Umstattd v. Metropolitan Life Ins. Co.

• Decision Date: 20 February 1937
• Parties: UMSTATTD v. METROPOLITAN LIFE INS. CO.
• Court: Tennessee Court of Appeals

110 S.W.2d 342

21 Tenn.App. 312

UMSTATTD v. METROPOLITAN LIFE INS. CO.

Court of Appeals of Tennessee, Eastern Section.

February 20, 1937

Certiorari Denied by Supreme Court May 12, 1937.

Appeal from Law Court, Sullivan County; J. R. Simmonds, Special Judge.

Suit by Alice M. Umstattd against the Metropolitan Life Insurance Company. From a judgment for defendant, plaintiff appeals.

Affirmed.

Clayton Scyphers and Burrow & Burrow, all of Bristol, for plaintiff in error.

A. K Morison, of Bristol, Va., and Caldwell, Brown & O'Dell of Bristol, for defendant in error.

ANDERSON Judge.

This suit, twice tried in the circuit court, was instituted by Mrs. Alice M. Umstattd to recover upon a policy of life insurance covering the life of her husband, J. W. Umstattd and naming her as beneficiary. The first trial resulted in a verdict and judgment for the plaintiff, which was affirmed by the Eastern Section this court and reversed by the Supreme Court. The suit was first dismissed as upon a directed verdict but upon the attention of the court being called to the fact that the defendant had assigned no error upon the action of this court in failing to sustain the motion for a directed verdict and dismiss the suit, the judgment for the plaintiff was reversed and the case remanded for a new trial.

The second trial resulted in a judgment dismissing the suit upon a directed verdict, and the question before us is whether this action was erroneous.

The policy was issued through the defendant's Bristol, Tenn., agents on November 14, 1929. The insured was then a resident of Bristol, Tenn., but moved to Florida shortly thereafter. The premiums were due on the first day of each month, with a provision for a grace period of thirty-one days thereafter.

The premiums were paid regularly up to and including that due on July 1, 1931. No premiums thereafter becoming due were paid. The insured died on September 5, 1931.

Liability is resisted upon the ground that under its terms the policy lapsed for failure to pay the August, 1931, premium during the grace period which expired thirty-one days after August 1, 1931.

To avoid the forfeiture plaintiff pleaded and sought to prove an agreement between the defendant's manager in charge of the Bristol office and Roy Umstattd, a son of the insured, whereby the former agreed, on behalf of the defendant, to notify the son before the expiration of the grace period in the event the insured failed to seasonably pay the premium and that said agreement had been breached thus precluding the defendant from relying upon the forfeiture for said default in the payment of the August, 1931, premium.

She further relied upon an alleged course of conduct with respect to giving such notice to the son as having estopped the defendant from insisting upon a forfeiture without having given notice to the son and made demand upon him for payment of the defaulted premium.

In reversing the former judgment the Supreme Court in a memorandum opinion by Mr. Chief Justice Green, after noting that the policy recited that "the company's agents have no authority to waive forfeitures, to alter or amend this policy, to accept premiums in arrears, or to extend the due date of any premium," held that: "Insofar as plaintiff's right of recovery rests upon the alleged parol contract between the local manager and Roy L. Umstattd, we think such contract was beyond the actual authority and beyond the apparent authority of the local agent. Insofar as plaintiff's recovery rests upon the theory that the insurance company is estopped by reason of a course of conduct from declaring a forfeiture for non-payment of premium, we think that the course of conduct relied upon was not pursued for a sufficient length of time, nor under such circumstances as to raise an estoppel."

Upon the remand of the case the plaintiff amended her declaration so as to aver in substance that at the time the default in the payment of premiums occurred, the defendant had in its possession a sum of money belonging to the insured more than sufficient in amount to pay the defaulted premium and that it was the duty of the defendant to apply a sufficient amount thereof to prevent a forfeiture of the policy.

In response to a motion for a bill of particulars, the plaintiff averred that said sum consisted of funds going to make up the cash value of the policy and the divisible surplus accruing thereon.

The insured formerly worked for a firm in Bristol and was then covered by a group policy of insurance issued to his employer. When his employment terminated, he and his son, Roy, advised with Mr. Cates, who was then the defendant's local manager in Bristol, in regard to exercising the option provided in the group policy to convert the insured's coverage to an individual policy. It developed that such a course would result in an increase in the premium, and apparently there was some doubt as to whether the insured would be financially able to pay the increased amount. In any event, according to Roy Umstattd's testimony, he then stated to Cates that he would pay the premiums when his father failed to do so, to which Cates responded that such an arrangement would be satisfactory and that "when I was notified I could send my check there to the office." The policy was thereupon issued and delivered on November 14, 1929, and within a few weeks thereafter the insured moved to Florida, where he was employed in a department store; the son remaining in Bristol.

Roy Umstattd's testimony is that in response to notices from the Bristol office to the effect that his father had not paid the then current premium, he made four payments, one in January, 1930, one in February, 1930, one in June, 1930, and one in August, 1930. All other premiums up to and including that due on July 1, 1931, were paid by the insured by checks sent from his residence in Florida.

As before mentioned, the premium due August 1, 1931, was not paid, and the insured died on September 5, 1931, without any notice having been given the son of the default in the premium payment.

Cates was killed in an automobile accident on March 30, 1930. The cashier of the Bristol office, a witness for the plaintiff who had formerly been employed in the capacity of assistant cashier during the period here involved, testified that she had never been advised by Cates of any such agreement as that alleged to have been made with Roy Umstattd and that there was no record thereof in the Bristol office; that on two occasions only she had phoned Roy Umstattd that his father had not paid the premiums then due; that this was done near the end of the grace period; and that in response to this notice the premiums were paid by the son.

It is conceded by the plaintiff, and properly so, that this course of conduct was held upon the former appeal to be insufficient in nature and extent to estop the defendant from relying upon the forfeiture of the policy for nonpayment of the premium, under the rule announced in Ellis-Jones Drug Co. v. Home Ins. Co., 158 Tenn. 237, 12 S.W.2d 707, and the line of cases referred to therein.

It remains to be determined whether there was any evidence not adduced upon the former trial to warrant the conclusion that the making of the alleged agreement with Cates was within the scope of his apparent authority; it being conceded, tacitly at least, that he had no express authority to make such an agreement.

In two elaborate briefs filed on behalf of the plaintiff, it is insisted with much force and ability that in addition to the same evidence offered before, the present record contains at least some evidence that the agreement relied upon to avoid the forfeiture was not an unusual one and was according to a custom pursued by the defendant and others in a like business, and hence it was at least a question for the jury as to whether the making of such an agreement was within the scope of the apparent authority of the defendant's local manager.

It is insisted that the new evidence supplies the deficiency in the former record which the Supreme Court, in reversing the former judgment, pointed out in the following language appearing in the memorandum opinion disposing of a petition to rehear:

"We remain of the opinion that the record before us was without evidence to show that the contract relied on by the plaintiff below was within the actual or apparent scope of the agent's authority and that the record sent up was without evidence of a usage or custom, with respect to notice to the insured's son of default, that would bind the company."

It was shown by several witnesses that it was usual and customary for insurance companies including the defendant, to give notice of the maturity of the premium payments to those interested and to give a subsequent notice during the grace period if default was made. The defendant customarily gave the first notice from its home office. The second appears to have been customarily given from the Bristol office to policyholders within its jurisdiction.

It further appears to have been the usual practice of the defendant, in cases where defaults in the payment of premiums had been made, to have its agents call upon the policyholders in person and make every reasonable effort to prevail upon them to pay the premiums in order to "conserve the policy" in the interest of the defendant's business. It also appears that it was not unusual in connection with such efforts for its agents to contact relatives of the insured if they thought payment could be effected thereby. This course was followed at the instance of the defendant in an effort to promote its business interests but not pursuant to any contractual obligation so to do. Conceding this custom to have been definitely proven, it...