Irby v. Gulf Life Insurance Co. , 78 Ga. App. 783 ( 1949 )

The amendment to the petition did not strengthen it in any particular as to alleged defects pointed out by the original demurrers to the original petition. Since the court sustained demurrers and ordered that the action stand dismissed unless amended in a certain time, and the amendment did not improve the petition insofar as the demurrers sustained were concerned, the court did not err in sustaining the demurrers to the amendment and to the petition as amended and in dismissing the action.

DECIDED MARCH 18, 1949. Mrs. Sarah E. Irby brought this action against Gulf Life Insurance Company to recover the amount of $3000, including double indemnity, allegedly due on a life-insurance policy. The original petition was brought in two counts. The first count alleged substantially the following: 3. On November 30, 1945, James F. Irby Jr., husband of the plaintiff, made application to the defendant for a policy on his life for $1500, and also double indemnity coverage of $1500. Said application was accepted and the defendant issued the policy to the insured, naming Sarah E. Irby, his wife, as beneficiary. 4. Under the terms of said policy the insured was to pay premiums for 20 years and at the age of 85 the policy matured as an endowment. 5. Said policy contained an "automatically non-forfeitable" clause, which provides as follows: "The Company, without any action by the insured, and provided the cash surrender value of the policy less any existing indebtedness on or secured by the policy and interest on the total indebtedness, will pay by loan against the policy the current year's premium, the unpaid portion thereof or any unpaid instalments thereof and subsequent annual premiums as they become due so long as the full annual premium may be advanced in accordance with the following conditions; namely, that the premium so advanced shall be charged as a loan bearing interest at six percent, annually in advance, that such loan shall become a first lien upon the policy in the Company's favor and priority to the claims of any assignee or any other person, that the cash value is sufficient at the end of the last completed policy year for which premiums have been fully paid after all existing indebtedness with accrued interest thereon including automatic premium loan have been deducted. The word `Premium' as used in this clause comprehends the entire premium under this policy, including the premium for all benefits provided by any rider of supplement. At any time while this policy is continued in force by the automatic premium loan provision, payment of premium may be resumed without any evidence of insurability being required by the Company. If the cash value is insufficient to the conditions as stated in the automatic premium loan provision above, the remainder of the cash valuewill be used to purchase Extended Term Insurance as provided inthe guaranteed values of this policy." (Italics ours.) Said premiums were paid for two full years, and the last premium was paid on January 1, 1948. In the table of guaranteed values, the value after payment of two years' premiums is not set out, but said table does provide "the reserve on the life insurance element of this policy shall be computed on the American Experience Table of Mortality with interest at the rate of three and one-half percent and the preliminary term method, modified on the twenty-payment life basis. Subject to such modification, the first year's insurance is term insurance purchased by the whole or part of the first year's premium. The Guaranteed Values herein are equivalent; and are equal to said reserve less a sum in no event in excess of two and one-half of the sum insured hereunder." 6. On February 25, 1948, the insured fell from a tree and suffered a compound fracture of his left foot, which became infected necessitating its amputation, and finally resulted in the insured's death on March 14, 1948. 7. At the end of the second policy year the insured would have had a cash or loan value sufficient to buy extended insurance for more than a year and far beyond the date of the insured's death. 8. On March 16, 1948, the plaintiff made claim for payment of said policy, and the defendant refused payment and denied liability.

Count two of the original petition set forth the identical paragraphs 1-8 of count one and further alleged: 9. The insured held another policy with face value of $500, which carried a double-indemnity feature of $500. 10. The insured on January 1, 1948, made application for the cash value of said policy for the amount of $16, in order to secure funds with which to pay the premium on the policy herein sued on. 11. The agent of the defendant company, knowing full well the insured's reason for surrender of said policy, accepted the policy and the application for cash-surrender value amounting to $16 for the purpose of paying the premium on the policy herein sued on. 12. On February 25, 1948, the same date insured was injured, he received a check for $16; but more than a month having expired from the making of the application and receipt by him, he had no opportunity of paying the proceeds to the defendant. 13. It had been the custom on numerous occasions for the defendant to allow premiums under this policy to become in arrears for as much as two months at a time without canceling the policy; and the agent of the defendant was well aware that the purpose of the money received from the surrender of the smaller policy was to be applied on the premium due on this policy sued on. The defendant company neglected for nearly two months to forward said money and made it impossible for the insured or the plaintiff to pay the premium due on the policy sued on in this case.

The defendant filed its general and special demurrers, all of which were sustained except one. Grounds 1, 2, and 3 of the demurrers were directed at the petition as a whole and to counts one and two on the ground they failed to set out a cause of action. Ground 4 was not ruled on and need not be considered. Grounds 5 and 8 moved to strike paragraph 7 of counts one and two on the ground that they were conclusions. Grounds 6 and 9 demurred specially to paragraph 7 of counts one and two on the grounds: (1) the amount of alleged cash or loan value is not alleged; (2) not alleged in what way said cash or loan value was calculated; (3) does not set forth the expenses and disbursements that were necessary for the defendant to make from said two years of alleged paid premiums. Grounds 7 and 10, referring to paragraph 8 of counts one and two, were met by amendment and need not be considered. Grounds 11, 12, 13, 14, and 15 were directed at paragraphs 9, 10, 11, 12, and 13 of count two on the grounds: (1) were not germane to the issues in said case; (2) were irrelevant, immaterial, and highly prejudicial to the cause of the defendant; (3) seek to vary the terms of an unambiguous written contract. The court's order sustaining the demurrers stated: "said petition is hereby dismissed" subject to amendment, which had to be filed by 5 p. m. the following day.

The plaintiff, without excepting, then amended her petition in the following manner: (1) by adding to paragraph 4 of counts one and two, that the method of payment of premiums had been changed from quarterly ($12.09) to a monthly basis ($4.14) more than a year prior to the death of the insured; (2) by striking paragraph 13 of count two and adding a new paragraph, alleging that it had been a custom on a number of occasions for the defendant to allow premiums to become in arrears for as long as two or three months, and that the defendant's agent accepted these deferred payments and the defendant had ratified such conduct in accepting the payment of premiums; that at the time of the insured's death, premiums were only two months in arrears, and he had a right to rely on the custom, and his failure to pay premiums for the two months in arrear should not have worked a forfeiture of the policy; (3) by adding to count two the following paragraph known as paragraph 14, alleging in substance that the defendant and its agents were well aware that the money secured from the surrender of the smaller policy was to be applied on the policy sued on, and that the defendant neglected for nearly two months to forward said money and made it impossible for the insured or the plaintiff to pay the premium due; (4) by adding a new count known as count three, which is identical to count two as amended with the following additional allegation: that the defendant company held $29 growing out of said policy for the benefit of the insured at the time of the so-called lapse, which should have been applied to the payment of the premium; and that the defendant company at the end of the second policy year had a reserve of $20 for the benefit of the insured growing out of the policy, but none of the proceeds were applied on the policy.

The defendant demurred generally and specially to the petition as amended and renewed its original demurrers. The court sustained all the demurrers and dismissed the petition. The plaintiff excepted to that judgment. Whether the original ruling of the trial judge in sustaining the general and special demurrers of the defendant was right or wrong, it became the law of the case and binding on the parties thereto. Darling Stores Corp. v. Beatus, 197 Ga. 125 (28 S.E.2d 124); Elijah A. Brown Co. v. Wilson,191 Ga. 750 (13 S.E.2d 779); Speer v. Alexander, 149 Ga. 765 (102 S.E. 150); Lavenden v. Haseman, 157 Ga. 275 (121 S.E. 646); Gamble v. Gamble, 193 Ga. 591 (19 S.E.2d 276); Collins v. Myers, 28 Ga. App. 457 (111 S.E. 686);Atlantic Refining Co. v. Peerson, 31 Ga. App. 281 (120 S.E. 652). An order of the court that a party shall amend is in no case compulsory upon the party to whom it is directed. The plaintiff could have refused to amend and tested the sufficiency of the petition by direct bill of exceptions. When, instead of excepting, he acquiesces in the ruling by amending, the only question for this court to decide is whether the amendment materially strengthened the original petition by curing the defects pointed out by the demurrers. The amendment did not in any particular strengthen the original petition as against any of the demurrers which were sustained. The petition originally alleged that at the end of the second policy year the insured would have had a cash or loan value sufficient to buy extended insurance for more than a year and far beyond the date of the insured's death. The amendment, alleging that the company held $29 growing out of the policy for the benefit of the insured which should have been applied to the payment of the premium, and that the company at the end of the second policy year had a reserve of $20 for the benefit of the insured growing out of the policy, and that none of the proceeds were applied on the policy, did not save the petition from the defects arrived at by the demurrers. The demurrers to the particular allegation in the original petition are as follows: (1) that said allegations are mere conclusions of the pleader; and (2) the amount of said alleged cash or loan value is not alleged; it is not alleged how or in what way the pleader calculated or arrived at said cash or loan value; the pleader does not set forth what expenses and disbursements were necessary for the defendant to make from said two years of alleged paid premiums. Neither did the amendment add anything to the petition with reference to the cashing in of the $500 policy, as against the demurrers urged. The amendment alleged only that the company had notice of the purpose for which it was cashed in. If it can be said that the amendment added materially to the petition as originally drawn as to the custom of accepting belated premium payments, the court was correct in sustaining the last demurrers filed to that part of the amendment, the grounds being as follows: (1) it is not alleged on how many occasions the defendant allowed the premiums under said policy to become in arrears for as much as two or three months; (2) it is not alleged on what date or dates said premiums became in arrears; (3) it is not alleged on what date or dates said premiums were paid; (4) it is not alleged what amount or amounts were paid on said alleged occasion; (5) it is not alleged on what date or dates the agent of the company accepted said alleged deferred payment of premiums; (6) it is not alleged what amount or amounts said agent accepted; (7) it is not alleged how or in what way the company ratified the alleged conduct in the payment and collection of said premiums. The judgment of the lower court is also correct in sustaining the last demurrer to the allegation that the company had $29 or $20, which allegedly should have been applied to extended insurance or premiums, for the reason that these sums under the terms of the policy were not applicable to the payment of a premium unless they amounted to a yearly premium or a part of a full yearly premium which was otherwise partly paid by the insured, and the reserve under the policy, if there was any, was not applicable to extended insurance because under the terms of the policy no value was so applicable unless it was stated in the guaranteed values, and these showed no such application until the end of the third year.

Under the terms of the non-forfeitable clause, the company specifically contracted to apply the remainder of the cash value to Extended Term Insurance "as provided in the guaranteed values of this policy." There being no cash or loan value listed in the guaranteed-values table until the end of the third year, the insured at the end of the second year had no reserve fund from which the company could apply on extended term insurance. "From its express provisions it appears that no present cash value and no automatic extension attached as incident thereto until three annual premiums had been paid and until three full years had passed. This is the contract as written: Entered into by competent parties, not unlawful in itself, not contrary to public policy, and in violation of no statute. It is not within the province of courts to whittle away by nice distinctions the patent meaning of plain English." Pacific Mutual Life Insurance Company v. Turlington, 140 Va. 748 (125 S.E. 658); Moss v. Aetna Life Insurance Company, 73 Fed. 2d, 339. "They have not specifically contracted that the American Experience Tables should control, but on the contrary, have specifically agreed as to the exact amounts of the cash surrender and loan values at the end of each of the years stated." Atlantic Life Insurance Companyv. Pharr, 59 Fed. 2d, 1024; Lonabaugh v. Mountain States Life Insurance Company, 14 Fed. 2d, 162.

The plaintiff relies on the case of State Mutual Life Ins.Co. v. Forrest, 19 Ga. App. 296 (191 S.E. 428), for authority that the cash or loan value should be applied on the premium regardless of whether such amount is sufficient to pay the entire annual premium. In that case the court held that, under an automatic non-forfeitable clause providing that the loan value of a policy will be charged against the unpaid premiums "until the loan value is consumed," the insurer is obligated to apply such fractional part of a year as any remaining loan value as then available to the premiums until such loan value should become wholly exhausted as against the insurance company's contention that a clause in the loan provision of the policy, which requires that before a cash loan may be obtained the premium must be paid in full up to the end of the policy year in which the loan is obtained, should be a condition precedent to the company's obligation to apply any loan value against the unpaid premiums. We are unable to see where that case is authority for the question involved here. In the above case the non-forfeitable clause expressly stated that, upon non-payment of premiums, the loan value of the policy will be applied to the unpaid premiums "until the loan value is consumed." There the parties have specifically contracted to apply any part of such value whether it is sufficient to pay the entire annual premium or a portion thereof. There was a stated cash value in that case to be applied. In the case at bar the parties have specifically contracted not to apply such loan value unless the cash or loan value is sufficient to pay for a whole year's premium or the remainder of the unpaid annual premium, and not to apply a cash or loan value in any event until after three years. Non-forfeitable clauses are not an inherent feature of insurance policies. The law imposes no duty on insurance companies to include such clauses in their policies. The only rights under such clauses arise by contract, and the courts will not interfere when their meaning is clear and unambiguous, as in the present case.

The plaintiff having failed to amend the petition to meet the sustained demurrers, the court did not err in sustaining the renewed demurrers to the petition as amended and to the amendments, and in dismissing the action.

Judgment affirmed. Sutton, C.J., and Parker, J., concur.