Washington National Insurance Co. v. Simmons

• Decision Date: 20 January 1941
• Docket Number: 4-6158
• Citation: 147 S.W.2d 3,201 Ark. 734
• Parties: WASHINGTON NATIONAL INSURANCE COMPANY v. SIMMONS
• Court: Arkansas Supreme Court

147 S.W.2d 3

201 Ark. 734

WASHINGTON NATIONAL INSURANCE COMPANY v. SIMMONS

4-6158

Supreme Court of Arkansas

January 20, 1941

Appeal from Logan Circuit Court, Southern District; J. O. Kincannon Judge; reversed.

Judgment Reversed.

Pryor & Pryor, for appellant.

Charles I. Evans, for appellee.

OPINION

MCHANEY, J.

October 1, 1924, the National Life Insurance Company of Chicago issued to appellee's husband, Andrew J. Simmons, its twenty-pay non-participating endowment policy for $ 3,000 with annual premiums of $ 105.48 which became due and payable October 1 each year, with a grace period of 30 days. Because of some physical defect or disability, the insured, who was 36 years of age at the time, was rated up 5 years. On February 12, 1934, the Hercules Life Insurance Company reinsured the business of the National Life, including this policy, under a reinsurance agreement, one of the conditions of which provided that the Hercules "shall not be required for five (5) years from the effective date of this contract to make policy loans (except for the purpose of paying premiums--) or to pay cash surrender values." On May 31, 1938, the Hercules merged with appellant and the latter assumed the obligations of the former, subject to said reinsurance agreement. A clause in said policy provided: "At any time while this policy is in force under its original premium paying condition, the company will advance on proper assignment of the policy and on the sole security thereof, any sum not exceeding the cash surrender value of the policy at the end of the current policy year, less any outstanding indebtedness on or secured by the policy and any unpaid balance of the premium for the current policy year."

Mr. Simmons paid all premiums on the policy up to but not including October 1, 1939, with considerable irregularity in the manner and time of payment, and the policy was permitted to lapse on five different occasions, but was always reinstated on his written application and payment of the premium. The proof shows that it was never continued in force beyond the period of grace, except the premium was paid, a note given therefor, or a written extension agreement entered into within the grace period.

After the premium became due October 1, 1939, and within the grace period, the insured mailed to appellant a check to cover the amount of the premium and the interest on his policy loan, drawn on a bank in Booneville by his son, Howard Simmons, and indorsed by the insured, dated October 18, 1939, for the sum of $ 165.65. Appellee's evidence shows this check was mailed to appellant the same day, but appellant's evidence shows it was not received by it until October 31 and was deposited in a Chicago bank for collection on the same day. This check was dishonored by the bank on which it was drawn and was returned to appellant on November 14, 1939, and was returned by it to insured on November 22, in a letter advising the insured of the dishonor of the check, that the premium receipt previously sent was invalid, that the policy had lapsed, and that he might apply for reinstatement on the inclosed blank form and return it with remittance of $ 167.31 to cover the amount then due. Thereafter, on November 24, Mr. Simmons executed application for reinstatement which after giving his name and date of birth in the first sentence reads as follows:

"I hereby apply for reinstatement of the above policy on my life, issued or assumed by the Washington National Life Insurance Company, which lapsed for nonpayment of premium due October 1, 1939." This application was sent to appellant with a check for $ 167.31 and was received by it on November 29. On December 11, appellant asked for further evidence of insurability and directed insured to go to Dr. McConnell for examination. On December 18, appellant received from Dr. McConnell a certificate that Mr. Simmons was not in good health and was not safely insurable, and on December 27, appellant advised insured that his application for reinstatement was denied and his check for $ 167.31 was returned. On January 1, 1940, insured was fatally injured in an automobile accident and died the next day.

The policy provides for a cash surrender value upon written application therefor, and the undisputed evidence shows that, at the expiration of the period of grace, it had a cash surrender value of $ 253.46. The only other non-forfeiture provision in the policy is as follows: "To have this policy automatically reduced at the expiration of the grace period and continued as a paid-up nonparticipating policy payable at the same time and on the same conditions as this policy, for such amount as the cash surrender value of this policy, less any indebtedness thereon, will purchase, applied as a net single premium at the attained age of the insured rated up five years in age according to the American Experience Table of Mortality with interest at the rate of three and one-half per cent. per annum."

It is also undisputed that the cash surrender value of $ 253.46 would purchase $ 436 of paid-up insurance under the terms of said last quoted clause.

Proof of death of insured was made and demand made for payment, which was refused, and this suit followed. At the conclusion of all the evidence both sides requested directed verdicts, appellant, who had tendered the sum of $ 436 into court, requested that a verdict for this amount be directed against it, and appellee that a verdict for the sum sued for, $ 1,793.10, be directed against appellant and in her favor. The court granted appellee's request and a judgment for this amount was entered, together with interest, penalty and attorney's fee.

Appellee contended in the court below and contends here as grounds of recovery that, (1) there had been established a custom of delayed payments of premiums, and, therefore, a waiver of the policy requirement of payment within the grace period; (2) delay in presenting the check of Howard Simmons was the cause of its dishonor; (3) appellant should have loaned from the cash surrender value...