HENRICKS v. METROPOLITAN LIFE INS CO (1936)

This is an appeal by defendant from a judgment entered against it in an action upon a policy of life insurance.

The stipulated facts are: On May 19, 1924, the defendant issued a policy of insurance upon the life of Noah Henricks in the sum of $2,500. The nonforfeiture provisions of this policy so far as material here are as follows:

“Options on Surrender or Lapse–Upon failure to pay any premium or any part thereof when due, this Policy, except as otherwise provided herein, shall immediately lapse. If, however, the lapse occur after three full years' premiums shall have been paid, the owner hereof, provided there be no indebtedness hereon, shall, upon written request filed with the Company at its Home Office together with the presentation of the Policy for legal surrender or for endorsement within three months from the due date of premium in default, be entitled to one of the following options:

“‘First–A cash surrender value.

“‘The Company in its discretion may defer the payment of the cash value for a period not exceeding ninety days after the application therefor is received by the Company.

“‘Second–To have the insurance continued for a reduced amount of non-participating paid-up insurance (including any existing additions to the credit of the Policy), payable at the same time and under the same conditions as the Policy. Such paid-up insurance shall have an increasing cash surrender value equal to the full reserve at the date of surrender, or a loan value up to the limit of the cash surrender value. Interest on loan under such paid-up insurance shall be payable annually in advance to the end of the policy year at the rate of six per centum per annum.

“‘Third–To have the insurance continued for its original amount as term insurance in whole number of months from due date of premium in default, without participation and without the right to loan, but with a cash surrender value decreasing each year and ceasing entirely upon the expiry of the extension term, which value shall be the full reserve in even dollars for each one thousand dollars of insurance at the date of surrender.

“‘If the owner shall not, within three months from the date of premium default, surrender this Policy to the Company at its Home Office for a cash surrender value or for endorsement for paid-up insurance or term insurance as provided in the above options, the policy shall be continued for a reduced amount of paid-up insurance as provided in the second option.

“‘The values of these options are mathematical equivalents, and have been calculated on the basis of the Metropolitan Intermediate Table of Mortality, as adopted by the Insurance Department of the State of New York for computing reserves hereunder, with interest at three and one-half per centum per annum (omitting fractions of a dollar per thousand of insurance) less a surrender charge not exceeding in any case two and one-half per centum of the face of the Policy; except that after the time for which premiums are payable as stated on the first page hereof, no surrender charge has been made. These values as computed produce the results set forth in the table herein at the end of the respective years. Values for other years (after the twentieth) will be computed upon the same basis for the entire reserve in even dollars for each one thousand dollars of insurance, and for even months in the event of election of term insurance, and will be furnished upon request of the Insured.

“‘Any indebtedness to the Company under this policy will be deducted from the cash value; and such indebtedness will also reduce the amount of paid-up insurance or the amount continued as term insurance in such proportion as the indebtedness bears to the cash value at due date of premium in default.

“‘The reserve for which funds are to be held upon this Policy shall be computed upon the Metropolitan Intermediate Mortality Table (as adopted by the Insurance Department of the State of New York), with interest at three and one-half per centum per annum.”’

This policy had attached to it as of the same date a supplementary contract executed by the defendant, which by its terms was made a part of the life insurance policy, providing for double indemnity, in event the insured died as a result directly, or independently of all other causes, of bodily injuries sustained through external, violent, and accidental means.

It also contained this provision:

“This supplementary contract shall automatically terminate and be of no further force or effect if any premium on said policy, or on this supplementary contract, shall remain unpaid at the end of the period of grace allowed under said policy for payment of premium thereunder or if said policy be surrendered or converted under one of its nonforfeiture provisions or otherwise terminated.”

All premiums on the policy and supplementary contract were paid to February 19, 1932, but the premium due on that date was never paid. May 8, 1932, insured was drowned.

The insured had borrowed $260.80 against the policy, which sum together with interest left a total indebtedness at the date of death of $270.15.

Three months after the policy had lapsed, plaintiff, the beneficiary named in the policy, demanded that the third nonforfeiture option specified in the policy be allowed her.

In addition to the stipulated facts, the trial court found:

“That the sum of $33.60 applied as a net single premium to purchase Paid-Up Non-Participating Term Insurance in the sum of $2,500.00 at the age of twenty-nine and three-fourths years, and to purchase insurance in the amount of $2,500.00 insuring against loss of life as a result, directly and independently of all other causes, of bodily injury sustained through external, violent and accidental means, would purchase said insurance in the total amount of $5,000.00 for a period in excess of two months (2) and nineteen (19) days.”

The lower court gave judgment for the plaintiff in the sum of $5,000.

Defendant relies for reversal of the judgment on four propositions:

First. Section 450 of the Civil Code (now section 10151 of the Insurance Code [St. 1935, p. 496]) requires only one of the three forms of automatic nonforfeiture value to be contained in a life insurance policy.

Second. A supplementary contract of double indemnity insurance in the event of death by accidental means need not contain an automatic nonforfeiture value.

Third. If, in lieu of the automatic nonforfeiture value provided in a life insurance policy, the beneficiary voluntarily and expressly elects to have one of certain other optional values specified in the policy, she is bound by such election and by the terms of the option so exercised.

Fourth. There was not any evidence to sustain the trial court's finding relative to the amount necessary to purchase double indemnity insurance for a period in excess of two months and nineteen days.

Defendant's first proposition is answered adversely to its contention by Metcalf v. Metropolitan Life Ins. Co., 1 Cal.App.(2d) 481, 489, 37 P.(2d) 115, 38 P.(2d) 401, in which case the District Court of Appeal of this state for the Third Appellate District held, in construing the nonforfeiture provisions of a life insurance policy identical with those in the instant case, that such provisions did not comply with the requirements of section 450 of the Civil Code (now section 10151 of the Insurance Code), and that the first provision of said section, granting nonparticipating term insurance, where the policy failed to comply with the requirements of the section, should be read into the policy. The Supreme Court in denying a hearing in Metcalf v. Metropolitan Life Ins. Co., supra, withheld its approval from that portion of the opinion relating to section 450 of the Civil Code, presumably for the reason that it was dictum in the case. We are, however, of the opinion that this dictum states the correct rule of law.

The second proposition must be answered adversely to defendant's contention, as the correct rule is stated in New York Life Ins. Co. v. Rositzky (C.C.A.) 45 F.(2d) 758, writ of review denied by the United States Supreme Court, 283 U.S. 829, 51 S.Ct. 353, 75 L.Ed. 1442. In this case the United States Circuit Court of Appeals, Eighth Circuit, held that a double indemnity clause in a contract of insurance was life insurance and therefore that the Missouri nonforfeiture value statutes were applicable. Judge Kenyon, quoting with approval from Logan v. Fidelity & Casualty Co., 146 Mo. 114, 47 S.W. 948, 950, at page 763 of 45 F.(2d), says:

“When a policy covers loss of life from external, violent, and accidental means alone, why is it not insurance on life? Such a provision incorporated in a general life insurance policy admittedly would be insurance on life. Then, why less insurance on life because not coupled with provisions covering loss of life from usual or natural causes as well? * * *

“The mere addition of one or more features or elements in a contract of insurance on life, that may serve to give the contract or policy a particular designation in the business or insurance world, will not in the least devest the contract or policy of its chief character of insurance on life, or make the contract other than life insurance. The promise to pay a weekly indemnity by an insurance company in the event the insured receives an injury from an accident not resulting in death, does not change the character of the agreement of the policy to pay a certain other sum when the accident results fatally, which is life insurance from accidental causes, as the promise to pay a certain stipulated sum to the insured (now contained in many of the policies issued by what is known as ‘old-line’ life insurance companies), when the insured attains a given age, or in a definite specified time, and if before the insured arrives at the age designated, or before the time fixed for its certain payment, he shall die from any cause, accidental or otherwise, to pay his legal representatives or some one named in the policy as beneficiary the amount stipulated, is none the less life insurance because coupled with an investment or bond feature, not found in what is commonly known as a ‘straight’ life insurance policy. The calling of a contract of insurance an ‘accident,’ ‘tontine,’ or ‘regular’ life policy, or, for that matter, by any other appellation that may be adopted for business or conventional uses or classification, cannot make a policy containing an agreement to pay to another a sum of money designated upon the happening of an unknown or contingent event, depending upon the existence of life, less a policy of insurance on life.

“Insurance on life includes all policies of insurance in which the payment of the insurance money is contingent upon the loss of life.”

Defendant's third proposition is answered contrary to its claim by the provision of section 450 of the Civil Code (now section 10153 of the Insurance Code) providing that, “No agreement between the company and the policy-holder or applicant for insurance contrary to the foregoing (referring to the nonforfeiture values) shall be held to waive any of the provisions provided above.”

Clearly, in view of this unequivocal pronouncement of the Legislature, neither the insured nor beneficiary in the policy could by election or any other purported agreement or act waive the benefits conferred by section 450 of the Civil Code.

The final proposition presented by defendant is untenable, since, in the absence of a showing to the contrary in the record, it will be presumed that the trial court took judicial notice, as it might properly have done, of such standard digests as the “Unique Manual,” which is issued annually by the National Underwriters and gives the cost of all types of insurance written by the major insurance companies doing business in the United States. At page 26 of this digest for the year 1932 it will be observed that there was substantial evidence to support the finding under scrutiny here. Dickinson v. Southern Pacific Co., 172 Cal. 727, 730, 158 P. 183; 23 Cor.Jur. 163, § 1989.

The judgment is affirmed.

McCOMB, Justice pro tem.

I concur: CRAIL, P. J. I concur in the judgment: WOOD, J.