Sellars v. Continental Life Ins. Co.

• Decision Date: 14 January 1929
• Docket Number: No. 2760.,2760.
• Parties: SELLARS v. CONTINENTAL LIFE INS. CO.
• Court: U.S. Court of Appeals — Fourth Circuit

30 F.2d 42 (1929)

SELLARS v. CONTINENTAL LIFE INS. CO.

No. 2760.

Circuit Court of Appeals, Fourth Circuit.

January 14, 1929.

J. Hertz Brown, of Spartanburg, S. C. (Carlisle, Brown & Carlisle, of Spartanburg, S. C., on the brief), for appellant.

H. K. Osborne, of Spartanburg, S. C. (Bomar & Osborne, of Spartanburg, S. C., on the brief), for appellee.

Before WADDILL, PARKER, and NORTHCOTT, Circuit Judges.

PARKER, Circuit Judge.

This was an action at law instituted by Julia A. Sellars against the Continental Life Insurance Company to recover on a policy of life insurance issued upon the life of her deceased husband. The defense was that the policy had lapsed. At the conclusion of the testimony verdict was directed for defendant, and plaintiff has appealed. We shall refer to the parties in accordance with the positions occupied by them in the court below.

The policy sued on was dated August 7, 1924. The insured, however, refused for some time to accept the policy, and it was not delivered to him until November 19, 1924. The second annual premium was never paid, and the policy contained no provision for extended insurance at the end of the first year except for the 31 days' grace allowed in the payment of premiums. Insured died December 12, 1925. If therefore the second premium was not payable until 12 months after the actual delivery of the policy, the 31 days of grace had not expired. If it was payable August 7, 1925, the policy had lapsed. The case turns, therefore, upon the answer to the question as to when the second premium was payable.

Insured made application for the policy July 18, 1924. He did not pay the premium at the time of the application, and the policy as issued differed from the policy applied for in that the application was for a policy to be issued November 1, 1924, with preliminary term insurance to that date, whereas the policy as issued was dated August 7, 1924, and no term insurance was issued. This change was made because it was seen that prior to November 1st the age of insured would change so that he would be 66 years of age on his nearest birthday and for that reason uninsurable under the rules of the company except by special contract. Insured was only 65 on August 7, 1924, counting his age as of his nearest birthday, and the premium rate of the policy was based on that age. Under the contention of plaintiff these facts become material because the application contained the following provisions:

"(1) If the first premium is paid in cash at the time this application is made and this application is thereafter approved by the company for the amount, on the plan, and in accordance with the terms of this application, the insurance will be in force from the date of such approval; and the first policy year shall, unless otherwise requested, begin with the date of such approval.

"(2) If the first premium is not paid in cash at the time the application is made, or if a policy different from the one described in this application is issued, the insurance shall not take effect until the first premium thereon has actually been paid to and accepted by the company, or its duly authorized agent, and the policy delivered to and accepted by me during my life and good health; but in that event the policy shall bear the date of its issuance and all future premiums shall become due on such policy and all policy values and extended insurance shall be computed therefrom."

The policy contained the usual provisions as to lapse for nonpayment of premiums, and also the following, which are the ones pertinent to the questions here involved, viz.:

"Only the president or secretary has power in behalf of the company to make or modify this or any contract of insurance, or to extend the time for paying any premium, and the company shall not be bound by any promise or representation heretofore or hereafter made unless made in writing by one of said officers.

* * * * * * * *

"This insurance is granted in consideration of the application herefor, which is made a part hereof, and of the payment in advance of four hundred twenty-two and 75/100 dollars being the premium for the term ending on the 7th day of August 1925, which is term insurance and for the legal reserve, if any. The insurance will be continued thereafter upon the payment of the annual premium of four hundred twenty-two and 75/100 dollars, on or before the seventh day of August in every year during the continuance of this policy.

"After delivery of this policy to the insured, it takes effect as of the date stated below.

"In witness whereof, the Continental Life Insurance Company has caused this policy to be signed by its proper officers at Saint Louis, Missouri, this 7th day of August, 1924.

"Edward P. Nelson "President."

Plaintiff offered testimony, which the court excluded, to the effect that one Bird, who delivered the policy for the agent of defendant, promised insured that it should be dated as of the date of delivery, and that the local agent of defendant had made this promise to Bird. Testimony was also excluded to the effect that after the death of insured the local agent requested plaintiff to return the policy to him in order that he might send it back to the company. The exceptions taken are to the direction of the verdict and to the exclusion of this testimony.

The contention of plaintiff is that the provisions in the application quoted above, which are made a part of the policy, are ambiguous and can reasonably be interpreted as referring to the actual delivery of the policy, and that, when they are so interpreted, the first year of insurance would not expire until November 19, 1925, and the second year's premium would not be payable until then. The contention is that this ambiguity should be resolved in favor of the insured, and that because of the ambiguity the parol evidence excluded was competent as showing the meaning and intention of the parties. We have given careful consideration to the very able brief and oral argument of the learned counsel for plaintiff, but we do not think that any of these positions can be maintained. We do not think, in the first place, that there is any ambiguity as to the date from which the first year's insurance was to run. And, in the second place, we think that the policy itself makes it perfectly clear that the second annual premium was payable on August 7, 1925, and that failure to pay same within the days of grace allowed would forfeit the insurance.

The first of the provisions of the application, which we have quoted, provides for the case where the premium is paid in advance and the policy is issued exactly as applied for. In such case the insurance becomes effective as soon as the application is approved, irrespective of the actual delivery of the policy. This is reasonable, for the company, having received the premium for the insurance and having accepted the offer as contained in the application, should be bound from the time of its acceptance. It is manifest, however, that a different rule should apply where the premium is not paid in advance or the policy is not issued as applied for and as issued constitutes in effect a counter offer from the company. It...