
    RIGHTS EXISTING UNDER A POLICY OF LIFE INSURANCE CONTAINING NO FORFEITURE CLAUSE.
    [Circuit Court of Lucas County.]
    Minnie Swander v. The Northern Central Life Insurance Company.
    Decided, June 13, 1903.
    
      Life Insurance — Overdue Premiums Accepted — No Forfeiture Clause —Suspension of Rights of Insured — Notice of Intention to Forfeit Policy.
    
    1. In a policy of life insurance, containing no clause of forfeiture and no provision for forfeiture, failure- to pay the premiums on or about the day when they become due may work a suspension of the rights of the party under the policy, until such a length of time has elapsed as will indicate that he does not intend to pay or has practically withdrawn; the company may then give notice to the insured of its intention to forfeit the policy.
    2. Whether a company has waived its right to suspend a policy by its habit of receiving premiums after they had become due is a question for the jury; but where a company month after month collects premiums after they have become due, and on the 14th of January collects the monthly premium which became due November 1st, and on the 25th of the same month attempts to collect the . premium which became due December 1st, and January 1st, but upon learning that the insured died on the preceding day refuses to accept the premium, and had given no notice to the insured of its intention to suspend or forfeit the policy, there is a very Strong showing that the company had waived the right to suspend or forfeit the policy for non-payment, and it is error to direct a verdict for the company.
    Hull, J. ; Haynes, J., and Parker, J.,"concur.
    Heard on error.
   This action was brought by the plaintiff, who was also- the plaintiff below, upon a certain life insurance policy issued for her benefit upon the life of her sister, Hattie Cappell, the first day of April, 1901, the premiums to be paid monthly in advance, the amount being eighty-eight cents per month. The premium for some months, •which was required by the policy to be paid on the first day of the month, was paid, but no premium falling due after the first day of November, 1901, was paid, and on the 24th day of 'January following, 1902, Mrs. Cappell, on whose life the policy was issued, died. On the 14th day of January preceding that, the premium up to the first day of November, 1901, was paid to and accepted by the company, and ten days later Mrs. Cappell, as stated, died. Payment of the policy was refused by the company on the ground that it had lapsed on account of default' in payment of premium, and action was brought 'by the beneficiary, Mrs. Minnie Swander.

At the conclusion of plaintiff’s testimony, upon motion of the defendant, the jury was directed to return a verdict in favor of the defendant on the ground that the policy had been forfeited and had lapsed on account of the non-payment of premiums as provided in the policy. Judgment was entered upon this verdict, and it was to reverse this judgment of the court of common pleas that a petition in error was filed here; and the question is, whether under the facts shown by the record in this case and under the contract of insurance that existed between the parties, the evidence offered by the plaintiff showed as a matter of law that the policy had been forfeited or had lapsed.

The plaintiff in her petition sets up certain things which she claims constituted a waiver on the part of the company to have the premiums paid on ’the first day of each and every month. It was shown in the evidence that after the first two or three months there were no premiums paid on the first' day of the month, but that they were paid at subsequent dates, and that no notice was given t'o Mrs. Swander that the policy was forfeited or had lapsed, and the last premium was accepted by the company on the 14th day of January, ten days before the death of Mrs. Cappell. And a question further arises as to whether, under the terms of this policy the insurance would become forfeited or lapsed by reason of the non-payment of the premium on the first day of each month.

A few general principles may be stated at the outset. Where a policy of insurance contains a clause of forfeiture by reason of the non-payment of premiums at a certain time, it is a valid part of the contract and the policy may «be forfeited unless prohibited by statute. The general rule, however, is, that clauses or provisions of forfeiture are to be construed strictly and are not to be encouraged by the courts. .As was said by our Supreme Court in 33 O. S., 459, forfeitures are odious and must be strictly construed; and there are other authorities to this effect. This policy does not contain any clause of forfeiture; it contains no such clause as is ordinarily inserted in insurance policies. It' provides:

“This contract is made in consideration of the application which is made a part hereof, and of the payment in advance t'o the company or its authorized representative of one month’s premium, $.88, due on date of issue of this policy and a like amount to be paid monthly thereafter during the continuance of this contract. * * * The company will not contest the payment of this policy except for fraud or non-payment of premium, provided that should death occur while engaged in military or naval service in time of war, without a permit, the liability of the company shall be limited to the net reserve on this policy computed according to-the legal standard of. the state of Ohio.”

That clause of the policy seems to recognize the fact that the non-payment of dues could be or might be a defense- to the payment of the policy. It provides further along that should this policy lapse after payments have been made for three full years then certain conditions would follow — not necessary to quote but showing that the policy does contemplate that it might' lapse under certain circumstances. The question in the case, of course, is to be considered in the light of the policy which we have before us, a policy which contains no clause of forfeiture.

Briefly as to the facts of the case. It appears from the oral testimony and as set down in the book which was given to the insured in which to have the payments of premiums recorded, that the first payment of eighty-eight cents, due April 1st, was paid and all of the other payments were made to the duly authorized collectors of the company, and one payment at least was made to the superintendent of the company. The second payment due May 1st, was paid' on the date it became due. The third payment, due June 1st, was not paid until June 15th. The payment due July 1st was not paid until July 6th; the next payment, due August 1st, was not paid until August 3d; the next payment, due September 1st, was not paid until the 23d of November, and the next payment, due October 1st, 1901, was not paid until January 14, 1902. The collectors called at the house-at various times to collect these premiums — mot always calling on the first of the month and sometimes calling two or three times during the month. In the fall some time, perhaps in November, one of the agents suggested to Mrs. Swander that she ought to pay up her premiums, or she might get no benefit out of the policy, but there was no statement made to her that the policy would be forfeited, nor did she understand that it would be forfeited on account of her being back in her payments. Her testimony on this subject is found on page 8 of the record, where she says that Mr. Tralour told her that she Would have to “catch it up” or it would not be of any benefit to ■her, and she told him that she would “catch it up” as quick as she could. This was the only conversation or communication, according to the evidence, she had on the subject with any representative of the company. The last payment was made on the 14th of January, but the agent came to her house to collect the balance due on premiums on-the 23 d of January. For some reason it was not paid then. She had the money to pay it and he promised to come the next day. He did not come the next day, but came the following day, the 25th, *and meanwhile on the 24th Mrs. Cappell had died. He came to the house on the 25th of January to collect the premiums then due for two months amounting to $1.76 and the evidence shows that plaintiff was prepared to pay and had the money to pay, but upon being informed that Mrs. Cappell was dead the agent declined to receive the money.

So it appears that these premiums were received from time to time after the first day of the month, without objection and without 'any notice to Mrs. Swander that her policy would be forfeited or lapse on account of non-payment on the exact day they became due, and collections were made, as stated, as far along as the 14th of January, 1902, and a visit made to the house to collect on the day after Mrs. Cappell died, and no attempt was made to forfeit the policy or to declare a forfeiture until after the death of Mrs. Cappell. In the book furnished by the company in which the payment of the premiums was recorded there is a printed notice to the insured which is significant and which indicates that it was not contemplated by the insurance company that these premiums in all cases should be paid on the day they were due. This is under the heading — “Notice to Policy Holders.” It says: “All premiums are due monthly in advance, and the company’s agent is instructed to call regularly to collect them, but his omission or neglect' to do so will not be any excuse lor non-payment. In cases of such omission or neglect, the premiums must be sent to the home office, Toledo, Ohio, stating the number of yoúr policy and the name of the collector.” So that although this recites that the failure of the agent to call will not be any excuse for not paying, it does not inform the policy holder that it will cause the policy to lapse, but does notify him that the premium is to be sent to the home office, and under such a notice the policy holder would be entitled to wait at least until the first day of the month had gone by before being required to send the -money to the home office, and the notice provides for payment in case the agent neglects to call on the first day of the month. And the part of the book, devoted to the recording of the premiums due the first day of the month, contains a heading providing for the recording. of the payment of the premium when it is not paid on the first of the month. One of headings is “Date when due,” and then- subheads are “Day of the Month” and “Year.” And then -another heading is. “Date when Paid” and under that again “Day of Month” and “Year.” So that the book which was furnished to- the -collector and left with the insured had in it provision for recording payments of premiums upon a date other than that on whicn they were due, and it would hardly be presumed that it was intended'to provide'for payments of premiums before they were due, but it provides clearly for the entering of payments after they were- due and to keep a record of the date when they were- due and of the date when actually paid and accepted by the company.

Now, considering these facts, was it efror for the court on -the conclusion of plaintiff’s evidence, to direct a verdict in favor of the defendant? We -are of opinion that' it was; that the evidence offered by the plaintiff did not show as a matter of law that this policy had been forfeited.

The policy, being drawn by the insurer, is to be construed most strongly against the insurer. As was said in Brink v. Merchants Ins, Co., 49 Vt., 457:

“It is a fundamental rule in the law of insurance that the policy shall be construed most strongly against the insurer and liberally in favor of the assured. ,, The policy is written by the insurers. They use their own language and surround and barricade their liability under it with such defenses as they chose to adopt.”

And in Yeaton v. Fry, 5 Cranch, 341, Chief Justice Marshall says:

“The words are the words of the insurer, and not of the insured.”

On the question of forfeiture clause our own Supreme Court has expressed itself several times to the effect that they should be construed strictly.

In 48 O. S., 533 (Blackwell v. Insurance Co.), at page 540, the court says:

“In this case, on page 10, Johnson, J., refers with approval and in the following language to the views on the subject contained on page 74 of May on Insurance: ‘Exceptions in a policy should be strictly construed, and where there are two interpretations equally fair, that which gives the greater indemnity should prevail.’ And on page 13 (27 Ohio St.) the same learned jurist says: ‘Stipulations in a contract providing for disabilities or forfeitures are to receive, when the intent is doubtful, a strict construction against those for whose benefit they are introduced.’ ”

And in the 53 Ohio St., at p. 558 (Webster v. Insurance Co.), the Supreme Court' say in the syllabus:

“Provisions for forfeitures are to receive, where the intent is doubtful, a strict construction against those -for whose benefit they are introduced.
“If it be left in doubt, in view of the terms of the instrument and the relation of the contracting parties, whether given words were used in an enlarged or a restricted sense, other things being equal, that construction will be adopted which is most' beneficial to the promissee.”

And in the 33 Ohio St., p. 459 (Union Central Life Ins. Co. v. Pottker), the Supreme Court say:

“Forfeitures are odious, and there must be no cast of management or trickery to entrap a party into a forfeiture.”

It must not be lost sight of that in this policy of insurance— a very unusual thing — there is no clause of forfeiture and no provision for forfeiture. We however are of opinion that under such a policy as this, if the premiums were not' paid on or about the date when due, that this would work a suspension at least of the policy and take from the party his right under it until he had paid what was due, and whether the company would be required to accept the payment at the time it was offered might depend somewhat upon the circumstances. It would be' unjust and inequitable to permit a party to go for a long time without paying his life insurance premium, even under such a policy as this, and when he was in bad health or on his death-bed to permit him to pay up and revive his insurance policy. The contract of insurance is of such a character that the success of the whole scheme depends upon each party, every policy holder paying his premiums and paying his dues. A company can not do business unless the dues are paid substantially as they become due, for the ability of the company to pay the losses as they accrue depends upon the policy holders paying their dues with reasonable promptness.

The question of the character of the contract of insurance is discussed very fully in two decisions of the Supreme Court of the United States, in 93 U. S. Rep., 24, and 104 U. S., 252. We think that under such a policy as this, where there is no clause of forfeiture, that a failure to pay would only work a suspension of the rights of the party under the policy until such a length of time had'gone by as would show that the party did not intend to pay and had practically withdrawn, and it would therefore be inequitable and unjust to permit him to pay and thus revive the policy. Sut, where there is no clause of forfeiture in the policy, before the policy can be forfeited, in our judgment, there should be some declaration to that effect on the part of the company 'and notice given to the insured, so that the insured may not allow a month, or two or three months to go by without any knowledge that this policy is to be forfeited, and finally after his death the beneficiary be deprived of the Benefits o-f the policy.

A case in point is found in 30 Ohio St., 240 (Insurance Co. v. French), where a policy of insurance provided for a forfeiture for non-payment of premium, and where a note was given for a portion of the premium and a cheek for the other part, the note containing the clause: “If not paid at maturity, said policy shall be null and void.” Neither note nor check was paid. It' was held by the court as stated in the first paragraph of the syllabus:

“The mere fact that the note was not paid at maturity did not of itself avoid the policy. It gave the insurance company the option of declaring a forfeiture, but this option must be asserted by clear and unequivocal acts. The clause of forfeiture being inserted in the note for the benefit of the company, may be waived by failure to act, or other circumstances evincing an intention not to claim the benefit of the stipulation. Whether the company has ■exercised such option or waived, their rights, is a question of fact for the jury under all the circumstances of the case.”

In this case the note which was given provided upon its face, or in the body of it, that if the note was not paid 'at maturity the policy was to be null and void; yet where such language as that was used the Supreme Court held that failure to pay the note when it became due would not of itself forfeit the policy, but it gave to the company the option to declare it forfeited, if it saw fit, but it might waive that; and whether the company had exercised such an option, or waived the right, was a question of fact for the jury. The whole question is very fully discussed in the opinion. The court say on p'age 247:

“It can not be successfully maintained that this clause makes the policy absolutely void'upon non-payment of the note.- Under the authorities such a clause, being introduced for the -benefit of the insurance company, means that the policy shall be void if the company insist upon it; but that it is their option to say whether this result shall follow or not.”

And they say on page 251:

“As far as we are able to discover, therefore, there was nothing done to inform Mr. French that his policy was void up to the 6th of July, 1868, when he went to arrange for the premium of that year, unless we take into account the statements of Simpson, which were left to the jury. We then can not consider that the company exercised their option to forfeit, and their failure to do so was a waiver of such forfeiture.”

And on page 252 the court' say:

“It appears to us that the disposition to prevent and guard against forfeitures of this kind is plainly evinced by the authorities.
“In The Georgia Mut. Life Ins. Co. v. Gibson, 52 Ga., 640, the case was this: Gibson had his life insured, but upon his death the company contended that he had not paid up his dues, and so the insurance had been forfeited. He died in 1870, but in the spring of that year he h'ad sent the insurance company $35.25 in payment of all his dues. The company retained the money till after his death without notifying him whether it was satisfactory or not. It was held that if the company received and retained the amount, this was a waiver of default. If the amount was not enough to pay past dues, it was the clear duty of the company to have promptly notified him. They should not have retained the money and remained silent till after the death.”

And, in quoting from another case, the court say:

“It is held that upon a non-payment of premium at the proper time the company have the right to declare a forfeiture; but if it failed to do so, it would be presumed that it chose to carry the risk, upon the responsibility of the party who had agreed to guarantee the payment. This case also holds that when a company has acknowledged in the policy the receipt of premiums, it will not be allowed to dispute such acknowledgment.”

And on page 254, the court quote from a Wisconsin case as follows :

“Forfeitures are not favored in the law, and will not be sustained upon mere inferences.”

In a North Carolina case (Woodfin v. Asheville Mut. Ins. Co., 6 Jones Law, 558), it was held that where there was fio clause of forfeiture the policy could not be forfeited for non-payment that it was an absolute contract and the company could only look to the personal responsibility of the party liable for the premium. This is the only case we have found where there was no clause of forfeiture in the policy. It was decided a great many years ago, by Chief Justice Pearson, when Judge Ruffin was upon the bench of that state and was one of the court. In the syllabus, the 'court say:

“Where, by a policy of insurance, the life of a slave was insured for five years absolutely, without requiring the payment of the annual installment as a condition of the defendant’s liability, it was held that the insurance money for a loss was not forfeited by a failure to pay such installment.”

In the opinion, Chief Justice Pearson says:

“Upon the point that the policy was forfeited by reason of a failure on the part of the plaintiff to pay the annual installment, this court is of opinion with the plaintiff irrespective of the question of notice. The policy contains no condition by which it is to be void if such payment is not made, but insures the life of the slave for five years, absolutely, in this respect — leaving the annual payment of $12.24 to be enforced, not as a condition, but as a part of the consideration.”

Nor does this policy that is before us contain any condition that if the payment of premium is not 'made when due that this policy was to become void and cease and determine. There are some expressions in the policy which, it has been urged, indicate that nonpayment of dues might be regarded as a forfeiture of the policy and that the policy might, under certain circumstances, lapse; but there is no express provision of forfeiture, and in view of the authorities holding that where there is a provision of absolute forfeiture it is to be construed strictly in favor of the insured, and may be waived by the insurance company by its conduct, it would seem as though a court' ought not to import into an insurance policy a clause of forfeiture which does not in fact there exist. But, as we have said, a contract of insurance is of such a peculiar character — whether it is a mutual company or a stock company —it being always to some extent a mutual arrangement, each person in the company depending on all the others paying their dues, it would be unjust and inequitable to permit a person to make his first payment on an insurance policy which contains no clause of forfeiture, and permit him to have the benefit of an insurance contract for the remainder of his life without making any payments of premiums for the benefit of the company or for the benefit of the others who are insured; and we are of the opinion that if a party under such a contract as this does not pay on or about the date the premium is due, unless this is waived the just and true rule would be that' the rights of the party would be suspended and the policy would be suspended until the premium is paid; we think' it is necessary to protect the rights of all the parties that such should be the law, but not that the insured should forfeit all of his rights under the policy without any provision for it' in the contract.

Upon this question of suspension of the policy under these circumstances, May on Insurance, 3d Ed., Secs. 343 and 344, is somewhat in point. The author says:

“If, however, the policy contains no such proviso, though the charter and by-laws require the payment of annual premiums, the non-payment of the annual premium when due does not work a forfeiture. Such a policy insures for the number of years stipulated absolutelyj leaving the annual payment of the premium to be enforced, not as a condition, but as a part of the consideration agreed to be paid. So if the policy is merely suspended while a premium or installment remains unpaid, a payment, even though upon a judgment recovered in a suit therefor, will revive the policy. But a part payment will not remove the suspension. Where a policy is to be void by non-payment' of 'a premium, yet capable of revival by subsequent payment, the company is not liable for loss occurring after default and before revivor, nor does it earn premiums during the period of suspension.”

There are very few cases, upon such policies, because it is very unusual that a forfeiture clause is omitted, and the question seems to have seldom arisen.

The question still remains whether the conduct of the insurance company was such that it had waived a suspension of the policy or the rights and benefits under the policy on account of the premiums not' being paid when due. That is a question of fact for the jury. Upon the subject of waiver I will cite 52 Missouri, p. 469 (Thompson v. St. L. Mut. Life Ins. Co.):

“Though a contract of insurance requires prompt payment of the premium or the policy will be' forfeited, yet the insurers may waive this condition by a habit of receiving the premium after it is due.”

In this case, on pages 472-3, the court say:

“In contracts of insurance, as in other contracts, the parties may make the.time of the performance of any stipulation of the very essence of the contract. In such'-case the contract becomes utterly at an end, or void, as soon as the default is made. The stipulations in regard to the time of the payment of the premiums in this policy I do not regard as of the essence of the contract. It was not so regarded by the parties themselves. By their acts and conduct the parties have construed this contract for themselves. It was not regarded by either party as of the essence of this policy, that the premiums should be paid at the very day they became due.
“The memorandum at the foot of the policy did not give any additional force to the stipulation in the policy, if we may consider it as having any effect whatever. If it had any force it seemed to be lo'oked upon by the parties as a license or invitation to the plaintiff to disregard the exact day of payment and to rely upon the courtesy of the company. The plaintiff pursued this course, 'and instead of making his payments on the very day when due, let them lie over for a short' time, and still they were received without objection.
. “The plaintiff was thus induced to believe, that a failure of strict payment on the day would not prejudice his rights.
“The courts have become more liberal in their construction of those sort of stipulations in policies of insurance; formerly it was held that when in a fire insurance policy it was required that' additional insurance could not be taken without first obtaining the consent in writing of the -company, to be indorsed upon the policy, it would become void if such consent was not in every case so indorsed. It was not sufficient to give notice of the additional insurance and rely upon the company’s verbal consent thereto.
“The old rule required the consent to be in writing and indorsed upon the policy, but' 'it is now understood to be the settled law of this state, that if notice be given to the company of the additional insurance and no objection is made, the company will be estopped from insisting on a forfeiture of the policy, because their consent thereto was not indorsed as required by the literal stipulation therein.
“So in regard to the payment of premiums, it seems to be well settled that the practice of the company in accepting the same without objection after the day stipulated for the,payment, must be treated as a waiver of the exact time as an essential ingredient of the contract.”

Upon the general law of insurance and questions of waiver and claims of forfeiture, without quoting from them, the following cases are cited: 30 S. E., 918; 37 Southeastern, 95; 18 Barbour, 541; 26 Barbour, 536; 65 Mo., 916; 159 Ill., 476; 93 U. S., 24: 104 U. S.. 352.

It is laid down by the Supreme Court of the United States in the two cases last cited that the payment of premium is not a condition precedent, but is a condition subsequent; that the theory that the premium paid by the month or by the year pays for.the insurance for' that month or year, is not correct; that the contract is an entirety, if if be a life insurance policy, to insure the party for -his life and the premium is payable in installments.

Under the facts in this case as disclosed, by the record — no evidence being offered by the defense — it would seem as though a very strong showing had been made that the company had waived the payment of the premiums upon the first day of each month by receiving the payment's, month after month, after they had become due; by receiving the payment due in November in the middle of January; in giving to the party a book with the blanks contained therein .to which I have referred; by notifying the party that if the agent did not come on the first day of the month to bring the premium to the company; by reason of the fact that no notice had been given to the insured that her policy had' been forfeited or suspended or had lapsed, and no direct notice that it would be forfeited or suspended if she did not pay, and by making the collection on the 14th day of January — ten days before death— and by promising to come on a subsequent day and collect the balance that was due, and by actually coming before the death of Mrs. Cappell for the purpose of collecting it on the 23d of January, and by coming again on the 25th of January, after her death, for the purpose of collecting the premium then due. In all this we have a very strong showing made that the company had in fact waived its right to suspend the policy for non-payment.

The policy of the law is against forfeitures; the equitable and just doctrine is that if a party gets all that is coming to him, all that is due to him, although it may be a short time after due, he should not be permitted to forfeit all the rights of the other party, especially if by his conduct he may be deemed to have waived the right t'o declare such a forfeiture.

We think that in this ease the common pleas court erred in directing the jury to return a verdict in favor of the insurance company; all the evidence should have been heard; the defendant given an opportunity to make its defense and then the case should have gone to the jury under proper instructions from the court. Therefore, the judgment of the court of common pleas will be reversed.

A. T. Gourley, for plaintiff in error.

22. W. Kirhley and E. W. Toler ton, for defendant in error.  