Court Opinion

ID: 3421426
Source: CourtListenerOpinion
Date Created: 2016-07-05 19:48:36.518146+00
Date Added: 2024-06-11T13:53:27.228738
License: Public Domain

DISSENTING OPINION ON PETITION FOR REHEARING.
After careful consideration of the questions discussed in support of the petition for rehearing, *Page 363 
it is my opinion that the petition for rehearing should be granted.
It is my opinion that the policies of insurance involved in this litigation did not lapse on August 7, 1933. It is true that the premiums due March 19, 1933, were not paid. The policies, however, contained an automatic premium loan provision which reads as follows:
"This Policy shall not lapse or become forfeited by reason of the non-payment of the premium within the month of grace allowed herein, provided the cash surrender value of the Policy less any indebtedness on or secured by this Policy is equal to or greater than the premium then due and unpaid. In such event the Company will treat the premium then due as paid, and the amount of such premium (with interest as hereinafter provided) shall become a first lien upon the Policy in the Company's favor in priority to the claims of any assignee or of any other person. If the net available cash surrender value be less than the premium that is due, the Company will continue this insurance in force until such value is exhausted (that is, for a period which bears the same ratio to the full premium period then insuing as such net value bears to the premium then due) and if prior to the expiration of such reduced period the last due premium be not paid in full, all liability of the Company on this Policy shall thereupon terminate subject to notice as hereinafter provided."
On March 19, 1933, when default occurred in the payment of premiums, the cash or loan value exceeded the existing indebtedness, and in accordance with the provisions of the policy, the company granted a policy loan and calculated the duration of this extended period upon the basis of the mathematical formula set forth in the policy. According to their calculations then made, this cash or loan value was sufficient to extend the term of insurance to August 7, 1933. On July 7, 1933, the appellant notified the insured that his insurance *Page 364 
would terminate on August 7, 1933, because of the fact that the indebtedness of each policy would equal the cash value thereof as of such date. No further payments were made under the policies, and no further notices were given with respect to the termination of this insurance.
The insured died on October 3, 1933. The appellee contends that the policies in suit had not lapsed at the time of his death and did not lapse on August 7, 1933, because the notice mailed on July 7, 1933, was not in accordance with the provisions of the policy relative thereto. The provision of the policy, with reference to notice of termination, reads as follows:
"Failure to pay any policy loan, automatic premium loan or interest thereon shall not avoid this Policy unless the total indebtedness shall equal or exceed the full amount available hereunder and in no event, until thirty days after notice thereof shall have been mailed to the last known address of the Insured, and of the Assignee, if any."
From a consideration of these policy provisions above quoted, it is at once apparent that this policy in suit would not immediately lapse or become forfeited by reason of the nonpayment of the premium. The company expressly agreed to continue this insurance in force in the event of a default of premium payment for such period as a cash surrender value of the policy at such premium due date would purchase. During this additional period of time in which the policy was continued in force, the premium last due could be paid, but if this premium was not paid during such period then "all liability of the company on this policy would thereupon terminate, subject to notice as hereinafter provided." The only notice mentioned in the policy is the thirty-day notice provision above quoted. The question, therefore, presented is whether or not this *Page 365 
notice may be given prior to the date of expiration of the extended insurance period.
This notice which the insurance carrier is required to give is a notice of forfeiture of the policy contract for failure to pay the automatic premium loan. Since this premium loan could be paid at any time during the period of the extended insurance, it is apparent that no cause for forfeiture could arise until the expiration of the extended insurance period. This question was before the Supreme Court of Kansas in the case of Priest v.Life Association (1916), 99 Kan. 295, 301, 161 P. 631, 633. The court said:
". . . the notice required is not notice of a contingent intention to forfeit which may possibly be entertained in the future. It is notice of an actual intention to forfeit because premium has not been paid. Such an intention can not exist until cause for forfeiture arises. Cause for forfeiture can not arise during the time within which payment may rightfully be made. That time must expire and the premium be unpaid."
The Supreme Court of Kansas accordingly held that the thirty days' notice cannot be given until the expiration of the time in which payment could rightfully be made. See also Cunningham v.Insurance Co. (1920), 106 Kan. 631, 189 P. 158.
A similar question was before the Supreme Court of Iowa,Andrews v. Union Mut. L. Ins. Co. (1935), 220 Iowa 719, 722, 263 N.W. 255, 256. This policy contained the provision that: "Failure to pay premium, premium note, or interest thereon shall not void this contract until thirty days' notice shall have been mailed to the last known address of the insured." The court said:
"The notice therein referred to obviously is not a notice that the premium will become due. A requirement for such a notice could be complied *Page 366 
with by giving notice at the time the policy was issued as to the time when all subsequent premiums would become due. Indeed, the policy does that very thing, because in the paragraph quoted herein it is stated that:
"`Notice of every premium that may become due and payable hereunder is hereby given and accepted by the delivery of this contract.'
"So that the notice referred to in the latter part of the same paragraph must be something different from a notice that a premium will become due. It must, therefore, be a notice that a premium is due or is past-due. In other words, the notice contemplated by that language is a notice, in substance, that a premium is in default. The obvious purpose of such a provision is to give to the insured thirty days after the mailing of such notice in which to avoid the cancellation of the policy."
In the case of Paul v. The Columbian National Life Ins. Co.
(1940), 125 N.J.L. 350, 352, 15 A.2d 636, 638, the policy contained a provision that "if at any time when the total indebtedness against said policy, including any unpaid premiums, together with interest thereon, shall equal or exceed the loan value of said policy, default shall be made in the payment of this loan or any interest thereon, the said policy shall (provided thirty-one days' notice has been mailed to the last known address of the insured) be canceled by said company and all insurance thereunder terminated." Being unable to meet his third annual premium, the insurance company agreed to loan the assured the amount of the cash surrender value of the policy, and the assured executed a promissory note for the balance required to make up the third annual premium. The note contained a provision that if not paid when due, the policy would lapse without further notice. The note was not paid when due and no notice of forfeiture was given. The court held that since the insurance company failed *Page 367 
to give the required statutory notice of forfeiture the termination of the policy was improper.
The rule has been tersely stated as follows:
". . . in the absence of waiver or estoppel, it is generally agreed that a notice of cancelation to the insured must be clear, unconditional, and unequivocal, and that a mere expression of a purpose or intention to cancel in the future is not sufficient; that is, it must be one of actual cancelation, not of future conditional cancelation, or of doubtful meaning as to time or purpose." Couch on Insurance, Vol. 6, § 1442.
In the light of these rules, it is my opinion, therefore, that the appellant was required to give the notice of forfeiture of the policy for nonpayment of premium or policy loans on or after the date of such forfeiture. A notice given prior to such date of forfeiture would not serve the purposes intended by the provisions of the policy and the statute.
It may be further noted that this provision of the policy, with reference to notice of forfeiture, while required by statute to be inserted in standard policies, is not required in contracts covering substandard risks. Since this provision of the policy is voluntarily assumed by the appellant, any ambiguity therein contained should be resolved in favor of the insured and against the insurer. Maxwell v. Springfield, etc. Ins. Co. (1920),73 Ind. App. 251, 125 N.E. 645.
It is my opinion, therefore, that since the time for the giving of the notice of termination of this policy is not free from doubt, that construction should be adopted which is most favorable to the appellee. Such a construction would require that the notice of termination of the contract of insurance could not have been given by the appellant until August 7, 1933.
It must follow, therefore, that the notice given by *Page 368 
the appellant on July 7, 1933, was not in accordance with the provisions of the contract, and was, therefore, insufficient to terminate the policy.
For these reasons, it is my opinion that the petition for rehearing should be granted and the opinion of this court should be reconsidered.
NOTE. — Reported in 37 N.E.2d 698.