New England Mut. Life Ins. Co. v. Reynolds

• Decision Date: 22 March 1928
• Docket Number: 3 Div. 830
• Citation: 217 Ala. 307,116 So. 151
• Parties: NEW ENGLAND MUT. LIFE INS. CO. v. REYNOLDS.
• Court: Alabama Supreme Court

116 So. 151

217 Ala. 307

NEW ENGLAND MUT. LIFE INS. CO. v. REYNOLDS.

3 Div. 830

Supreme Court of Alabama

March 22, 1928

Appeal from Circuit Court, Montgomery County; Walter B. Jones Judge.

Action by Leona Reynolds against the New England Mutual Life Insurance Company. Judgment for plaintiff, and defendant appeals. Reversed and remanded.

Rushton Crenshaw & Rushton, of Montgomery, for appellant.

Hill Hill, Whiting, Thomas & Rives, of Montgomery, for appellee.

BOULDIN J. (after stating the facts as above).

We are of opinion that furnishing proof of disability to the insurer is made a condition precedent to the waiver of premium payments under the supplemental agreement set out in the special plea above. This agreement declares:

"If the insured *** 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, *** the company will waive payment of each premium as it thereafter becomes due during the continuance of such disability."

The intervening clauses name the conditions under which such proof is allowable, and define the character of disability. They must all concur to make the waiver effective. But the furnishing of proof is the specific condition upon which the company "will" waive each premium "thereafter" to become due. "Thereafter" clearly refers to date of furnishing proof. The clause is in no way ambiguous or of doubtful meaning. The preceding paragraph recites the consideration upon which the insurer agrees to the "following waiver." A later clause provides that the insurer may, after acceptance of such proof as satisfactory, have a medical examination made, and if it appears the insured is able to perform work or engage in any occupation for compensation or profit, no further premiums will be waived.

The entire structure of the agreement negatives the idea of a self-operating waiver in the event of total disability, but imposes a contractual obligation on the company to waive premiums when "due proof" is furnished. Manifest reasons appear for thus limiting the agreement. The premium named in a policy of life insurance is the consideration for the contract. Its prompt payment is the life of the business. By the contract the renewal premium carries protection to a fixed date. Unless renewed by another stipulated premium it lapses, and the rights of the insured are measured by the nonforfeiture provisions, usually certain options for cash surrender value, paid-up insurance, or extended term insurance.

It is important that the status of each contract be known. Otherwise the insurer is unadvised as to the amount of insurance outstanding--can make no accurate statement of resources and liabilities as often required by law. This case well illustrates the confusion which may ensue if the policy holder has a policy still in force by reason of a waiver of premiums without any notice thereof to the insurer. Here there was correspondence looking to payment of premium when due, notice of lapse for nonpayment, negotiations for examination and reinstatement, and, finally, a settlement surrendering the evidence of the policy loan, and showing the period of extended insurance--all received and apparently approved without a suggestion to the insurer that the insured had become insane. This status continued for about a year, when death of the insured intervened. It might have continued five or ten years.

It is further of importance that any issue as to the fact of disability be adjusted while the insured is living, not postponed until an issue must be made with the beneficiary after his death. In cases of insanity as the result of chronic disease, great difficulty may often arise in fixing the date when the border line is passed between mental capacity and incapacity to contract.

Appellee strongly relies upon the line of accident insurance cases, wherein the insured is required to give notice of his injury within a given time. In such cases the general rule is that if the insured is rendered physically or mentally incapable of giving notice as stipulated, it will be sufficient to give notice after such disability has passed, and if death ensues in the meantime, the indemnity will not be thereby forfeited. "The theory of these cases is that it could not have been in the contemplation of the parties that if the insured, who was required to give notice, was unable to do so by reason of the very accident against which indemnity was given, he should therefore lose such indemnity through no fault of his own." 4 Cooley's Briefs on Insurance (1st Ed.) p. 3462. See, also, 1 C.J. p. 472, note 4; 14 R.C.L. p. 133, § 504; Note 18 L.R.A. (N.S.) 109; Roseberry v. Amer. Ben. Ass'n, 142 Mo.App. 552, 121 S.W. 785; Woodmen Accident Ass'n v. Pratt, 62 Neb. 673, 87 N.W. 546, 55 L.R.A. 291, 89 Am.St.Rep. 777.

This is but an application of the general rule that insurance contracts are to be...