Court Opinion

ID: 6259474
Source: CourtListenerOpinion
Date Created: 2022-02-17 21:57:37.598715+00
Date Added: 2024-06-11T08:59:39.988192
License: Public Domain

Dissenting Opinion by
Mr. Justice Cohen :
I agree completely with the majority’s review of the factual background of this case, its carefully detailed explanation of the insurance policy involved and contrasting positions of the contending parties and its excellent analysis of the critical point of difference' between the parties. In fact, were I to have written the opinion, I would not have changed a single word from the beginning through the sentence “The other gave an identical answer to a similar question” on page 242. Thereafter, I part company with the majority.
The majority advance several reasons for ruling against the Company. First, they say, no reason or *247justification exists for the Company’s “withdrawal” of the first coupon in determining the cash value of the policy at the end of the second year (June 24, 1961). They also indicate that the due date of the coupons is unclear and that there are ambiguities in the source of payment of the first coupon and in the meaning of “unmatured.” I find no such problem.
The majority seem unable to conceptualize the matter of computing the cash value at the end of the second year (June 21, 1961). It is undisputed that such value at the end of the first year (June 24, 1960) was minus ninety dollars and fifty cents (f—90.50). This date having passed at the time of default, no one seems to have difficulty in understanding or accepting the computation. In computing cash value a year later.; however, we must assume existence of a state of facts which never actually existed in the context of this policy (i.e. the actual arrival of June 24, 1961, while the policy was in force); and in so doing, we must make a computation based upon the situation which actually would have existed on June 24, 1961.
On that date, by the terms of the policy, the first coupon would have been a matured coupon. In fact, since the second annual premium would have been paid in full upon remittance of the monthly premium due May 24, 1961, this first coupon would have been a matured one for a month prior to June 24, 1961. While one may call anything “ambiguous” if he wishes to do so, such an appellation does not necessarily make it ambiguous. What difficulties the majority find in use of the word “unmatured” and in the monthly, rather than annual, payment of premiums elude me. A coupon is unmatured if, by its terms, it is not presently payable (i.e. it represents a future benefit); conversely, it is matured if it is presently payable. The monthly payment of premiums (a convenience to the policy*248holder, by the way, not to the company) does not create confusion in the table of annual cash values any more than a quarterly or semi-annual payment would. It means only that the payment of the annual premium in full will not occur as early as it would if the premium were paid only once a year. Thus, here, this payment in full occurred on May 24, 1961, when the twelfth monthly payment for the second year was made.
Clearly, therefore, the first coupon, which became due on May 24, 1961, would be a matured coupon by the time June 24, 1961, arrived, would no longer be a future benefit on June 24, 1961, and should not be included in computing the present (June 24, 1961) value of unmatured coupons on that date. It should be included for no more or no less than its matured value—$59.60. If this is done, the computation of cash value on June 24, 1961, would be as follows:
1. Add present value of future guaranteed benefits:
a. Present value of unmatured coupons $1055.70
b. Present value of return premiums 642.10
c. Present value of whole life benefits 3964.90
Total present value of all policy benefits $5662.70
2. Less present value of adjusted premiums 5448.10
3. Difference $ 214.60
4. Add value of matured coupon 59.60
5. Total $ 274.20
The interpolation is then made as follows:
1. Cash value on June 24, 1961 274.20
2. Less cash value on June 24, 1960 ($-90.50)
*2493. Increase in cash valne for year 364.70
4. Increase in cash value for 5 months (5/12ths times $364.70) 151.96
5. Cash value on November 24, 1960 ($-90.50 plus $151.96) 61.46
This cash value on November 24, 1960 (rounded out to $61.50), is precisely the cash value obtained by the Company. After subtracting the indebtedness due it from the insured, we are left with the net policy value of $15.50, an amount which would have purchased term insurance only until April 8, 1961. All of this very clear procedure the majority ignores by resorting to use of the word “ambiguous” and misunderstanding the role of the first coupon.
Second, the majority attempt to inflate the pro rata value of the first coupon by attributing part of the first year’s premium to it. Yet, the policy is clear that this is improper. The first coupon, by the terms of the policy, is payable only upon payment of the second annual premium in full. The amount of the coupon is $59.60. Each year thereafter, upon payment of the annual premium, another coupon for $59.60 matures. The first year’s premium plays no part in the accrual of value in the first coupon; the second year’s premium, like every succeeding year’s, is wholly responsible for this: This fact also disposes of the majority’s third contention that the entire $59.60 value of the first coupon might be includible in the November 24, 1960, cash value on the theory it was fully earned upon payment of the first year’s premium. As we have shown, none of the value of this coupon was earned until commencement of payment of the second year’s premium.
Finally, the majority reject the Company’s argument that plaintiff cannot prevail even if her computation is accepted, but it does not explain fully what this *250argument is. The Company contends that if one accepts plaintiffs computations, the conclusion is inescapable that there would have been sufficient cash value in the policy on December 24, 1960, to advance the payment of the full monthly premium due November 24, 1960, and that once this was done the remaining cash value on December 24, 1960, would have been insufficient to purchase term insurance for more than several days. Its reasoning is based upon accepting plaintiffs determination that the December 24, I960,' cash value would be $92.90 and upon interpreting the automatic premium loan clause in a certain way.
This clause, supra, requires the advancement of an automatic premium loan upon default in payment of a premium if the cash value of the policy at the end of the period for which the premium is to be advanced would be sufficiently in excess of the “total indebtedness” to the Company to cover the premium. On the computations of both parties here this determination was first made upon default in the payment of the premium due October 24, 1960; and both agreed that the indebtedness to the Company on November 24, 1960, would be $46.00 (the premium of $45.80 plus $.20 interest for the one month). Since this indebtedness of $46.00 was less than the November 24, 1960, cash value found by each party, both agree that this premium was properly advanced.
Upon default in payment of the November 24, 1960, premium, a similar determination was required by the automatic premium loan clause. The cash value a month later, according to plaintiff, would be $92.90. The indebtedness on that date, according to the Company, would be the above $46.00 plus another $.20 interest for that October 24, 1960, premium advance: The available cash value on December 24, 1960, therefore, would be $92.90 less $46.20 or $46.70. Since the *251amount of the November 24, 1960, premium plus interest would be another $46.00, the available cash value would cover advancement of this premium with $.70 to spare. Therefore, it had to be advanced.
Plaintiff says this is wrong, that “indebtedness” means the premium amount plus interest to the next succeeding policy anniversary (June 24, 1961). If interest is so computed, the December 24, 1960, cash value would then be insufficient to provide a premium loan for the November 24, 1960, premium. Plaintiff contends this view is correct because the automatic premium loan provision goes on to say that the amount of an advanced premium with interest to the “next succeeding anniversary” of the policy shall constitute a loan against the policy and, therefore, an insured’s indebtedness can only be computed at a given date by adding full interest to the next succeeding anniversary.
I disagree. The proximity of these two sentences in the premium loan provision should not becloud the fact that they speak of different things. It is the first-sentence only that governs a determination of whether a premium loan must be made; and consistent with the proper view that all of the benefits of a life insurance policy should be preserved for an insured by making such a loan where possible, this sentence allows interest to be computed only to the end of the period for which the premium is being advanced. Thus, as plaintiff herself indicated in determining whether or not the October 24, 1960, premium could be advanced, interest should be computed only to November 24, 1960. In determining whether the November 24, 1960, premium should be advanced, interest should be computed to December 24, 1960. As the Company thus points out, plaintiff’s calculations would require advancement of this November 24, 1960, premium and would leave insufficient cash value thereafter to purchase term insurance beyond the end of 1960.
*252The majority gives no reason for its position in rejecting this contention except to say the Company “made an election and must abide by it.” I do not understand this conclusion. The policy either did or did not require an automatic premium loan to be made on November 24, 1960. If it did (i.e., plaintiff’s computation being correct), no “election” by the Company is possible; the loan had to be made. Therefore, as the Company correctly notes, there remained insufficient cash value to purchase term insurance for more than a few days after December 24, 1960, on this basis. This is so clear that plaintiff did not advance this “election” argument before us, and I fail to see how the majority can reasonably do so.
Finding nothing in the majority’s reasoning to support its decision, does one find such support elsewhere? The lower court did advance several points not mentioned by the majority.
In upholding its submission of the case to the jury and the jury’s verdict for the plaintiff, the court below also determined that the policy provisions were ambiguous in not making clear the proper method of treatment of the first coupon. It found such ambiguity in the undefined phrase “due allowance” contained in the nonforfeiture clause of the policy; and, in accordance with the established rule that ambiguities in an insurance policy are to be construed against the insurer, Papadell v. Harleysville Mutual Casualty Company, 411 Pa. 214, 191 A. 2d 274 (1963), it determined that plaintiff’s computation was equally as proper as the Company’s and could be submitted and adopted.
Second, the lower court actually determined that the first coupon had not matured and, therefore, should have been included in the computation of cash surrender value and treated as a nonforfeiture benefit. This, it said, supports plaintiff’s position.
*253Finally, as a practical justification for its decision, the court below pointed out that the Company’s calculation of cash value as of November 24, 1960, gave the insured a gain of only forty cents in the value of the coupons for the five months period since the first policy anniversary. It came to this conclusion as follows:
Present value of coupons on June 24, 1960 $1080.10
Present value of coupons on June 24, 1961 1055.70
Decrease between 1st and 2nd years $ 24.40
Pro rata value of first coupon as of November 24, 1960 (rounded out) $ 24.80
Net increase as of November 24, 1960 $ .40
Since the cash value provision of the policy requires that the net value of coupon additions be not less than the amount used to purchase such additions and since, reasoned the court, the premium charge of five months for the coupons had to be more than forty cents, the Company’s proration had to be incorrect.
In concluding, as it did, that the Company was giving the insured credit for only forty cents increase in coupon value between June 24, 1960, and November 24, 1960, the court made a fallacious computation. It first found the decrease in value of the unmatured coupons for an entire year and then added back only a five months prorated value for the matured coupon. This procedure naturally distorted the computation and produced a much lower increase than a proper computation would reveal. Moreover, it is not consistent with the Company’s actual computation since the values of the unmatured coupons on the two dates (June 24, 1960 and June 24, 1961) each entered into the computations of the cash values on those dates and then into a single proportion to determine the November 24, 1960, cash value. Through this method the coupon values also *254were prorated; and although the record is insufficiently clear regarding the basis of the actuarial computation of the present value of unmatured coupons, the following calculation would more closely resemble what the Company actually did regarding coupons:
Present value of 19 unmatured coupons on June 24, 1960 $1080.10
Present value of 18 unmatured coupons on June 24, 1961 1055.70
Decrease in value of unmatured coupons $ 24.40
Decrease in value of unmatured coupons for five months (5/12ths of $24.40) $- 10.17
Add: Pro rata value of matured coupon on November 24, 1960 24.83
Increase in coupons value between June 24, 1960 and November 24, 1960 $ 14.66
Second, in concluding that the first coupon should have been treated as a nonforfeiture benefit and allowed in the calculation of cash surrender values because it was “not actually matured”, the court engaged in a bit of illogic. This first coupon does play a role in the computation of cash values and does enter into the determination of the nonforfeiture benefit but not because it was unmatured at the time of default. The coupon enters into these items because both the policy and the State statute require such a result. The policy’s cash value provision, supra, says that the excess of the life insurance benefits’ present values over the adjusted premiums’ present value is to be supplemented by the present value of any “coupon . . . additions” in determining the cash value at the end of any policy year. The statute, subsection (b), 40 P.S. *255§510.1 (b), supra, says the cash value shall include “any existing paid-up additions. . . .” Therefore, consideration of the first coupon as an element in determining cash value is required because the policy and statute so state, not because this coupon had not matured.
Finally, I find nothing ambiguous in the phrase “due allowance” appearing in the nonforfeiture provision of the policy. It is true that this provision does not further set forth an exact method of computing a “due allowance;” however, it is no more defective in that respect than the statute itself. Subsection (e), 40 P.S. §510.1 (e), of the statute, supra, requires that “allowance” be given under circumstances like those present here; and we believe that, taken as a whole, the policy and statute provide ample procedures for determining what this means in any particular case.
In short, I find nothing here which supports plaintiff’s position. I would reverse the order of the court beloAV and direct the entry of judgment for the defendant Company.