Underwood v. State Life Ins. Co.

• Decision Date: 08 June 1923
• Docket Number: 290.
• Parties: UNDERWOOD v. STATE LIFE INS. CO.
• Court: North Carolina Supreme Court

117 S.E. 790

185 N.C. 538

UNDERWOOD v. STATE LIFE INS. CO.

No. 290.

Supreme Court of North Carolina

June 8, 1923

Appeal from Superior Court, Cumberland County; Devin, Judge.

Action by Annie K. Underwood against the State Life Insurance Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Adams J., dissenting.

Where insurance policies gave options of extended insurance for a specified period after payment of two annual premiums, and insured, after paying two premiums, executed notes in the amounts of the third premiums, containing provisions that they were not given in payment thereof, that nonpayment of the notes or any extension thereof at maturity should lapse the policy, whereupon the proportionate parts of the premiums should become due, and "that the company may charge the proportionate part of this note or any extension thereof that may be due as above provided" against the reserve value of the policy, any extended insurance value to be reduced accordingly, the policies remained in effect, after nonpayment of the notes on the date to which the time for payment was extended for the extended insurance period, as reduced by application of the reserve value to payment of the earned premium.

J. M Broughton, of Raleigh, for appellant.

Bullard & Stringfield, of Fayetteville, for appellee.

STACY J.

The essential facts of this case are as follows:

(1) On March 11, 1919, the defendant issued upon the life of John Underwood two policies of life insurance, No. 225378 for $3,500, and No. 225379 for $1,500; the plaintiff, wife of assured, being named as beneficiary in both policies. On each of these policies two full annual premiums were paid.

(2) When the third annual premiums became due, on March 11, 1921 the assured did not pay said premiums, but executed in respect to said policies two "premium notes," one in the amount of the annual premium due in advance on policy No. 225378, to wit, $149.24, and the other in the amount of the annual premium due in advance on policy No. 225379, to wit, $63.96, with each note containing the following stipulation:

"I understand and hereby agree that neither this note, nor any extension thereof, is given or accepted as a payment of said premium. And I agree that the nonpayment of this note, or any extension thereof at maturity, shall ipso facto lapse said policy, and there will be due the proportionate part of said premium (with interest, less any payments made on said premium) that the time from the date to the maturity of this note, or any extension thereof, bears to the whole time covered by said premium. I also agree that, upon nonpayment of this note, or any extension thereof, if said policy should have any reserve value, the company may charge the proportionate part of this note or any extension thereof that may be due as above provided against such reserve value, and any extended insurance value it may have shall be accordingly reduced."

(3) Both notes were to be paid within six months, but the maturity date of each was subsequently extended to January 26, 1922. Neither of said notes, nor any part of the earned premium on either policy, was paid at that time.

(4) In each of said policies there is a provision for certain nonforfeiture options, available after two full premiums shall have been paid (the policy being then in force, and there being no indebtedness against the same); and, under the said nonforfeiture options, it is provided that, if full premiums shall have been paid for two years, the assured shall have as the first option, extended insurance to the extent of one year and 128 days. Such extended insurance is nonparticipating, and not renewable except upon satisfactory physical examination.

(5) The assured did not borrow any money from the defendant, and there was no indebtedness against the policies, unless said "premium notes" are to be considered as such.

(6) Upon the nonpayment of the note given in connection with policy No. 225378 at its extended maturity date, there being due at that time the sum of $135.26 as the earned premium on said policy, the defendant notified the assured that the said policy had lapsed; and, in accordance with the provisions of the note, given in connection therewith, the entire reserve value of the policy, amounting to the sum of $92.75, had been credited upon the earned premium then due, leaving a balance of $42.51 still due on said earned premium. And upon the nonpayment of the note given in connection with policy No. 225379 at its extended maturity date, there being due at that time the sum of $52.96 as the earned premium on said policy, the defendant notified the assured that the said policy had lapsed, and, in accordance with the provisions of the note, given in connection therewith, the entire reserve value of the policy, amounting to the sum of $39.75, had been credited upon the earned premium then due, leaving a balance of $13.21 still due on said earned premium.

(7) The assured died May 5, 1922, before the expiration of the period of extended insurance under the first option above mentioned.

(8) Demand for payment of each of the policies having been made and refused, the beneficiary thereunder, plaintiff herein, filed suit to enforce collection.

Judgment on the pleadings in favor of plaintiff, and defendant appealed.

The uniform rule of construction with respect to insurance policies and notes given in connection therewith is that, if they are reasonably susceptible of two interpretations, the one more favorable to the assured will be adopted.

"The policy having been prepared by the insurers, it should be construed most strongly against them." Bank v. Ins. Co., 95 U.S. 673, 24 L.Ed. 563.

"The tenets established for the guidance of courts in such matters are well understood, and no one is better established than that in all cases the policy must be liberally construed in favor of the assured, so as not to defeat, without a plain necessity, his claim for indemnity. And when the words used may, without violence, be given two interpretations, that which will sustain the claim and cover the loss should be adopted." Deemer, J., in Goodwin v. Assurance Society, 97 Iowa, 226, 66 N.W. 157, 32 L. R. A. 473, 59 Am. St. Rep. 411.

In Bray v. Ins. Co., 139 N.C. 390, 51 S.E. 922, the same rule is stated by Walker, J., as follows:

"If the clause in question is ambiguously worded, so that there is an uncertainty as to its right interpretation, or if for any reason there is doubt in our minds concerning its true meaning, we should construe it rather against the defendant, who was its author, than against the plaintiffs, and any such doubt should be resolved in favor of the latter, giving, of course, legal effect to the intention, if it can be ascertained, although it may have been imperfectly or obscurely expressed. * * * This is the rule to be adopted for our guidance in all such cases, and one reason, at least, for it is that the company has had the time and opportunity, with a view to its own interests, to make clear its meaning, by selecting with care and precision language fit to convey

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