Poindexter v. The Equitable Life Assurance Soc'y Of The United States

• Decision Date: 22 May 1945
• Docket Number: (No. 9659)
• Citation: 127 W.Va. 671
• Parties: C. D. Poindexter, Administrator, Etc., v. The EquitableLife Assurance Society of The United States
• Court: West Virginia Supreme Court

127 W.Va. 671

C. D. Poindexter, Administrator, Etc.,

v. The EquitableLife Assurance Society of The United States

(No. 9659)

Supreme Court of Appeals of West Virginia.

Submitted April 4, 1945.

Decided May 22, 1945.

1. Insurance

Equity will not reform a life insurance policy except upon such a showing of accident, fraud or mutual mistake as would suffice to procure the reformation of any other written instrument.

2. Insurance

Under a policy of life insurance which provides that the "dividend" allocated to it at the end of any year, unless the insured shall elect another option, shall be used to purchase additional paid-up insurance, and that upon lapse of the policy after three years such "dividend additions", in the absence of any other election by the insured, shall be used to extend the term for which the policy will be carried by the company's reserve, a "dividend" allocated to the policy at the end of the eleventh year, at which time the policy lapsed, there having been no election to the contrary, must be used to purchase such additional term.

3. Insurance

Where a life insurance policy provides for the payment to the beneficiary of a stated income each month for twenty years, and that if the age of either the insured or the beneficiary shall be misstated in the policy, that such income shall be in such an amount as the premium actually paid would have purchased at the correct ages, any excess of premium paid by reason of such erroneous age stated in the policy must be used for that purpose, and no other.

4. Insurance

Excess in a premium paid by the insured on a "participating" life insurance policy, through mutual mistake of the insurer and one acting for the insured, in the absence of a provision otherwise in the policy, creates a simple debt from the insurer to the insured, and the insurer cannot be compelled, upon discovery of the mistake, to treat such excess payment as having purchased additional insurance benefits.

5. Insurance-

A life insurance company which, through the mutual mistake of itself and a policyholder, has received certain sums in excess of those actually due as premiums on the policy, should not be penalized by statutory interest during the period before discovery of the error, but should account to the payor, or to his personal representative, for such sums, together with the actual net usufruct thereof while in its hands.

Fox, Judge, absent.

Appeal from Circuit Court, Cabell County.

Suit by C. D. Poindexter, as administrator of William Robert Dabney, against the Equitable Life Assurance Society of the United States for reformation of a life policy, for an accounting, and for a decretal judgment for the corrected face value of the policy. The trial court decreed a reformation of the policy in certain particulars, decreed the policy to have been in force at time of insured's death, and entered a decretal judgment against defendant, and defendant appeals.

Reversed and remanded.

Vinson, Thompson, Meek & Scherr, for appellant. P. H. Murphy and Scott & Ducker, for appellee.

Rose, Judge:

This is a suit by C. D. Poindexter, as administrator of William Robert Dabney, seeking reformation, in certain respects, of an insurance policy issued by the defendant on the life of Dabney, and an accounting to the plaintiff concerning all moneys received by defendant applicable to the policy, and the application of all funds so found in the hands of the defendant which are proper for that purpose, to the extension of the term of the policy after its lapse for nonpayment of premiums; and, if sufficient funds are found to keep the policy in force through the date of the insured's death, to have a decretal judgment for its corrected face value.

No demurrer was interposed to the bill; an answer was filed which raised principally questions of law. Evidence was taken on behalf of the plaintiff and defendant. The court decreed a reformation of the policy in certain particulars, found the defendant in possession of certain funds which were directed to be applied to the purchase of an additional term of extended insurance, beyond that provided in the policy in case of lapse, decreed the policy to have been in force at the time of the insured's death, and entered a decretal judgment against the defendant for $9,070.89.

The application for the policy and receipt for the initial premium bear date November 17, 1911. The policy, issued under date of December 2, 1911, provided for the payment of $50.00 per month to the insured's wife, Kate V. Dabney, for twenty years after the insured's death and as much longer as she should live, and provided further that if the beneficiary should predecease the insured, the insured should have the right to name a new beneficiary, whose benefits should be limited to a monthly income of $50.00 for twenty years only, but that if no new beneficiary should survive the insured the policy should operate as an ordinary life policy payable to the personal representative of the insured in the amount of a commuted value of $9,194.40. The annual premium was $322.92, except that if the named beneficiary should predecease the insured the premium thereafter should be reduced to $303.48. At the time of the issuance of the policy, the insured was a resident of Ohio, but counsel appear to agree that the statutes and court decisions of that state do not differ from those of this state on any matter affecting this case.

The insured became insane sometime in the year 1912, and shortly thereafter was legally so adjudged and remained so until the time of his death. No committee or guardian, however, was ever appointed for him. After the insured became insane, the premiums on the policy, to and including that due November 17, 1921, were paid by the beneficiary's brother. Failure to pay the premium due November 17, 1922, resulted in the lapse of the policy as of that date. The named beneficiary died January 18, 1918. No new beneficiary was named. The insured died May 15, 1936.

It is sought to reform the policy by making the commuted value thereof $9,070.89 instead of $9,194.40; and by determining the annual premium to be $318.87 instead of $322.92 during the life of the named beneficiary, and $299.43 instead of $303.48 after her death, with other changes necessarily resulting in the benefits arising upon lapse of the policy by reason of the nonpayment of premium.

The trial chancellor found that the policy should be reformed as prayed for and that there are in the hands of the defendant the following sums which are applicable to the purchase of an additional term of insurance: (1) The sum of $75.48, being the dividend to which the insured was entitled at the end of the last year for which the premium was paid; (2) the sum of $53.44, being the aggregate of eleven overpayments of $4.05, calculated from the reduction of the annual premiums by reformation of the policy in that respect, with three per cent compound interest to the time the policy lapsed; and (3) the sum of $98.70, being the aggregate of four excess payments of premium in the amount of $19.44 each after the death of the original beneficiary, and the excess payment of $1.68 per year during the beneficiary's lifetime by reason of the erroneous statement of her age in the policy, with like compound interest to the date of the lapse of the policy.

The defendant contends here that the trial chancellor erred as follows:

"1. In finding that the excess premium paid, on account of the misstatement of the age of the beneficiary by the insured, for the policy years 1911 to 1917, inclusive, compounded at 3% interest annually, constitutes a credit by way of a trust fund and should be applied to the purchase of additional extended term insurance.

"2. In finding that the excess premiums paid for the policy years beginning November 17, 1918, 1919, 1920 and 1921-subsequent to the death of the beneficiary without notice or knowledge to the defendant constitute a credit and as a part of the so-called trust fund to be applied to the purchase of additional extended term insurance.

"3. In reducing the face value or commuted value of the insurance from the sum of $9,194.40, as stated in the policy, to $9,070.89 and thereby creating the basis for application of the so-called trust fund credits for the purchase of additional extended term insurance in order to furnish a basis for extending the term insurance to a date beyond the death of the insured.

"4. In arbitrarily reducing the annual premium of the company for the Ordinary Life portion of the policy at the sum of $4.05 per annum, compounded at 3% annually, in the aggregate amount of $53.44, and in using that amount as a further trust fund credit for the purchase of extended term insurance.

"5. In disallowing the dividend apportioned for the policy year beginning November 17, 1922 (which the defendant applied to the purchase of paid up additional insurance), and thereby reducing the amount of the insurance and including the said dividend item in the so-called trust fund credit."

An insurance policy is subject to reformation in equity precisely as any other written instrument. Bowman v. Hartford Fire Insurance Company, 113 W. Va. 784, 169 S. E. 443; Croft v. Hanover Fire Insurance Co., 40 W. Va. 508, 21 S. E. 854; Thompson v. Phenix Insurance Company, 136 U. S. 287, 10 S. Ct. 1019, 34 L. Ed. 408. This rule applies, of course, to life insurance policies. McMaster v. New York Life Ins. Co., 78 Fed. 33; Gray v. Supreme Lodge, K. H., 118 Ind. 293, 20 N. E. 833; Pfiester v. Missouri State Life Ins. Co., 85 Kan. 97, 116 P. 245; Central Life Ins. Co. v. Robinson, 181 Ky. 507, 205 S. W. 589; Pacific Mutual Life Insurance Co. v. Frank, 44 Neb. 320, 62 N. W. 454; Steinbach v. Prudential Ins. Co., 172 N. Y. 471, 65 N. E. 281; Britton v. Metropolitan Life Ins. Co. of New York, 165 N. C. 149, 80 S. E. 1072. And the grounds for, and the limitations which govern, the reformation of an insurance policy are exactly the same as for...