State Mut. Life Ins. Co. v. Forrest
| Decision Date | 16 February 1917 |
| Docket Number | 7354. |
| Citation | 91 S.E. 428,19 Ga.App. 296 |
| Parties | STATE MUT. LIFE INS. CO. ET AL. v. FORREST. |
| Court | Georgia Court of Appeals |
Syllabus by the Court.
Insurance policies are prepared and proposed by the insurers; and where such a contract is capable of being construed in two ways, that interpretation must be placed upon it which is most favorable to the insured. Especially is this true where as in this case, the construction insisted upon by the company would work a forfeiture of the policy, while the other will preserve the obligations of both the company and the insured.
The policy involved in this case contains a loan clause, wherein the company agrees to loan the insured, at his option, stated amounts of cash, upon the policy as sole security; the company further agreeing that any such "loan may be renewed annually, if interest be paid for one year in advance." The insured obtained such a loan, and died four months and eight days after its maturity, without having either renewed or repaid it. The company now insists that under these facts, it is entitled to charge against the loan value of the policy a full year's interest. Held, that since the policy makes no provision for such a case, the amount of interest to be charged is controlled by the rules of law applicable to written obligations to pay in general; that is to say, the company is entitled only to the contract rate of interest for the actual time of its forbearance. No more can be charged against the loan value of the policy so as to reduce the amount thereof available for other purposes under the policy; and no more can be charged against the liability of the company, if any, which accrued upon the death of the insured.
The "automatic" nonforfeiture clause of the policy stipulates that "the company, upon failure of the insured to pay any premium, will charge the premiums as they fall due as loans against the policy until the loan value is consumed." The insured died four months and eight days after the due date of an annual premium, leaving the premium wholly unpaid, and leaving the policy without a sufficient loan value to pay a full annual premium. The company insisted that under these facts the "automatic" clause was inoperative to sustain the policy or keep it of force for any length of time, notwithstanding it may have had some small loan value remaining; and that such a construction is made imperative by a provision of the loan clause requiring the payment in advance of a full annual premium before the insured could obtain a cash loan. Held:
(a) The obligation of the company under the "automatic" clause, to charge the unpaid premiums against the loan value of the policy "until the loan value is consumed," entitled the insured not only to such full years of insurance as the available loan value was sufficient to cover, but also to such fractional part of a year as any remaining loan value then available for such purpose might cover, continuing the policy in full force until its stated loan value should become wholly exhausted.
(b) The "automatic" clause, under its own express provisions, could become operative only "upon the failure of the insured to pay any premium." It cannot, therefore, be nullified by ingrafting thereon through a process of alleged construction the contradictory provision of the loan clause that, before obtaining a cash loan, "premiums under this policy shall be paid in full up to the end of the policy year when the loan is obtained." The last-quoted provision is a limitation upon the loan clause only, applies to cash loans only, and does not affect the charges to be made "as loans" under the provisions of the "automatic" clause.
(c) In order, however, for this policy to have been sustained by its own loan value and the provisions of the "automatic" clause for the period of time in question, it was necessary that the loan value be sufficient to cover the interest as well as the principal debt, both as to the cash loan obtained under the loan clause and as to the charges made as loans under the "automatic" clause.
The grace clause of this policy refers to premiums only, and does not affect the cash loan or the accrual of interest thereon. But it applies with equal force to any premium, whether annual, semiannual, or quarterly, and whether paid in cash under the premium clause or by allowing the company to charge it as a loan under the provisions of the "automatic" clause. The fact of the payment, rather than the method thereof, together with the expiration of the period for which the premium was paid, fixed the date when the grace clause became operative, if it ever became operative under the facts of this case.
Considering this policy as a whole, its loan value, as fixed in the table of values incorporated in the policy, was, at the time of the death of the insured, sufficient to cover the amount of the loan, and also the amount of the unpaid premiums for that part of the policy year preceding the death of the insured, with interest upon both the loan and the unpaid premiums, and therefore, under the provisions of the "automatic" clause, the policy was in full force at the time of the death of the insured, subject only to such charges.
The policy provides: "If the insured makes written application within six months after default in payment of premiums, the company will extend the policy as a term policy for its full amount * * * as stated in the table on the third page hereof." The insured died within six months after the maturity of the eighth annual premium, without having paid it, and without having made any written or other application in accordance with the above-quoted provision of the policy. Held:
(a) The privilege so extended the insured is not a mere gratuity personal to the insured alone, but it is a property right which on his death survives to his beneficiary or legal representative, as the case may be.
(b) The provisions of the policy relating peculiarly to the continuation of the insurance risk become inapplicable and immaterial when the policy is converted into a death claim by the death of the insured.
(c) Upon the death of the insured within the period covered by this clause of the policy (where the extended insurance would have run beyond that period), his legal representative was entitled to hold and sue upon the original policy as a death claim against the company for the full amount of its face value.
(d) The insured having died before the expiration of his right to pay up his indebtedness to the company, which would have entitled him to the full benefit of the seven years and four months extended insurance provided by the table, this right also survived to his legal representative; and, where such payment was made by her, or was legally tendered, or where she was excused by law from making such tender, such indebtedness cannot operate to defeat or nullify the provisions of the "six months" clause of the policy by shortening the term of extended insurance as fixed by the table.
(e) And "tender may be made by an agent or friend at the instance of an interested party."
The trial judge did not err in overruling the demurrer to the petition.
Error from City Court of Floyd County; W. J. Nunnally, Judge.
Action by C. M. Forrest, administratrix, against the State Mutual Life Insurance Company, and others. Judgment for plaintiff, overruling demurrer to petition, and defendants bring error. Affirmed.
Alex C. King, of Atlanta, and Maddox & Doyal, of Rome, for plaintiffs in error.
Barry Wright, of Rome, and Sheppard Bros., of Edgefield, S. D., for defendant in error.
This case arose as an action on a life insurance policy. It comes to this court on questions of construction. The policy was issued on January 19, 1907, for $5,000, in consideration of an annual premium of $190.40, payable in advance, the insured being allowed the privilege of paying a semiannual premium of $99 or a quarterly premium of $50.45, as he might elect at the time for paying any premium. The policy contains the following special provisions:
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