Woodmen of World Life Ins. Soc. v. Ried

Decision Date27 February 1941
Docket Number6 Div. 716.
Citation200 So. 883,241 Ala. 30
PartiesWOODMEN OF WORLD LIFE INS. SOC. v. RIED.
CourtAlabama Supreme Court

Rehearing Denied March 27, 1941.

Appeal from Circuit Court, Jefferson County; J. Edgar Bowron, Judge.

Action on a certificate of life insurance by Minnie Ried against the Woodmen of the World Life Insurance Society. Judgment for plaintiff, and defendant appeals.

Affirmed.

Wm. B McCollough, of Birmingham, for appellant.

Harsh Harsh & Hare, of Birmingham, for appellee.

BOULDIN Justice.

Appellee sued as beneficiary named in certificate of life insurance issued by appellant. The issues were presented under special pleas alleging a lapse of the policy for nonpayment of premiums.

Plea III alleged that the insured failed to pay the monthly instalment for the month of August, 1938, and paid no further instalments prior to his death March 11, 1939 that at the time of default the certificate had a cash value over and above outstanding loans in the sum of $43.91, sufficient to keep the certificate in force for the months of August to November, inclusive, 1938, and that thirty days thereafter, to wit, January 1, 1939, the certificate lapsed and became void.

Plea VI sets out certain provisions of the certificate, among them the Automatic Premium Loan clause, and alleges that upon default in payment of monthly premiums as alleged in plea III, automatic premium loans carried the insurance for the months of August to November, 1938, when the cash value of the policy was exhausted, and the certificate lapsed January 1, 1939, for nonpayment of the premium due for December, 1938.

The evidence for defendant presented the history of this certificate, issued in 1929, but dating back to 1926 in figuring cash and loan values; and by a series of calculations found the cash or loan value of the certificate as of August, 1938, to be $43.91. The monthly premium was $6.80, and monthly interest on existing loans was figured at $2.11, making a monthly charge under the automatic loan clause, $8.91, or $35.64 for four months, August to November, inclusive, leaving only $8.32 available to pay the December charges. Thus, it is figured, the policy lapsed January 1, 1939, because of a shortage of 59 cents in hand to meet the December charges.

Appellee questions these calculations in that the loan value available under the automatic loan clause is figured as of August, 1938, when payments in cash by the insured terminated.

This question was decided in Sovereign Camp, W. O. W., v. Miller, 231 Ala. 336, 164 So. 742. We there held the loan value should be figured as of the date when cash payments ceased, in that no additional reserve, or operating capital, became available from which cash or loan values could be increased. The Automatic Premium Loan stipulation is set out in the above decision.

Appellee invites a reconsideration of this opinion. It is argued that the table of loan values, increasing in this instance, some $4.17 per month, contemplates a continuous increase so long as the policy is in force; that by reason of the Automatic Premium Loan clause, there is no "default," and certainly no lapse of the policy as of the date cash payments cease.

Sovereign Camp, W. O. W., v. Easley, 188 Ark. 1012, 69 S.W.2d 273, and Barthel v. Sovereign Camp, W. O. W., 230 Mo.App. 247, 93 S.W.2d 285, support appellee's construction of these provisions. The Missouri case, supra, deals with the question at length, and disapproves our case of Sovereign Camp, W. O. W., v. Miller, supra.

De Almada v. Sovereign Camp, W. O. W., 49 Ariz. 433, 67 P.2d 474, 477, takes the same view as our Miller case saying: "Did such loan value increase in value during the period in which the monthly premiums were paid therefrom in the same manner as it would had the insured paid the same in cash from his own funds? There is a greater division of authority upon this point than upon the previous one. Most of the cases which we have cited hold that it does; that, in substance, the situation is the same as though the insured had personally borrowed the full amount of the loan value from a third party, and then paid it on his premiums as they became due, in which case, of course, the reserve value of the certificate would have increased in the usual manner. We think, however, that the cases which so hold have overlooked the fundamental reason why cash surrender and loan values are allowed at all. This reason is, of course, that by the payment of...

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