Thompson v. Fidelity Mut. Life Ins. Co.

• Decision Date: 19 May 1906
• Citation: 92 S.W. 1098,116 Tenn. 557
• Parties: THOMPSON v. FIDELITY MUT. LIFE INS. CO.
• Court: Tennessee Supreme Court

92 S.W. 1098

116 Tenn. 557

THOMPSON v. FIDELITY MUT. LIFE INS. CO.

Supreme Court of Tennessee.

May 19, 1906

Appeal from Chancery Court, Shelby County; F. H. Heiskell Chancellor.

Action by M. E. P. Thompson, as administratrix, against the Fidelity Mutual Life Insurance Company. From a judgment for defendant plaintiff appeals. Affirmed.

Turley & Turley, for appellant.

R. Lee Bartels, for appellee.

WILKES J.

This is a suit to collect a life insurance policy. The bill upon its face shows that the insured died in default of payment of the last premium. The complainant seeks to recover upon two theories, one that there was a course of dealing between the insured and the company by which the insured was allowed to pay his premiums after they became due, and in consequence of this course of dealing complainant was led to believe that he might make such payments within 30 days after they became due.

The last payment which was allowed to go by default was due December 30, 1904. The insured was then absent from his home at Memphis, and in his last sickness; but of this the company had no notice.

The company mailed notice in due time and in the usual way of the maturity of this premium, but it was never received by Thompson or his wife, or any one else for him, so far as the record shows.

The policy provides as follows:

"The Fidelity Mutual Life Association, *** in consideration of the application for this policy, which is made a part hereof, *** and the payment to said association of seven and 83/100 dollars ($7.83) upon the thirtieth days of the months of March, June, September, and December in every year, for a period of twenty years from March 30th, 1896, and thereafter in the event of the continuance of this contract, the payment of renewal premiums on the date aforesaid, *** does hereby receive William Y. Thompson, of Memphis, Tennessee, as a member of said association, and issues this policy of insurance and hereby promises to pay the sum of twenty-five hundred dollars to the administrators, executors, or assigns of said member within ninety days after proof of death," etc. *** "less the balance of the dues for the current year of the death of the insured, and any indebtedness of the member to said association, subject, however, to all the requirements hereafter stated, and the conditions herein indorsed, which are hereby referred to and made a material part of this contract.

"(2) Provided, any moneys required to be paid under this policy, during the continuance of this contract, must be actually paid when due to said association; *** otherwise, this policy shall be ipso facto null and void, and all moneys paid thereon shall be forfeited to the said association."

The policy was issued on the 30th of March, 1896, and delivered to the insured on April 3, 1896, at which time he paid the initial premium. The insured died on the 14th of January, 1905, in default in the payment of the premium due December 30, 1904. On a day between January 20 and 23, 1905, a tender of the premium due December 30, 1904, was made to the Nashville office of the defendant. At that time the company was not aware that Thompson had died, and that fact was not communicated to it at the time of tender. The agent in charge at the Nashville office, advised the party making the tender that it could not be accepted because it was overdue, unless accompanied by a certificate of good health.

At the time the policy was issued, the insurer had an office in Memphis, but during the summer of 1900, this office was abolished, and the insured was instructed to pay his premiums by mail to the Nashville office. The subsequent premiums were paid to the Nashville office.

There were thirty-six premiums due upon the policy between the date of its issuance and the death of the insured. Of these, seven were accepted after they were due. Of these seven, two were accepted only when the insured had executed a certificate of good health, Of the five remaining premiums, two were forwarded by mail to the Nashville office on the day they became due, thus leaving only three premiums that were paid and accepted after due, unconditionally. Of these three premiums one was paid one day overdue, one two days overdue, and one sent by mail to the home office one day after due, and received five days after due.

The evidence shows that the certificates of health executed by Thompson and the revival contracts recited that the policy had become forfeited for nonpayment of premiums at maturity, and there was an express agreement on the part of the insured that he was to pay his future premiums promptly. The correspondence that passed between the cashier of the Nashville officer and the insured in reference to the premium due December 30, 1900, shows that it was necessary, in order to protect Thompson's insurance, that the cashier should pay his premiums on the due date, out of her own funds. The subsequent correspondence between the cashier of the same officer and Thompson, in reference to the premium due June 30, 1901, made known to Thompson that his policy had been forfeited because his premium was not paid promptly, and that before he could be reinstated it was necessary for him to execute a health certificate.

We cannot, in view of the evidence in regard to the payment of premiums which we find in the record, conclude that there was an habitual course of dealing between the parties which would justify the insured in believing that the company would not insist upon a forfeiture of the policy if he failed to pay his premiums when they fell due, so as to bring the case within the operation of the rule laid down in Insurance Co. v. Hyde, 101 Tenn. 396, 48 S.W. 968; Insurance Co. v. Eggleston, 96 U.S. 572, 24 L.Ed. 841.

The doctrine is there laid down, that any agreement declaration, or course of dealing on the part of an insurance company which leads the insured honestly to believe that by conformity thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part, will estop the company from insisting upon a forfeiture, though it may be claimed under the express letter of the contract.

As was said by the court in case of Equitable Assur. Soc. v. McElroy, 83 F. 631, 28 C. C. A. 365:

"The course of dealing between the insured and the insurer must be such as to justify the insured in believing that the company will not insist upon a forfeiture of the contract for his failure to pay his future premiums when due; that the insured does believe this and that he acts on this belief. Otherwise, there is no estoppel on the part of the insurer to insist upon prompt payment and forfeiture for failure to pay ad diem."

The rule is laid down by Mr. Bacon, Mr. Joyce and other text-writers that the "course of dealing" between the insured and the insurer as to accepting overdue premiums must amount to a custom or habit in order to estop the insurer from insisting on forfeiture for the failure to pay a subsequent premium ad diem; and that not only must it be shown that the premiums were habitually received after they were due, but that the insurer intended to waive the prompt payment of future premiums, or that the assured, as a reasonable man, was led to believe by its action that the insurer had waived the condition of forfeiture. Bacon, vol. 2, § 431; Joyce, vol. 2, § 1368; Vance, p. 353; Crossman v. Association, 143 Mass. 435, 9 N.E. 753.

That mere indulgencies in the payment of premiums do not constitute a waiver of the condition of forfeiture for failure to pay premiums when due. Thompson v. Insurance Co., 104 U.S. 252, 26 L.Ed. 765; Easley v. Association, 91 Va. 169, 21 S.E. 235.

In the case of Thompson v. Insurance Co., supra, the claim made was similar to the contention made in this case. Justice Bradley said:

"If the permission to pay a premium or premiums after maturity was a matter of indulgence on the part of the company, it cannot be justly construed as a permanent waiver of the clause of forfeiture, or implying an agreement to continue the same indulgence for time to come. As long as the insured continued in good health, it is not surprising and should not be drawn to the company's prejudice, that it was willing to accept the premium after maturity, and waive the forfeiture which might have been insisted upon. This was for the mutual benefit of themselves and the insured at the time, and in each instance in which it happened, it had respect only to that particular instance without involving any waiver in reference to future payments. The insured had no right, without some agreement to that effect, to rest on such voluntary indulgence shown on one occasion or a number of occasions, as a ground for claiming it on all occasions. If it were otherwise, an insurance company could never waive a forfeiture on occasion of a particular lapse without endangering its right to enforce it on occasion of a subsequent lapse."

Under the above authorities, before complainant can recover in this case, she must show:

(1) That the course of dealing between the insurer and the insured, in reference to the acceptance of overdue premiums, amounted to a custom or a habit.

(2) That by reason of this course of dealing, the insured was justified in believing that the company would not insist upon a forfeiture for his failure to pay his subsequent premiums ad diem.

(3) That the insured did actually believe that he could postpone the payment of his future premiums after maturity without the risk of a forfeiture.

(4) That the insured acted upon this belief in this instance, and that by reason thereof, did not pay the premium due December 30, 1904, at its maturity.

But this rule does not in any event apply, unless the payment is made...