Priest v. The Bankers Life Association of Des Moines

• Decision Date: 09 December 1916
• Docket Number: 20,435
• Citation: 161 P. 631,99 Kan. 295
• Parties: JAMES M. PRIEST, a Minor, etc., Appellee, v. THE BANKERS LIFE ASSOCIATION OF DES MOINES, IOWA, Appellant
• Court: Kansas Supreme Court

161 P. 631

99 Kan. 295

JAMES M. PRIEST, a Minor, etc., Appellee, v. THE BANKERS LIFE ASSOCIATION OF DES MOINES, IOWA, Appellant

No. 20,435

Supreme Court of Kansas

December 9, 1916

Appeal from Cloud district court; JOHN C. HOGIN, judge.

Reversed and remanded.

SYLLABUS

SYLLABUS BY THE COURT.

1. LIFE INSURANCE-Nonpayment of Premiums-Notice of Forfeiture-Construction of Statute. The notice contemplated by the act to prevent cancellation or forfeiture of life insurance policies without notice (Laws 1913, ch 212), is notice of an intention to forfeit under an accrued right to forfeit, resulting from default in payment of premium within the time limited therefor, and notice given before the time has expired within which payment may rightfully be made that forfeiture will be enforced if payment be not made, does not satisfy the requirement of the statute.

2. SAME-Statute Prospective in Operation. The act is prospective in its operation, and does not affect forfeiture or cancellation of policies issued before the act took effect.

M. V. B. Van De Mark, of Concordia, and I. M. Earle, of Des Moines, Iowa, for the appellant.

Park B. Pulsifer, and Charles L. Hunt, both of Concordia, for the appellee.

OPINION

BURCH, J.

The action was one to recover on a mutual benefit certificate issued by the Bankers' Life Association of Des Moines, Iowa, to William R. Priest. A demurrer was sustained to the answer and the defendant appeals.

The by-laws of the association are a part of the contract. They provide for assessments due on the first day of January, April, July and October of each year, with a "grace" period of one month within which to pay. Assessments are levied by resolution of the board of directors, and notices of assessments are mailed to members in the month preceding the calendar month in which the payment is due. Failure to pay an assessment within the required time forfeits membership and all right to share in the funds of the association. Lapsed certificates of membership may be reinstated, at the option of the association, on written application therefor. No right to reinstatement exists unless a variety of conditions be met, among them being good health, sound constitution, temperate habits, and unobjectionable occupation and residence, on the part of the applicant.

On June 23, 1914, the association sent to the insured notice of assessment call No. 125, reading as follows:

"This is to notify you that a levy has been made upon the assessment membership of this Company for fifteen per cent. based pro rata on the amount of the Guarantee Fund of such membership, for the purpose of providing Benefit Fund.

Your portion of the Benefit Fund is.......................$ 13.80

"This call embraces the expense dues for six months for the Contingent Fund....................................... 4.60

Total............................ $ 18.40

"When more than one certificate is included herein an equal proportion of the above total is payable on each.

"This sum is due July 1, 1914, and payable only to this Company at its Home Office or to a Depository Bank. One month's grace is allowed so that payment may be made on or before August 1, 1914. If not made by that date your membership and insurance will thereby cease without action by the Company."

The assessment was not paid on or before August 1, 1914. On September 18, 1914, the insured was reinstated. The reinstatement was procured through representations made in the application for reinstatement. The insured died on November 9, 1914. The answer avoided the effect of reinstatement by alleging that the representations contained in the application for reinstatement were not true, and predicated nonliability on lapse of membership for failure to pay the assessment within the time limited. The demurrer to the answer was sustained on the ground that notice of intention to forfeit membership had not been given, as required by chapter 212 of the Laws of 1913. If this notice was essential and was not given, reinstatement and the representations inducing reinstatement were not material. The statute reads as follows:

"An act to prevent the cancellation or forfeiture of life insurance policies, without notice.

"Be it enacted by the Legislature of the State of Kansas:

"SECTION 1. It shall be unlawful for any life insurance company other than fraternal doing business in the state of Kansas to forfeit or cancel any life insurance policy on account of the nonpayment of any premium thereon, without first giving notice in writing to the holder of any such policy of its intention to forfeit or cancel the same.

"SEC. 2. Before any such cancellation or forfeiture can be made for the nonpayment of any such premium the insurance company shall notify the holder of any such policy that the premium thereon, stating the amount thereof, is due and unpaid, and of its intention to forfeit or cancel the same, and such policy holder shall have the right, at any time within thirty days after such notice has been duly deposited in the post office, postage prepaid, and addressed to such policy holder to the address last known by such company, in which to pay such premium; and any attempt Lon the part of such insurance company to cancel or forfeit any such policy without the notice herein provided for shall be null and void. The affidavit of any responsible officer, clerk or agent of the corporation, authorized to mail such notice, that the notice required by this section has been duly addressed and mailed by the corporation issuing such policy shall be prima facie evidence that such notice has been duly given."

The defendant says the notice which was given complied with the statute. The court regards the statute as providing for notice of an intention to forfeit under an accrued right to forfeit, and not for notice given before the time for payment has expired that forfeiture will be enforced if payment be not made. The notice of June 23 did not and could not state that the assessment, which was not due until July 1, and which could be paid as late as August 1, was both due and unpaid, as the statute requires.

The defendant says the statute of this state "is based on the New York statute and is practically the same," and cites two decisions of the New York court of appeals to the effect that notice containing the necessary information, given before the premium is payable, is sufficient. (Conway v. P. M. L. Ins. Co., 140 N.Y. 79, 35 N.E. 420; O'Brien v. Union Central Life Ins. Co., 207 N.Y. 180, 100 N.E. 702.) The New York act of 1876 regulating forfeiture of life-insurance policies provided that forfeiture should not be permitted unless a notice stating the amount of premium due and the place where it might be paid were mailed to the insured not less than thirty days nor more than sixty days before the payment became due, according to the terms of the policy. (Laws N. Y. 1876, ch. 341.) The next year the statute of 1876 was amended. The amended statute provided that power to forfeit could not be exercised except under the following conditions: "Whenever any premium or interest due upon any such policy shall remain unpaid when due," notice shall be given to the insured, stating the amount due, the place where payable and the person to whom payable, and stating that unless "the premium or interest then due shall be paid . . . within thirty days . . . the . . . policy will become forfeited and void." The statute further provided that payment within the thirty days limited therefor should satisfy the requirements of the policy, and then proceeded as follows:

"Provided, however, that a notice stating when the premium will fall due, and that if not paid the policy and all payments thereon will become forfeited and void, served in the manner herein before provided, at least thirty and not more than sixty days prior to the, day when the premium is payable, shall have the same effect as the service of the notice herein before provided for." (Laws N. Y. 1877, ch. 821.)

Very clearly two kinds of notice are here recognized: One, the advance notice stating when premium will fall...