Rocky Mount Savings & Trust Co. v. Ætna Life Insurance

154 S.E. 743, 199 N.C. 465, 1930 N.C. LEXIS 150

• Court: Supreme Court of North Carolina
• Decided: September 24, 1930
• Status: Published

Opinion

BbogdeN, J.

Tbe determinative question of law is whether the forfeiture resulting from failure to pay the premium was waived by the defendant company.

The time for the payment of the premium due 1 July, 1927, was duly extended until 1 November of that year. The insured failed to pay the premium on 1 November, and, therefore, by virtue of the express terms of the contract, his policy lapsed subject, however, to the conditions of revival or reinstatement contained in paragraph 9 of said policy.

The defendant insists upon forfeiture. A long line of decisions in this Court and the uniform ruling of other courts throughout the country have established an axiom that the law abhors a forfeiture. Nevertheless, forfeitures are usually creatures of contract, and if plainly incurred, there is no sound reason why the courts should refuse to enforce them in the absence of express or implied waiver. This idea was expressed by Chief Justice Clark in Hay v. Association, 143 N. C., 256, when he wrote: “It is always sad when one who has made payments on his policy deprives his family of expected protection by failure to pay at a critical time. But insurance is a business proposition, and no company could survive if the insured could default while in good health, but retain a right to pay up when impaired health gives warning. . . . It is the insured’s own fault when he does not make a payment as he contracted.”

In the case at bar the plaintiffs rely upon the contention that the policy was reinstated, and that the defendant had waived the forfeiture. The methods by which the payment of premiums as contracted may be waived are discussed and applied in Foscue v. Ins. Co., 196 N. C., 139, 144 S. E., 689. The principles of waiver are well settled, but the application of those principles to particular states of fact frequently engender difficulty. In this case, the policy in section 9 thereof conferred upon the policyholder the right to reinstatement upon failure to pay premium. This right is a substantial property right and by the terms of the contract must be exercised (a) within five years; (b) upon evidence of insurability satisfactory to the company and payment of arrears of premium, etc. The insured filed an application for reinstatement within five years and undertook to furnish evidence of insura- bility. Tbe company bad tbe right to pass upon tbe question of insura-bility and tbe evidence thereof submitted by tbe insured. Of course, it was tbe duty of tbe company to pass upon tbe insurability in tbe exercise of ordinary care and not to decline tbe application of tbe plaintiff for reinstatement upon any arbitrary ground not founded on reason or tbe exercise of reasonable prudence and diligence, because tbe policy itself created and recognized tbe right of reinstatement after default in tbe payment of a premium. Tbe insured on or about 8 November, executed tbe request for extension which is referred to in tbe evidence as an extension note. An examination of tbe instrument, however, discloses that it was not a note but a request for an extension of time for 60 days to pay tbe premium, and tbe further agreement that if tbe premium with interest was not paid within said extended period that tbe policy would immediately lapse and become void. On tbe same date, to wit, 8 November, 1927, tbe general agent of tbe company issued a temporary receipt containing tbe following notice on tbe reverse side thereof: “If you do not bear from tbe company in relation to reinstatement of policy within 60 days, notify tbe company at its home office at Hartford, Conn. This is a temporary receipt only. If tbe application for reinstatement is approved, a regular receipt signed by an executive officer of tbe company and countersigned by tbe agent will be given.” Tbe defendant retained this receipt and took no action whatever with reference to tbe application of tbe insured for reinstatement until 10 January, 1928, thus covering a period of 62 days.

Tbe plaintiffs contend that tbe failure to act upon tbe application for a period of 62 days was an unreasonable lapse of time from which a waiver may be inferred.

Manifestly, it was tbe duty of tbe defendant to pass upon tbe application for reinstatement with reasonable promptness and diligence under all tbe circumstances as they existed at tbe time. If parties agree upon a period of time in which an act is to be performed, and such period of time is reasonable upon its face, then tbe parties must abide tbe terms of tbe agreement. If no time for tbe performance of an obligation is agreed upon by tbe parties, then tbe law prescribes that the act must be performed within a reasonable time. Reasonable time is generally conceived to be a mixed question of law and fact. “If, from tbe admitted facts, tbe court can draw tbe conclusion as to whether tbe time is reasonable or unreasonable by applying to them a legal principle or a rule of law, then tbe question is one of law. But if different inferences may be drawn, or tbe circumstances are numerous and complicated, and such that a definite legal rule cannot be applied to them, then tbe matter should be submitted to tbe jury. It is only when tbe facts are undisputed and different inferences cannot be reasonably drawn from them, that the question ever becomes one of law.” Claus v. Lee, 140 N. C., 552, 53 S. E., 433; Blalock v. Clark, 133 N. C., 306, 45 S. E., 642; Blalock v. Clark, 137 N. C., 140, 49 S. E., 88.

The notice, on the back or reverse side of the receipt referred to, does not undertake to fix a definite time when the company will pass upon the application. The notice in effect merely states that if the applicant or insured does not hear from the company within 60 days, he is at liberty to notify the home office. Hence no time was fixed by the company for determining the insurability of plaintiff’s intestate, and his resultant right of reinstatement. Therefore, the principle of reasonable time for action by the company upon the application is applicable. The final and determinative inquiry, then, is whether the defendant acted within a reasonable time under all the facts and circumstances surrounding the parties when the application for reinstatement was filed.

If it did, the forfeiture was complete and no recovery is permissible. If it did not, the forfeiture is deemed to be waived.

Whether the defendant so acted, creates an issue of fact for a jury.

Reversed.