Underwood v. Jefferson Standard Life Ins. Co.

• Decision Date: 15 April 1919
• Docket Number: 387.
• Citation: 98 S.E. 832,177 N.C. 327
• Parties: UNDERWOOD v. JEFFERSON STANDARD LIFE INS. CO.
• Court: North Carolina Supreme Court

98 S.E. 832

177 N.C. 327

UNDERWOOD v. JEFFERSON STANDARD LIFE INS. CO.

No. 387.

Supreme Court of North Carolina

April 15, 1919

Appeal from Superior Court, Guilford County; Shaw, Judge.

Action by Mary H. Underwood against the Jefferson Standard Life Insurance Company. Judgment for plaintiff, and defendant appeals. Affirmed.

The word "assigned," as used in a life insurance policy provision that insured could change beneficiary while policy was unassigned, refers to an assignment to a stranger, and not one to the insurer for a loan thereon, and the insurer while holding the policy under an assignment, could waive any objections to a change of beneficiary.

The case is as follows: The policy was issued by the Greensboro Life Insurance Company August 1, 1905, and on September 12 1912, this company was merged with defendant. Nine full annual premiums were paid, the last being paid to the defendant on or about August 1, 1913. The premium due on August 1, 1914, was not paid in full, but $66.85 was paid upon it, and a "blue note" for $96 was given, which plaintiff contends by its terms kept the policy in force until February 1, 1915. The policy was originally payable to Ruth Underwood, daughter of insured, as beneficiary, but on October 1, 1907, the beneficiary was changed to the plaintiff. While plaintiff was beneficiary, the insured and plaintiff borrowed $385 from the Greensboro Life Insurance Company and assigned the policy sued on as security for the loan. While the policy was thus assigned to the company the assured changed the beneficiary, this time from plaintiff to his estate; and while his estate was beneficiary he borrowed sums from the Greensboro Life Insurance Company aggregating $342.29, thus bringing his total indebtedness to $727.29 which was charged against the policy, as a lien on it, in the hands of the company by assignment to it. Of this amount plaintiff signed a note for $385, and, of the remaining $342.29, $162.04 was spent in paying the premiums on said policy. After the last loan was obtained by insured he again changed the beneficiary from his estate to the plaintiff.

Insured did not at any time avail himself of the privilege of taking the paid-up policy allowed him by nonforfeiture provision 2 set out below. The policy, among other provisions, contained the following:

[Relevant Portions of Tables A and B.]

Table A. Table B.

Nonforfeiture Values. Nonforfeiture Values.

After End of Loan Value. Paid"Up Policy. Ext. Ins. Yrs. Mos. After End of

Year. Year.

2 $ 165 .... 0 2 2

3 275 530 3 0 3

4 385 795 5 2 4

5 500 1060 8 0 5

6 620 1325 10 0 6

7 750 1590 12 10 7

8 875 1855 15 0 8

9 1010 2120 17 0 9

10 1180 2385 19 0 10

"Tables A and B of nonforfeiture values on the margin of the page show the guaranteed values of this policy corresponding to the number of years for which full annual premiums have been paid, and in the event of any indebtedness against this policy these values will be reduced proportionately."

Nonforfeiture provisions:

"(1) Loans will be made by the company in accordance with Table A upon satisfactory assignment of this policy as sole security, at a rate of interest not to exceed six per cent per annum, provided premiums are duly paid to the anniversary next succeeding the date when the loan is applied for.

(2) If provision 2 has not been availed of one month from default in payment of premiums, the company will voluntarily extend this policy in the first-named sum on page one as automatic paid-up term insurance in accordance with Table B."

"Change of Beneficiary: The insured may, while this policy is in force unassigned, change the beneficiary, and such change will take effect when indorsement thereof is made by the company upon this policy."

Assignment: No assignment of this policy shall be valid unless made in writing, and the original, or a duplicate original, filed in the home office of the company. The company will not be responsible for the validity of any assignment."

This policy is incontestable after one year from date except for nonpayment of premiums."

On September 2, 1914, the insured paid to the defendant $19.97 unearned interest on the loan of $727.29, as shown by article 19 of the complaint and not denied in the answer. The insured and the plaintiff, on the 21st day of August, 1912, executed a note to the Greensboro Life Insurance Company for $150. This note was unsecured, did not refer to the policy, nor profess to be a lien upon it, nor was the policy assigned to secure it, and was afterwards destroyed by the defendant's vice president.

The following is a copy of note for indebtedness to the company secured by the assignment of the policy:

"$727.29. No.____

This is to certify that I, the undersigned, the insured and beneficiary, respectively, under, and the sole owner of, policy No. 792, issued by the Greensboro Life Insurance Company, have this day borrowed from the said company the sum of seven hundred twenty-seven and 29/100 dollars, and hereby assign the said policy, and all profits and benefits now due, or which may hereafter become due, thereon, to secure the repayment of said loan and the interest thereon, as herein provided."

The following is a copy of the "blue note":

"Greensboro, N. C., Aug. 1, 1914.

On or before the 1st day of November, 1914, without grace and without demand or notice, I promise to pay to the order of Jefferson Standard Life Insurance Company one hundred twenty-three 6/100 dollars, at their home office in Greensboro, N. C., with interest at the rate of six per cent. per annum.

This note is accepted by said company at the request of the maker, together with $38.89 dollars in cash, on the following express agreement:

That although no part of the premium due on the 1st day of August, 1914, under policy No. 792-G on the life of W. I. Underwood, has been paid, the insurance thereunder shall be continued in force until midnight of the due date of said note; that, if this note is paid on or before the date it becomes due, such payment, together with said cash, will then be accepted by said company as payment of said premium, and all rights under said policy shall thereupon be the same as if said premium had been paid when due; that, if this note is not paid on or before the day it becomes due, it shall thereupon automatically cease to be a claim against the maker, and said company shall retain said cash as part compensation for the rights and privileges hereby granted, and all rights under said policy shall be the same as if said cash had not been paid nor this agreement made."

Judgment for the amount of the policy and interest at six per cent., less $150 and interest thereon, and costs, from which defendant appealed.

Brooks, Sapp & Kelly, of Greensboro, for appellant.

Chas. A. Hines and Thos. C. Hoyle, both of Greensboro, for appellee.

WALKER, J. (after stating the facts as above).

The plaintiff contends, upon the above-stated facts, that the policy was kept in force until after the death of the insured by the nonforfeiture provisions above set forth. And, for the purpose of calculating the extended insurance, she insists that the value of the policy, at the end of the ninth year, was $1,010, the number set opposite the figure 9 in Table A, and from this sum should be taken the amount for which the policy was liable; and she further contends that this amount was the sum of $385 (the amount of the note she signed), and $162.04 (the sums used in paying premiums on the policy), less $19.97 (the amount of unearned interest), in all $527. The extended insurance, as the plaintiff contends, is therefore $1,010--$527.07 of 17 years, and should be counted from February 1, 1915.

The defendant contends, on the other hand that in calculating the extended insurance the value of the policy at the end of the ninth year was only $875, the number set opposite the figure 8, in Table A, and by the application of the nonforfeiture provision 1, above set forth. It also contends that $727.29 should be deducted from $875, in order that the term of extended insurance may be calculated, and that such extended insurance should be counted from August 1, 1914, the date of the note, and not from the due date of the premium note. It is conceded by the defendant that if $1,010 was the value of the policy at the end of the ninth year (and especially if the amount of the note for $150 due the company is not to be added to the other indebtedness), it was in force at the death of the insured; and, on the other hand plaintiff conceded that if the value of the policy at the end of the ninth year was only $875, and the debt properly chargeable against it was $727.29, then the policy had expired before the death of the insured.

The plaintiff further contends that the only amounts chargeable against the value of the policy in computing the extended insurance is $385, the original loan signed by her, and $162.04, the portions of the other loans used in paying the premiums; and from this, she contends, should be taken $19.97 unearned interest paid to the defendant, and her reasons are as follows:

"(a) The policy provides that the insured may, while this policy is in force and unassigned, change any beneficiary, and that there is no question that this policy was assigned to the company at the time when the attempted change in the beneficiary was indorsed on the policy, and therefore the attempted change was null and void, the rule of law being that where provision is made in a policy for a change of the beneficiary the right must be exercised in strict accordance with the provisions of the policy."

And she cites for this position Lanier v. Insurance Co., 142 N.C. 14, 54 S.E. 786; 14 R. C. L. Insurance, § 554...