National Investors Life Ins. Co. v. Tudor

• Decision Date: 09 October 1978
• Docket Number: No. 78-52,78-52
• Citation: 264 Ark. 361,571 S.W.2d 585
• Parties: The NATIONAL INVESTORS LIFE INSURANCE COMPANY, Appellant, v. Flora Mae TUDOR, Appellee.
• Court: Arkansas Supreme Court

Page 585

571 S.W.2d 585

264 Ark. 361

The NATIONAL INVESTORS LIFE INSURANCE COMPANY, Appellant, v. Flora Mae TUDOR, Appellee.

No. 78-52.

Supreme Court of Arkansas, In Banc.

Oct. 9, 1978.

Rehearing Denied Nov. 6, 1978.

[264 Ark. 362] Allan W. Horne, Little Rock, for appellant.

Travis Mathis, Arkadelphia, for appellee.

HOWARD, Justice.

We are to determine whether the verdict of the trial court, sitting without a jury, finding that appellant waived the requirement of reinstatement of a life insurance policy, after the policy had lapsed, resulting in a judgment in behalf of the appellee-beneficiary in the sum of $30,000.00, including 12% Penalty and interest, and reasonable attorney's fee in the amount of $3,000.00, is supported by substantial evidence.

A verdict supported by substantial evidence dictates an affirmance on appeal while, on the other hand, a reversal is required where the evidence falls short of substantiality.

THE FACTS

On December 14, 1970, appellant issued a reducing term life insurance policy, number 25699, to the late Keith Tudor, husband of appellee-beneficiary, with a face amount of $50,000.00. A monthly premium, in the amount of $78.00, was required on the 14th day of each month under a pre-authorized check plan, hereinafter referred to as P.A.C. draft. ¹

A premium became due on March 14, 1975, and pursuant to the P.A.C. draft plan, a check was submitted to the insured's bank for payment, but the check was returned twice because of insufficient funds. on April 4, 1975, appellant mailed the following communication to the insured, stating in relevant part "Dear Mr. Tudor:

We have just received word that our check for the March 14, 1975 premium was not honored by your bank.

We know how easily these things can happen so rather than having us resubmit your check to the bank, will you please send another check or money order for $78.00 for premiums due?

We know you don't want to lose the valuable coverage your National Investors policy provides, so it is to your advantage to send your payment today. This will assure the continuing security you get with National Investors and preserving this security is what we are all about. " ² (Emphasis added)

On May 7, 1975, Mrs. Tudor called Lynwood Richards at the office of Southern Standard Publishing Company and requested him to send a check to appellant in the sum of $234.00, representing premiums for three months. On the same date, Lynwood Richards prepared a company check on Elk Horne Bank & Trust Company, Arkadelphia, Arkansas, dated May 7, 1975, and made payable to appellant in the amount of $234.00. Mr. Richards signed the check and placed the following words in the left hand corner: "March, April and May payments", but did not submit a policy number or designate the name of the insured. The check was a regular Southern Standard Publishing Company check containing the following address: 510-512 Main Street, Arkadelphia, Arkansas 71923. This check was received by appellant's premium accounting department on May 8, 1975. ³

On May 15, 1975, appellee received the following communication from appellant dated May 13, 1975:

"Dear Mr. Tudor:

Your policy lapsed because the monthly premium due 3-14-75 was not received.

I am concerned about this since termination of your policy will result in a loss to you, both financially and from a protection standpoint.

You can never replace this policy at the same low premium rate since premiums for life insurance are based on age at time of issue. This loss may be avoided if you apply for reinstatement.

We will consider restoring the full benefits of your policy if you will complete, sign and return the enclosed Application with your check for $234.00.

You may be able to change your method of premium payments or make a change in your policy to suit your present needs.

Please contact me if you would like to discuss these changes."

On May 19, 1975, appellee called Mrs. Glenda Nash, representative in the Policy Owner's Service Department, who had written the letters of April 4, 1975, and May 13, 1975, and advised Mrs. Nash that she was somewhat surprised to receive the letter of May 13, 1975, inasmuch as premiums for three months had been mailed to appellant's office on May 7, 1975. However, Mrs. Nash was unaware of the $234.00 check sent by Mr. Richards and advised Mrs. Tudor that she would look into the matter and get back in touch with her. ⁴

On May 27, 1975, the insured, Keith Tudor, died. The next communication received by appellee from appellant was a letter dated May 30, 1975, containing a refund check in the sum of $234.00, as follows:

"Dear Mr. Tudor:

Your policy lapsed on 3-14-75 because the bank draft was returned by your bank unpaid.

On May 13, 1975, I wrote you advising you that your policy had lapsed and we would need a completed reinstatement form completed and signed by you and returned to us with your check or money order for $234.00 before we could consider restoring the full benefits of your policy.

We received your check for $234.00. However, since we have not received the completed reinstatement application I am therefore returning your $234.00 to you.

Sincerely,

Mrs. Glenda Nash

Service Consultant" ⁵

HOLDING OF THE TRIAL COURT

The trial court rendered the following decision:

"(T)he Court is impressed with the fact that the policy by its face has lapsed as of March 14th of 1975 and that the notice thereof of April the 4th, 1975 was properly and in due time given. I'm likewise impressed that if the same current, proper handling had been made of the check of May the 7th, we would probably not have been here today.

"So, I'm finding that the actions waived the reinstatement provisions, and the policy was in force and effect on the date of the death of Keith Tudor. I believe this was the 27th?

"Based on such finding, it would go without saying that there would be the twelve per cent penalty and reasonable attorney's fees. Reasonable attorney's fees will be found by the Court to be $3,000.00."

THE DECISION

The central and controlling facts in this case are not in dispute, but only the interpretation of these facts generates the sharp differences of opinion between the parties.

Appellant emphasizes that the insurance policy extending the coverage on the late Mr. Keith Tudor provides, in relevant part, as follows:

". . . Only the President, a Vice President or the Secretary is authorized to change, modify or waive any of the provisions of the policy, and then only in writing."

Further, the appellant points out that the policy provides "REINSTATEMENT If this policy lapses because of non-payment of premium, it may be reinstated at any time within 5 years after default in premium payment upon presentation of evidence of insurability satisfactory to the Company, and payment of all past due premiums with interest on such premiums from their respective due dates at the rate of 5% A year, compounded annually."

Thus, appellant argues, the record is void of any evidence that the above policy provisions have been complied with, and, more particularly, there is no evidence the president, a vice president or the secretary authorized any change or waived the reinstatement provisions and, as such, appellee has failed to establish a waiver of the reinstatement provisions. Accordingly, appellant contends, the trial court committed reversible error.

Appellant's argument is neither persuasive nor compelling for it is well settled that the agents or representatives of the life department, as here, of an insurance underwriter can waive a forfeiture of a life insurance policy, although the policy provides that only the president, a vice president or secretary has power to modify or to waive provisions in a policy. Home Life & Accident Co. v. Scheuer, 162 Ark. 600, 258 S.W. 648 (1924).

Moreover, in Millers Mutual Fire Insurance Company of Texas v. Russell, 246 Ark. 1295, 433 S.W.2d 536 (1969), which involves a fire insurance policy, we stated a provision in an insurance policy which is essentially for the benefit of the insurer can be waived by the insurer through the conduct of its agent acting within the real or apparent scope of his authority.

We now turn to the evidence in the record before us to determine if there is substantial evidence to support the trial court's finding that the reinstatement requirements, under the policy, were waived by appellant through the conduct of its representatives.

First, it is well established that forfeitures are not favored and that courts are prompt to seize on circumstances which indicate a waiver on the part of an insurer or which will raise estoppel against it. Union Life Insurance Company v. Brewer, 228 Ark. 600, 309 S.W.2d 740 (1958).

The evidence reflects that a P.A.C. draft was submitted to the insured's bank for the premium due March 14, 1975, which was returned for insufficient funds. On April 4, 1975, Mrs. Nash, Service Consultant for appellant, advised the insured "to send another check or money order for the premium due. Pursuant to this request, a company check for $234.00, representing premiums for three months, was mailed by an employee of the insured on May 7, 1975. This check was received on May 8, 1975, in appellant's office. However, five days after this item had been received, appellant, for the first time, indicated an intention of forfeiting the policy in its letter of May 13, 1975, which was prepared 29 days after the 31 day grace period had expired, namely, April 14, 1975, and 22 days prior to a purported refund made by appellant and just three days after the insured's death.

However, appellant contends that the delay, in advising the insured of the forfeiture and the necessity for an application of reinstatement, was due to appellant's inability to determine for whom the payment was intended...