Penn Mut. Life Ins. Co. v. Forcier

• Decision Date: 13 May 1939
• Docket Number: No. 11119.,11119.
• Citation: 103 F.2d 166
• Parties: PENN MUT. LIFE INS. CO. v. FORCIER et al.
• Court: U.S. Court of Appeals — Eighth Circuit

103 F.2d 166 (1939)

PENN MUT. LIFE INS. CO. v. FORCIER et al.

No. 11119.

Circuit Court of Appeals, Eighth Circuit.

April 26, 1939.

Rehearing Denied May 13, 1939.

James C. Jones, Jr., of St. Louis, Mo. (Lon O. Hocker and James C. Jones, both of St. Louis, Mo., John M. Huebner, of Philadelphia, Pa., and Jones, Hocker, Gladney & Grand, of St. Louis, Mo., on the brief), for appellant.

W. H. Woodward, of St. Louis, Mo. (John F. Evans, of St. Louis, Mo., on the brief), for appellees.

Before STONE, GARDNER, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

This is an appeal from a judgment for the defendant in a suit brought by the insurance company under the Declaratory Judgment Act. Judicial Code, Section 274 d, 28 U.S.C.A. ß 400. Diversity of citizenship is the basis of jurisdiction. In its petition the company prayed the court to adjudicate and determine whether a policy of life insurance issued by it February 20, 1929, for $40,000 upon the life of Guy S. Forcier in the state of Missouri was in force on April 5, 1936, the date of insured's death, and to declare and adjudicate the rights and obligations of the parties under the policy. The defendant is the beneficiary named in the policy. In her answer she joined with plaintiff "in asking the court to declare the law under the facts as set forth."

The appeal presents three questions for determination. They are: (1) Had the policy lapsed for non-payment of premiums before the death of the insured? (2) Had there been a valid surrender and release of the policy prior to insured's death? and (3) Was the judgment appealed from authorized under the pleadings?

It will help to single the attention upon the separate issues to state the pertinent facts in connection with the discussion as we go along. The ultimate facts are not in dispute.

1. Had the policy lapsed? The insured made application to the appellant on February 16, 1929, for an ordinary life policy for $40,000. The policy was issued and dated February 20, 1929. It was delivered and the first premium paid March 18, 1929. Premiums were payable by the terms of the policy on February 20th. The policy provided for 31 days of grace. The premium due February 20, 1936, was not paid and the insured died on April 5, 1936.

The disputed question is whether the premium period began to run on February 20, the date of the policy, or on March 18, the date of its delivery and the payment of the first premium; if on the 20th of February the policy had lapsed on April 5, the date of insured's death, but if on March 18 it was in force, because death in that event occurred within the grace period.

The application, expressly made a part of the contract, provided that "If the premium on the insurance herein applied for is not paid at the time of making this application, the contract of insurance shall not be in force unless or until a policy shall be issued and delivered to me and the first premium thereon actually paid during my lifetime and good health."

The policy contained the provision that "The insurance under this policy is based upon annual premiums payable in advance." It also provided that upon written request payments might be made semi-annually or quarterly. The latter privilege had been taken advantage of by the insured in his lifetime.

The policy contained the further provision that the "policy year shall be computed from the 20th day of February, 1929," and that upon the non-payment of any premium when due, or within the period of grace, the policy should lapse and be void.

Thus there is presented for construction a contract of ordinary life insurance in which the date of the policy and the date of the delivery of the policy and the payment of the first premium are different. The contract provides, (1) "this policy is based upon annual premiums payable in advance," that is, each annual premium pays for keeping the policy alive and in effect for one year; (2) the "policy year shall be computed from the 20th day of February;" and (3) "the contract of insurance shall not be in force * * * until * * * delivered * * * and the first premium paid," on the 18th day of March.

The contract was made in Missouri, and its interpretation and effect are controlled by Missouri law. Turner v. New York Life Ins. Co., 8 Cir., 100 F.2d 193; Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L. R. 1487; Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290; New York Life Ins. Co. v. Jackson, 304 U.S. 261, 58 S.Ct. 871, 82 L.Ed. 1329; Rosenthal v. New York Life Ins. Co., 304 U.S. 263, 58 S.Ct. 874, 82 L.Ed. 1330. The trial court, after a careful review of the decisions of the Missouri courts, held that under the law of that state the contract must be construed as fixing March 18 for the beginning of the premium period. The same cases reviewed by the lower court are cited and relied upon by the parties here.

Cases involving the proper construction of life insurance policies containing provisions the same as or similar to the above quoted provisions of the policy here in suit and in which the date of the policy and the date of the payment of the first premium and the delivery of the policy are different have been frequently considered by the Supreme Court and the appellate courts of Missouri. Neither the provisions of the policy under consideration nor the circumstances attending its issue and delivery are uncommon. In construing such policies and in determining their effective premium date the Missouri courts have emphasized two controlling factors: first, the character of the contract, that is whether it provides for ordinary life, term or endowment insurance; and, second, the relative date of the insured's change of age for the purpose of determining the amount of the premium.

The application of these distinctions has resulted in two separate and distinct lines of decision by the Missouri courts. The appellant relies upon one of these lines of decision and the appellees upon the other.

The leading case is the decision of the Supreme Court of Missouri in Halsey v. American Central Life Ins. Co., 1914, 258 Mo. 659, 167 S.W. 951, 952. In this case Augustus C. Halsey made written application to the insurance company on May 24, 1906, for a $10,000 policy. The policy was issued and dated May 31, 1906. It was delivered to the insured and the first premium paid June 5, 1906. On May 31, 1907, the second annual premium was tendered to the agent of the company and refused on the ground that the policy had lapsed. The insured died on the morning of June 5, 1907, and the company denied liability. The policy provided for no period of grace. The application provided that "This application and policy hereby applied for taken together shall constitute the entire contract between the parties hereto." It further provided: "The annual premium to be made payable in advance on the 24th day of May;" and "That there shall be no contract of insurance until a policy shall have been issued and delivered to me when in good health, and the premium paid to said company or its duly authorized agent during my lifetime."

The application further provided that all premiums "shall be annual premiums" and that failure to pay any premium at the time it should become due would render the policy void.

The policy provided that the company "hereby insures the life of Augustus C. Halsey * * * for a period of one year from the 24th day of May, 1906, and in consideration of the further payment in cash of $307 on or before the 24th day of May in every year thereafter" etc. The policy also provided: "The payment of the first annual premium thereon is a condition precedent to the taking effect thereof, and it is expressly agreed that this policy shall not become binding upon the company until said premium is actually paid during the lifetime and good health of the insured."

The insurance company contended that the policy lapsed for failure to pay the premium on May 24, 1907, according to the terms of the policy. The court held that the premium was not due and that there could be no default until June 5, 1907, the anniversary of the delivery of the policy and the payment of the first premium because the policy did not become effective until June 5, 1906, by its terms. In the course of the opinion the court said:

"Under the terms of this contract, which consisted of the application and the policy issued in pursuance thereto, the deceased was clearly insured for one full year from June 5, 1906, to the last minute of June 4, 1907. That being unquestionably true, the tender made of the second premium by the brother of the deceased on May 31, 1907, while the policy was still in full force and effect, was clearly made within the time agreed to by the parties, if the entire contract is to be considered as a whole.

"If this is not true, then, by parity of reasoning advanced by counsel for appellant, the policy was never in force, for the simple reason that the first premium was not paid on May 24, 1906, but was paid on the 5th of June, 1906, the date the policy, by its terms, went into effect. This very act of the parties, under the facts and circumstances in the case, puts a practical construction upon the contract made and entered into between them, namely: That each succeeding annual premium should be paid during the life of the policy, and thereby keep it in full force and effect for the period of time stated therein.

"If this is not the true meaning of the parties, then the appellant is driven to the conclusion that the deceased paid for a full year's insurance; but under the terms of the policy he was only entitled to about 11O months of insurance."

The decision in the Halsey case has been frequently discussed in subsequent opinions of the Supreme and appellate courts of Missouri, but it has not been overruled. It has been followed by the Supreme Court in State ex rel. Mo. State Life Ins. Co. v. Allen, 295 Mo....