BITTINGER v. NEW YORK LIFE INS. CO.
This is an appeal from a judgment in favor of defendant in an action by plaintiff as beneficiary in a life insurance policy to recover the death benefit provided therein.
There is no dispute as to the facts. The record shows them to be as follows:
On April 1, 1905, respondent corporation issued a policy of insurance on the life of George E. Bittinger, appellant's husband, for the sum of $20,000, the first $10,000 of which was payable in forty equal semiannual instalments of $250 each, and the second $10,000 of which was payable in cash six months after the fortieth payment.
The provision of the policy regarding cash loans reads as follows: “The insured may obtain Cash Loans on the sole security of this Policy, on written request, at any time after it has been in force two full years, if premiums are duly paid to the anniversary of the insurance next succeeding the date when the loan may be obtained. * If any indebtedness on this Policy remains unpaid at the death of the Insured, and the amount of such indebtedness is not repaid in cash before the first instalment becomes payable under this Policy, the amount insured by this Policy shall not be paid in instalments, as specified on the first page, but shall be paid in one sum, namely $13,000.00, from which shall be deducted the amount of the indebtedness due on this Policy.”
Under the heading “This Policy is Automatically Non–Forfeitable”, the said policy contains the following:
“First:—If any premium is not paid on or before the date when due, and if there is no indebtedness to the Company,—The insurance, for the amount stated at the head of Column 3 of the Table on the second page, payable in instalments in the manner stated on the first page, will automatically continue from such due date as Term Insurance as follows, and no longer, namely: for 37 days if premiums have been paid for 3 months; for 45 days if for 6 months; for 53 days if for 9 months; for 60 days if for one year and less than two years; and for the period specified in Column 3 of said Table, if premiums have been paid for two or more years” (italics included); and
“Second:—If any premium or interest is not paid on or before the date when due, and if there is an indebtedness to the Company,—Insurance for the net amount that would have been payable in one sum as a death claim on said due date, namely: $13,000, less the amount of the indebtedness, will automatically continue from said due date as Term Insurance for such time as any excess of three-fourths of the reserve under this Policy over such indebtedness will purchase at the age of the Insured on said due date, according to the Company's present published table of Single Premiums for Term Insurance, and no longer. In Lieu of such Automatic Term Insurance, on the Insured's written request within six months from said due date but not otherwise, this Policy will be endorsed for such amount of Paid-up Insurance, payable in one sum, as said excess will purchase at the age of the Insured on said due date, according to the Company's present published table of Single Premiums.” (Italics included.)
Then follows this clause: “The Automatic Term Insurance and the Paid-up Insurance, as specified above, shall be payable under the same conditions as this Policy, but shall be without participation in profits, cash loans or further payment of premiums.”
A paragraph under the head “Reinstatement” reads: “If any premium or interest is not paid on the date when due, the Company will restore this Policy as of the date of such non-payment, on payment by the Insured of such premium or interest within one month thereafter, with interest. The Company will also restore this Policy as of the date of such non-payment, at any time after one month and within the Accumulation Period, under the following conditions:” (Then follow the conditions, which are not pertinent to the question here to be considered.)
Among the “general provisions” of the policy are the following: “(5) If this Policy is continued beyond the Accumulation Period, with payment of premiums, Profits will be apportioned at the end of every five years thereafter during the continuance of the Policy. (6) Any indebtedness to the Company will be deducted in any settlement of this Policy or of any benefit thereunder.”
On April 1, 1933, there was a loan outstanding against said policy in the sum of $6,630, which was the full amount of the cash loan value at that time. There was also declared due on said date a cash dividend on said policy in the sum of $189.77, in favor of the insured. There was due from the insured on said date a semi-annual premium of $202.15 and interest on said loan in the sum of $331.50. The insured elected to apply the above-mentioned dividend to the payment of the said premium, and in addition delivered to respondent insurance company his check for $12.38 to make up the difference between said premium and the amount of the dividend. The insured later and about May 31, 1933, attempted to pay the full amount of the said interest with his check, but this check was not honored because of insufficient funds. Respondent insurance company, by letter dated June 27, 1933, notified the insured of this fact and also that by reason thereof his policy had been lapsed.
On May 1, 1933, respondent's agent had issued a receipt for the premium of $202.15, and thereafter respondent issued an official premium receipt for the same. The said official receipt showed on its face the amount of the premium of $202.15, the amount of the loan interest of $331.50, the total thereof of $533.65 and a notation of the dividend of $189.77. There is nothing on the face thereof to show that it is not a receipt for the total amount shown.
Under date of May 8, 1933, respondent company wrote to the insured stating that the records of the company showed that the premium of $202.15 was paid, but that there was also due the interest in sum of $331.50, and requesting the insured to let the company know when it could expect a remittance covering the interest. Under date of August 8, 1933, respondent company sent to insured its check in the sum of $12.38, enclosed with a letter as follows: “On June 28th, we refunded to you an N.G. check given in payment of the loan interest due April 1st, 1933, on the above numbered policy. To-date this interest has not been paid, and in view of this the Company has authorized us to refund the premium, which was also due on April 1st. We therefore, attach hereto our check No. 184255, drawn to your order for $12.38, to cover said refund, and regret to advise that your policy now stands lapsed on the books of the Company with this premium. We trust, however, that at your earliest convenience, you will take up the matter of reinstatement. We ask that you kindly make prompt use of our check.” The said check was never cashed. Nor was the interest due April 1, 1933, ever paid, and no further payments of any kind appear to have been made under the policy or upon the loan. The insured died October 21, 1933, at the age of 65 years. Appellant's claim as beneficiary for benefits under the policy was denied by respondent company on the ground that the said policy of insurance was not in force and effect on the date of the insured's death.
In addition to the facts noted above the trial court found, upon undisputed evidence, that the said policy of insurance was automatically continued from April 1, 1933, as term insurance for the sum of $6,370 for a period of 189 days, purchased by $189.77, the amount of the said dividend, which the company had applied as reserve; that according to the company's published table of single premiums for term insurance in effect April 1, 1933, $1 reserve would carry $1,000 of insurance as automatic term insurance at age 65 for a period of 6.3371 days; that in figuring the period of said automatic term insurance the company had allowed the insured the full reserve value of the policy less the indebtedness.
The deposition of the company's actuary, read in evidence, showed that the policy had been carried as term insurance to October 7, 1933, and that if on the date the said policy lapsed the amount of the reserve value thereof had been increased by $12.38 the term insurance would have expired October 20, 1933.
Accordingly, the trial court concluded that the said policy of life insurance was of no force or effect on October 21, 1933, the date of the insured's death.
Appellant contends that the premium on the policy was paid to October 1, 1933; that the reserve on the policy carried it beyond October 21, 1933, the date of death of the insured; and that the “forfeiture provision” of the policy did not become final until 30 days after October 1, 1933. Appellant argues in support of her contentions that the premium paid by the insured April 1, 1933, by means of the dividend and his check for the difference, was never refunded, and that the insurance company had no authority or right to refund it; that the term “Indebtedness” used in the policy includes interest on loan as well as principal and the interest default should be disposed of by deducting the amount from the death benefit instead of using the default to lapse the policy; that there was a reserve of at least $125 on the policy on October 1, 1933; and that in any event the policy was still effective October 21, 1933, because the policy provisions under the heading “Reinstatement”, above set forth, constituted a grace period for the payment of premiums, irrespective of the automatic term insurance provision.
The provisions of the policy, read together, indicate clearly, and without any ambiguity, that the policy was intended to lapse into term insurance immediately upon default in the payment of any premium, and, when there was an indebtedness to the company outstanding, such a lapse also occurred immediately upon default in the payment of any interest as well, but if the amount due was paid within one month after the due date, with interest, the policy would be restored to full force and effect as of the due date.
It is therefore evident that under the terms of the policy, nonpayment of the interest due April 1, 1933, caused the policy to lapse into term insurance as of that date, and immediately thereafter, subject to the right of the insured to have the policy restored to full force and effect if the defaulted interest, with interest thereon, were paid within one month after the due date, April 1, 1933.
Appellant argues, however, that the provisions of the policy respecting the loan and the effect of the loan are ambiguous, and, reading the policy as a whole and resolving the ambiguity in favor of the beneficiary, the word “indebtedness” must be held to include interest as well as principal of the loan and that the nonpayment of the interest is disposed of by adding the interest to the principal and deducting the full amount of the “indebtedness” from the death benefit due and payable. But the policy expressly provides for another method of handling unpaid interest, namely, automatic term insurance upon default. As respondent points out, “appellant has failed to differentiate between what obligations of the insured make up the indebtedness on the policy and the effect upon the status of the policy resulting from the non-payment of said indebtedness”, and that when the policy provided that “Any indebtedness to the Company will be deducted in any settlement of this Policy or of any benefit thereunder,” it merely meant that at the time of any settlement of the policy, or any benefit thereunder, the indebtedness then existing would be deducted. It did not mean that all indebtedness must remain outstanding until such settlement was made or benefit received. See Burton v. Columbian, etc., Ins. Co., 20 Cal.App. 21, 127 P. 1037 (cited by respondent).
As is also pointed out by respondent, the provisions of the loan agreement, under which insured's indebtedness was incurred, are not inconsistent with the provisions of the policy above referred to.
Since it appears that on April 1, 1933, there was outstanding against the policy an indebtedness equal to the full amount of the reserve at that time, there would have been no reserve left with which to purchase term insurance had it not been for the dividend declared as of that date. The policy would then have become forfeited on April 1, 1933, subject, however, to the right of the insured to have the same restored upon payment within thirty days of the amount due, with interest.
Under the policy as written, the insured having defaulted in an interest payment on April 1, 1933, any payment of premium on that date could not have served to keep the policy in full force or effect but could have only been applied to purchasing additional term insurance. In this respect, the uncontroverted evidence indicates that had respondent company credited insured with the payment of $12.38 made upon the premium as aforesaid, it would only have served to extend the term insurance to October 20, 1933, which, while close indeed, would still fall short of covering the insured on October 21, 1933, the date of his death.
Under the facts as above noted it cannot be said that respondent company waived the provisions of the policy regarding automatic term insurance. Any forbearance on the part of respondent company was clearly conditioned upon payment by insured of the interest due.
Appellant's arguments as to the amount of reserve under the policy on October 1, 1933, and as to the said policy not having been forfeited until thirty days after October 1, 1933, are all based on the assumption that the policy could not have lapsed into term insurance on April 1, 1933, which, as is seen above, was the case under the provisions of the policy.
For the foregoing reasons the judgment is affirmed.
We concur: YORK, P.J.; WHITE, J.