U.S. Life Ins. Co. v. Spinks

• Decision Date: 19 October 1906
• Parties: UNITED STATES LIFE INS. CO. IN THE CITY OF NEW YORK v. SPINKS.
• Court: Kentucky Court of Appeals

96 S.W. 889

UNITED STATES LIFE INS. CO. IN THE CITY OF NEW YORK v. SPINKS.

Court of Appeals of Kentucky.

October 19, 1906

Appeal from Circuit Court, Campbell County.

"To be officially reported."

Action by Harry Spinks against the United States Life Insurance Company in the City of New York. Judgment for plaintiff, and defendant appeals. Affirmed.

Augustus E. Wilson and W. H. Mackoy, for appellant.

L. J Crawford and Hazelrigg, Chenault & Hazelrigg, for appellee.

O'REAR J.

February 21, 1894, appellant issued to Charles Spinks a policy of insurance upon his life, payable to his son, Harry Spinks appellee. The policy was an agreement to pay the beneficiary the sum of $25,000 if the assured died within 10 years from December 12, 1893. The consideration was the payment of $1,128.25 annually by the assured on or before December 15th of each year, as premium, the first payment having been contemporaneous with the issue of the policy. Among the conditions contained in the policy was this clause: (2) After being in force three full years, an extended insurance shall be allowed, in accordance with the requirements of chapter 690, p. 1930, of the Laws of 1892, of New York." The insured paid appellant four annual premiums of $1,128.25 each, aggregating $4,513, which continued the policy in force regardless of chapter 690, p. 1969, § 88, Laws of New York up until December 12, 1897. The insured did not pay the premium due on December 12, 1897.

Section 88, c. 690, p. 1969, Laws of New York 1892, is as follows: "Whenever any policy of life insurance issued after January 1st, 1880, by any domestic life insurance corporation, after being in force three full years, shall by its terms lapse or become forfeited for the nonpayment of any premium or any note given for a premium or loan made in cash on such policy or security, or of any interest on such note or loan, the reserve on such policy computed according to the American Experience Table of Mortality at the rate of four and one-half per cent. per annum shall, on demand made, with surrender of the policy within six months after such lapse or forfeiture, be taken as a single premium of life insurance at the published rates of the corporation at the time the policy was issued, and shall be applied, as shall have been agreed in the application or policy, either to continue the insurance of the policy in force at its full amount, so long as such single premium will purchase temporary insurance for that amount, at the age of the insured at the time of lapse or forfeiture, or to purchase upon the same life at the same age paid-up insurance, payable at the same time and under the same conditions, except as to payment of premiums as the original policy. If no such agreement be expressed in the application or policy, such single premium may be applied in either of the modes above specified at the option of the owner of the policy, notice of such option to be contained in the demand hereinbefore required to be made to prevent the forfeiture of the policy. The reserve hereinbefore specified shall include dividend additions calculated at the date of the failure to make any of the payments above described according to the American Experience Table of Mortality with interest at the rate of four and one-half per cent. per annum, after deducting any indebtedness of the insured, on account of any annual or semi-annual or quarterly premium then due, and any loan made in cash on such policy, evidence of which is acknowledged by the insured in writing. The net value of the insurance given for such single premium under this section, computed by the standard of this State, shall in no case be less than two-thirds of the entire reserve, computed according to the rule prescribed in this section after deducting the indebtedness as specified, but such insurance shall not participate in the profits of the corporation. If the reserve upon any endowment policy, applied according to the provisions of this section as a single premium of temporary insurance be more than sufficient to continue the insurance to the end of the endowment term named in the policy, and if the insured survive that term, the excess shall be paid in cash at the end of such term, on the conditions on which the original policy was issued. This section will not apply in any case where the provisions of the section are specifically waived in the application, and notice of such waiver is written or printed in red ink on the margin of the face of the policy when issued." As the provisions of this act were not specifically waived in the application or otherwise, or notice of such waiver indorsed in red ink on the policy, the last section of the act above quoted is not applied, and the act is to be treated as if that section had been omitted.

On January 27, 1898, the assured, Charles Spinks, and the beneficiary, Harry Spinks, appellee herein, requested the appellant in writing to apply the entire reserve on the policy, including dividend additions, if any, therein calculated as provided in the policy, to be taken as a single premium to continue the insurance of $25,000 named in the policy in force at its full amount for such time as said single premium would purchase that amount as nonparticipating insurance at the company's rates therefor at the date of the policy, taken at the age of the assured at date of default, subject to the conditions and agreements of the contract contained and referred to in the policy. The written application was transmitted with the policy to appellant, who on February 14, 1898, issued and delivered to Charles Spinks its certificate of extended insurance, which was in these words: "The United States Life Insurance Company in the City of New York, doth hereby certify, that in pursuance of the application therefor, of which the above is a copy, the principal sum of insurance mentioned in the hereto annexed policy No. 79,714, on the life of Charles Spinks, and (if all the terms and conditions of said policy, in it contained and referred to, have been and shall be fully kept, and not violated), payable in the manner therein mentioned to the persons therein described as the payee thereof, viz., $25,000.00, will be so payable as continued insurance, in the event of the death of the insured life on or before the 10th day of August, in the year eighteen hundred and ninety-eight; but after said date said policy, and the continued insurance thereunder, will in all respects be and become determined and null, void, and of no effect. The continuation of the insurance as aforesaid being in accordance with the conditions and agreements in said policy mentioned, and the application for said continued insurance, of which the above is a copy, as aforesaid, and which application is hereby made a part hereof. Dated New York City, February 14th, 1898." The assured, Charles Spinks, died September 13, 1898. No other action was taken before his death either by him or the insurer relative to any other extension of the policy.

Thereafter this suit was brought by appellee as the named beneficiary to recover from appellant the full amount of the insurance. In addition to the foregoing facts, it was alleged in the petition that there was a considerable sum in the hands of appellant (hereinafter sometimes referred to as the "Company") known as surplus, belonging to, and contributed by, the policy holders, of whom Charles Spinks was one of a class, and which was subject to dividends on behalf of such policy holders; that of such surplus there was enough due to be applied to the policy in suit on February 14, 1898, and, on the date of the default in the payment of premium by the assured, which, if applied as a single premium at the company's published rates at the date of the policy, would have purchased for the assured extended insurance for the full amount of the policy for a period beyond September 13, 1898; that the company fraudulently, or by mistake, failed to include such dividend in the reserve of the policy when it extended the insurance, although assured had applied for it to do so, and never knew but what it had done so. It was also charged that appellant was wholly a mutual company. The company denied that there was any dividend addition which could have been applied to the extension of the policy; denied that it had ever declared any dividend to this policy; and denied that there was any fund out of which it could have legally declared such dividend. It also pleaded that the policy was a deferred dividend term policy of life insurance, containing among other things these express conditions: "(1) All premiums are payable in New York City at the company's office. * * * Failure to make payment of any subsequent premium either to the company, or to a duly authorized agent, in exchange for receipt signed as above * * * will render this contract null and void. Whenever this policy shall become null and void for any cause, all payments made hereunder shall become forfeited to the company, except that: (2) After being in force three full years, an extended insurance shall be allowed, in accordance with the requirements of chapter 690, of the Laws of 1892 New York. * * * (7) The said company agrees, in case the life insured survive to the end of the specified period, if this policy be then in full force, to pay to the legal holder or holder of this policy the dividend apportioned to this policy from its profits by said company." Appellant pleaded that clause 7, just quoted, excluded the Spinks policy from participation in any division of profits or surplus, unless the assured survived the period for which he was insured, and unless the policy was then in full force; that, as he died, and was also in default of premiums, within the 10 years,...