Omaha Nat. Bank v. Mutual Ben. Life Ins. Co.

• Decision Date: 16 June 1897
• Citation: Omaha Nat. Bank v. Mutual Ben. Life Ins. Co., 81 F. 935 (D. N.J. 1897)
• Parties: OMAHA NAT. BANK v. MUTUAL BEN. LIFE INS. CO.
• Court: U.S. District Court — District of New Jersey

81 F. 935

OMAHA NAT. BANK v. MUTUAL BEN. LIFE INS. CO.

United States Circuit Court, D. New Jersey.

June 16, 1897

In pursuance of a stipulation in writing waiving a jury, this cause was tried by the court without the intervention of a jury on the 20th day of April, 1897.And now, this 16th day of June, 1897, upon due consideration the court finds the following stated facts:

(1) This is an action by the Omaha National Bank, as assignee of Frank C. Johnson, to recover $20,000, the amount insured by the defendant under its two policies, numbered respectively 165,039 and 165,040, each dated January 15, 1891, and providing that in consideration of the payment of the annual premium of $359.40 on each November 11th during the continuance of the policy the defendant insures said Johnson's life in the sum of $10,000 under each policy payable to Johnson, his executors, administrators, or assigns, at his death, and also providing that, in case the premiums were not paid when due, the policies should cease and determine, subject to the provisions of the company's nonforfeiture system as indorsed thereon with the accompanying table.

(2) The nonforfeiture provisions indorsed on each of the policies provided that:

'When after two full annual premiums shall have been paid on this policy, it shall cease or become void solely by the nonpayment of any premium when due, its entire net reserve by the American Experience Mortality and interest at four per cent. yearly, less any indebtedness to the company on this policy, shall be applied by the company as a single premium at the company's rates published and in force at this date, either-- First, to the purchase of nonparticipating term insurance for the full amount insured by this policy; or, second, upon the written application by the owner of this policy, and the surrender thereof to the company at Newark, within three months from such nonpayment of premium, to the purchase of a nonparticipating paid-up policy, payable at the time this policy would be payable if continued in force.'

There was also the following indorsement:

'The following table shows the amount that the company agrees to loan (being one-half of the reserve) upon a satisfactory assignment of the policy as collateral security; also the additional time for which the insurance will be continued in full force after lapse by nonpayment of premium, or the value of the policy in paid-up insurance upon surrender within three months from date of lapse.The figures given are based upon the assumption that the premiums (less current dividends) have been fully paid in cash.If there be any indebtedness upon the policy, the values as stated in the table would have to be reduced proportionally upon the principles stated in the policy.The indebtedness, if any, may be paid off in cash, in which case the figures in the table will apply.'

The table showed that after three premiums had been paid the company would loan $250 on the policy, or, in case of lapse of policy, the extended insurance purchasable would be for 3 years and 258 days, and the paid-up policy would be for $1,030.

(3) The insured, Johnson, settled three annual premiums on each policy according to the company's 30 per cent. premium loan plan, namely, by paying at the outset 70 per cent. of the premium in cash, and signing, with respect to the policies, respectively, certificates of loan for the balance of one of which certificates the following is a copy, the other being identical with it except as to the distinguishing number of the policy: Certificate of Loan.

Newark, N.J., Jan. 15th, 1891.

Premium Payable Nov. 11th.

Certificate of Loan on PolicyNo. 165,039.

This certifies that the Mutual Benefit Life Insurance Company has loaned on policy No. 165,039 one hundred and seven 82/100 dollars, being thirty per cent. on the first annual premium, which, with any additional loan, shall be a lien on the policy until paid; legal interest on the same to be paid annually out of the dividend, if any, otherwise to be paid in cash; the amount of the existing loan to be indorsed hereon, and also stated on the renewal receipt.

Frank C. Johnson.

At the settlement of the annual premiums on the 11th of November, 1891, in the case of each policy, the amount of the then existing premium loan, namely, $145.21, was indorsed on the certificate of loan, and also entered on the margin of the renewal receipt which was then issued to the insured; and this was again done at the settlement of the annual premiums on the 11th of November, 1892, the amount of the premium loan then remaining outstanding being $182.74 on each policy.

(4) In the case of each of the policies there was a total failure to pay or settle the premium which became due on the 11th day of November, 1893, and thereupon the policies, by their terms, ceased and determined.

(5) The reserve on each policy at the time of the lapse amounted to $508.36.The indebtedness on each for premium loan as above mentioned amounted to $182.74, which, with interest for one year, $10.96, amounted to $193.70.The net reserve, less said indebtedness on each policy at the time of lapse, was, therefore, $314.66,-- the purchase price of term insurance for 2 years and 104 days.

(6) The insured, Johnson, did not apply for the benefit of the second alternative of the nonforfeiture provisions of the policies and after the expiration of the three months therein provided, namely, on February 27, 1894, the defendant(the insurance company) prepared, and, in accordance with its practice in like cases, executed, under the...