New York Life Ins. Co. v. Kincaid

• Decision Date: 26 December 1935
• Citation: 122 Fla. 283,165 So. 553
• Court: Florida Supreme Court
• Parties: NEW YORK LIFE INS. CO. v. Kincaid

165 So. 553

122 Fla. 283

NEW YORK LIFE INS. CO. v. Kincaid

Florida Supreme Court

December 26, 1935

Rehearing Denied Feb. 6, 1936.

En Banc.

Error to Circuit Court, Orange County; Frank A. Smith, Judge.

Action by Nellie T. Kincaid against the New York Life Insurance Company. Judgment for plaintiff, and defendant brings error.

Reversed with directions.

COUNSEL

Doggett, McCollum, Howell & Doggett, of Jacksonville, for plaintiff in error.

George P. Garrett, of Orlando, for defendant in error.

OPINION

TERRELL Justice.

On June 30, 1920, New York Life Insurance Company issued two policies of insurance in the sum of $5,000 each on the life of James Kincaid of Orlando, Fla., payable to his wife, Nellie T Kincaid as beneficiary. The insured paid all premiums on these policies as they matured until June, 30 1929. In June, 1927, he borrowed $880 on each policy, which had not been repaid when his last premium matured. He was, therefore, indebted to the New York Life Insurance Company at that time for a quarterly premium of $66.30 (payment of premiums having been changed to quarterly basis) and one year's interest or $52.80 on the loan, being a total of $119.10 on each policy. At the same time the company owed Kincaid a dividend for 1928 of $60.35 and a dividend for 1929 of $62.50, or total dividends of $122.35 on each policy.

Kincaid did not pay his premiums nor the interest on his loan when they matured or within the thirty days' grace allowed by the policy, so on August 6, following default, the company notified him that it had lapsed both policies. August 8, two days after lapse, Kincaid filed his applications to reinstate both policies. The sum due the company for premiums and interest on loans was remitted with the applications and after considerable correspondence between the company and Kincaid and an investigation by the company of Kincaid's insurability, both policies were, on November 12, 1929, reinstated and the premiums marked paid to December 30, 1929, the reinstatements having been approved as of June 30, 1929.

All premiums were then regularly paid until March 30, 1931, but on February 19 of that year Kincaid applied for permanent disability benefits, as provided in the policy, and for which an extra premium charge of $12.72 per annum was required. The policies also provided that when total disability benefits were allowed all premiums would be waived beginning with the ensuing anniversary of the policy.

On March 9, 1931, the company notified Kincaid and his wife, Nellie T. Kincaid, that it had elected to and had as of June 30, 1929, rescinded the reinstatement of both his policies, because of his (Kincaid's) failure to disclose in his applications for reinstatement material facts as to his insurability. The policies as reinstated had been in force approximately twenty months when the reinstatement was rescinded, so in the letter of the company notifying Kincaid of the rescission of the reinstatement it tendered him the sum of $489.75, being the amount paid by him on premiums and interest on loans from the date of lapse to the date of rescission of the reinstatement.

Kincaid promptly applied for reconsideration of the order rescinding the reinstatement. Much correspondence ensued, but on June 12, 1931, the company notified him that the matter was closed, and that its order rescinding the reinstated policies was final and effective as of June 30, 1929. Kincaid, on May 27, 1931, cashed the check for $489.75 sent him by the company in return of premiums and interest on loan, and died September 18, 1931.

Nellie T. Kincaid then brought a suit in equity against the New York Life Insurance Company in the United States District Court for the Southern District of Florida, praying for an accounting and for other relief. Identical suits were brought on each policy, the facts being the same. Both suits were on appeal dismissed without prejudice because they were not of equitable cognizance. Kincaid v. New York Life Ins. Co. (C.C.A.) 66 F. (2d) 268.

In September, 1933, this action was instituted in the circuit court of Orange county to recover the proceeds of the policies. Declaration was filed and issues made as to each policy, but at the trial both actions were consolidated, the facts and issues being identical. There was a verdict and judgment for the plaintiff in the sum of $3,000 and costs, a new trial was denied, and final judgment was entered. The present writ of error was prosecuted to the final judgment.

The errors brought up for solution are numerous, most of which are predicated on rulings as to pleadings and evidence and refusal to grant a new trial. The pleadings are involved. The briefs are very clear and helpful. The record has been examined with great care, but we treat only those questions essential to the disposition of the cause. Under the conclusion we reach, the others become immaterial.

The vital questions in this case may be stated as follows: Whether or not the company erroneously lapsed Kincaid's policies as of June 30, 1929; whether he knowingly misrepresented his physical condition, that is to say, his insurability, when he applied for reinstatement of them; and whether or not his acceptance of and cashing the check for $489.75 was in full settlement of all claims held by him against the company.

In our view, question one must be answered in the negative. Kincaid had carried these policies for nine years. They provided that dividends, consisting of an annual apportionment of the company's surplus earnings, should be made to the policyholders after premiums were paid for two years, which by option in the policy could be applied on the payment of premiums or withdrawn in cash. The New York Life Insurance Company was, therefore, a mutual company, and Kincaid was more than a policyholder. He was a stockholder in the company.

Section four of the policies provides for their surrender after three full years' premiums have been paid if default in payment of premiums occurs, and defines three options that may be taken by the insured in lieu of continuing the policy if availed of at the end of any insurance year or within three months after default in payment of premium. We are concerned primarily with option three in this case. In paragraph two of option three cash surrender value is defined with particularity, and the method of its computation set out in detail. A table of guaranteed surrender values computed as specified is carried in the face of each policy.

Options one and two carry distinct privileges for the insured which we will not discuss because not pertinent to this case. Paragraph one of option three provides that if the policy be not surrendered for cash or paid-up insurance within three months after default in payment of premiums, its cash surrender at date of default, less the amount of any indebtedness, shall automatically purchase continued insurance from the date of default for the face of the policy plus any dividend additions and less any indebtedness to the company. The continued insurance shall be without future participation and without the right to loans, cash surrender values, disability, or double indemnity benefits.

These options were incorporated in the policies for the benefit of the insured to protect him should his financial condition become such that he was no longer able to carry or should he elect for other reasons to surrender them. Insurance like other contracts should be executed according to their express intent. Under paragraph one of option three as just quoted the company should not have lapsed Kincaid's policies when he failed to pay at maturity his June, 1929, premiums. He should have been carried for three months, and if he failed to surrender his policies and accept options one or two the company was mandatorially required to credit him with continued insurance from the date of default for the face of the policies as long as their cash surrender value, plus due dividends, less loans, would carry them. Such insurance, being without participation in benefits, amounted to nothing more than term insurance. The policies required this without any suggestion from the insured.

The company did not give Kincaid a chance to elect under options one or two, and if he failed to do so invoke option three in his behalf as the policies required. It promptly lapsed the policies, and Kincaid as promptly applied for reinstatement, which was granted. He paid his premiums as they matured and applied for disability benefits in February, 1931. The company responded to this request by again rescinding his policies as of June 30, 1929, and invoked the provisions of option three in his behalf. The company at this time took the position that the cash surrender value of the policies as of June 30, 1929, less advances thereon, was sufficient to purchase term insurance for one year and 204 days, carrying them to January 20, 1931, which, having expired, the policies had lapsed when Kincaid applied for total disability. In its computation of cash surrender value the company did not include the June, 1928, and the June, 1929, dividends.

Kincaid borrowed $880 on each policy in June, 1927, at 6 per cent. When he defaulted in payment of premiums, the surrender value of each policy, computed as required by option three, was $1,075, not including dividends. One year's interest on his loan was then due, making the full amount of $932.80 against the cash surrender value. The net surrender value of the policies was, therefore, $1,075 less $932.80, or $142.20. To this amount should have been added the June dividends of 1928 and 1929, aggregating $122.05 to apply on term insurance which was ample to carry the policies beyond Kincaid's death. The company was, consequently,...