Nielsen v. American Union Life Ins. Co.

• Decision Date: 17 February 1941
• Docket Number: No. 19799.,19799.
• Citation: 155 S.W.2d 515
• Parties: MARY E. NIELSEN, RESPONDENT, v. AMERICAN UNION LIFE INSURANCE COMPANY, A CORPORATION, APPELLANT.
• Court: Missouri Court of Appeals

155 S.W.2d 515

MARY E. NIELSEN, RESPONDENT, v. AMERICAN UNION LIFE INSURANCE COMPANY, A CORPORATION, APPELLANT.

No. 19799.

Kansas City Court of Appeals, Missouri.

February 17, 1941.

Appeal from the Circuit Court of Atchison County. — Hon. Ellis Beavers, Judge.

REVERSED AND REMANDED.

Brown, Douglas & Brown for appellant.

(1) The provision in insured's application for the policy in suit, that in the event of default in payment of any premium after premiums for three years shall have been fully paid, "the company shall continue such policy as non-participating paid up insurance of such reduced amount as the then value of such policy, less any indebtedness, will purchase," is an integral part of the contract of insurance, and unless unlawful must be enforced as a binding provision of the contract. Prangle v. International Life Ins. Co., 329 Mo. 651, 46 S.W. (2d) 523; Baker v. Keet-Roundtree Dry Goods Co., 318 Mo. 969, 2 S.W. (2d) 733; State ex rel. Mo. State Life Ins. Co. v. Allen, 295 Mo. 307, 243 S.W. 839; Fowler v. Mo. Mut. Assn. (Mo. App.), 86 S.W. (2d) 946; Hampe v. Metropolitan Life Ins. Co. (Mo. App.), 21 S.W. (2d) 926. (2) The insurance contract made up of the application and the printed policy forms, definitely provides that upon default in payment of any premium after the third, the policy shall continue as nonparticipating paid-up insurance of such reduced amount as the value, less indebtedness, will purchase, which is a clear provision for "unconditional commutation of the policy for nonforfeitable paid up insurance," and Sec. 5741, R.S. 1929, providing for extended insurance in the absence of an automatic policy provision, does not apply. State ex rel. Adams v. Allen (Mo.), 125 S.W. (2d) 854; State ex rel. Clark v. Becker, 335 Mo. 785, 73 S.W. (2d) 769; Cleaver v. Central States Life Ins. Co., ___ Mo. ___; R.S. Mo. 1929, sec. 5744. (3) Even if the contract of insurance stated in the application and the printed policy form did not contractually obligate the insurer at the outset to automatically continue the insurance as non-forfeiture, paid-up insurance, nevertheless, section 5741, would not apply in this case, for the reason that the provision in the application was, nevertheless, a request for paid-up insurance in the event default in payment of premiums after the third should occur, which remained unrevoked after the default occurred, and obligated the appellant to grant paid-up insurance in a reduced amount. R.S. Mo. 1929, sec. 5742; State ex rel. Clark v. Becker, 335 Mo. 785, 73 S.W. (2d) 769. (4) The finding of the court that appellant's refusal to pay more than extended insurance in reduced amount was vexatious, and the judgment assessing penalties and attorneys' fees, are erroneous. State ex rel. Life Ins. Co. v. Allen, 295 Mo. 307; 243 S.W. 839; Cleaver v. Central States Life Ins. Co., ___ Mo. ___.

Gerlash & Gerlash and Cook & Wulber for respondent.

(1) The policy sued on does not provide, in the event of its lapse after three full years premiums have been paid, for its unconditional commutation for nonforfeitable paid-up insurance within the meaning of Sec. 5744, R.S. 1929, and therefor the extended insurance statute (Sec. 5741, R.S. Mo. 1929) applies. Bothman v. Metropolitan Life Ins. Co., 299 Mo. 269, 252 S.W. 652, 655; Hickney v. Metropolitan Life Ins. Co., 270 S.W. 388; State ex rel. Metropolitan Life Ins. Co. v. Dawes, 297 S.W. 951, 952; Ross v. Capital Life Ins. Co., 205 Mo. App. 243, 228 S.W. 889, 890; Milburn v. Royal Union Life Ins. Co., 209 Mo. App. 228, 234 S.W. 378, 381; State v. Allen, 112 S.W. (2d) 843, 846, motion for rehearing overruled, 125 S.W. (2d) 854; Heuring v. Central States Life Ins. Co. of St. Louis, 120 S.W. (2d) 176. (2) Where an insurance company does business in this State and issues its policies to residents of this State, the validity of clauses in its policies must be determined by the laws of this State. The laws of this State establish a rule of public policy which overrides the freedom of contract of the parties. Gootch v. Ins. Co., 61 S.W. (2d) 704, 707; State v. Allen, 112 S.W. (2d) 843, supra, l.c. 846. (3) The courts of this State always have held to this rule that the terms of a policy of insurance, when doubtful, must be construed in favor of the insured and against the insurer. Very slight conditions have been sufficient to take the policy from under the effects of section 5744. Bothman v. Metropolitan Life Ins. Co., 229 Mo. 269, 252 S.W. 652, supra; Stark v. Ins. Co., 176 Mo. App. 574-581, 159 S.W. 758; Mathews v. Modern Woodman, 236 Mo. 326, 342, 344. (4) Where an insurance policy issued in Missouri in 1930, does not contain a provision for the unconditional commutation of the policy for nonforfeitable paid-up insurance, Sec. 5741, R.S. Mo. 1929, applies. Secs. 5741, 5744, R.S. Mo. 1929. (5) A provision that a policy will automatically become paid-up, is not the same literally or in affect as a provision for an unconditional commutation into a nonforfeitable paid-up policy. Ross v. Capital Life Ins. Co., 205 Mo. App. 243, 228 S.W. 890. (6) The policy and the application became the entire contract. But if the policy contains provisions in conflict with those in the application, being the later instrument, it should prevail. The terms of the offer are varied in the acceptance of the policy, as was done in this case. That is true, though the policy makes the application for insurance a part of the contract of insurance. The recitation in the application cannot be invoked for the purpose of contradicting the terms of the policy. 32 C.J., pp. 1102 to 1107, secs. 188 to 198 inclusive; Zielinski et al. v. Gen. Am. Life Ins. Co., 96 S.W. (2d) 1059; Neuner v. Gove, 133 S.W. (2d) 689, 694; Baker v. Roundtree Drygoods Co., 2 S.W. (2d) 733, 738; Tate v. Jasper County Farmers Mut. Ins. Co., 113 S.W. 659, 660; Legrand v. Central States Life Ins. Co., 132 S.W. (2d) 1105. (7) Mrs. Nielsen, beneficiary under the policy, in issue had no right to exercise any of the options given in the policy during the lifetime of the insured, since owner in policy means insured and not beneficiary, who had only expectancy. Davis v. Metropolitan Life Ins. Co., 2 N.E. (2d) 141; Harrell v. Bankers Mut. Life Co. of Freeport, 23 N.E. (2d) 818, 822; McKinney v. Fidelity Mut. Life Ins. Co., 193 S.W. 567; Allen v. Aetna Life Ins. Co., 62 S.W. (2d) 916, 918; Cohen v. Samuel, 245 U.S. 50; Supreme Council of Royal Arcamen v. Behrend, 247 U.S. 394; Missouri State Life v. California State Bank, 202 Mo. App. 347, 216 S.W. 785; Grand Lodge v. McFadden, 213 Mo. 269, 111 S.W. 1172. (8) The statute contemplates that the whole question of vexatious refusal shall be a matter of fact to be determined by the jury from the evidence. The court sitting as a jury determined there was vexatious delay in this case. No tender of the amount due was made. Glover v. Liverpood & London & Globe Ins. Co., 186 S.W. 583, 33 C.J., p. 151, sec. 890; Coscarella v. Metropolitan Ins. Co., 157 S.W. 873; Cox v. Kansas City Life Ins. Co., 135 S.W. 1013; Barber v. Hartford Life Ins. Co., 214 S.W. 207; Colley v. National Live Stock Ins. Co., 171 S.W. 663.

CAMPBELL, C.

This is an action on a policy of life insurance in the amount of $2000, issued by defendant to John Nielsen under date of November 28, 1930. Trial of the cause to the court without the aid of a jury resulted in a judgment for plaintiff for the amount of the policy with interest, less the unpaid annual premium, $131.52, due November 28, 1938, $186.84 penalty and $750 attorneys' fee. The defendant has appealed.

The insured paid eight annual premiums, the last on November 28, 1937, and failed to pay the premium due November 28, 1938. He died June 18, 1939. In due time thereafter plaintiff's beneficiary in the policy furnished to defendant proofs of the death of the insured, and thereupon defendant offered to pay to plaintiff $758, the amount of paid-up insurance and $53.82 dividend credited to the policy. The offer was refused and this suit followed.

The single question presented on this appeal is, did the policy contain a provision to the effect that upon default in the payment of a premium after the third for the unconditional commutation of the policy for nonforfeitable paid-up insurance within the meaning of section 5744, Revised Statutes 1929? If this question is answered yes, then the amount defendant offerd to pay was the correct amount. If answered no, then the policy was continued in force for the full amount stated therein to a time beyond the date of the death of the insured. [Sec. 5741, R.S. 1929.] The nonforfeiture provisions of the policy proper are as follows:

"Non-Forfeiture and Loan Provisions.

"After payment of premiums for three or more full years the following options shall be effective:

"Cash Surrender Value — At any time within sixty days after default in payment of any premium the Company will pay upon request, and upon a full and valid surrender of this policy and all claims thereunder, a cash surrender value in accordance with the accompanying table, less any existing indebtedness to the Company on account of this policy.

"Paid-Up or Extended Insurance — Upon written request, at any time prior to, or within sixty days after default in payment of premium, the Company will, after such default, either continued this policy for a reduced amount of non-participating paid-up insurance in accordance with the accompanying table, or extend and continue in force the face amount of this policy as non-participating term insurance in accordance with the accompanying table.

"Automatic Paid-Up Insurance — Upon default in the payment of premium, and provided the Insured shall not select one of the above options, this Policy shall be binding upon the company as non-participating PAID-UP INSURANCE of a reduced amount, in accordance with the accompanying table, payable at the same time and upon the same conditions as in the original...