Opinion ID: 1122303
Heading Depth: 1
Heading Rank: 2

Heading: Was the policy voidable for lack of mutuality?

Text: Each of the plaintiffs purchased a term insurance policy in Mutual. The policy was denominated on its face as automatically convertible. In addition to the initial premium, each plaintiff paid a $5 life membership fee and agreed to exchange the policy in Mutual for a non-assessable legal reserve life policy in a different company, Producers Life Insurance Company, after the fifth anniversary of the policy. Plaintiffs argue that the contract was illusory because Mutual was not bound to keep the policy itself; that all Mutual said was that some other company would take over responsibility; nor did Producers Life promise anything, and nothing is made to appear either that Producers Life ever accepted such policies or that it is even an existing company. Plaintiffs also urge that there was no consideration to support the life membership payment, for under our statute, Section 31-9-11, U.C.A. 1953, every purchaser of a mutual policy is automatically a member of the insurance company. We agree, of course, that mutuality of obligation is an essential element of the contract. A plea that a contract is defective in this regard is really a statement that the contract lacks consideration. Consequently the issue posed is whether, considering the contract as a whole, the plaintiffs here were left without valid consideration for their promise. [13] Whenever possible a contract should be so construed that there are mutually binding promises on each party. [14] Each of the plaintiffs lapsed his policy before the convertibility feature of the policy came into operation. Moreover, it appears that Mutual has subsequently agreed to continue the policies under the terms set out in the Application for Insurance and has, in fact, furnished such coverage to those insureds who have requested it  all with the approval of the State Insurance Commissioner. Thus, even if it should be conceded that the policies initially lacked mutuality, plaintiffs' assertion appears unmeritorious on two grounds: (1) The contracts have been executed, and (2) the lack of mutuality was subsequently cured. [15]