Swann v. Insurance Company

• Decision Date: 18 June 1931
• Court: Virginia Supreme Court
• Parties: CHRISTINA S. SWANN v. ATLANTIC LIFE INSURANCE COMPANY.

Page 852

156 Va. 852

CHRISTINA S. SWANN v. ATLANTIC LIFE INSURANCE COMPANY.

Supreme Court of Virginia, Wythebille.

June 18, 1931.

Present, Campbell, Holt, Hudgins, Gregory and Browning, JJ.

1. LIFE INSURANCE — Failure to Pay Premium — Total Disability of Insured — Notice of Disability by Insured — Replication — Facts Set Up in Replication Taken as True — Case at Bar. — The instant case was an action on a life insurance policy. Defendant, in a special plea, set forth that plaintiff could not maintain her action because of the failure of insured to pay the premiums. To this plea plaintiff filed a replication, setting forth that she should not be barred from recovery because the policy remained in force, notwithstanding the nonpayment of premiums, as the company had agreed to continue the insurance without requiring payment of premiums if the insured became totally and permanently disabled, and that insured had become disabled and mentally and physically incapable of furnishing the defendant any proof of his disability prior to his death. The court struck out plaintiff's replication.

Held: That for the purpose of testing the correctness of the ruling in striking out plaintiff's replication, it must be admitted that the facts set up in the replication were true, and that the trial court committed reversible error when it struck out the replication, thereby preventing a jury from determining the question of whether the disability existed and whether the failure to furnish the required proof thereof was excusable by reason of insured's physical and mental disability.

2. LIFE INSURANCE — Failure to Pay Premiums — Total Disability of Insured — Notice of Disability to Company. — Notwithstanding the literal meaning of the words used, unless clearly negatived, a stipulation in an insurance policy requiring notice should be read with an exception reasonably saving the rights of the assured from forfeiture when, due to no fault of his own, he is totally incapacitated from acting in the matter.

3. CONTRACTS — Matters not in Party's Mind. — That which cannot fairly be said to have been in the minds of the parties, at the time of the making of the contract, should be held as excluded from its terms.

4. LIFE INSURANCE — Purpose of Insurance. — The primary purpose of all insurance is to insure, or to provide for indemnity, and it should be remembered that, if the letter killeth, the spirit giveth life.

5. LIFE INSURANCE — Waiver of Payment of Premiums — Where Insured is Totally Disabled — Total Disability of Insured as Excuse for Failure to Present Proofs of Disability. — A life insurance contract provided that it should not be forfeited for nonpayment of premiums where insured became totally incapacitated. The insured could not present proofs to the company of his incapacity before his disability and he certainly could not present proofs after he became mentally and physically incapable of doing so. It would be unreasonable to say that he should present proofs to the company if he were insane or unconscious.

6. LIFE INSURANCE — Payment of Premiums — Furnishing Proofs of Total and Permanent Disability. — Payment of the premium, when due, has been strictly enforced in favor of the insurance companies. This is because the premium is the basis of the contract and the companies cannot carry on their business unless the premiums are paid. Furnishing proofs of total and permanent disability is a different matter.

7. LIFE INSURANCE — Waiver of Payment of Premiums — Total Disability of Insured — Notice of Disability not a Condition Precedent — Case at Bar. — The giving of notice and proof of disability is not a condition precedent to the right to a waiver of premiums where the insured, through no fault of his own, has become, while the policy is in force, mentally and physically incapable of giving the notice or furnishing the proofs to the company.

Error to a judgment of the Circuit Court of the city of Norfolk, in an action of assumpsit. Judgment for defendant. Plaintiff assigns error.

The opinion states the case.

Page, Page & Page, for the plaintiff in error.

Andrew D. Christian, Alexander W. Parker and Savage & Lawrence, for the defendant in error.

GREGORY, J., delivered the opinion of the court.

Christina S. Swann brought an action of assumpsit to recover, as beneficiary, on a life insurance policy for $2,500.00, against the Atlantic Life Insurance Company. Judgment was entered in favor of the Atlantic Life Insurance Company, and Christina S. Swann has been granted a writ of error by this court. The plaintiff in error and the defendant in error will be referred to as the plaintiff and defendant, having reference to their respective positions in the court below.

The case was submitted to the trial court upon the declaration, the policy of insurance, the special plea of the defendant and the replication thereto, of the plaintiff. A motion was made by the defendant to strike out the replication, and the court sustained the motion on the ground that it did not constitute any answer to the matters set up in the special plea. The plaintiff then elected to stand on her replication and declined to plead further. The court entered a judgment, of which the plaintiff now complains, in favor of the defendant.

It was alleged in the declaration that Harry K. Swann, Jr., on October 27, 1921, purchased from the defendant a life insurance policy on his life for the amount of $2,500.00. His wife, the plaintiff here, was named as the beneficiary. It was alleged that Swann died on April 28, 1929, while the policy was in force, and due proof of death was given the defendant in conformity with the terms of the policy, but the defendant refused to pay the plaintiff the amount of the policy.

The defendant set forth in its special plea that the plaintiff could not maintain her action because on or before the due date, or within the designated grace period, the premium for the policy due on October 27, 1928, was not paid, and as a consequence, the policy lapsed, except that after the deduction of a loan which had been made against the policy the net amount available under it was applied, in accordance with its terms in continuing the insurance, as "extended term insurance" to March 27, 1929; that the policy was not in force on April 28, 1929, the date of the death of the insured, it having lapsed on March 27, 1929.

To this special plea the plaintiff filed her replication, setting forth that she should not be barred from recovery by reason of anything contained in the special plea, notwithstanding the facts therein alleged were true; that the policy remained in force by reason of a supplemental agreement made a part of the policy, under the title "premium waived," which supplemental agreement is as follows:

"In consideration of the payment of the premium mentioned on the first page of said contract, and subject to all the terms and conditions thereof:

Disability. — "Atlantic Life Insurance Company hereby agrees that if, prior to attaining the rated age of sixty years, while this contract is in full force (not continued as paid-up or extended term insurance) the insured shall furnish proof satisfactory to the company that, from causes originating after delivery of this contract, and entirely beyond the control of the insured, he has become totally and permanently disabled, and will by such disablement be prevented for life from engaging in any gainful occupation, the company shall by endorsement hereon agree to:

Premium Waived. — 1. "Continue the contract without requiring the payment of premiums, if any, thereafter falling due during the continuance of such disability, during which period the right of the insured to dividends (payable only in cash), surrender values and all other benefits under said contract shall continue with the same force and effect as if premiums were duly paid by the insured; or in lieu thereof —

Monthly Income During Disability. — 2. "Pay to the insured, with the written consent of the assignee, if any, without requiring further payment of premiums, the sum due in event of death, in one hundred equal monthly instalments, the first instalment to be payable immediately and subsequent instalments to be payable monthly thereafter upon presentation of the contract for endorsement evidencing payment. Each instalment shall reduce by its amount the face value of the contract, and the loan and cash values, for which tables are provided on the third page of the contract, shall be calculated as if premiums had been duly paid for the reduced insurance on the basis employed in said table. Any indebtedness on the contract shall be so far settled out of each such instalment payment as to reduce the balance of the indebtedness to a sum never exceeding the cash value of the contract after said payment has been made. In the event of the death of the insured, or the expiration of the original endowment period, before the said one hundred instalments shall have been paid, the remaining unpaid instalments, plus any dividend additions or accumulations, shall be paid in one sum to the beneficiary named in the contract, or to the insured, if it be an endowment contract. Should all instalments be paid to the insured, any dividends left to accumulate or the cash value of any dividend additions will be added to final payment."

It is further set forth in the replication that by reason of the said agreement, notwithstanding the failure to pay the premium, the defendant had agreed to continue the insurance without requiring payment of premiums if, prior to attaining the age of sixty years, the insured from causes entirely beyond his control, had become totally and permanently disabled and was thereby prevented for life from engaging in any gainful occupation; that the insured had not attained the age of sixty years, and that...