Court Opinion

ID: 8037436
Source: CourtListenerOpinion
Date Created: 2022-09-09 03:22:33.598678+00
Date Added: 2024-06-11T16:37:11.493385
License: Public Domain

Johnsen, J.,
dissenting.
The effect of the majority opinion, as I view it, is to permit a life insurance company to escape the provisions of the statutes and the rules of construction applicable to insurance contracts generally, by entangling other activities and obligations in its contracts. That to me is unsound as a matter both of legal principle and public policy. An insurance company should no more be able to dodge the insurance laws of the state, by wrapping its life insurance obligations in “thrift certificates” or savings contracts, than a liquor dealer to escape the liquor laws, by burying and distributing his products in bags of beet sugar.
The first page of Gartner’s certificate binds the company, “for and in consideration of the warranties * * * in the application * * * and of the * * * premium specified in the margin,” to pay his wife as beneficiary, upon satisfactory proof of death while the certificate is in effect, “twelve times the amount shown by column four (4) of the table of values herein to be insured on the date of * * * death.” There is attached to the certificate a copy of an application executed by Gartner, which sets forth his age, place of birth, occupation, nationality, sex, marital status, and beneficiary designation, and which contains the following condition: “I agree that the certificate issued hereon shall not take effect until the first payment has been received by the company during my good health.”
That this definitely constitutes a life insurance contract, there can be no possible doubt. The fact that a thrift or savings scheme is incorporated in the instrument does not alter its status as a life insurance obligation or exempt it from amenableness to the insurance laws of the state. My concept is that a life insurance company’s business is to write life insurance. The statute (Comp. St. 1929, sec. 44-401) specifically defines life insurance as insurance upon or pertaining to the lives of persons, including endowments *840and annuities, and disability benefits. Nothing else, except convenient and appropriate incidents and provisions in connection with such business, can be regarded as falling within its field. I do not recognize the right of a company to subvert its activities into other fields, nor its ability to escape the dictates of the insurance statutes by hybridizing its contracts.
I shall not here attempt to discuss whether the thrift or savings business is such a reasonable incident of the life insurance business that a company ought to be permitted to engage in it and to include provisions therefor in its insurance contracts. Assuming that it is, it is clear to my mind that, as a matter of public policy, the contract into which such a scheme is integrated must still conform to the requirements of the laws applicable to life insurance contracts.
Section 44-602, Comp. St. 1929, requires that every policy ' of life insurance (“except policies of industrial insurance or where the premiums are payable monthly or of tener”) shall contain among other things, provisions for nonforfeitable loan and surrender values and for extended insurance. Subdivision 11 of such section requires a provision in the policy “that if, in event of default in premium payments, the value of the policy shall be applied to the purchase of other insurance, and if such insurance shall be in force and the original policy shall not have been surrendered to the company and canceled, the policy may be reinstated within three years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums with interest.”
Gartner’s certificate sets up a table of cash or loan values, but, if any premium is not paid within thirty days after it is due, these rights are automatically forfeited. The only privilege of reinstatement is for a period of two years from the default, by paying an amount equal to all overdue payments plus 6 per cent, compound annual interest thereon. There is no provision in the contract for extended insurance.
Gartner paid his premiums to August 12,1935. According to the table of values in the certificate, the cash or loan *841value of his contract was at that time approximately $325. This money was derived from premiums which the company had collected under a life insurance contract. The contract made no attempt to apportion the premium between its insurance obligation and its thrift feature. Gartner paid a single premium under the contract for its integrated benefits. The insurance obligation, by the very language of the contract, was predicated upon the consideration of payment of the entire premium. The fund which these premium payments created was liable for all of the company’s obligations, — death losses, surrender values and thrift terminal settlements.
In this situation, whatever right, if any, the company had to disintegrate and separate the thrift benefits and the insurance provisions of the contract, and to set up different standards and scopes of contract obligation and allocate premium charges for each, it is clear that, not having done so, the insurance obligation impregnated the entire contract and left it subject to the conditions which the statute imposed upon such contracts. More specifically, when the company attempted to set up policy rights and benefits out of the premiums which it had collected on its integrated obligation, the terms and conditions of such rights and benefits had to be in accord with the provisions of section 44-602, Comp. St. 1929. Thus, for example, it could not set up loan and surrender values, derived from such premiums, which were subject to forfeiture. So, too, it was required to make any cash value, which the policy might have, convertible into extended insurance.
The majority opinion, as well as the previous case of Howie v. Cosmopolitan Old Line Life Ins. Co., 132 Neb. 367, 272 N. W. 207, which it follows, seem to me to have fallen into the error of making the tail wag the dog. To me, the thrift feature of Gartner’s contract, as I have already indicated, could never become more than a subordinate incident in the conduct of the company’s life insurance business, and the insurance obligation, therefore, necessarily dominated any contract intp which the two had been inseparably fused. *842Such obviously must have been the intent of the legislature when it provided, in section 44-101, Comp. St. 1929, that the insurance business “is public in character, and requires that all those having to do with it shall at all times be actuated by good faith in everything pertaining thereto; shall abstain from deceptive or misleading practices, and shall keep, observe and practice the principles of law and equity in all matters pertaining to such business.”
Perhaps the court was somewhat confused in the Howie case by the fact that the insurance involved was term insurance. Gartner’s contract too was a term policy for ten years. But, even as to policies of term insurance, section 44-602, Comp. St. 1929, provides for the setting up of the benefits and conditions therein prescribed which are applicable to such a contract. Under the statute, in such a policy, the provisions may be made “more favorable to the policyholder than hereinbefore required,” but they cannot, in any event, be set up with limitations or conditions not in con - formity with the statutory requirements. Thus, — to repeat,. —loan and surrender values cannot be set up with a forfeiture provision. So, too, any cash value which a policy may have must be permitted to be used for extended insurance, “and if such insurance shall be in force and the original policy shall not have been surrendered to the company and canceled, the policy may be reinstated within three years from such default, upon evidence of insurability satisfactory to the company and payment of arrears of premiums with interest.” These requirements governed the duty and obligation of the company, even though the provisions of the policy did not comply with them. Comp. St. 1929, sec. 44-608.
As I view it, therefore, Gartner was entitled to have-any cash value which the company had created, as of August. 12, 1935, out of the premiums of his contract, applied to the purchase of other insurance, in the amount then in force under the policy. I do not know what the cost of such insurance would have been, but it probably is a reasonable assumption that $3-25 would more than have paid the *843premium to April 30, 1938, when Gartner sought to compel the company’s assignee to permit reinstatement of the original contract. If I am right in assuming that the surrender value would have purchased extended insurance to April 30, 1938, then, since three years had not elapsed from the date of default and the certificate had not been surrendered to the company, Gartner was entitled, under section 44-602, Comp. St. 1929, to have his original contract reinstated “upon evidence of insurability satisfactory to the company and payment of arrears of premiums with interest.” If the surrender value would not have purchased extended insurance to April 30, 1938, or if Gartner was no longer an insurable risk, the company should, of course, have the opportunity to show these facts.
The reinstatement of the original certificate necessarily would include both the insurance and thrift benefit rights, because of their contract integration.
For the reasons stated, I respectfully dissent from the opinion of the majority.
Carter, J., concurs in the foregoing dissent.