Court Opinion

ID: 5626501
Source: CourtListenerOpinion
Date Created: 2022-01-11 04:55:05.301495+00
Date Added: 2024-06-11T08:37:37.634235
License: Public Domain

Broyles, C. J.,
dissenting. As I see it, the controlling question here is whether the policy of insurance should be construed as providing for certain options if there were no indebtedness against the policy at the date of the lapse of the policy, and for different options if such an indebtedness existed. It is undisputed that the policy lapsed for the non-payment of the premium due May 25, 1935, and the lapse became effective at the expiration of the 31-day grace period after that date; that an indebtedness of $823.81 existed against the policy when it lapsed, and was existing at the death of the insured on August 9, 19S5; and that the insured did not, before his death, make any tender either of the premium in default or of the indebtedness against the policy, and did not make any election as among the three options provided for in the policy. Under the provisions of the contract of insurance, if the insured had been in life on August 9, 1935, that day being before the expiration of the three-months option period after the lapse of the policy, and if there had been no indebtedness against the policy, he would haye had the right to choose cash, paid-up insurance, or extended insurance. His beneficiary, after his death, had the same right of choice within three months after the lapse of the policy, because it was both a contract right and a property right which survived to her. And although she failed to exercise that choice, the option most favorable to her, in the event of an existing indebtedness against the policy, was automatically made by the terms of the contract; and that was the third option, which provided for non-participating term insurance continued for 28 years and 3 months in the amount of $2000, reduced by the proportion which the indebtedness against the policy on May 25, 1935, bore to the cash-surrender value as of that date, or by the proportion of $823.81 to $8'33, which would leave $22 as the amount which she was entitled to recover, and which was tendered to her by the insurance company. If the policy had not lapsed, it would have been in force as primary insurance, and the death of the insured would have matured the obligation of the insurer. There would have then been no longer insurance against the death of the insured, but there would have been a monetary liability of the insurer; and any indebtedness against the policy would automatically be deducted from the amount due under the policy, and the balance, if any, would be *200the sum due the beneficiary. However, since the policy was not in force as primary insurance (the policy having lapsed), the liability of the insurer is fixed by the non-forfeiture terms of the policy; and, after the death of the insured, the only obligation of the insurer is to pay a determined sum of money. I can not agree with counsel for the defendant in error that the policy, when it refers in paragraph 5 to an existing “indebtedness,” means an indebtedness existing after the expiration of the 31-day grace period subsequent to the non-payment of the premium due May 25, 1935.
I think that on this question the policy is clear and unambiguous, and should be construed to mean an indebtedness existing at the date of the lapse of the policy. This being true, it is obvious that neither the insured nor his beneficiary was entitled, under the terms of the policjq to any one of the three options which would have been available if there had been no indebtedness against the policy on thé date of its lapse. Such a ruling would not be in conflict with any decision of the two appellate courts of this State, cited by the defendant in error, when the particular facls of those eases are considered. And any decisions of other States are not binding on this court. However, Metcalf v. Metropolitan Life Ins. Co., 1 Cal. App. 481 (37 Pac. (2d) 115, 38 Id. 401), cited and relied on by the defendant in error, is persuasive authority, because the policy there and the policy in this case are identical. Tire California court held that the debt against the policy could be paid by the beneficiary after its lapse. I agree to that ruling; but the question in the instant case is not one of an automatic foreclosure of the indebtedness or of the right of the beneficiary to pay the indebtedness after the lapse of the policy. The question here is whether the insured or his beneficiary can pay the debt and thereby create an insurance right or option not ■ given by the policy. As stated in the brief of the plaintiff in error, “It is one thing to pay a- debt and redeem a pledge, the pledge being the cash value or reserve value of the policy. It is another thing to pay the debt and thereby become entitled to an amount of insurance, not cash value, for which the policy did not provide, and for which there is no statutory provision in this State. On that question, which is the real and controlling question, the California case [supra], cited by opposing counsel, is very strong authority for our contention. There the policy terms were identical *201[with those in this ease]. The California court interpreted the policy as containing no provision for the insurance for which the plaintiff in this case is contending. The California court did that in so many words. The plaintiff in this case is contending that she was entitled, by paying the debt after lapse and after death [of the insured], to the amount of secondary insurance provided by the terms of the policy in case there had been no indebtedness against the policy. Our contention is that she may be able to pay the debt and she may be able to redeem the cash value of the policy which was pledged to secure the debt, but she can not thereby obtain the benefit of insurance which was available only on the condition that there be no indebtedness. That is exactly what the California court held. However, there was in force in the State of California a statute to which reference is made in the reported case. . . [Under the provisions of that statute] it was mandatory upon the company in.that State to provide three options. The first option applied where there was no indebtedness against the policy. While the policy contained that option, it was not available, because there was an indebtedness [for] which the beneficiary actually tendered [payment] after lapse and after death [of the insured], but within the three-months period. The court held that this option did not satisfy the statute, because it applied only in case there was no indebtedness. The policy did not contain any provision granting to the insured the benefit of the sec'ond statutory option, which specifically applied in case there was an indebtedness, and which provided that the insured should be entitled to paid-up non-participating term insurance in the amount of the face of the policy, ‘less any outstanding indebtedness’ for such a period as the net value of the policy, the cash value less the indebtedness, would purchase. The California court held that the insured, or his beneficiary, was entitled to the benefit of that statute. The cash value of the policy without deducting the indebtedness was $441. The indebtedness amounted to $414.87. The net value was $26.13. Under the statute the insured was entitled to non-participating term insurance for the face of the policy, less the indebtedness for such a period as $26.13 would purchase. The California court held that the plaintiff was entitled to the benefit of that statute, because there was no such option provided in the policy.” The writer has read the California *202case and the California statute referred to, and agrees with the foregoing interpretation given to them, and with the contention and argument of counsel for the plaintiff in error. Under the provisions of the .policy of insurance sued on, and the undisputed facts of the instant case, I think that a verdict in favor of the plaintiff for $22 was demanded, that the verdict returned was contrary to law, and that the refusal to grant a new trial was error.