Mutual Reserve Life Ins. Co. v. Roth

• Decision Date: 20 April 1903
• Docket Number: 1,807.
• Citation: 122 F. 853
• Parties: MUTUAL RESERVE LIFE INS. CO. v. ROTH.
• Court: U.S. Court of Appeals — Eighth Circuit

122 F. 853

MUTUAL RESERVE LIFE INS. CO. v. ROTH.

No. 1,807.

United States Court of Appeals, Eighth Circuit.

April 20, 1903

J. C Jones (William C. Jones, Lon O. Hocker, George Burnham, Jr. and Sewell T. Tyng, on the brief), for plaintiff in error.

F. H Bacon and John E. McKeighan, for defendant in error.

In Error to the Circuit Court of the United States for the Eastern District of Missouri.

This is an action on an insurance policy in the sum of $10,000, dated January 9, 1884, which was issued by the Mutual Reserve Fund Life Association on the life of Adam Roth, who died in the city of St. Louis, Mo., where he resided, on June 20, 1900. The action was originally brought by Margaret Roth, the widow of Adam Roth, against the Mutual Reserve Fund Life Association, which has since changed its name and become the Mutual Reserve Life Insurance Company. Margaret Roth died, as it seems, after the institution of the suit; and the case was prosecuted in her behalf in this court by Caroline G. Roth as executrix of the estate of Margaret Roth.

When the action was brought, the defendant company answered that the policy sued upon lapsed and became void on account of the failure of the deceased to pay a bimonthly assessment which was levied and became due and payable on November 1, 1899, and that it was not in force on June 20, 1900, when Adam Roth died. To this defense the plaintiff below replied, in substance, that at the time of the alleged lapse the policy in question had a net value incident to the payment of previous premiums, which net value, by virtue of section 5983 of the Revised Statutes of Missouri for the year 1879, operated to extend the insurance for a period which did not expire until subsequent to June 20, 1900, although the assessment which became due and payable on November 1, 1899, was not paid, directed the jury to return a verdict in favor of the plaintiff, which was accordingly done, whereupon the Mutual Reserve Life Insurance Company, the present plaintiff in error, sued out a writ of error.

The statute of the state of Missouri (section 5983, Rev. St. 1879) on which the decision of the case was made to turn is as follows:

'Policies Non-Forfeitable, When. No policy of insurance on life hereafter issued by any life insurance company, authorized to do business in this state, on and after the first day of August, A. D. 1879, shall, after payment upon it of two full annual premiums be forfeited or become void, by reason of the non-payment of premium 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 American experience table of mortality, with four and one-half per cent. interest per annum, and after deducting from three-fourths of such net value any notes or other indebtedness to the company, given on account of past premium payments on said policy issued to the insured, which indebtedness shall then be canceled, the balance shall be taken as a net single premium for temporary insurance for the full amount written in the policy, and the term for which such temporary insurance shall be in force shall be determined by the age of the person whose life is insured at the time of default of premium and the assumption of mortality and interest aforesaid; but if the policy shall be endowment, payable at a certain time or at death, if it should occur previously, then if what remains as aforesaid, shall exceed the net single premium of temporary insurance for the remainder of the endowment term for the full amount of the policy, such excess shall be considered as a net single premium for a pure endowment of so much as such premium will purchase, determined by the age of the insured at date of defaulting the payment of premium on the original policy and the table of mortality and interest as aforesaid, which amount shall be paid at end of the original term of endowment, if the insured shall then be alive.'

Before CALDWELL, SANBORN, and THAYER, Circuit Judges.

THAYER Circuit Judge, after stating the case as above,.

We are of opinion that, when the trial ended, all of the material facts in the case were practically confessed, and that the learned trial judge was right in holding that the only question involved was one of statutory construction arising upon the aforesaid statute. All of the actuaries who testified in the case (and there were several) agreed that the net value of a policy at any time is the difference between the single premium necessary to purchase the sum assured, estimated on the age of the person at the time the policy is valued, and the then present value of all the future premiums expected to be received on the policy. The net value of a policy is sometimes termed the reserve on the policy, and represents a sum of money already collected, which is supposed to be in the hands of the insurer, and available in its hands either to reinsure the risk in some other company, or to enable it, with the aid of the premiums thereafter payable, to meet the risk at the end of the party's expectancy. The net value of a policy is computed, of course, on a given table of mortality, at a specified rate of interest, and upon the assumption that during the early years of the risk, the premium being the same each year, the insured pays more than the actual cost of insurance; the excess which is thus paid making good the deficit during the later years, when it costs more to carry the risk. New York Life Ins. Co. v Statham, 93 U.S. 24, 34, 23 L.Ed. 789. All of the actuaries agree on the foregoing proposition. The actuaries further agreed, we think, that, under the provisions of such a policy as was issued to Roth, it did not have an actual net value; that is to say, they agreed that the defendant company had not accumulated any sum of money to help carry the risk to maturity, because the policy did not stipulate for the payment of a fixed or uniform premium annually, like an ordinary life policy, but contained provisions which necessarily made the premiums variable, by limiting them to such amounts as were necessary to meet death losses as they occurred.

The policy in suit contained a provision making it payable out of what is termed the 'Death Fund' of the association and a further provision that if, at such time as the directors of the association might fix for making an assessment, the death fund should be insufficient to meet existing death claims, an assessment should be made upon every member whose certificate was in force at the date of the death for which the assessment was made, said assessment to be made at such rates, according to the age of each member, as might be established by the directors, and that the net amount of such assessment, less 25 per cent. to be set apart for the reserve fund, should go into the death fund. The policy further stated that 'no assessments will be made while there remains in the death fund a sum sufficient to pay the existing claims in full. ' The constitution of the order, which was made a part of the contract, provided that on the 1st days of February, May, August, and November an assessment should be made upon the entire membership in force at the date of the last audited death claim prior thereto, for such a sum as the executive committee might deem sufficient to meet the existing claims by...