Court Opinion

ID: 3254884
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:24:56.031857+00
Date Added: 2024-06-11T13:40:32.988940
License: Public Domain

The contention of appellee, in short, is that, in as much as the insurer failed or refused to apply the dividend of $197, apportioned to his policy and payable March 11, 1930, in reduction of his loan, as he requested it to do, it had no authority to apply said dividend in purchasing additional insurance, as it did do, and therefore it must be held that it had money in its hands which ex aequo et bono belonged to the insured on January 11, 1931, when the time for the payment of the balance on the semiannual premium expired, and it was the duty of the insurer to apply said dividend, or so much thereof as was necessary, to the payment of said premium, and in the absence of such application by the insurer, the law will so apply it to prevent a forfeiture of the insured's rights under the policy.
The prevailing opinion heretofore promulgated reaffirms the doctrine approved on the former appeal, to the effect "that where the insurer, at the time of default in the payment of premium, has in his hands dividends duly declared, sufficient to meet such premium, or unpaid portion thereof, and which have not been theretofore otherwise applied in accordance with theterms of the policy, or by mutual consent, a legal obligation is on the insurer to apply such dividends to the payment of the premium in order to avoid a forfeiture of the policy." (Italics supplied.) Equitable Life Assur. Soc. of the United States v. Roberts, 226 Ala. 8, 12, 145 So. 157, 160.
The principle is denied application in the case at bar on the ground that the insured had the right, under the terms of the policy, without the consent of the insurer, to direct that the dividend apportioned to his policy be applied in reduction of his outstanding loan, and that he had elected to so apply it, long before the premium became due, the failure to pay which worked a forfeiture of the policy as to its "additional indemnity provisions."
While the writer is still in accord with the conclusion that the policy had lapsed as to the double indemnity feature for the nonpayment of the semiannual premium due September 11, 1930, the time for the payment of which was extended until January 11, 1931, on insured's application, after more mature consideration, I am not in accord with the holding that the insured had the right, without the consent of the insurer, to apply the accumulated dividend in abatement of the loan.
The provisions of the policy with respect to "AnnualDividends" are as follows: "The proportion of divisible surplus accruing upon this policy shall be ascertained annually. Beginning at the end of the second policy year, and on each anniversary thereafter such surplus as shall have been apportioned by the Society to this policy shall at the option of the insured (or assignee if any) be either — 1, Paid inCash; or, 2, Applied toward the payment of any premium if the remainder of the premium is duly paid; or, 3, Applied to thepurchase of paid-up Additional Insurance payable in a singlesum at death of the insured (without additional indemnity or total and permanent disability benefits); or, 4, Left to accumulate at 3% interest, compound annually. If a higher average annual rate is earned, this accumulation may be increased by an interest dividend as determined and apportioned by the Society. Such accumulations will be payable upon the maturity of this policy or on any anniversary of its register date. Unless the insured (or assignee if any) shall elect oneof the foregoing options within three months after the mailingby the Society of a written notice requiring such election, thedividend shall be applied to the purchase of paid-up AdditionalInsurance (Option 3)." (Italics supplied.)
On February 15, 1930, the "Society" (insurer) mailed the insured notice that a dividend of $197 had been apportioned to his policy, payable March 11, 1930, the notice stating that: "Upon condition that premium payments for the current policy years shall have been completed, the above noted policy will, on the date stated, be entitled to the above dividend, which, at the option of the owner of the policy, may be applied under any one of the options shown on the reverse side of this notice. The owner of the policy is hereby required toelect the manner in which the said dividend shall be applied asherein provided, within three months after the date this notice was mailed, notifying the Society in writing of his election;otherwise the dividend will be applied to the purchase of paid-up additional insurance." (Italics supplied.) On the reverse side of the notice, there was a printed form ofelection, in which the options set forth in the policy, above stated, were repeated in the following order: "Additional Insurance," "Deposit," "Applied Toward Premium," "Cash. To receive the dividend in cash. Payments made under this option to be by check." Immediately opposite each of the stated options was a blank space for the "Owner's Signature" immediately under the following: "I elect the option opposite my signature," and following the several spaces, "Please date, sign and return to person designated to receive your premium." *Page 544 
This form was not used in responding to the notice, but on April 29, 1930, the insured, "James C. Roberts, wrote the defendant at its Birmingham office the following letter: 'In regard to my dividend of $197.00 coming to me on this policy as of date March 1, 1930, wish to say that I would like for you to credit this dividend on my loan against this policy.' * * * This letter was received by the defendant but was by oversight misfiled and overlooked, and the request as to the application of the dividend was never complied with, and at the expiration of the three months' period from the time James C. Roberts received said notice requiring him to elect as to the disposition of said dividend, the defendant used said dividend of $197.00 to purchase paid-up insurance in the amount of $398.00 under the automatic alternative set out in the policy."
It is too clear to permit of controversy, that the letter written by Roberts on April 29, 1930, was not an election to apply the dividend under any one of the several options written into the policy contract.
Neither of the said options provided for or authorized such application; therefore, the insured had the right to accede to the request and so apply the dividend, or it had the right to ignore or refuse the request. The dividend was but an indebtedness due from the insurer to the insured, a chose inaction, which might be treated as a set-off against the insured's indebtedness arising from the loan, and, under the uniform holdings of this court, could only be applied in payment of the loan indebtedness by the mutual consent of the parties. Wharton v. King, 69 Ala. 365; McCurdy v. Middleton,82 Ala. 131, 2 So. 721; Cotton v. Scott, 97 Ala. 447, 12 So. 65; Aultman  Co. v. Gamble, 88 Ala. 424, 7 So. 248; Smith v. Pitts, 167 Ala. 461, 52 So. 402; J. F. Morgan Paving Co. v. Carroll, 211 Ala. 121, 99 So. 640; Stovall v. Hamilton, 14 Ala. App. 484,71 So. 63; 48 C. J. 585, § 1, page 588, § 2; 21 R. C. L. 45, §§ 42, 43.
The insured not having elected to apply the dividend in accordance with any one of the options expressed in the policy contract, in the absence of an agreement between the parties to otherwise apply it, the insurer was clearly within its right in applying it to the purchase of additional paid-up insurance, as provided by option 3. Therefore, there was no unpaid dividend in the hands of the insurer on September 11, 1930, or on January 11, 1931, and the principles of law stated on the first appeal, and reaffirmed on this appeal, are without application.