Opinion
No. 34656.
February 7, 1938. Rehearing Denied March 7, 1938.
Certiorari to Court of Appeal, Parish of Orleans.
Suit by Augustine Laurent against the Unity Industrial Life Insurance Company to recover on a life policy. From a judgment for plaintiff, defendant appealed to the Court of Appeal, and, to review a judgment of that court dismissing the suit, plaintiff applied for certiorari or writ of review.
Judgment of Court of Appeal reversed and that of city court affirmed.
Herman L. Midlo, of New Orleans, for relator Augustine Laurent.
Normann Bethea and Harold M. Rouchell, all of New Orleans, for respondent Unity Industrial Life Insurance Co.
Relator, Augustine Laurent, filed suit in the First city court for the sum of $88, together with legal interest from September 10, 1936, until paid and 6 per cent. penalty, as beneficiary in insurance policy No. E-21745, issued by defendant company on the life of Walter Laurent, her son, who died on September 10, 1936.
Defendant company filed an answer in the First city court, and, after admitting amicable demand and denying the allegations of relator's petition, avers in paragraph 10 of its answer:
"Now further answering, your respondent says that the Policy on which this suit is brought was permitted to lapse for non-payment of premium on December 14th, 1931. That at the time the policy lapsed the insured was in the employ of your respondent as an agent on a debit collecting premiums. Your respondent further shows that when the insured left the employ of your respondent, he was indebted unto your respondent for premiums collected but which had not been surrendered unto your respondent in the sum of Thirty-five and 23/100 ($35.23) Dollars, together with legal interest on said amount from August 15th, 1932, until paid.
"Now your respondent shows that the insured requested your respondent to apply the accumulated reserve on said policy against the foregoing amount representing an indebtedness by the insured unto your respondent. That the accumulated reserve on the policy in the suit was insufficient to liquidate the entire balance due on said loan."
Judgment was rendered in the First city court in favor of plaintiff, Augustine Laurent, against defendant, the Unity Industrial Life Insurance Company, in the sum of $88, with 6 per cent. per annum interest from October 1, 1936, until paid, and for all costs.
From this judgment, defendant company appealed to the Court of Appeal for the Parish of Orleans, which reversed the judgment in plaintiff's favor, and dismissed the suit.
1. In the memorandum on behalf of plaintiff and appellee in support of application for rehearing in the Court of Appeal, we find the following admission:
"The sum of $16.85 (the amount of reserve at the lapse of the policy) divided by the 5 1/2¢ will buy a little more than 306 weeks net cost of insurance, which is more than sufficient, as it is almost six years of extended insurance and more than sufficient to carry this policy in full force and effect until the date of the death of the insured."
The defendant and appellant, on page 5 of its brief dated October 27, 1937, lines 18 to 23, admits as follows:
"The defendant, for the reasons stated to the court, has further admitted for the purpose of this case only, that the reserve or accumulated forfeiture value is sufficient to continue this policy from the date of lapse to the date of death as extended insurance."
On the trial of the case in the Court of Appeal, defendant company, over the objection of counsel for plaintiff, was permitted to prove the alleged oral agreement of the insured to surrender the policy to defendant company, by applying the reserve to the payment of the indebtedness alleged to be due by the insured to defendant company.
This fact clearly appears from the following paragraph in the stipulation of facts annexed to the application for the writ of review:
"It is agreed by and between counsel for the plaintiff and defendant herein that the factual issues presented in this case are as set forth on Pages 4, 5 and 6 of the Defendant's memorandum to the Court of Appeal and that counsel for the plaintiff and appellee made timely objection to the introduction of any testimony to prove the subsequent oral agreement relied on by the defendant on the ground that such testimony was inadmissible by the provisions of Act 227 of 1916."
Defendant company was attempting in this case to prove by parol testimony, not an indebtedness in the sum of $35.23 on the part of the insured to the company, to be deducted from the face value of the policy for $88, but, on the contrary, this company, as a defense, was attempting by such proof to cancel the entire policy itself, by proving a subsequent verbal agreement with the insured that the reserve should be applied to the payment of the indebtedness alleged to be due to the company.
The effect of such proof would clearly be to prevent the insurance from being extended to the date of the death of the insured, and thereby cause the cancellation and surrender of the policy to defendant company prior to that date.
In the language of the answer filed by defendant company in the First city court: "the insured requested your respondent to apply the accumulated reserve on said policy against the foregoing amount representing an indebtedness by the insured unto your respondent." Such request or statement was not admissible in evidence at all, in our opinion, under Act No. 227 of 1916.
Section 2 of this act provides:
"Be it enacted, etc., That every policy of insurance issued or delivered within the State on or after the first day of January, nineteen hundred and seven, by any life insurance corporation doing business within the State shall contain the entire contract between the parties and nothing shall be incorporated therein by reference to any constitution, by-laws, rules, application or other writings unless the same are endorsed upon or attached to the policy when issued; and all statements purporting to be made by the insured shall in the absence of fraud be deemed representations and not warranties, and no statement or statements not endorsed upon or attached to the policy when issued shall be used in defense of a claim under the policy unless contained in a written application and unless a copy of such statement or statements be endorsed upon or attached to the policy when issued. Any waiver of the provisions of this section shall be void."
In Whitmeyer v. Liberty Industrial Life Insurance Co., 166 La. 328, 331, 117 So. 268, 269, in commenting on Act No. 227 of 1916, this court said:
"By the provisions of this act it is necessary that the statement relied upon as a defense be contained in a written application for the policy, and, if it be so contained, then that the statement be indorsed on the policy at the time it is issued, or else that the application containing the statement be attached to the policy at that time. In the absence of a written application, containing the statement, it is not sufficient that the statement be indorsed on the policy. It must be contained in a written application for it. The law so requires, and prohibits a waiver of the requirement, in order to more securely protect the insured and the beneficiary against statements appearing on the face of the policy that were not made by the insured or the applicant. It therefore follows, at least, in the absence of clear proof of the loss or accidental destruction of the application, that the statement relied upon, in defending the suit, must be shown by the production of a written application containing it. No such application was offered in evidence. The parol evidence, offered to show it, was not only insufficient, but was inadmissible. It therefore follows that the statement attributed to the applicant for the policy, as to the age of the insured, has not been proven. Without proof that such a statement was made, the defense that the statement was false fails."
The Court of Appeal for the Parish of Orleans in the case of Cobb v. Unity Industrial Life Insurance Company, 19 La.App. 539, 140 So. 877, at pages 878, 879, said:
"Defendant contends that the above act has no application, because the writing which he seeks to introduce was confected subsequent to the issuance of the policy, and therefore could not have been attached to it `when issued.' In others words, it is only such writings as may be in existence at the time the policy is issued which the act requires to be incorporated in the policy. We cannot agree with counsel in this view, since it would only be necessary, in order to modify the contract of insurance, as it is expressed in the policy, to have a subsequent agreement issued one day, or one week or one month later, whereas the plain intendment of the law is that the respective obligations of both parties to the contract of insurance be determined by the policy itself unqualified by any extraneous instrument, regardless of its date. Barnett v. Merchants' Life Ins. Co., 87 Okla. 42, 208 P. 271; 2 Cooley's Briefs on Insurance (2d Ed.) 1014."
It is the fixed public policy of this state that every policy of insurance "shall contain the entire contract between the parties."
If a policy of insurance cannot be qualified by any subsequent extraneous "instrument in writing," for stronger reasons a policy cannot be qualified by mere parol testimony to prove a subsequent verbal agreement, which in effect would cancel the policy and surrender it to the insurance company.
2. Defendant company has filed a motion to recall the writ of review and dismiss the application on the ground that the petition for the writ is not accompanied by either "a copy of the judgment of the Court of original jurisdiction, nor a copy of the opinion or decree rendered by the Court of Appeal on original hearing, nor a copy of the opinion or decree rendered by the Court of Appeal on rehearing," as required by rule XIII, section 5, of this court.
A complete answer to such contention is that the writ has already been granted in this case, and the record of the First city court of New Orleans, upon which the Court of Appeal acted, is before this Court. The judgment of the First city court is contained in this record, as well as all of the proceedings had in that court. Indorsed upon the face of the First city court record, in the handwriting of Judge McCaleb of the Court of Appeal, and signed by him, are certain entries, showing that the judgment of the First city court was reversed and plaintiff's suit dismissed, that a rehearing was granted, and the original judgment was reinstated.
The proceedings of the Court of Appeal, in the trial of cases appealed to that court from the First city court, are informal, and, because of the small amounts involved, opinions are not usually written in such cases. The case has been submitted here on the record before us and under certain agreed stipulations of fact, which are referred to in this opinion.
There are but two issues involved in the case:
(1) Was there sufficient extended insurance to keep the policy in full force and effect from the time of its lapse to the death of the insured?
It is admitted that there was.
(2) Can defendant introduce testimony to prove a verbal agreement to surrender an insurance policy when objection to the introduction of such testimony is timely made?
Counsel for respondents will not be permitted by this court to wait until after the submission of the case for decision, and, at the eleventh hour, complain, for the first time, that the opinion of the Court of Appeal is not annexed to the petition for the application for the writ of review, when the issues involved clearly appear upon the face of the record presented to this court. The requirement that certain documents shall accompany an application for a writ of review is intended for our convenience and information so that we might readily determine whether the case should be ordered up for decision by this court. The failure to fulfill the requirement might have justified the refusal of the writ, but it does not justify the dismissal of the proceedings after the writ has been issued, and the case submitted for decision in this court, when the issues involved are clearly presented by the record before the court.
For the reasons assigned, it is ordered that the judgment of the Court of Appeal for the Parish of Orleans be annulled and reversed, and that the judgment of the First city court of New Orleans be affirmed, and that defendant, Unity Industrial Life Insurance Company, pay the costs of this proceeding and all other costs.
ODOM, J., dissents, being of the opinion that Act No. 227 of 1916 has no application to this case.
O'NIELL, C.J., dissents and hands down reasons.
The facts of the case, as stated in the prevailing opinion, are not disputed. Walter Laurent, who was a son of the plaintiff in this case, held an industrial life insurance policy, issued by the defendant company, on December 17, 1923, of the face value of $88. The premiums, which were 10 cents per week, were paid regularly, up to the 14th of December, 1931, on which date the policy was permitted to lapse for nonpayment of premiums. The insured was in the employ of the company as an agent, whose duties included the collecting of premiums for the company; and, after the policy had lapsed, it was discovered that the insured owed the company $35.23 for premiums which he had collected and had not accounted for. He requested the company to apply the amount of the accumulated reserve on his policy to the partial payment of the $35.23 which he owed the company, and to cancel the insurance. The accumulated reserve at the time when the policy lapsed was $16.85; which, if the insured had preferred to apply the amount to the payment for extended insurance, would have been sufficient to extend the insurance to a date beyond that on which the insured died — September 10, 1936. The two executive officers of the company, the superintendent and the general manager, agreed with the insured to credit the $16.85 on the indebtedness of $35.23, which the insured owed the company, and to cancel the insurance. After the death of the insured, his mother, who was named as the beneficiary in the policy, brought this suit for the $88, face value of the policy. The company pleaded that the policy had lapsed for nonpayment of premiums, and that the insured had requested — and that the company had consented — to have the accumulated reserve, which was $16.85, applied to the indebtedness of $35.23 which the insured owed the company, instead of being applied to the payment for extended insurance; and hence that the lapsed policy was canceled before the insured died. The attorney for the plaintiff objected to the proof of the agreement of the insured to apply the accumulated reserve on the lapsed policy to the indebtedness of the insured to the company, instead of applying it as a premium on extended insurance — the only ground for the objection being that the company was forbidden by Act No. 227 of 1916 to set up the agreement of the insured in defense of the claim of the beneficiary under the policy. The judge of the city court sustained the objection and gave judgment for the plaintiff for the $88. The Court of Appeal, on trial of the case de novo, reversed the ruling of the judge of the city court, and rejected the plaintiff's demand. She has brought the case here on a writ of review. The only question tendered is whether the insurance company is forbidden by Act No. 227 of 1916 to urge in defense of this suit the agreement by which the accumulated reserve on the lapsed policy was applied to the indebtedness of the insured to the company, instead of being applied to the payment for extended insurance.
In the policy in question the insured reserved the right to change the beneficiary. It is well settled that, in a policy of insurance in which the insured reserves the right to change the beneficiary, the beneficiary named in the policy has no vested right, and hence the insured is at liberty to make any contract or agreement that he sees fit to make with the insurer concerning the payment of the insurance, or the payment or settlement of any claim that he may have under the contract of insurance, without the consent of the beneficiary named in the policy. Dorsett v. Thomas, 152 La. 60, 92 So. 734; Pollock v. Pollock, 164 La. 1077, 115 So. 275; Couch's Cyclopedia of Insurance Law, vol. 2, p. 810, § 306; Cooley's Briefs on Insurance, 2d Ed., p. 6403; Vance on Insurance, 2d Ed., p. 559, § 147.
Therefore, it was not violative of any right of the beneficiary named in the policy — and it was certainly not contrary to public policy — for the insured in this case to surrender the cash value of his insurance policy, or the accumulated reserve thereon, to the partial payment of his indebtedness to the insurer. In fact, the nonforfeiture statute of Louisiana, Act No. 193 of 1906, § 2, as amended by Act No. 57 of 1932, § 1, in declaring how the reserve on a life insurance policy shall be applied in order to prevent a forfeiture for nonpayment of premiums, declares that the application shall be made "after deducting any indebtedness to the company," etc. This, of course, has reference particularly to a loan on the policy; but it serves as an express sanction of an agreement on the part of the insured, when he is in arrears in the payment of premiums, to allow the company to deduct any indebtedness due by him to the company, and to apply only the remainder of the reserve, if there be any, to continuing the insurance in force for its full amount.
Act No. 227 of 1916 is not at all relevant to the question of admissibility of the evidence — or of the availability of the defense — offered by the defendant in this case. The statute merely requires that every life insurance policy shall contain the entire contract between the parties, and hence that nothing shall be incorporated therein by mere reference to some other writing, such as the constitution, bylaws, rules of the company, or application for the insurance, unless the writing referred to is endorsed upon or attached to the policy when issued. And, to that end, the statute provides that any statement purporting to have been made by the insured shall, in the absence of fraud, be deemed a representation and not a warranty, and that no such statement shall be used in defense of a claim under the policy unless the statement is contained in a written application and unless a copy of the statement be endorsed upon the policy when issued. The statute declares that any waiver of these provisions shall be void.
I do not see how this statute can be applicable to an agreement by which the insured consents to the way in which the accumulated reserve on a lapsed policy shall be applied — or to any settlement of a claim under a lapsed policy. It is impossible for the law to require that such an agreement shall be "contained" or "incorporated" in the policy, or be "endorsed upon or attached to the policy when issued."
In the case of Fisette v. Mutual Life Insurance Co., 162 La. 620, 110 So. 880, it was held that Act No. 227 of 1916 was applicable to a statement alleged to have been made by the insured after the policy was written, but the reason why the statute was declared applicable was that the statement was made in an application to establish or place in force a policy which, because of the failure of the applicant to pay the initial premium within the time stipulated, had not gone into effect.
The case of Whitmeyer v. Liberty Industrial Life Insurance Co., 166 La. 328, 117 So. 268, 269, is not at all applicable to this case, in my opinion, because the statement which the insured was accused of having made, and which was said to be a false statement as to his age, was said to have been made at the time when he applied for the insurance; and the ruling was that the alleged statement could not be urged in defense of the suit on the policy because the alleged statement was not "contained in a written application" for the insurance.
In the case of Cobb v. Unity Industrial Life Insurance Company, 19 La.App. 539, 140 So. 877, decided by the Court of Appeal, and cited in the prevailing opinion in this case, the reference to Act No. 227 of 1916 was not at all necessary to the decision. The suit was for indemnity provided for in an industrial accident insurance policy. The company defended on the ground that the insured had given a written receipt for the benefits due up to the date of the receipt, and acknowledged in the receipt that the amount received was in full settlement for all claims that the insured then had or might thereafter have against the company for the accident which he had already suffered, or for any other accident that might happen in the future. The court decided that, in so far as the written instrument purported to release the company from future liability, it was absolutely null because the only consideration given for it was the amount already due to the assured; and hence that there was no consideration given for the release from future liability under the policy. Having thus decided the case rightfully, the court gave expression to the opinion quoted in the prevailing opinion in this case, with regard to Act No. 227 of 1916; and the court cited the case of Barnett v. Merchants' Life Insurance Co., 87 Okla. 42, 208 P. 271, 272; 2 Cooley's Briefs on Insurance (2nd Ed.) 1014. In Barnett's Case, the Supreme Court of Oklahoma held that an agreement purporting to modify or restrict the terms of an insurance policy by attaching a rider thereto was violative of the statute, Rev. Laws 1910, § 3470, 36 Okla.St.Ann. § 218, providing "that the policy, together with the application therefor, a copy of which application shall be indorsed upon or attached to the policy and made a part thereof, shall constitute the entire contract between the parties." The insured in that case, in his application for the insurance, agreed that, if a policy should be issued, it should be conditioned upon the terms of a rider attached thereto, providing that military or naval service in time of war were risks not assumed under the policy, etc. As far as the report of the case shows, the rider was attached to the policy when it was issued. The ruling in the case is not at all applicable to an agreement by which the insured makes provision for disposing of the accumulated reserve on a lapsed policy of insurance.
According to the prevailing opinion in this case, Act No. 227 of 1916 would forbid the insurance company to set up the agreement between the company and the insured in defense of this suit, even if the agreement had been made in writing, because it would have been impossible for the agreement to be "contained" or "incorporated" in the policy, or to be "endorsed upon or attached to the policy when issued."
For these reasons I respectfully dissent from the opinion and decree rendered in this case.