Reliable Life Insurance v. Harvey

562 S.W.2d 601, 263 Ark. 116, 1978 Ark. LEXIS 1959

• Court: Supreme Court of Arkansas
• Decided: March 20, 1978
• Docket: 77-257
• Status: Published

Opinions

Frank Holt, Justice.

This case was submitted to the court on stipulated facts and motions by each of the parties for summary judgment. Appellee is the named beneficiary in a life insurance policy, the premium being payable annually, semi-annually, quarterly or monthly. The insured, appellee’s deceased husband, paid the premiums annually. Upon his death appellant paid the face amount of the policy and refused to refund pro rata the last annual premium. This action resulted. The trial court granted appellee’s motion for summary judgment and awarded her approximately $240 or two-thirds of the last annual premium paid. Appellant contends the court erred because a premium paid on a life insurance policy is non-apportionable and non-refundable, in the absence of a contractual agreement or statutory authority, once the risk attaches even though the insured dies within the period covered by the premium. We agree.

This appears to be a case of first impression in our state. Here the policy provided that initially it became effective upon payment of the first premium and delivery of the policy to the insured. The policy had been renewed annually for several years. The inception of appellant’s liability or the date its risk attached was the date the premium was paid. The general and well settled rule is that “in the absence of statutory or contract provision to the contrary, if a legal risk has once attached or commenced, there can be no apportionment or return afterward of the premium, so far as that particular risk is concerned.” Couch on Insurance 2d § 34:9; accord, 43 Am. Jur. 2d Insurance § 629; see also Tyrie v. Fletcher, 2 Cowp. 666, 98 English Reprint 1297 (1777); North New York Sav. Bank v. Federal S. & L. Ins. Corp., 515 F. 2d 1355 (D.C. Cir. 1975); and Crouch v. Southern Surety Co., 131 Tenn. 260, 174 S.W. 1116 (1916). In Couch, supra, it was also said:

This rule is based upon just and equitable principles, for the insurer has, by taking upon himself the peril, become entitled to the premium, and although the rule may result in profit to the insurer, it is but a just compensation for the dangers or perils assumed.

Further, here there was a savings to a policy holder by payment of the premium annually instead of monthly, quarterly or semi-annually. Also there was no applicable contractual provision involved as in Krouner v. Companion Life Ins., 50 Misc. 2d 894, 271 N.Y.S. 2d 835 (1966) cited by appellee. Therefore, there being no statutory or contractual provision contrary to this general rule of law, the trial court erred in granting appellee’s motion for summary judgment. We need not discuss the appellant’s other contention for reversal.

Reversed and remanded for proceedings not inconsistent with this opinion.

Harris, C.J., and Howard, J., dissent.