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NATIONAL LIFE INS. CO. v. SPARROW

Supreme Court of Mississippi, Division B.

Sep 24, 1928

Judgment

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CITATION CODES

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DOCKET NO.

No. 27069.

Attorney(S)

Wm. Estopinal, for appellant. It is contended by counsel for the appellee and he so insisted in his argument before the lower court that even though no premiums had been paid on the policies for four consecutive Mondays, immediately preceding the death of Dolan Sparrow, that since the Company was indebted to Dolan Sparrow for these weekly benefits, that the Company was obliged to apply the said weekly benefits to the payment of the premiums on the said policy and to utilize the said weekly benefits in keeping the policy in force for the benefit of the insured for as long a period of time as the weekly benefits would carry the said weekly premiums. Ordinarily this would be the law, and had no tender of the payments been made, of the said weekly benefits and payment refused, we would not be here contending and contesting the payment of the said death claims. But our contention is, and we are sustained in the law in that respect that when we tendered the payment of the weekly sick claims, and the payments were refused, there devolved no liability on the part of the appellant to utilize the said weekly sick benefits and apply them to the payment of the premiums on the two said policies. In that we are sustained by a large number of decisions in many states of the Union, but we will quote only one or two leading cases in our own state, as we believe that will be sufficient authority to convince the court that our contention is correct. Mutual Life Ins. Co. v. Batson, 125 Miss. 789, 88 So. 335; Independent Order of Sons Daughters of Jacob of America v. Moncrief, 96 Miss. 419, 50 So. 558; Fore v. United States Fire Ins. Co., 129 Miss. 497; Phoenix Ins. Co. v. Hunter, 95 Miss. 754; N.Y. Life Ins. Co. v. Norris (Ala.), 91 So. 595; N.Y. Life Ins. Co. v. Alexander, 122 Miss. 813. Mize, Mize Thompson, for appellee. The law is clear that a debt must be due and owing and certain before a tender can be made. In the case at bar, the definite amount which was due could not be definitely ascertained for the reason that Dolan Sparrow's illness was continuous until the moment of his death, and liability had already attached, as shown clearly and undisputably by the evidence, and, since such liability was continuous, there could be no definite sum fixed as due and owing until Dolan Sparrow's demise or recovery; in this instance, his demise. Further, a tender must be specifically pleaded and set up in defendant's answer, which was not done by the defendant according to law. The amount was not shown under the evidence to have been definitely due, nor was the time and place shown to have been within legal hours or at a proper place; and, further, tender must be strictly construed against the person interposing such plea. It is also a clear proposition of law that a tender cannot be accepted unless unconditional, and, as is shown by the record, complainant refused the purported tender on the ground that to have done so would have relieved the defendant of liability on the other claims, and under the law we respectfully submit that she had the right to refuse such tender. 38 Cyc. 178; 26 R.C.L. 640. We submit that it is the law in this state, as well as the general law throughout the country, that, when an insurance company has in its hands funds belonging to its insured, it is the duty of such company under the law to apply such funds to the payment of any premiums or assessments which might be due at that time by the insured, and that they cannot escape liability by refusing to apply such funds. Under the facts in this case, we submit that Dolan Sparrow's premiums were paid in full at the time of his death, for the reason that defendant's own answer shows that it had in its hands at the time of his death the sum of eight dollars and twenty-five cents belonging to Sparrow, which was considerably more than sufficient to pay the premium which Dolan Sparrow owed, assuming for the sake of argument that appellee had not paid A.D. Barnes as she testified and her witness testified that she did; and, therefore, under the law, it was the duty of the defendant to apply these funds in payment of any premium owing by him, and for that reason, further, no tender could have been made, do not apply and are not pertinent to this case. We have carefully searched the authorities and have been able to find only one case of the Mississippi court which we think will apply squarely to the case at bar, to-wit: Mutual Life Ins. Co. v. Breland, 117 Miss. 479. See Girard Life Ins. Co. v. Mutual Life Ins. Co., 97 Pa. 15; North v. National Life Accident Ins. Co., 231 S.W. 665. See, also, 32 C.J. 1308, for general rule throughout the United States.

JUDGES

ANDERSON, J.

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Factual and Procedural Background

Appellee filed a bill in the chancery side of the county court of Harrison County against appellant concerning two separate insurance policies issued to appellee's deceased husband, Dolan Sparrow, with appellee as beneficiary. One policy was a straight life policy, and the other was a combination life insurance and sick and accident benefit policy. Both policies required weekly premium payments, and if premiums were not paid for four consecutive weeks, the policies would lapse and become void.

The insured's final illness lasted about one month. Evidence showed that at the time of his death, premiums had not been paid for more than four weeks. However, appellant had accumulated sick benefits of $8.25 under the combination policy, sufficient to cover the unpaid premiums on both policies. Appellant contended that the policies had lapsed due to nonpayment, while appellee argued that appellant was obligated to apply the sick benefits to the premiums, preventing lapse. The county court ruled in favor of appellee, and the circuit court affirmed. Appellant appealed from this judgment.

Legal Issues Presented

Whether an insurance company is obligated to apply funds (sick benefits) held on behalf of the insured to pay overdue premiums, thereby preventing policy lapse.
Whether refusal by the insured to accept tendered sick benefits affects the insurer's duty to apply such funds to premiums.
Whether the policies lapsed and became void due to nonpayment of premiums despite the insurer holding sufficient funds belonging to the insured.

Arguments of the Parties

Appellant's Arguments

Appellee contended that despite nonpayment of premiums for four consecutive weeks before Dolan Sparrow's death, the insurer was obligated to apply weekly sick benefits owed to Sparrow to pay those premiums and keep the policies in force.
Appellant argued that they tendered payment of the weekly sick benefits to the insured, which was refused, thus relieving them from liability to apply those benefits to premiums.
Appellant relied on precedents, including Mutual Life Ins. Co. v. Batson and others, to support the position that refusal of tender negates the duty to apply benefits to premiums.

Appellee's Arguments

A debt must be certain and due before a tender can be made; here, the amount due was not ascertainable until the insured's death, making tender premature and improper.
Tender of payment must be specifically pleaded and strictly construed against the party making it; appellant failed to properly plead tender.
The insured had the right to refuse the tendered benefits as it was conditional and could relieve the insurer of other liabilities.
The insurer had a duty to apply funds held on behalf of the insured to pay premiums, and refusal to do so does not absolve liability.
At the time of death, appellant held $8.25 in sick benefits belonging to Sparrow, sufficient to cover premiums, and thus premiums were effectively paid, preventing lapse.
Appellee cited Mutual Life Ins. Co. v. Breland and other authorities to support the duty of insurers to apply funds to premiums.

Table of Precedents Cited

Precedent	Rule or Principle Cited For	Application by the Court
Mutual Life Ins. Co. v. Breland, 117 Miss. 479	Duty of insurance companies to apply funds held on behalf of insured to payment of premiums to prevent policy lapse.	The court relied on this precedent to hold that appellant had a duty to apply the sick benefits to the premiums and could not declare policies forfeited when funds were available.
Mutual Life Ins. Co. v. Batson, 125 Miss. 789, 88 So. 335	Under a New York statute, insurer not obligated to apply reserve on lapsed policy to policy extension unless demand made within six months.	The court distinguished this case as controlled by a New York statute and policy provisions, finding it not applicable to the facts here.
Independent Order of Sons Daughters of Jacob of America v. Moncrief, 96 Miss. 419, 50 So. 558	Referenced by appellant to support their contention regarding tender and application of benefits.	The court did not find this case conflicting with its ruling.
Fore v. United States Fire Ins. Co., 129 Miss. 497	Referenced by appellant regarding tender and benefits application.	The court did not find this case conflicting with its ruling.
Phoenix Ins. Co. v. Hunter, 95 Miss. 754	Referenced by appellant regarding tender and benefits application.	The court did not find this case conflicting with its ruling.
N.Y. Life Ins. Co. v. Norris (Ala.), 91 So. 595	Referenced by appellant regarding tender and benefits application.	The court did not find this case conflicting with its ruling.
N.Y. Life Ins. Co. v. Alexander, 122 Miss. 813	Referenced by appellant regarding tender and benefits application.	The court did not find this case conflicting with its ruling.
Girard Life Ins. Co. v. Mutual Life Ins. Co., 97 Pa. 15	General rule regarding insurer's duty to apply funds to premiums cited by appellee.	Supported appellee's position on insurer's obligation.
North v. National Life Accident Ins. Co., 231 S.W. 665	General rule regarding insurer's duty to apply funds to premiums cited by appellee.	Supported appellee's position on insurer's obligation.

Court's Reasoning and Analysis

The court analyzed the contractual provisions requiring weekly premium payments and the consequences of nonpayment. It found that although premiums had not been paid for over four weeks, appellant held in its possession sick benefits belonging to the insured sufficient to cover those premiums. The court emphasized the legal principle that when an insurer holds funds belonging to the insured, it is obligated to apply those funds to premiums or assessments due to prevent forfeiture of the policy.

The court rejected appellant's argument that refusal by the insured to accept tendered sick benefits relieved appellant of this duty, reasoning that the funds belonged to the insured and the insurer could not escape liability by refusing to apply them. It noted that courts disfavor forfeitures contrary to equity and good conscience and found it unconscionable to allow the policies to lapse when funds were available to pay premiums.

The court distinguished appellant's reliance on Mutual Life Ins. Co. v. Batson as controlled by a New York statute not applicable here. It concluded that appellant's failure to apply the sick benefits to the premiums meant the policies did not lapse, and the beneficiary was entitled to recover under the policies.

Holding and Implications

Affirmed.

The court affirmed the judgment in favor of appellee, holding that the insurance company had a duty to apply funds held on behalf of the insured to pay overdue premiums, preventing lapse of the policies. The refusal of the insured to accept tendered sick benefits did not relieve the insurer of this obligation. The direct effect is that appellee, as beneficiary, may recover under the policies. The opinion does not establish new precedent beyond reaffirming the insurer’s duty to apply funds to premiums to avoid forfeiture.

Show all summary ...

1. INSURANCE. Insurance company cannot escape liability by refusing to apply funds in its hands belonging to insured to payment of premiums or assessments.

Where an insurance company has in its hands funds belonging to insured, it is duty of the company to apply such funds to payment of any premiums or assessments which may be due at the time by the insured, and insurance company cannot escape liability by refusing to apply such funds.

2. CONTRACTS. Courts do not favor forfeitures against equity and good conscience.

Courts do not favor forfeitures, when to do so would be against equity and good conscience.

3. INSURANCE. Insurer failing to apply sum due insured as benefits to premiums cannot escape liability, though tender of benefits had been refused.

Where insurance company having issued two separate policies to insured, one of which was a straight life, and the other a combination life and sick and accident benefit, policy, had in its hands as benefits under one policy more than sufficient funds to pay premiums due on both policies, its failure to apply such benefits to payment of premiums cannot defeat right of beneficiary to recover under policies after death of deceased, notwithstanding tender of amount due as benefits had been made to insured and refused.

ANDERSON, J.

Appellee filed the bill in this case on the chancery side of the county court of Harrison county against appellant on two insurance policies issued by the latter to appellee's husband, Dolan Sparrow, deceased, in which appellee was named as beneficiary. There was a trial before the county judge, acting as chancellor, resulting in a decree in appellee's favor, from which decree appellant prosecuted an appeal to the circuit court of Harrison county, where the decree of the county court was affirmed. From that judgment, appellant prosecutes this appeal.

One of the policies sued on is a straight life policy; the other is a combination life insurance and sick and accident benefit policy. The policies are separate and distinct contracts. The combination life insurance and sick and accident benefit policy bears date July 27, 1925, and the straight life policy bears date July 12, 1926. The combination policy provides for the payment of a weekly premium of twenty-five cents, and the straight life policy provides for the payment of a weekly premium of thirty-five cents. Both policies provide that, in event the weekly premiums were not paid in advance for four consecutive weeks, the policies should lapse and become null and void, and the premiums previously paid forfeited to the appellant.

The illness from which the insured died extended over a period of about one month. The evidence on behalf of appellant tended to show that, at the time of his death, default had been made in the payment of weekly premiums on both policies for a period of more than four weeks immediately before his death. The evidence showed, without conflict, however, that during the period of insured's last illness, and before the expiration of the period of four weeks in which default had been made in the payment of premiums on the policies, there had accumulated and been allowed by appellant to the insured on the combination policy sick benefits in the sum of eight dollars and twenty-five cents, which was more than enough to pay the premiums on both policies up to the time of the death of the insured. The evidence for appellant tended to show that these sick benefits were tendered to the insured before his death, and by the latter declined, on the ground that he was entitled to a larger amount than that tendered.

Appellant's position is that both policies had lapsed and become void because of default in the payment of the weekly premiums, while appellee's position is that, under the law, it was the duty of appellant to have appropriated to the unpaid premiums the sick benefits due by appellant to the insured, which would have been more than enough to have paid said premiums, and therefore no lapse in the policies had taken place. Appellant argues that appellee is estopped from making that contention, because the sick benefits provided by the policy had been tendered by appellant to the insured before his death, and by him declined.

Where an insurance company has in its hands funds belonging to the insured, it is the duty of the company, under the law, to apply such funds to the payment of any premiums or assessments which may be due at the time by the insured, and the insurance company cannot escape liability by refusing to so apply such funds. Mutual Life Ins. Co. v. Breland, 117 Miss. 479, 78 So. 362, L.R.A. 1918D, 1009; 33 C.J., section 548, p. 1308. Courts do not favor forfeitures, when to do so would be against equity and good conscience. We think it would be unconscionable to hold that appellant had the right to declare these policies forfeited because of nonpayment of premiums thereon, when appellant had in its hands, at the time such premiums became due, more than enough money belonging to the insured to pay the premiums. The fact, if it be a fact, that the appellant tendered to the insured the sick benefits which had accumulated and been allowed to him by appellant during his last illness, and which tender the insured wrongfully refused, is wholly immaterial. The insured's money was in appellant's hands. It belonged to the insured, and not to the appellant. It was the duty of the appellant to appropriate it, so far as necessary, to the payment of the premiums in default.

We are of the opinion that no case cited by the appellant is in conflict with this view. Appellant seems to lay special stress on the case of Mutual Life Ins. Co. v. Batson, 125 Miss. 789, 88 So. 335. We do not think that case is in point. It was there held that under a New York statute an insurance company is under no obligation to apply the reserve on a lapsed policy to the extension of the policy, unless a demand therefor is made on the company within six months after the lapse. It will be seen that the decision in that case was controlled by a New York statute and the provisions in the policy itself.

Affirmed.