Court Opinion

ID: 7021716
Source: CourtListenerOpinion
Date Created: 2022-07-24 04:47:09.405898+00
Date Added: 2024-06-11T16:10:35.234408
License: Public Domain

JUSTICE WEBBER, dissenting: I cannot accede to the decision of my learned colleagues. We are faced with two delinquent parties: the plaintiff bank failed to police its loan, and the defendant insurance company violated the statute in several particulars. As to the finger pointing, it requires no citation of authority to say that all well-pleaded facts in a complaint must be taken as true when the complaint is dismissed on motion as being insufficient as a matter of law. I note that nowhere in its complaint does the bank allege that it took any action to ascertain that Drakos was current in his payment of premiums. With regard to the insurance company, the complaint alleges that the bank was never given any notice of premiums due and that upon application for the proceeds under its assignment, it was informed that the policy had been forfeited on September 16,1983. First, anent the premium notice, I do not agree that the statute is ambiguous. It states clearly that no forfeiture can be declared within six months after default in payment unless notice has been given to the insured or his assignee, if notice of the assignment has been given, at least 15 days and not more than 45 days prior to the due date before the grace period. This is not an “either-or” option, it is an “or-if.” If an assignment has been made (and in this case the assignment was acknowledged by the company), the assignee is entitled to notice. It is not sufficient to notify the insured. In the instant case it stands admitted that notice was given to Drakos, the insured, but none was ever given to the bank, the assignee. This alone, in my judgment, would be sufficient to deny the company’s motion. Next, the record shows that the company denied the claim because the premium due on May 1, 1983, was not paid and that therefore the company forfeited the policy on September 16, 1983, after applying the cash-surrender value in lieu of premium payments. Again, the statute is plain that no lapse or forfeiture can be declared “within six months” after default. Six months from May 1 is November 1. The declaration of forfeiture was premature by at least six weeks. To me it is patent that “within six months” must be interpreted as a grace period in addition to whatever other grace period may be in the policy. Although I believe that the two foregoing statutory breaches are sufficient to dispose of the case, some discussion of the entire problem of forfeiture is in order. The statute furnishes no specific guidelines other than to fix the time frame, and I am aware of no case authority on the specific point. It speaks of a policy being “forfeited or lapsed.” I find these terms essentially synonymous. The nouns from which the verbs are derived are defined in Black’s Law Dictionary 1022-23, 778 (4th ed. 1951) as: “LAPSE. The termination or failure of a right or privilege through neglect to exercise it within some limit of time, or through failure of some contingency.” “FORFEITURE. Something to which the right is lost by the commission of a crime or fault or the losing of something by way of penalty.” In either event, the statute requires the company to “declare” the lapse or forfeiture. Webster’s New International Dictionary 681 (2d ed. 1941) defines “declare” as: “To make known explicitly, esp. by language; to communicate clearly to others, whether by acts, words, writing, or signs; to publish; announce; as, to declare war.” It follows that before a company may “declare” a policy lapsed or forfeited, it must take some positive action. Simply closing the file is insufficient. It has been accepted doctrine for many years that forfeitures are not favored in the law. This has been specifically applied to insurance contracts. (Old Colony Life Insurance Co. v. Graves (1915), 200 Ill. App. 71 (abstract of opinion).) In that case the insured held a policy with a fraternal organization whose bylaws required notice of assessments be given to him. The insured apparently moved about, following his trade as a printer. Assessment notices did not reach him, although he kept the company aware of his address from time to time. The company forfeited the policy, and the court said: “Furthermore, it does not appear that the notice of assessments, which is provided for by Section 4 of Article 5 of the By-Laws of the Knights of the Globe Mutual Benefit Association, was mailed to his post office address; and this was required, before a forfeiture could be declared and made legally effective. It is clear, that the right to declare a forfeiture, was dependent on the giving of the notice, as well as the failure of the insured to pay the assessment which he was obligated to pay. (N. W. Traveling Men’s Assn. v. Schultz, 148 Ill. 304.) Forfeitures are not favored in the law.” Slip op. at 358. In other areas of the law the question of forfeiture has caused much litigation. This is especially true in the case of contracts for deed. Commonly such contracts contain provisions for forfeiture on nonpayment of installments due together with provisions for notice. It is generally held that no forfeiture can be made unless the notice provisions of the contract are complied with by the seller. Lovins v. Kelley (1960), 19 Ill. 2d 25, 166 N.E.2d 69. Similar authority, albeit scant, exists in the field of insurance law. In Kahn v. Continental Casualty Co. (1945), 391 Ill. 445, 63 N.E.2d 468, the suit was over a health and accident policy. Among other contentions, the insured claimed that the policy could not lapse without notice to him. The court brushed the contention aside, saying: “By the contract it was provided that the policy would lapse if default was made in the payment of the premium. No notice was required.” (391 Ill. 2d 445, 452, 63 N.E.2d 468, 471.) The Kahn case was cited for the same proposition in Sistler v. Illinois Bankers Life Assurance Co. (1950), 341 Ill. App. 512, 520, 95 N.E.2d 507, 511. Admittedly, the policy in the instant case likewise contains no specific provision for notice of forfeiture or lapse. The only provision relating to the question is entitled “Non-Forfeiture Provisions” and states, “Upon default in premium payment one of the following provisions will apply”; then follow three options: extended-term insurance, paid-up insurance, and cash surrender. However, I do not feel that this answers the question because the statute becomes part of the policy just as much as if it were written into it in haec verba. Since the Kahn case concerned a health and accident policy, the court had no occasion to consider the statute, and the Sistler case, although concerned with a life policy, woodenly followed Kahn without reference to the statute which was enacted some 13 years before. This brings me full cycle back to the interpretation of the statute. The general principles of statutory construction are well known, but a brief recapitulation may be in order. The primary function of the courts in interpreting and construing statutes is to ascertain and give effect to the legislature's intent in enacting the statute. (County of Du Page v. Graham, Anderson, Probst & White, Inc. (1985), 109 Ill. 2d 143, 151, 485 N.E.2d 1076, 1079.) Courts should first look to the statutory language as the best indication of intent (109 Ill. 2d 143, 485 N.E.2d 1076) and examine the entire statute (City of Springfield v. Board of Election Commissioners (1985), 105 Ill. 2d 336, 341, 473 N.E.2d 1313, 1315). Additionally, courts seek to determine the objective the statute sought to accomplish and the problems it sought to remedy. (105 Ill. 2d 336, 473 N.E.2d 1313.) When the terms of a statute are not specifically defined, they must be given their ordinary and popularly understood meaning but be construed in light of the purpose of the legislation. Niven v. Siqueira (1985), 109 Ill. 2d 357, 366, 487 N.E.2d 937, 942. In my judgment the purpose of the statute is to afford some measure of protection to a policyholder. He is given an additional six-month grace period before the policy may be terminated. In order to comply with this protection, the company must “declare” that the policy is forfeited or lapsed. As previously indicated, I believe that this requires some positive action on its part, i.e., notice of intent to exercise its statutory right served upon its policyholder. With modern means of bookkeeping and the generation of notices by computer, this would seem a small burden. I would therefore hold that any life company cannot exercise its right of lapse or forfeiture unless, in addition to the notice of premium due, it serves upon the insured a notice of intent setting forth the date upon which the policy will be lapsed or forfeited unless all defalcations are made good beforehand. If the theory of the majority is correct, that the provisions are self-executing, it will place the policyholder in an unfavorable position. Banks and other lending institutions will become reluctant to take life policies as collateral for loans. In many instances a life insurance program is the principal asset of a borrower’s estate. I would reverse the trial court and remand for trial on the issues. I would also allow the amendment to the complaint. It may well develop at trial that the bank is entitled to nothing for reasons which are not apparent on the pleadings, but the question should not be disposed of as a pleading matter. At a minimum, if the bank is to recover, it should be required to pay whatever premiums were due from the date of default to the date of Drakos’ death.