premiums thereon for seven years, or to and including the annual premium due thereon on September 16, 1930. The annual premium due on said policy on September 16, 1931, was never paid. The insured did not, within three months after default in the payment of said premium, exercise either Option (a) or Option (c), as set forth under "Options on Surrender or Lapse" in said policy. Option (b) therefore became operative automatically. The defendant thereupon applied the sum of $ 15.75 to purchase paid-up non-participating term insurance for the insured.

The reserve held for the face amount of said policy, computed in accordance with the American Experience Table of Mortality, and 3% interest, was, at the end of the seventh policy year $ 123.39. Prior to the issuance of the policy in suit, the amounts of the cash value per $ 1000 face amount of insurance which are included in the "Table of Surrender and Loan Values" were computed by the Company and in the computation of the seventh year cash value per $ 1000, the Company deducted a surrender charge of $ 7.50, that is 3/4% of the face amount of $ 1000, from the reserve of $ 123.39, to give the cash value of $ 115.89 shown in the table. At the time of default in the payment of the premium due on September 16, 1931, the policy had to its credit $ 18 of paid-up dividend additions from a prior year. The reserve value of these dividend additions on the basis of the American Experience Table of Mortality and 3% interest was $ 6.51. The Policy also had to its credit the dividend allotted to the policy on September 16, 1931, having a cash value of $ 9.07 corresponding to a paid-up dividend addition of $ 25. The sum of the foregoing items $ 115.89, $ 6.51 and $ 9.07 was $ 131.47. On September 16, 1931, there was an outstanding policy loan of $ 112 and accrued interest thereon to September 16, 1931, or $ 3.72, or a total indebtedness of $ 115.72, which deducted from $ 131.47 left the sum of $ 15.75.

The amount of term insurance to be continued was computed in accordance with the terms of the policy by adding to the face amount of $ 1000 the paid-up dividend additions of $ 43, making a total of $ 1043, and deducting therefrom the indebtedness of $ 115.72, leaving the net amount of $ 927.28, which the defendant adjusted to $ 928 when computations were completed, in order that the face amount of the paid-up insurance would be in even dollars, which is its uniform practice.

The sum of $ 15.75 was only sufficient, when applied as a net single premium on the basis of the American Experience Table of Mortality and 3% interest at the insured's attained age, to purchase paid-up non-participating term insurance in face amount of $ 927.28 for a period of two years and seventy days. Term insurance for $ 928 was, therefore, continued for 2 years 70 days from September 16, 1931. This expired on November 25, 1933.

If, in its calculation of the continued term insurance, the defendant had used the reserve for the face amount of the insurance, to-wit, $ 123.39, instead of the cash value of the face amount of insurance shown in the table in the policy, to-wit, $ 115.89, the period for which $ 927.28 of term insurance would have been continued is 3 years 105 days from September 16, 1931, or in other words, to December 30, 1934.

It is understood that the foregoing stipulation is without prejudice to the plaintiff's contention that the term "cash value" as herein used refers to and means "cash surrender value" and not the cash value for all purposes.

It is further understood and agreed that this stipulation as to the correctness of the foregoing statements of fact is not to be construed to exclude other testimony relating to said matters but not inconsistent therewith, and either party may offer testimony relating to said matters or to any other matters and facts pertinent to the issues herein.

Reversed.

Wells, Wells & Lipscomb, of Jackson, and Louis W. Dawson, of New York City, for appellant.

It is respectfully submitted that the law as uniformly developed in other jurisdictions should receive the careful consideration of this court. It is definitely in the public interest that the mutuality of mutual life insurance companies be recognized and that fundamentally sound insurance principles everywhere prevail. In all of the other jurisdictions in which this question has arisen, it has been held directly or indirectly, without exception, that the surrender charge such as that provided for in the policy at bar is proper. No such court, to our knowledge, has held that the cash value may not include a surrender charge unless the policy is surrendered for cash. No such court, to our knowledge, has held that the provisions in question are discriminatory or permit discrimination or limit the surrender charge to the physical surrender of the policy.

Williams v. Union Central Life Ins. Co., 291 U.S. 169, 78 L.Ed. 711; Carter v. Mutual Benefit Life Ins. Co., 161 So. 446; Erickson v. Equitable Life, 258 N.W. 736; Intersouthern Life Ins. Co. v. Zerrell, 58 F.2d 135; Bene v. New York Life Ins. Co., 87 S.W.2d 979; Moss v. Aetna Life Ins. Co., 73 F.2d 339; Atlantic Life Ins. Co. v. Pharr, 59 F.2d 1024; Darby v. Equitable Life Assur. Society, 79 So. 329; Neal v. Columbian Mutual Life Assurance Society, 138 So. 353, 161 Miss. 814; Fidelity Mut. Ins. Co. v. Oliver, 71 So. 302, 111 Miss. 133; Pilot Life v. Owen, 31 F.2d 862; Kurth v. National Life, 79 S.W.2d 339; Devitt v. Mutual Life, 22 D. L. R. 1915, 183; Brown v. Mutual Life, 195 S.E. 552; Rosenthal v. New York Life, 94 F.2d 675; Bostock v. Life Ins. Co. of Virginia, 93 F.2d 556; Life Ins. Co. of Va. v. Sluss, 11 N.E.2d 500.

It is the duty of the court to put that construction upon a contract which renders it legal and fair and reasonable.

Citizens Bank v. Frazier, 127 So. 716, 157 Miss. 298; Granberry v. Mortgage B.& T. Co., 132 So. 334, 159 Miss. 460; Harris v. Townsend, 58 So. 529, 101 Miss. 590; Home Mutual Fire Ins. Co. v. Pittman, 71 So. 739, 111 Miss. 420; Messina v. New York Life Ins. Co., 161 So. 462, 173 Miss. 378.

The extrinsic evidence in this case, both documentary and parol, was relevant and material in order to show that not only was discrimination not practiced under the circumstances disclosed by the record but that it was in effect impossible under the practice of the company. It was furthermore admissible to show that defendant's interpretation of the contract is the only correct one.

Interior Linseed Co. v. Becker-Moore Paint Co., 202 S.W. 567; Plumbing Co. v. Carmichael & Co., 80 Miss. 66; 3 Williston on Contracts, Rev. Ed., sec. 629; Finch v. Branham, 148 Miss. 137; 89 A.L.R. 1228; 10 R. C. L. 1072; 22 C. J. 1203; New York Life Ins. Co. v. Blaylock, 144 Miss. 541, 110 So. 432; Lamar Life Ins. Co. v. Minor, 170 Miss. 223, 154 So. 542; New York Life Ins. Co. v. Boling, 177 Miss. 172, 169 So. 882.

The policy in case at bar had at time of lapse, without dispute under the evidence in this case a net value of $ 15.75, which sum was used in the manner provided in the policy to purchase extended insurance on the life of Nelson for two years and 70 days for the amount of $ 928.

If the decision of the lower court in this case is...