Southland Life Ins. v. Hopkins , 219 S.W. 254 ( 1920 )

I cannot agree to many of the conclusions reached by the court in this case, as expressed in the opinion written by Judge HALL. I do not question the law as announced in such authorities as the case of Equitable Life Insurance Society v. Ellis, 105 Tex. 526, 147 S.W. 1152,152 S.W. 625; in fact, as I understand the law, the opinion throughout announces correct principles, but I cannot bring myself to the conclusion that the application of these principles to the facts of this case should lead to the results announced. It is not my purpose to indulge in an extended discussion of insurance law, but, accepting as correct in the main the pronouncement of the law as contained in the opinion, to point out those conclusions which I do not think should follow from the application of such law to the facts of this case.

In the first place, I do not think that the facts are sufficient to warrant a finding that there was a waiver by the insurance company of the forfeiture of the policy if such forfeiture or lapse would otherwise have resulted from the nonpayment of the premium note at maturity. The only act of the insurance company upon which such waiver can be based is in the writing of the letter of October 19th, nine days before maturity of the note and the time when any forfeiture could occur. This letter, addressed to the insured, reads:

"In order that your policy may not lapse, we beg to remind you that the note due October 28th you gave in lieu of the premium due last February, provides no grace, and settlement should be made without fail on or before maturity. If inconvenient to pay the full amount due ($69.13), we will accept a partial payment and extend the balance a reasonable time."

The meaning of this letter, it seems to me, is clear enough. It is a plain warning that the time for the lapsing of the policy, if the note be not paid, is near at hand; it proposes an alternative to the full payment of the note in cash "in order that the policy may not lapse," to wit, a partial payment of the note and extension of the balance for a reasonable time; or, to express it differently, it proposes an alternative settlement of the note by partial payment and extension. There is nothing in the letter to suggest that this alternative means of avoiding the lapse of the policy must not be accepted at or prior to the time when the policy would lapse under the terms of the contract as it then existed. Ample time was given, in these days of quick communication by post, telegraph, and telephone, for arrangement of the details of the transaction before the time for the forfeiture of the policy. The whole tenor of the letter, it seems to me, is to invite some action on the part of the insured to prevent the lapsing of the policy in the ordinary course, not to invite action after the time when that result should have become a fact. Wichita Southern Life Insurance Co. v. Roberts, 186 S.W. 412 (1). The case is wholly unlike that of the Equitable Life Insurance Co. v. Ellis, 105 Tex. 526, 147 S.W. 1152, 152 S.W. 625, where, after the time of forfeiture, the insurance company proposed to make a loan to enable the insured to pay the premium already past due, and the insured died prior to the expiration of a reasonable time within which to act upon this proposition, and it was held that such action on the part of the insurance company was a recognition of the continuance in force of the policy pending the result of negotiations for payment of the premium, and that, since no time was fixed for the acceptance of the proposition on the part of the company, it would be concluded that the company intended that the insured should act upon it within a reasonable time. The lack of attention on the part of the insured to the payment of the note at maturity in this case was evidently due to his sickness, and not to any reliance on the letter as inducing a belief that he could attend to it after October 28th. He was stricken with influenza and pneumonia on October 19th, and, to use the words of his wife, appellee herein, was "desperately ill from the first minute." Within a few days after he became ill he spoke to his wife of the policy, and stated that the premium would be due the latter part of the month, and said that he could attend to it all right. He was irrational during a greater part of the time of his illness, and died on October 29th. These facts are most appealing to the sympathy; the consequence of the lapse of the policy is deplorable. But it has long been held that "sickness or incapacity are no grounds for avoiding the forfeiture of the policy or for granting relief in equity against forfeiture" (Thompson v. Life Insurance Co.,104 U.S. 252, 26 L. Ed. 766), and the courts cannot rightfully refuse to enforce the forfeiture "even in hard cases and in the face of a harsh consequence" (Equitable Life Insurance Society v. Ellis, 105 Tex. 536,147 S.W. 1156).

I cannot concur in the proposition that the note is to be considered as the payment of the premium and its provision for forfeiture of the policy disregarded. I do not think our decisions leave us free to so hold. Underwood v. Security Life Insurance Co., 108 Tex. 381, 194 S.W. 588; Wichita Southern Life Ins. Co. v. Roberts, 186 S.W. 411. The note recites that it is given "on account of the premium," and provides for forfeiture of the policy in the event of its nonpayment. The receipt is to the same effect. The Supreme Court, in the Underwood Case, supra, held that such a note "represents the premium, and takes its place in the contract. It is the equivalent of the premium, and should be treated as such when the note itself preserves substantially the provisions of the contract which relate to a failure to pay the premium for which it was given." The note in this case is not distinguishable in its terms from the note in question in the case of Wichita Southern Life Insurance Co. v. Roberts, supra. It was held in both the cases cited that the nonpayment of the note forfeited the policy. I am in considerable doubt as to whether the provisions of articles 4741, 4953, and 4954 of the Revised Statutes should be construed so as to forbid agreements such as this. These articles of the statute were formerly a part of the act of 1909, p. 192 et seq., article 4953 being section 17, article 4954 being section 19, and article 4741 being section 22 of said act. It is provided by article 4953 that the policy of insurance "shall contain the entire contract between the parties"; by article 4954 that the insurance company shall not "make any contract of insurance or agreement as to such contract other than as expressed in the policy, issued thereon"; and by article 4741 it is required, among other things, that a life insurance policy shall contain: (1) "A provision that all premiums shall be payable in advance"; and (2) "a provision for a grace of at least one month after the payment of every premium after the first, which may be subject to an interest charge." Can it be that the Legislature intended by these provisions to prohibit the insurance company from granting further grace at the time of the maturity of a premium? The Commission of Appeals, in the case of State Mutual Life Insurance Co. v. Rosenberry, 213 S.W. 242, in discussing the effect of article 4953, said:

"There is nothing in the Texas statute requiring collateral agreements affecting the policy, made subsequent to its issuance to be included in or attached to the policy."

This is a recognition that subsequent collateral agreements might be made. However, the court seems to have overlooked the provisions of article 4954. This will be apparent from a reading of that part of the opinion which discusses the Alabama case cited therein, Mutual Life Insurance Co. v. Lovejoy, 78 So. 299, L.R.A. 1918, 860, and compares the Alabama statute with our own. For this reason the force of the authority is much weakened. The particular provision of article 4954 under consideration is identical in language with a similar statute of Kentucky. Compare the language of this article with that of the Kentucky statute (Ky. St. § 656) as quoted at length in the case of Provident States Life Insurance Society v. Puryear, 109 Ky. 381, 59 S.W. 15, and as partially quoted in the case of Fidelity Mutual Life Insurance Co. v. Price, 117 Ky. 25, 77 S.W. 384. In the case last cited it was held that these provisions did not apply to an agreement for extension of payment of a premium as evidenced by the insured's note; it being said that such provisions "relate to the time the policy was issued." But whatever may be the correct construction of these provisions of the statute in reference to a subsequent agreement made for the extension of the payment of a premium, the insured and the beneficiary of a policy would certainly gain no advantage in maintaining the illegality of the contract. For, as said by the Kentucky court, in the said case of Fidelity Mutual Life Insurance Co. v. Price:

"If it [the statute] had the effect, as contended by counsel, that the note was void, and likewise its provisions, because it was not attached to the policy, the appellee could not get any benefit from the execution of the note. If it was void * * * its terms would not be binding on either party. The logic of counsel's position would be that, as there was no valid agreement between the parties as to the extension of time for the payment of the premium, the policy was forfeited on the 20th of November, 1900 [the date when the premium was originally due], and the insured was never relieved from the forfeiture. If the contract was void, then the court would not uphold the part that was beneficial to the insured, to wit, the extension of time for * * * the right of forfeiture, and deny the company the right to insist upon the forfeiture upon the failure to perform that part of the contract which induced the company to extend the time for declaring the forfeiture."

To the same effect is the language of our own Supreme Court in the Underwood Case, supra:

"We think the beneficiary should not be allowed to accept the benefits of the extension of the life of the policy which was provided by the execution of the note by her husband, and its acceptance by the company, and at the same time be heard to complain that it changed the contract and disturbed her vested rights. It seems inequitable for her to rely upon the note to prevent a forfeiture of the policy for a failure to pay a premium, and at the same time to repudiate the provisions of the note relating to forfeiture, when they are substantially the same provisions provided in the policy itself."

I may here say that the appellee does not seek to uphold her right to recover on the policy on this ground. Appellee relies on only two propositions to sustain the judgment, to wit, that the insured was entitled to 30 days' grace in the payment of the note; and if mistaken in this that the letter written by the company on October 19th was sufficient to support the finding of a waiver.

In the preceding discussion I have assumed that under the terms of the policy it would automatically lapse upon nonpayment of a premium when finally due after allowing grace. I think this is the correct construction of the policy though in this opinion I am also in disagreement with the majority of the court. The policy provides for the payment of the sum of $5000 to the beneficiary upon the death of the insured, "within five years from the date hereof, provided this policy is then in full force and effect." It recites that it is issued "in consideration of the payment in advance of the annual premium, $66.45, and of the payment of a like sum upon each 28th day of February hereafter during the continuance of this policy until five full years' premiums shall have been paid, or until the prior death of the insured." By its terms it requires that all premiums should be payable in advance, but this clause of the policy continues thus:

"The mode of premium payments may be changed by the insured giving written notice to the company at its home office, not less than forty-five days prior to any anniversary of this policy, from annual payments to semiannual or quarterly, or vice versa, at the premium rate and on the conditions in force at the date hereof. Except as herein provided, the payment of a premium or installment thereof shall not maintain the policy in force beyond the date when the next premium or installment thereof is payable."

This clause is immediately followed by this provision:

"A grace of thirty-one days without interest shall be granted for the payment of every premium after the first, during which time the insurance shall continue in force. If death occur within the period of grace the unpaid premium for the then current policy year shall be deducted from the amount payable hereunder."

It is true that the policy does not contain the exact language that is used in many policies to indicate forfeiture upon nonpayment of premiums when due, as that the policy and all its rights thereunder shall be forfeited, or that the policy shall ipso facto be void, etc., but, the form of expression is not material if the meaning be the same. Ætna Life Insurance Co. v. Wimberly, 102 Tex. 46, 112 S.W. 1038, 23 L.R.A. (N. S.) 759, 132 Am. St. Rep. 852; Iowa Life Insurance Co. v. Lewis,187 U.S. 335, 23 S. Ct. 126, 47 L. Ed. 204; Kline v. New York Life Insurance Co., 104 U.S. 88, 26 L. Ed. 662. In the case of Ætna Life Insurance Co. v. Wimberly, supra, the policy provided that it should "cease * * * if the premiums are not paid on or before the day stipulated * * * for such payment, except that a grace of thirty days is allowed for the payment of any premium after the first." And our Supreme Court held that the policy was ipso facto forfeited upon nonpayment of the premium within the 30 days' grace. In the case of Iowa Life Insurance Co. v. Lewis, supra, a note was given for a premium and a receipt issued by the insurance company, which provided that if the note should not be paid "at maturity the said policy shall cease and determine," and the Supreme Court of the United States held that failure to pay the note automatically terminated further liability on the policy. The same effect was given to a similar provision in the policy in the Kline Case, referred to. What is the difference in meaning between a provision that upon nonpayment of a premium the policy shall cease, and the one under consideration that the payment of a premium shall not maintain the policy in force beyond the date when the next premium is payable? I must say that I can see none. I do not think there is any inconsistency between this provision of the policy and the subsequent one, which the court holds to be inconsistent with it, to wit:

"Any indebtedness to the company on account of this policy will be deducted in settlement hereunder. Any portion of the premium for the current policy year remaining unpaid at the death of the insured shall be considered as indebtedness."

Several contingencies may be suggested which this clause of the policy was intended to cover. For instance: If the mode of payment of premium were changed, in accordance with the terms of the policy, and made quarterly or semiannually, and death should occur during any one of the periods prior to the last period of the year, then under this provision of the policy the balance of the annual premium remaining unpaid could be deducted in settlement; or if, as in this case, the time of payment of a premium should be extended and death occur prior to the time for payment under the agreement for extension, then, under this provision of the policy, the amount due on account of such premium would be deducted from the settlement. So there being contingencies which might reasonably arise to which this clause of the policy would apply, I cannot think that it should be construed as being inconsistent with and destroying another express term of the policy. The insurance granted by the policy is, in my opinion, "term insurance" within the meaning of our statutes; otherwise it violates a number of its provisions, in particular, subdivisions 6 and 7, of article 4741, which provisions stipulate that they shall not apply to "term insurance."

I am inclined to the opinion that the court is also in error in holding that the insured had 31 days' grace for the payment of the note after its maturity, but I am not so convinced of the error in this conclusion that I cannot defer to the majority and assent to this holding.