Pilot Life Ins. Co. v. Owen

• Citation: 31 F.2d 862
• Decision Date: 09 April 1929
• Docket Number: No. 2759.,2759.
• Parties: PILOT LIFE INS. CO. v. OWEN.
• Court: U.S. Court of Appeals — Fourth Circuit

31 F.2d 862 (1929)

PILOT LIFE INS. CO. v. OWEN.

No. 2759.

Circuit Court of Appeals, Fourth Circuit.

April 9, 1929.

H. J. Haynsworth, of Greenville, S. C. (C. F. Haynsworth and Haynsworth & Haynsworth, all of Greenville, S. C., on the brief), for appellant.

A. C. Mann, of Greenville, S. C. (J. L. Plyler and Mann & Plyler, all of Greenville, S. C., on the brief), for appellee.

Before WADDILL and PARKER, Circuit Judges, and COLEMAN, District Judge.

WILLIAM C. COLEMAN, District Judge.

This is an appeal from a judgment rendered by the District Court of the United States for the Western District of South Carolina, in a suit upon a life insurance policy. The action was originally begun in the court of common pleas for Greenville county, S. C., and from there removed to the District Court.

The material facts are these: The Pilot Life Insurance Company (formerly the Southern Life & Trust Company), hereinafter called the Company, issued to one James Robert Owen, a building contractor, a policy of life insurance, effective April 29, 1919, insuring his life in the sum of $7,500 in the event of death before the age of 60, and in the sum of $5,000 in the event of death after 60 and before 70, for an annual premium of $234.20 up to the age of 60, and $178.35 thereafter. The appellee, the wife of the insured, hereinafter called the plaintiff, was named the beneficiary. The insured paid seven annual premiums in full, but on the 1926 premium due July 1st, he paid on account $44.55, and pursuant to his original instructions and in accordance with his right under the policy, a dividend which had accrued to him of $38.10 was applied by the Company in further reduction of the premium. At the same time, that is, on or about August 1st and presumably within the 31 days of grace allowed within which to pay premiums, the insured applied to the Company for an extension to October 1, 1926, within which to pay the balance, namely, $151.55, still due on the annual premium, with interest. On August 5th such extension was granted by the Company's president, as he was empowered to do, with the proviso that "if payment be not made when due by the terms of the extension, then without grace and without further notice, the policy shall lapse and become void as of the due date, except that the right of the insured provided in said policy to elect an option on surrender will be the same as if no such extension had been granted." No further payments being made, on October 1, 1926, the Company declared the policy to have lapsed as of December 12, 1926, with a cash value of $741.25. That is to say, the partial payment made on the 1926 premium was sufficient to increase the policy's cash value by an amount equivalent to the increase allowed upon payment of a full quarterly premium. However, on March 1, 1926, the insured had procured a loan of $696 on the policy which, together with accrued interest, amounted to $706.44, and was deductible, pursuant to the provisions of the policy, from the cash value, leaving a balance of $34.81 which reduced the extended insurance value, as the Company claimed, to $235. On January 12, 1927, the insured died at the age of 46 of sclerosis of the liver and Bright's disease. He was given to the excessive use of alcohol, and for 18 months or more had been in failing health, but continued to attend to business affairs until less than a month before his death. The plaintiff, in due course, filed the requisite proofs and made claim for the full amount of the policy, namely, $7,500 with interest from the date of her husband's death, but the Company replied, denying liability under the policy for any amount except for $235 as extended insurance.

The case was tried before a jury, and at the conclusion of the testimony the Company moved for an instructed verdict against it for the sum of $235 only, being the amount of the extended insurance. This motion was denied, whereupon the jury returned a verdict against the Company for $7,033.63, and in due course judgment for that amount was entered. A motion for a new trial was filed, but overruled.

Besides the assignment of error raising the question of the trial court's refusal to direct a verdict, there are seven other assignments, but it is not necessary to refer to them specifically, because a consideration of the question whether the trial court was correct in refusing to grant the motion for a directed verdict necessarily embraces a consideration of all of the questions raised by the other assignments of error. Summarized, the answer as to whether the trial court was in error in refusing the motion depends upon the answer to the following questions: (1) Had the default of the insured on October 1, 1926, in the payment of the balance ($153.83) of the annual premium due July 1, 1926, been (a) excused by the disability of the insured, or (b) by waiver on the part of the Company; and (2) assuming that such default had been neither excused nor waived, was the only right which the insured had under the policy a right to the extended insurance, computed in the amount and manner claimed by the Company as embraced in its motion for a directed verdict?

The contract of insurance was made in South Carolina when the policy was there delivered to the insured upon payment of the first premium. Northwestern Mut. Life Insurance Co. v. McCue, 223 U. S. 234, 32 S. Ct. 220, 56 L. Ed. 419, 38 L. R. A. (N. S.) 57. It is, however, to be construed by the general commercial law as enforced by the federal courts, which are free to exercise their own judgment, independently of state decisions. Carpenter v. Providence Washington Insurance Co., 16 Pet. 495, 511 (10 L. Ed. 1044); B. & W. Taxi Co. v. B. & Y. Taxi Co., 276 U. S. 518, 530, 48 S. Ct. 404 (72 L. Ed. 68, 57 A. L. R. 426). We will consider first the question as to the disability of the insured, and what effect, if any, it had upon his rights under the policy.

The disability provision in the policy is as follows:

"If, while this Policy is in full force and effect and before default in payment of any premium, proof satisfactory to the Company is furnished that the insured, while under age sixty, and prior to the maturity of this Policy in any respect, has become wholly disabled by accident or disease, sustained, or contracted after this Disability Insurance Provision becomes effective so that the insured has thereby become, and presumably will be for life, wholly, continuously and permanently unable to pursue or engage in any gainful occupation, or to perform any work mental or manual for compensation or profit (hereinafter referred to as `such disability'):

"Upon written request by all parties in interest accompanied by this Policy the Company will agree, by endorsement hereon, to waive the payment of premiums as they become due during `such disability,' and, beginning six months thereafter, if `such disability' continues, the Company will pay to the Insured a monthly income of ten dollars for each one thousand dollars of Insurance payable at Age Seventy, during `such disability' prior to the maturity of this Policy. All said payments will be due at the Home Office, but without presentation of this Policy."

No proofs of disability were ever furnished the Company, nor was any claim presented until after the death of the insured. Nevertheless, plaintiff claims that the evidence on the question of disability is entirely ample to show that the insured was not only disabled on December 12 and October 1, 1926, but even before July 1, 1926, when the last regular premium became due; in fact, even as far back as the early spring of that year. But we do not find this to be borne out by the testimony. The insured was in...