Court Opinion

ID: 9639401
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:15:52.506661+00
Date Added: 2024-06-11T18:05:02.779255
License: Public Domain

SOPER, District Judge
(dissenting).
In this case there is no suggestion or suspicion that the insured was misled or entrapped by the conduct of the insurance company or by obscurity of the insurance contract. The plain fact is that he stopped paying the premiums upon his ordinary life participating policy, §nd hence in due time, the policy necessarily lapsed and the obligations of the insurer came to an end. On December 6, 1928, more than six months before the insured died, the company wrote the first of eleven letters, addressed either to the insured or the beneficiary, urging the reinstatement of the lapsed policy. The insured was told that unless action to this end was taken, the policy would expire on June 16, 1929; so that long before the controversy arose or could have been foreseen, the company placed the same interpretation upon the policy for which it now contends.
Whether that interpretation was correct is the only substantial question in the ease, and in its determination, the parties stand upon an equal footing before the pourt except in so far as there is occasion to apply the rule that if a policy of insurance is so framed as to leave room for two constructions, it should be interpreted in the sense unfavorable to the insurer. If, however, the meaning is clear, it is of no significance that it is against the interests of the policy holder. It was really a trivial matter in this case that the policy took effect sixteen days after the first premium was paid. Had the insured died before the contract was approved by the company, no recovery could have been had because no policy existed. But he knew this fact when he paid the money. Having survived the interval, there was some slight advantage in the earlier maturity of the loan values of the'policy; but if there had been no compensating advantage, the case would have been the same. Judge Parker has pointed out in Sellars v. Continental Ins. Co. (C. C. A.) 30 F.(2d) 42, 45, where the policy was antedated to se>eure a lower rate and the insured got less than nine months’ insurance for twelve months’ premium, that it is immaterial which party gets the better bargain. He said: “All of these considerations, however,'are beside the point. Courts cannot make contracts for parties. They can only enforce the contracts which the parties themselves have made.”
*85The insured failed to pay the premium due October 22, 1928, on that day or within thirty-one days thereafter, so that upon the expiry of the period of gTa.ee, tho policy lapsed and the rights of the insured thereunder came to an end with two qualifications: (1) The insured had the right to reinstate the policy at any time within three years on evidence of insurability and payment of tho sums due the company with interest. Ho failed to do so and wo have no concern with this feature on this branch of the ease. (2) The insured had the light to extended insurance for a period of 237 days. The controverted question is whether this period should run from October 22, 1928, the anniversary date for the payment of premiums, or from November 7, 1928, the anniversary date of the approval of tile policy; that is, until June 16, before the insured died on June 25, or until July 2d, after Ms death took place.
The reasons advanced for the later date are easily stated: (1) It is pointed out that a provision of the poliey provides that it shall be incontestable after one year from date of issue, except for nonpayment of premium. It is too plain for argument that the date here intended is the anniversary of November 7, 1938, when the policy was approved. But this provision relates only to the feature of incontestability and has no reference to the term of extended insurance, or the date for the payment of premiums.
(2) The policy contains a provision that it shall take effect when approved, that is, on November 7th, and hence it is contended that that date is meant by tho several expressions “the end of the policy year,” “the anniversary of tho poliey,” etc., which occur in various parts of the contract. Assuming for the moment that this is true, it does not follow that the extended insurance runs from this date. There is no statement in the poliey that tho term of extended insurance shall run from the end of the poliey year. It is admitted that the failure to pay the second or third premium within a period of thirty-one days from October 22d would have voided and nullified the poliey. It is also admitted that the failure to pay any subsequent premium within tho same period of grace would cause the poliey to lapse whereupon proof of insurability would be required for reinstatement. If these serious consequences are to he reckoned from October 22d, it is not possible to contend that it is contrary to the spirit of the poliey to reckon the term of extended insurance from the earlier date, even if November 7th be the end of the poliey year.
Indeed, one would expect, since the right to extended insurance arises only upon tho lapse of the policy, to find that the term of extension should be reckoned from the same date as the lapse itself; and that such is tho case is apparent from the terms of the poliey. It is expressly said that when the policy lapses and no other option is exercised, the participating term insurance shall run “from the date to which premiums have been paid.” Of course the poliey might have provided that tho payment of premium on October 22d of any year would pay up the policy until November 7th of the succeeding year; but the irresistible inference from the terms of the contract is that such a payment was intended to carry the poliey only until the succeeding October 22d when the next premium would become due. The consequences of failure to pay tho premium, viz., the voiding of the policy at the beginning of second and third years, and tho lapsing in subsequent years, have been pointed out. The due date confessedly was October 22d, and the grace granted in the contract ran from that date. If the payment on any premium date kept the insurance in good standing until November 7th, the voiding or lapsing of the poliey and the period of grace would have been measured from that date. Since they are not so reckoned, the only reasonable conclusion is that each premium carried the poliey for one year from the 22d day of October.
Moreover, the same result is reached if it is considered that the ease turns on the meaning of the terms “end of policy year” or “anniversary of tlio policy,” for they also refer to October 22d. Thus it is provided that beginning at the end of the first policy year, if the second year’s premium is paid, dividends shall bo declared annually; and that dividends may be withdrawn in cash or applied to the payment of premiums or to the purchase of paid-up additions to the policy; and that if the policy holder does not exercise any other option within the period of grace, the dividend shall be applied to the purchase of paid up additions. These provisions clearly show that the dividend is available to the poliey holder on the day when the premium is due; and in this ease the parties so understood them, for dividends were declared by the company and used by the insured in aid of payment of premiums as of October 22d during the life of the policy.
If the conclusion is reached that the term of extended insurance expired before the insured died, the two additional minor grounds upon which the appellant relies present no *86difficulties.' The appellant contends that if either of two sums, to wit, (1) the sum of $33.48, representing a dividend which accrued on October 22, 1928, or (2) the sum of $40 sent by the beneficiary to the company on March 12,1929, to be applied to the reinstatement of the policy, had been applied to the reduction of the loan, the term of extended insurance would have reached beyond the policy holder’s death. The short answer is that the company did not so apply either sum, and was under no obligation to do so. The facts are that thirteen days after the expiration of the days of grace, to wit, on December 6, 1928, the agent of the company wrote to the insured calling attention to his failure to pay the premium on October 22d and urging him to take steps to reinstate the policy. He was told the amount of the net premium due on October 22d, after deducting the dividend of $33.48, and it was suggested, doubtless because such was the practice of the insurer, that the dividend might be used as part payment of the premium. The insured made no response. Three subsequent letters on the same subject were written him by the company in all of which he was urged to( take steps to reinstate the policy. Finally, on March 12, 1929, the beneficiary of the policy sent to the company a cheek for $40 to be used with the dividend to reinstate the policy, and accordingly this matter was referred to the company’s representative at Spartans-burg, S. C. Considerable delay ensued, and again the company in a series of seven letters, extending from April 13, 1929, to June 13, 1929, urged the insured to take the necessary steps for medical examination and reinstatement of the policy before it was too late. Numerous references in these letters show beyond any possibility of dispute that it was the understanding of both parties that the company was t"o hold not only the dividend of $33.48, but also the additional cash sum of $40 and use them to reinstate the policy in full effect. The medical examination was finally held and the unfavorable report of the physician was mailed on June 15, 1927, and received by the company’s representative at Spartansburg on the following day. It was sent by him on June 17th to the home office of the company in Cincinnati, Ohio, where in the ordinary course of the mail, it could not have been received until June 19th.
Thus it appears that the dividend was retained by the company for a particular purpose at the express direction of the insured; and that the term of extended insurance expired on June 16, 1929, through no fault of the company before it was ascertained that the purpose could not be effected. On June 25, 1929, the insured died, and shortly thereafter, the beneficiary was requested to furnish evidence of the appointment of a representative of the estate so that the company might pay him the dividend. These facts preclude the inference that the company used or should have used the dividend to lengthen the term of extended insurance.
_ Nor is there any reasonable ground to believe that the sum of $40 was applied by the company to the payment of the interest on the loan. The basis of the contention is a letter of June 24,1919, from an official in the home office to the insured stating that the remittance of $40 had been applied to the interest on-the loan. The occasion for the letter was the fact that an indebtedness was due by the insured on June 26th. The insured died on June 25th, and the letter in the course of the mail did not reach his home until after' his death. ■ Confining its attention to these facts, a jury might well have held that the money had been so applied. But' other uneontradieted evidence shows that the letter was written in mistake by one who did not know that the policy had expired; and when we also take into consideration that another department of the company had already been informed that the policy holder was no longer an insurable risk, we are compelled to believe that the company did not knowingly divert the money from the authorized purpose, and use it to revive a policy already dead. Had a jury decided otherwise, the verdict would necessarily have been set aside. Hence there was no issue for its determination.
The rulings of the District Judge seem to have been correct in all respects.