Sjoberg v. State Auto. Ins. Ass'n of Des Moines, Iowa

• Decision Date: 11 June 1951
• Docket Number: No. 7207,7207
• Parties: SJOBERG v. STATE AUTO. INS. ASS'N OF DES MOINES, IOWA.
• Court: North Dakota Supreme Court

Page 452

48 N.W.2d 452

78 N.D. 179

SJOBERG v. STATE AUTO. INS. ASS'N OF DES MOINES, IOWA.

No. 7207.

Supreme Court of North Dakota.

June 11, 1951.

Syllabus by the Court.

1. An insurer may waive any provisions of an insurance policy or of the law which are solely for his benefit.

2. 'Waiver is the voluntary and intentional relinquishment or abandonment of a known existing right, advantage, benefit, claim or privilege which except for such waiver the party would have enjoyed.' Meyer v. National Fire Insurance Co., 67 N.D. 77, 269 N.W. 845.

3. A waiver may be made by express language or agreement or by acts or conduct from which an intention to waive may be inferred. Whether or not there has been a waiver depends upon the facts and circumstances of each individual case.

4. When an insurer accepts a check in payment of a premium due on a policy of insurance and issues an unconditional receipt for the premium and on the return of that check unpaid for lack of funds, instead of returning the check, cancelling the receipt and notifying the insured of a lapse of the policy according to its custom on nonpayment of premiums, endeavors to make collection on the check an intention to keep the policy in force and to waive forfeiture will be inferred.

E. J. McIlraith, Minot, for plaintiff and respondent.

Day, Lundberg, Stokes, Vaaler, & Gillig, Grand Forks, for defendant and appellant.

GRIMSON, Judge.

The plaintiff is the widow of one Herbert Vernon Sjoberg. She brings this suit against the defendant upon a $5000. policy, No. 11242, of accident and health insurance covering her husband, in which she was the beneficiary. Her husband was killed in an automobile accident on August 5, 1948. She made demand upon the defendants for payment under the policy. Upon denial thereof this suit was brought. Defendant answered claiming that the last premium was not paid and alleging that the policy had lapsed and was not in force at the time of the insured's death. Plaintiff claims payment was made or in any event that forfeiture was waived. By consent the case was tried to the court without a jury. The court found that forfeiture had been waived and rendered judgment in favor of the plaintiff. Defendant appeals therefrom.

The policy in suit was introduced in evidence. It provides for health and accident insurance 'in consideration of the payment of premiums' and of other conditions not pertinent in this case. It provides for quarterly premiums payable on or before the 1st. day of July, October, January and April or within a grace period of ten days thereafter. It provides, 'Insurance afforded by this policy shall terminate and the policy shall lapse upon the insured's failure to pay any premium hereunder on or before the due data thereof. No notice of the due date of any premium shall be required.'

These provisions are valid and binding conditions of the policy. The payment of the premiums in accordance therewith is a condition precedent to the maintenance of the insurance. On failure to pay a premium the insurance lapses ipso facto, Pina v. Continental Casualty Co., 51 R.I. 466, 155 A. 659, unless forfeiture is waived.

These provisions are for the benefit of the insurer. They protect him in carrying on his business. They preserve to him certain rights with regard to the insurance which is the subject matter of the contract. He may insist on these rights and the performance of the conditions created in his favor to the letter of the contract if he so desires. He may waive them, when in the interests of his business generally or on equitable grounds he desires to do so. Forfeiture is harsh and not favored in law or practice.

"Forfeiture for nonpayment is a necessary means of protecting themselves (The insurers) from embarrassment. Unless it were enforceable, the business would be thrown into utter confusion.' On the other hand, we recognize that well-managed insurance companies do not depend to any large extent upon forfeitures and lapses for the successful operation of their business; that it is frequently to their interest to waive forfeitures and to make advances to their policy holders in order to discourage the discontinuance of the payments of premiums.' Veal v. Security Mutual Life Insurance Co., 6 Ga.App. 721, 65 S.E. 714, 716.

'Policy conditions as to forfeiture for the non-payment of premiums or premium notes are regarded as being for the benefit of the insurer, and hence may be waived by it.' 15 Appelman Insurance Law and Practice, Sec. 8401, Policy Conditions, p. 213; Equitable Life Assurance Society v. Boisvert, 66 N.D. 6, 262 N.W. 188; Beauchamp v. Retail Merchants Ass'n, 38 N.D. 484, 165 N.W. 545; National Life Insurance Co. v. Clayton, 70 Okl. 116, 173 P. 356.

Bishop on Contracts, Enlarged Edition, Sec. 792, p. 309, defines waiver as follows: "Waiver is where one in possession of any right, whether conferred by law or by contract, and of full knowledge of the material facts, does or forbears the doing of something inconsistently with the existence of the right, or of his intention to rely upon it. Thereupon he is said to have waived it, and he is precluded from claiming anything by reason of it afterwards." See also Meyer v. National Fire Insurance Co., 67 N.D. 77, 86, 269 N.W. 845, 852. Beauchamp v. Retail Merchants Ass'n supra.

Whether there was a waiver by the defendant of some of its rights under the policy is the question at issue. In order to determine that a careful examination of the evidence is necessary.

The policy in question was for an initial term commencing April 15, 1946, and ending July 1st 1946, renewable 'at the option of the association for further quarterly terms by the payment of rerenewal premiums therefor on or before the 1st day of each July, October, January, April thereafter,' or within a ten day grace period. The quarterly renewal premium amounted to $20. The premiums were paid and the policy renewed up to July 1, 1948. On June 21st. 1948, a courtesy reminder was sent to the insured by the defendant to the effect that the premium on this policy would be due July 1, 1948. The insured responded thereto by sending his personal check to cover the premium on this policy and two other policies he held with the defendant. This was received by the defendant on July 8, well within the grace period. Thereupon defendant issued to him its official receipt as follows:

'Policy No. 16242

RECEIPT

Date Due 7-1-48

'Thank you! We acknowledge receipt of your premium as indicated:

'Annual Premium 80.00

Semi-Annual Premium 40.00

Quarterly Premium Paid 7-8-48 $20.00

'Herbert Vernon Sjoberg

8th. Ave. N.W.

Minot, North Dakota

'Accident & Health Division--The State Automobile Insurance Assn. 710 Insurance Exchange Bldg.,--Des Moines, Iowa.

* * *

* * *

'(Luedke Ins. Agency Box 567 Minot, North Dakota) Local Agent.'

This receipt was mailed to the insured and produced by the plaintiff on the trial. On July 27th. the insured's check was returned to the defendant unpaid, marked, 'Insufficient funds.' No notice of that was sent to the insured nor was he notified of any forfeiture of the policy. Instead of that the defendant, on July 28th. wrote its agent at Minot concerning the policy as follows:

'July 28, 1948.

Re: Policy No. 16242

'Luedke Insurance Agency,

Herbert V. Sjoberg,

18th. Ave. N.W.

Minot, North Dakota.

Box 567,

Minot, North Dakota.

Pol. 13684 Frances Sjoberg

Pol. 13685 Donald V. Sjoberg

'Dear Sirs:

'The $33.55 check, dated July 3, 1948, submitted in payment of the July 1, 1948 premiums on the above numbered policies has been returned by H. V. Sjoberg's bank with the notation, 'Insufficient funds.'

'We will appreciate your cooperation in contacting Mr. H. V. Sjoberg and securing a bankable check or other remittance. (Italics ours.)

'Very truly yours,

'The State Automobile Insurance Assn.

G. R. Larimore,

G. R. Larimore, Accident & Health Div.'

'GRL.

Mr. Luedke received this letter on the 1st. or 2d. of August 1948. He testified: 'Well, I called him on the telephone as soon as I received that letter, told him his check was bounced and he told me he was going to the bank and for me to look out the window and I did and I hollered at him and he said he would be up and take care of it.'

Mr. Sjoberg, the insured, was killed within three or four days thereafter. He did not get around to taking care of the check.

Payment by check is generally held conditional upon the check's being honored unless there is a special agreement to the contrary. Lloyd Mortgage Co. v. Davis, 51 N.D. 336, 199 N.W. 869, 36 A.L.R. 465; Busch v. Manahan, 56 N.D. 491, 217 N.W. 658, Sec. 41-1709 NDRC 1943; Kady v. Schutte, 72 N.D. 228, 5 N.W.2d 721; 14 Appelman on Insurance Sec. 8144, p. 522.

There is authority, however, that if a check is unconditionally accepted as payment of the premium even though it turns out to be worthless the acceptance will prevent a forfeiture. 40 A.L.R.Anno. Effect on Giving Worthless Checks, p. 423, and authorities cited. Mutual Life Ins. Co. v. Chattanooga Savings Bk., 47 Okl. 748, 150 P. 190, L.R.A.1916 A, 669 and note.

The situation in the case of Veal v. Security Mutual Life Insurance Co. supra, was very similar to that in the case at bar. The court said: 'If the holder of a policy of life insurance sends to the company on the day the premium is due a check in payment thereof, and, when the check is presented at bank, payment is refused because of lack of funds to the credit of the drawer, the company, * * * in such a case, after notice that the check has been dishonored, retains it, and, instead of repudiating the transaction by returning the check and demanding back its receipt, insisted upon the insured's paying it after the date on which the policy would otherwise have lapsed, a waiver of the punctual payment of the premium in cash results.' [6 Ga.App. 721, 65 S.E.2d 714.]

In the case at bar the defendant did nothing towards repudiating the transaction of the check and the...