Southern Life Ins. Co. v. Hazard

• Decision Date: 17 May 1912
• Citation: 148 Ky. 465,146 S.W. 1107
• Parties: SOUTHERN LIFE INS. CO. v. HAZARD.
• Court: Kentucky Court of Appeals

146 S.W. 1107

148 Ky. 465

SOUTHERN LIFE INS. CO. v. HAZARD.

Court of Appeals of Kentucky.

May 17, 1912

Appeal from Circuit Court, Taylor County.

Action by Mattie L. Hazard against the Southern Life Insurance Company. From a judgment for plaintiff, defendant appeals. Affirmed.

John W Ray, of Louisville, for appellant.

W. M Jackson, of Campbellsville, for appellee.

MILLER J.

On September 27, 1909, the appellant issued to Martin L. Hazard an insurance policy upon his life for $1,000, at an annual premium of $43.60, which was then paid. The policy is known as a "special twenty payment life, diminishing premium" policy. It contains the following provision "Premiums on this contract will be paid by the company if insured is wholly disabled. After one full annual payment shall have been made, and before a default in the payment of any subsequent premium, if the insured shall furnish satisfactory proof that he has been wholly disabled by bodily injuries or disease, and will be permanently, continuously and wholly prevented thereby for life, from pursuing any and all gainful occupations, the company by an indorsement in writing upon this contract, will agree to pay for the insured the premiums, if any, which shall thereafter become payable during the continuance of such disability." It also contains this further provision: "A grace of thirty-one days, during which this contract shall remain in full force, will be allowed in the payment of all premiums except the first." By a further provision there is an automatic extension of insurance to the extent of the policy's cash surrender value, and the surrender value at the end of the first year in this case was $22.

On June 25, 1910, and before the second annual premium became due on September 27, 1910, Hazard was wholly disabled by bodily disease from pursuing any gainful occupations, and this disability continued until the time of his death on May 18, 1911. Hazard failed to pay the second premium of $43.60 due September 27, 1910, but on December 21, 1910, he furnished the appellant with the required proof showing his total permanent physical disability, and demanded that it carry out the contract by paying for him the premiums upon the policy, and keeping it in full force and effect, as provided by the provision above quoted. The appellant, however, denied any liability under the policy. Upon the death of Hazard, the appellee, who was his wife and the beneficiary under the policy, demanded payment of the $1,000 called for by the policy, and, upon appellant's refusal to pay the same, she instituted this action to recover it. She recovered below, and, to reverse that judgment, the insurance company prosecutes this appeal.

The payment of the initial premium carried the policy to September 27, 1910, and the 31 days of grace carried it to October 28, 1910, which was about seven weeks before the date upon which Hazard furnished the proofs of his disability to the company. The decision is to be determined by the construction given that provision of the policy which requires that satisfactory proof of disability shall be furnished "before default in the payment of any subsequent premium." It is conceded that the notice of disability was not given before the default in the second premium. It is insisted, however, by the appellee, that time is not of the essence of the contract; that the fact that the insured became totally and permanently disabled on June 25, 1910, which was before default in the payment of any subsequent premium, entitled the insured to have the policy carried for him by the appellant, if notice and demand were made thereon within five years thereafter; that notice to appellant of the insured's physical condition, "before default in the payment of any subsequent premium," was not a condition precedent, but a penalty, and the failure to keep same to the very letter did not defeat his rights under the contract. This argument is based upon the theory that it was not the notice which gave the insured the right to paid-up insurance, but it was his becoming totally and permanently disabled before a default in the payment of the succeeding premium that gave him that right, and that the notice simply fixed or applied a pre-existing right.

This court has repeatedly held that the right of the insured to a paid-up policy, or to any existing right under a policy, is not lost or forfeited by a failure to surrender the policy within the time required by the policy, upon the theory that, the insured's right having been earned and become fixed by the previous payment of premiums, time has ceased to be of the essence of the contract.

In Montgomery v. Ph nix Life Insurance Co., 14 Bush, 60, we enlarged upon the doctrine somewhat at length, in the following language: "Time is not generally of the essence of contracts. Story's Equity, § 776. It may be so when the contract is executory on both sides, or when the nature of the transaction or the stipulation of the parties shows it was so intended by them. But when the defendant has received the...