Fahle v. Connecticut Mutual Life Insurance , 155 Mo. App. 15 ( 1910 )

CAULFIELD, J.

(after stating the facts).- — Both parties agree that the policy in suit is a Missouri contract and as the only question presented is to be decided by a construction of, and reference to, sections 7897 to 7900, inclusive, of the Eevised Statutes of Missouri of 1899, we will set forth their substance at the outset of this opinion, omitting parts not important to the controversy.

“Section 7897. Policies non-forfeitable, when. — No policies of insurance on life hereafter issued by any life insurance company authorized to do business in this state, . . . shall, after payment upon, it of three annual payments, be forfeited or become void, by. reason of non-payment of premiums thereof, but it shall be subject to the following rules of commutation, to-wit: The net value of the policy, when the premium becomes due, and is not paid, shall be computed upon the actuaries’ or combined experience table of mortality, with four per cent interest per annum, and . . . three-fourths o‘f such net value shall be taken as a net single premium for temporary insurance for the full amount written in the policy; and the term for which said temporary insurance shall be in force shall be determined by the age of the person whose life is insured at the time of default of premium, and the assumption of mortality and interest aforesaid; but, if the policy shall be an endowment payable at a certain time, or at death, if it should occur previously, then, if what remains as aforesaid shall exceed the net single premium of temporary insurance for the remainder of the endowment term for the full amount of the policy such excess shall be considered as a net single premium for a pure endowment of so much as said premium will purchase, determined by the age of the insured at date- of default in the payment of premiums on -the original policy, and the table of mortality and interest aforesaid, which amount shall be paid at end of original term of endowment, if the insured shall then be alive.”

“Section 7898. Paid-up policy may be demanded, when. — At any time after the payment of three or more full annual premiums, and not later than sixty days from the beginning of the extended insurance provided in the preceding section, the legal holder of a policy may demand of the company, and the company shall issue, its paid-up policy, which, in case of an ordinary life policy, shall be for such an amount as three-fourths of the net value of the regular policy at the age and date of lapse, computed according to actuaries’ or combined experience table of mortality, with interest at the rate of four per cent per annum, . . . will purchase, applied as a net single premium upon the said' table of mortality and interest rate aforesaid; and in case of a limited payment Ufe policy, or of a continued payment endowment policy, payable at a certain time, or at death, it shall be for an amount bearing such proportion to the amount of the original policy as the number of complete annual premiums actually paid shall bear to the number of such annual premiums stipulated to be paid” (Italics our own.)

“Section 7899. Rule of payment on commuted policy. — If the death of the insured occur within the .term of temporary insurance covered by the value of the policy as determined in section 7897, and if no condition of the insurance other than the payment of premiums shall have been violated by the insured, the company shall be bound to pay the amount of the policy, the same as if there had been no default in the payment of premium, anything in the policy to the contrary notwithstanding.”

“Section 7900. Foregoing provisions inapplicable, when.- — The three preceding sections shall not be applicable in the following cases, to-wit: If the policy shall contain a provision for an unconditional surrender value, at least equal to the net single premium, for the temporary insurance provided for hereinbefore, or for the unconditional commutation of the policy for non-forfeitable paid-up insurance, or if the legal holder of the policy shall within sixty days after default of premium, surrender the policy and accept from the company another form of policy, or if the policy shall be surrendered to the company 'for a consideration adequate in the judgment of the legal holder thereof, then, and in any of the foregoing cases, this article shall not be applicable: Provided, that in no instance shall a policy be forfeited for non-payment of premiums after the payment of three annual payments thereon; but in all instances where three annual premiums shall have been paid on a policy of insurance, the holder of such policy shall be entitled to paid-up or extended insurance, the net value of which shall be equal to that provided for in this article.”

Defendant states that the only question before us is, .“Did the policy in suit meet the conditions of the proviso to section 7900 as to the amount of paid-up insurance given?” That is to say, did the policy entitle its holder to paid-up insurance “the net value of which shall be equal to that provided for in this article?” If it did, then the provision for- paid-up insurance» was binding upon the insured, the insured could not recover more than one hundred and eighteen dollars, and the finding and judgment of the trial court were erroneous. If it did not, then the judgment of the trial court should he affirmed. Defendant contends that the proviso is satisfied if the paid-up insurance provided for in the policy equals or exceeds in amount that paid up endowment insurance which the insured might have demanded upon the policy, it being an endowment policy, by virtue of the above italicized portion of section 7898. On this theory the amount of the paid up insurance need have been only $111.11 while in fact it was $118.00.

Plaintiff contends that the proviso is not satisfied unless the amount of paid-up insurance provided for is at least equal to the greatest amount of paid-up insurance that could be bought with the net value of the original policy, computed at the time of default as provided in section 7897. On this theory the amount of paid-up insurance was insufficient, for it is agreed that it would have taken only $42.47 of net value to purchase $118.00 of paid up insurance, while three-fourths of the net value of the original policy available to purchase paid-up insurance at the time of default was actually $47.86.

One of the purposes of these statutes is to prevent the insurance companies inserting in their policies conditions of forfeiture or restriction, except so far as the statute permits. And section 7900 by specifying four cases in which the three preceding sections “shall not be applicable” necessarily implies that those sections shall control all cases not so specified, whatever be the form of the policy. [Equitable Life Insurance Society v. Clements, 140 U. S. 226.].

. That a provision for paid-up insurance contained in a policy must come strictly within the cases specified in section 7900 is evidenced by the action of our Supreme Court in holding that a provision was not “unconditional” if it provided that the paid-up policy should issue “on demand made within six months ” although such provision was more liberal than section 7898 which provided for paid-up insurance on demand made within sixty days. [Cravens v. Ins. Co., 148 Mo. 583, 50 S. W. 519.] The court there held that section 7898 was not applicable in any event because the holder of the policy had not demanded the paid-up insurance. Such is the case here. No pretense is made that any demand was made for paid-up insurance. Either the provision in the policy is sufficient, under section 7900 and its proviso, to render section 7897 inapplicable, or else the plaintiff is entitled to recover the full amount of the policy; it being conceded that if section 7897 is applicable, the net value of the policy at the time of default was more than sufficient to carry the insurance for its full amount beyond the time when the -insured' died. Undoubtedly section 7897 is applicable, unless the provision for paid-up insurance contained in the policy is sufficient under section 7900 and'its proviso to render it inapplicable. By that proviso “the holder of such policy shall be entitled to paid-up or extended insurance the net value of which shall be equal to that provided for in this article.” The article referred to is of course the one containing sections 7897 to 7900 inclusive.

We take it that the proviso means nothing else than that in order to determine the amount of paid-up insurance which the policy must have provided for in order to render section 7897 inapplicable, we must first ascertain the net value of the policy computed in accordance with the provisions of the article, and then ascertain how much paid-up insurance can be bought with the net value so ascertained. The insured was entitled to as much paid-up insurance as could be purchased with the net value so ascertained. [Nichols v. Mutual Life Ins. Co., 176 Mo. 355, 381, 75 S. W. 664.]

If then we ascertain what “net value” is provided for “in this article” we can easily find the answer to our question.

We have examined the article carefully and find that the only place “net value” is provided for is section 7897 and section 7898. Section 7897 prescribes the rule for computing the net value of the policy and provides that in a certain event three-fourths of the result of such computation shall be applied toward purchasing temporary or term insurance for the full amount of the policy. So far as the facts of this case are concerned, the rule of section 7897 is the same as to endowment insurance. Section 7898 prescribes a rule for ascertaining net value exactly like that prescribed by section' 7897 and provides that at any time after the payment of three annual premiums, and not later than sixty days from the beginning of the temporary insurance provided for in section 7897, the legal holder of a policy may demand, and the company shall issue, its paid-up policy, which in case of an ordinary life policy shall be for such an amount as can be purchased with three-fourths of the net value of the regular policy at the age and date of lapse.

As above mentioned, section 7898 is inapplicable to the case at bar because the legal holder of the policy did not demand paid-up insurance. If either is applicable it is section 7897. They are both referred to at this point merely to show the only manner in which the article provided for “net value.” Now, in so far as they refer to “net value” the said sections are to be read together. It has been held that section 7898 clearly indicates that the policies contemplated by section 7897 are such as will admit of the holder obtaining a paid-up policy under section 7898. [Westermann v. Supreme Lodge K. of P., 196 Mo. 670, 729, 94 S. W. 470.] And that “net value” as used in our non-forfeiture statutes is a technical term, to be given its technical meaning, and that it has but one meaning. [Rose v. Franklin Life Insurance Company, 153 Mo. App. 90, 132 S. W. 613.] Which is but another way of saying that “net value” as provided for “in this article” is the same as that provided for in section 7897.

Now the parties have stipulated in their agreed statement of fact that on May 21, 1908, (the time of default) three-fourths of the net value of said policy, computed upon the actuaries’ or' combined experience table of mortality with four per cent interest per annum, is $47.86.

It is apparent upon reading this stipulation that the “net value” of which said $47.86 is three-fourths, was computed in the manner provided in the article containing the sections under consideration, and is the only “net value” of the policy in suit, contemplated by said article, according to our construction. It is, therefore, the net value “provided for in this article” which the paid-up insurance provided for in the policy must have had in order to be sufficient to make inapplicable section 7897 under which plaintiff is entitled to the full amount of the policy.

As it is stipulated in the agreed statement of facts that the net value of the paid-up insurance provided for in the policy is only $42.79 it is plain that the said paid-up insurance is insufficient to render section 7897 inapplicable, and it is therefore applicable, and under it the plaintiff was entitled to the full amount of the policy and the finding and judgment of the trial court were correct and should be affirmed.

In arriving at the above conclusion we have considered the contention of counsel for defendant that the words “net value” should be taken to mean the provision for the amount of paid-up insurance the insured would have been entitled to if he had made demand therefor during his lifetime, as provided in the latter part of section 7898, but we cannot agree with it. That- section provides that in case of a continued payment endowment policy the paid-up insurance which the insured would have been entitled to demand during his lifetime would have been “for, an amount bearing such proportion to the amount of the original policy as the number of complete annual premiums actually paid shall bear to the number of such annual premiums stipulated to be paid.” The method of computing the amount' so provided for has no relation whatever to “net value” as the term is generally understood and as it is used in our insurance statutes. It is an arbitrary apportionment not based upon the general purpose of our non-forfeiture laws, which is to provide, in case the insured shall make default after he has paid three annual premiums, that at least three-fourths of the reserve or net value accumulated out of his payments shall be applied toward purchasing extended or paid-up insurance, and not be appropriated by the insurance company. [Rose v. Franklin Life Ins. Co., supra.]

While we have no right or inclination to criticize, the provision, still we do not feel justified in holding that the words “net value” as used in the proviso to section 7900 point to and mean said provision, when there are other provisions in the article which respond to the call of the words in question by using and dealing expressly with them. Neither does it follow, as counsel suggests, that because under section 7898 the insured could, by demanding same, have obtained paid-up insurance of an amount computed regardless of “net value,” therefore a provision in the policy entitling him to the same amount of paid-up insurance, without demand, would be a sufficient compliance with section 7900 to render section 7897 inapplicable.

Section 7898 has no application to this case, the insured having made no demand as thereby contemplated. And in Cravens v. Insurance Co., supra, it was held that even though the provision in the policy was more liberal than that of section 7898, still if it did not comply with the provisions of section 7900, it was insufficient. The court' held in that case that notwithstanding the statute made a provision that a party should be entitled to paid-up insurance of a certain amount upon demand made within sixty days, a provision in the policy that he should have paid-up insurance of tliat amount upon a demand made within six months was not a compliance with section 7900. We appreciate that that holding was based upon the statutory requirement that the provision for paid-up insurance must be “unconditional,” but we think it demonstrates that the poAver of the insured to contract away his rights is limited and that giving him by' contract Avhat he might have obtained under section 7898 is not necessarily all that section 7900 contemplates.

We believe that the construction which we have given to section 7900 not only conforms to the strict letter of that section, but is in absolute harmony with the spirit and purposes of our non-forfeiture laws.

The judgment will be affirmed. Reynolds, P. J., concurs; Nortoni, J., dissents. Judge Nortoni deems this decision contrary to the decision of the Supreme Court in Nichols v. Mutual Life Ins. Co., 176 Mo. 355, 75 S. W. 664, and requests that the cause be certified to the Supreme Court. It is so ordered.