Veal v. Security Mut. Life Ins. Co.
| Decision Date | 05 October 1909 |
| Docket Number | 1,850. |
| Citation | 65 S.E. 714,6 Ga.App. 721 |
| Parties | VEAL v. SECURITY MUT. LIFE INS. CO. |
| Court | Georgia Court of Appeals |
Syllabus by the Court.
If the holder of a policy of life insurance sends to the company on the day the premium is due a check in payment thereof, and when the check is presented at bank, payment is refused because of lack of funds to the credit of the drawer, the company, although it has delivered the premium receipt to the insured, may, by taking the proper steps, repudiate the transaction for the legal fraud resulting from the insured's having sent a check without having in bank the funds to meet it, and may enforce a lapse of the policy for nonpayment of premium. But if the company, in such a case after notice that the check has been dishonored, retains it and, instead of repudiating the transaction by returning the check and demanding back its receipt, insisted upon the insured's paying it after the date on which the policy would otherwise have lapsed, a waiver of the punctual payment of the premium in cash results. If the insurance company accepts and retains a note, check, or other interest bearing obligation for the premium, the policy will not be held to be lapsed or forfeited for nonpayment of premium, even though the note or other obligation is not paid at maturity, unless there is an express provision in the policy providing that a failure to pay any such obligation at maturity shall result in a lapsing or a forfeiture of the insurance. Prima facie the liability to pay interest is regarded as the only penalty for failure to meet at maturity an ordinary indebtedness.
Where a policy of life insurance provides that after three full premiums have been paid, if the policy should lapse for nonpayment of a subsequent premium, the insured should have the privilege within six months thereafter of surrendering the policy, and taking his choice of a sum of money in cash or a paid-up life policy for a slightly larger sum or extended insurance for the full face of the policy for a stated term of years (the exact figures being set out in a table annexed), held, (a) that the privilege so extended the insured is not a mere gratuity personal to the insured alone, but is a property right which on his death may survive to his beneficiary; (b) that, so long as the person insured lives, time is of the essence of the contract, and his choice as to which option he will take must be exercised within the six months after a lapse occurs, or it is ended as to him and as to the beneficiary, but, if he dies after a lapse and before the expiry of the six months, time is no longer of the essence as against the beneficiary; (c) that provisions of the policy relating peculiarly to the continuation of the insurance risk are inapplicable and immaterial when the policy has been converted into a death claim by the insured having died; (d) that, upon the death of the insured within six months of a lapse (in a case when the extended insurance would have run beyond that period), the beneficiary is entitled to hold and sue upon the original policy as a death claim against the company for the full amount of its face value.
Error from City Court of Atlanta; H. M. Reid, Judge.
Action by M. J. Veal against the Security Mutual Life Insurance Company. Judgment for defendant, and plaintiff brings error. Reversed.
On October 29, 1900, the insurance company issued its 20 annual payment life policy insuring the life of John B. Veal in favor of his wife, the plaintiff. In the face of the policy it was provided that the requirements and provisions contained in the pages which followed were conditions precedent, and were material parts of the policy. One of the privileges so included in the terms of the policy is contained in the following language: By the table which is set out in extenso the insured would have been entitled to demand in case of a lapse at the end of the sixth year $84 in cash, a paid-up policy for $300, or extended insurance for 11 years and 2 months. One of the provisions of the policy is as follows: "That to continue this policy in force subsequent premium payments of forty-four dollars and ninety cents each shall be made to the company, at its home office, on or before the 29th day of October in every year for a period of 19 years." Also: "If any premium shall not be paid on or before the date when due, this policy shall be null and void except as hereinafter provided." The policy allowed 30 days of grace for the payment of premium.
There is no contest over the proposition that six annual premiums were regularly paid. On November 28, 1906, within the period of grace allowed for the payment of the seventh premium, Mr. Veal sent to the company's authorized agent in Atlanta a check for the premium, and the company's formal premium receipt was sent him. When the check was presented at bank, it was protested for lack of funds to the credit of the drawer. On December 3, 1906, a date on which the right to pay the premium under the provisions of the policy as to 30 days of grace no longer existed, the assistant cashier of the insurance company wrote Veal as follows: Veal replied on the next day, stating that he had been out of town, and asking that the check be presented at bank again, and stating, further, that it would be paid together with the protest fee. On December 7th the assistant cashier replied, saying that the check had been sent to the bank again, and asking him to call there and pay it. On December 26th the cashier wrote Veal another letter, telling him that his policy had lapsed for failure to pay the premium due October 29th, but stating that they would be glad to entertain an application from him for reinstatement according to a blank enclosed. It appears that the foregoing constituted the entire correspondence on the subject, and that the check was not paid when it was sent back to the bank on December 7th, but had been sent to the home office of the insurance company, where it was retained at the time suit was brought on the policy. Veal died on March 25, 1907. On March 30th a friend of the family of the deceased wrote the company, stating that at the request of the family he was asking for blanks on which to make proofs under the policy. The company replied on April 2d, stating that Veal was not insured in the company; that his policy had lapsed. At the conclusion of the evidence, the judge directed the jury to find in favor of the defendant.
Moore & Pomeroy, for plaintiff in error.
Anderson, Felder, Rountree & Wilson, for defendant in error.
POWELL, J. (after stating the facts as above).
Upon two distinct grounds we think that the trial court erred in deciding that the insurance company was not liable on the policy. In the first place, at the time the insured died the company held in its possession, without ever having previously offered to surrender it, except on condition of its payment, the insured's check for the last premium due under the policy. This check was the insured's fixed certain, and unconditional promise to pay the sum named therein, bore interest at the rate of 7 per cent. per annum, was enforceable against him by suit at any time within six years, and was secured by a lien on the proceeds of the policy. The insurance company's only right to hold it grew out of the fact that it was tendered in payment of the premium due October 29, 1906. If it did not operate to pay the premium, or to create a waiver of a punctual payment thereof in cash, the company had no right to retain the check or to demand payment of it from the insured. If the right of the insured to pay the annual premium were such an existing indebtedness against him that the company could have enforced payment otherwise than by his voluntary compliance, then the taking of the check would not, in the absence of an agreement to the contrary, have amounted to a payment of the indebtedness, for in the case of an existing indebtedness checks are not payment until they themselves are paid, unless there is an agreement otherwise. Civ. Code 1895, § 3720; Hall's Cotton Gin Co. v. Black, 71 Ga. 450. Where a check or promissory note is given for a pre-existing debt, the transaction is not, however, wholly without legal incidents and effects. Payment is not necessarily effectuated, but the creditor holds additional evidence that there is an indebtedness, and, further, the rate of interest may be changed, and the time of the maturity of the debt may be extended. In case there is no pre-existing debt, and the transaction between the parties is one that would otherwise be on a cash basis, and one party tenders a check and the other takes it and retains it, even after notice of dishonor, the necessary legal...
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