Gooch v. Metropolitan Life Ins. Co. , 333 Mo. 191 ( 1933 )

Action on a policy of life insurance for $1,000. Judgment for plaintiff for the difference between said sum and the amount of a loan on the policy, which difference, with interest, amounted to $876.43. The Kansas City Court of Appeals reversed the judgment and remanded the cause with directions to enter judgment for plaintiff for $118.26. It deemed its decision in conflict with the decision of the St. Louis Court of Appeals in Knapp v. Life Ins. Co., 214 Mo. App. 151, 259 S.W. 862, and for that reason transferred the case to this court. [Gooch v. Metropolitan Life Ins. Co., 49 S.W.2d 679.]

The facts are not in dispute. On September 13, 1917, defendant issued a "Twenty Year Payment" policy of insurance on the life of Eugene Gooch for $1,000, payable to his wife, the plaintiff. It provided for the payment of $1,000, less any indebtedness due defendant on the policy, and less any unpaid portion of a premium for the current policy year. The premium of $15.96 was paid semi-annually on March 13th and September 13th for twelve years. It was not paid on September 13, 1929, and the policy lapsed. The insured died December 8, 1929.

It is admitted that plaintiff is entitled to recover under the provision for extended or term insurance. At the time of default in the payment of the premium, the reserve value of the policy was $248 and a dividend of $6.22 to the credit of the insured increased the value of the policy to $254.22. At said time the insured owed defendant $224.57, secured by the policy. The indebtedness of $224.57 subtracted from $254.22, as provided in the policy, left $29.65 to the credit of the insured.

The policy provides that on default in the payment of a premium, and if there is no indebtedness on the policy, the insurance may be continued for its original amount as term insurance. Under the table of guaranteed loan values and surrender options set forth in the policy if there had been no debt on the policy at the end of the twelfth year, the reserve value of the policy would have extended the face value of the policy as insurance for twenty-two years and one hundred nineteen days.

The policy also provides that any indebtedness thereon will reduce the amount continued as term insurance in such proportion as the indebtedness bears to the cash value at due date of premium in default. Under this provision the insured, on default in payment of the premium was entitled to extended or term insurance for the full term of twenty-two years and one hundred nineteen days, reduced in amount in such proportion as the indebtedness of $224.57 bears to the cash value of $254.22. In other words, the face value of the policy was reduced to $118.26 as extended or term insurance for said full term.

Plaintiff contends that under the policy and Section 5741, Revised Statutes 1929, the sum of $29.65 to the credit of the insured was available as a net single premium for extended or term insurance and was sufficient to provide said insurance for the face amount of the policy until after the death of insured. The section of the statute provides that "the amount of such temporary (extended) insurance shall be such as is specified in the policy, but never less than the face amount insured by the policy reduced by the unpaid portion of notes and indebtedness."

Defendant contends that plaintiff must claim either under the statute as a whole or the policy as a whole. It is admitted that under the rule provided in the statute for computing reserve values, the three-fourths value of the policy at the time of default in the payment of the premium is $172.41, which is less than the indebtedness of $224.57. Therefore, under said rule there would be no sum available as a net single premium for extended or term insurance. However, under the rule provided in the policy for computing reserve values, the insured had to his credit $29.65, as above stated. In other words, the rule provided in the policy is more favorable to insured than the rule provided in the statute.

[1] Plaintiff insists that she is not compelled to elect as between the statute and the policy. She contends that the statute is a part of the policy. We think the contention should be sustained. The policy and the statute make up the contract of insurance. [1 Couch's Cyclopedia of Insurance Law, p. 297; 2 Cooley's Briefs on Insurance (2 Ed.) p. 1102; Prudential Ins. Co. v. Ragan, 212 S.W. 123, l.c. 125, 126.] The rulings of the Courts of Appeals to the contrary in Dougherty v. Mutual Life Ins. Co.,44 S.W.2d 206, Wilhelm v. Prudential Ins. Co., 227 S.W. 897, and Alexander v. Northwestern Mutual Life Ins. Co., 290 S.W. 452, are overruled.

The rule provided in the statute for computing reserve values must be held to be the minimum value permitted. Of course, an insurance company may provide a rule for computing said values more favorable to the insured. The policy under consideration did so. Therefore, the rule provided in the policy must be substituted for the rule provided in the statute.

[2] Furthermore the provision in the policy that indebtedness reduces the amount continued as term insurance in such proportion as the indebtedness bears to the cash value must be held invalid. It is in conflict with the statute which provides that such insurance shall never be less than the face value of the policy reduced by the indebtedness. The statutory provision prevails, for it allows a greater indemnity. [2 Couch's Cyclopedia of Insurance Law, p. 304, 14 R.C.L. p. 925.]

The annual premium was $15.96. It follows that the $29.65 to the credit of the insured at the time he defaulted in the payment of the premium was sufficient to provide extended or term insurance for the face amount of the policy until after his death.

Plaintiff next contends that to reduce the amount of extended or term insurance because of an indebtedness on the policy rather than reduce the period of such insurance, as in the case of a non-borrower, is a discrimination against a borrowing policyholder and contrary to Section 5729, Revised Statutes 1929. The question is reserved.

The judgment should be affirmed. It is so ordered. All concur.