New York Life Ins. Co. v. Boling , 177 Miss. 172 ( 1936 )

In filing this dissent I shall undertake to avoid an argument in extenso but shall content myself with a statement of the conclusions I have reached.

The main opinion, in effect, holds that the surrender charge of not more than one and one-half per cent. of the face of the policy, provided for in the policy, is not enforceable in this state for two reasons: (1) Because there was no physical, actual surrender of the policy by the insured, as held to be necessary in the case of New York Life Insurance Company v. Blaylock,144 Miss. 541, 110 So. 432, 433; and (2) without reference to the Blaylock Case, this surrender charge cannot be deducted because it permits the insurer to discriminate between policyholders of the same class, and this is in violation of section 5171, Code of 1930. The effect of the holding of the main opinion is that, because the surrender charge is not fixed and definite, it cannot be deducted in any event. If the insured elects to take the cash and actually surrenders the policy, this charge may not be deducted, and, likewise, if the insured desires to purchase paid-up insurance.

I am of the opinion that the Blaylock Case, supra, should be overruled, for the reason that the construction placed upon the contract there under consideration is in opposition to the judicial opinion of the country. In the Blaylock Case we said, with reference to a surrender charge:

"We have been unable to find any decision of the question, counsel cite none, and we are therefore left to construe the provisions of the policy from the language used; and after a careful consideration of the proposition we are convinced that the $15 `surrender charge' cannot be collected by the insurance company, because, as we see it, there was no actual surrender of the policy, but the default in the payment of the premium amounted to a mere lapse of the policy, and under the said clause (b) the insurance was automatically extended, or `the insurance was continued as provided in option (b),' as expressed by the provisions of the policy mentioned, the insured having failed to elect to come under clause (a) or clause (c); therefore no `surrender charge' could be collected from the amount due the insured on the policy at the time of the lapse, because there was no surrender of the policy.

"We do not understand the provisions of the policy to mean that the $15 `surrender charge' could be retained by the company where the policy merely lapsed, and clause (b) extending the insurance automatically applied. It seems clear to us that this `surrender charge' can be collected by the company only where the policy is surrendered for cash, as provided in clause (a) or where the insured elects, clause (c), which latter question we do not decide, but the surrender charge cannot be retained where the insurance is continued under clause (b) as it was in the case before us."

Let it be noted that in the Blaylock Case the contract specifically fixed a graduated charge in dollars and cents as the amount of the surrender charge based on the time the policy had remained in force.

On this clause, as to surrender charges in contracts substantially identical with the one before us, the authorities are nearly unanimous that upon the default in the policy the extended insurance, if any, is to be paid for from the cash surrender value less the surrender charge. Carter v. Mutual Benefit Life Ins. Company, 230 Ala. 389, 161 So. 446; Erickson v. Equitable Life Assur. Society, 193 Minn. 269, 258 N.W. 736; Inter-Southern Life Ins. Co. v. Zerrell (C.C.A. 8th),58 F.2d 135; Bene v. New York Life Ins. Co., 191 Ark. 714,87 S.W.2d 979; Moss v. AEtna Life Ins. Co. (C.C.A. 6th), 73 F.2d 339; Atlantic Life Ins. Co. v. Pharr (C.C.A. 6th), 59 F.2d 1024; Darby v. Equitable Life Assur. Society, 143 La. 757, 79 So. 329.

I cannot understand that section 5171, Code of 1930, has any application to the contract under consideration here. I think the parties had a perfect right to make this contract, and that in the long run it was designed to favor the insured. As the statute has been construed in this case, it will operate to force the insurance companies to fix an arbitrary amount as a surrender charge high enough to protect them and the other policyholders who are interested from loss by reason of the lapse of the policy or the surrender of it in any of the modes set out in the contract. In the last analysis the purpose of the charge is to make available to the insured a certain amount of cash if he desires to surrender the policy, or with which to buy additional paid-up insurance, or, if the insured does not exercise those options, then for the company to automatically extend the insurance. To my way of thinking, to require the insurance companies to deduct the same amount from a policy which has been in force eight years as it would from one which has been in force four years would be unfair and inequitable, and I do not think the statute ever contemplated the many features of insurance contracts which must be left to calculation.

If the insurer cannot deduct the surrender charge in the contingency here involved, when the amount thereof is fixed for the particular year as in the Blaylock Case, because the insured does not physically surrender the policy, and if, as now decided, the amount of that charge must be definitely fixed in the contract, then the items of expense and loss to the company involved in the surrender charge would in the future be taken care of by the insurer as a deduction originally from the reserve. It is idle to say that it is fair that this charge should be as much in a case where the policy has lapsed after the ninth year as it is after the fourth year. Insurance companies can only earn reserves by keeping policies of insurance in force, and when they lapse, by securing others to pay premiums at immense costs to replace the lapsed policies. In my judgment, the next step would be to apply this statute and say that the person who has paid his premiums for a time exceeding ten years had an unjust discrimination in his favor, if no deduction for surrender charge was made, as against the man who had only paid premiums for four years and was required to pay the surrender charge, and that the amount must be fixed in the contract, or section 5171, Code of 1930, would eliminate the charge. Such a construction of this statute would lead to a destruction of the very basis of these beneficent provisions of insurance contracts which aid those who are so unfortunate as not to be able to pay the premiums on their policies. The mandate of the statute is only to require that all the benefits to accrue thereon shall be plainly set forth in the contract. As illustrated above, according to the main opinion, a man who has paid premiums on his policy ten or more years, so far as class is concerned, is in the same position as the man who has paid only four years. In my opinion, in applying this statute the classification is by the year.

I do not think the many statutes which have been passed in the several states on this subject can be said to be unfair and unjust or discriminatory, as, for instance, article 4732, Revised Civil Statutes of Texas of 1925, wherein a sum not more than two and one-half per cent. of the amount insured by the policy may be deducted. That clause of the statute is the same as that contained in the contract in the case at bar. The calculation of the surrender charge is essential to the ascertainment of the cash surrender value and these calculations are not within the condemnation of our statute.

Cook, J., joins in this dissent.