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The Equitable Life Assurance Society of United States v. Pettid

Supreme Court of Arizona

May 31, 1932


APPEAL from a judgment of the Superior Court of the County of Maricopa. J. C. Niles, Judge. Judgment reversed and remanded, with instructions to render judgment in favor of the defendant.

Messrs. Armstrong, Kramer, Morrison & Roche, for Appellant.

Messrs. Hayes, Stanford, Walton, Allee & Williams, for Appellee.


Page 834

[40 Ariz. 241] LOCKWOOD, J.

This is an action by Nellye A. Pettid, hereinafter called plaintiff, against the Equitable Life Assurance Society of the United States, a corporation, hereinafter called the defendant, to recover on a certain life income insurance policy issued by defendant, as insurer, upon the life of Michael John Pettid, hereinafter called the insured, and in favor of plaintiff as beneficiary.

The policy is dated August 7, 1920, and originally provided for the payment of a premium of $910.10 on July 21st of each year, which included a premium of $24 for double indemnity, as hereinafter discussed, and also of $35.50 for total and permanent disability features, with which last we are not concerned.

At the request of the insured, the mode of payment was changed to quarterly installments of $241.20 each, payable on July 21st, October 21st, January 21st and April 21st of each year. The policy provided that, upon the death of the insured, there should be paid to the plaintiff by the defendant a monthly income of $100 for twenty years, and as long thereafter as the beneficiary should live, but, if she died before the payments had been made for the twenty years, the income should not terminate, but be paid to the beneficiary's executors and administrators until the completion of the twenty-year period.

It also contained certain special features as the result of which this litigation arose. We quote these provisions from the policy as follows:

"Upon due proof that the death of the insured occurred in consequence of bodily injury effected solely through external, violent and accidental means, [40 Ariz. 242] . . . the Society will pay instead of the face amount of this policy, double that amount, making a monthly income of two hundred dollars, provided all premiums have been duly paid and this policy is then in full force and effect. . . ."

"The proportion of divisible surplus accruing upon this policy shall be ascertained annually. Beginning at the end of the second insurance year, and on each anniversary thereafter such surplus as shall have been apportioned by the Society to this policy shall at the option of the Insured (or assignee if any), be either -- 1. Paid in cash; or 2. Applied toward the payment of premiums; or, 3. Applied to the purchase of paid-up Additional Insurance (without double indemnity or total and permanent disability benefits): or, 4. Left to accumulate at 3% interest, compounded annually. If a higher average annual rate is earned this may be increased by an interest devidend as determined and apportioned by the Society. Such accumulations will be payable upon the maturity of this policy or on any anniversary of its register date.

"Unless the insured (or the assignee if any) shall elect one of the foregoing options within three months after the mailing by the Society of a written notice requiring such election, the dividend shall be applied to the purchase of paid-up Additional Insurance (Option 3.) . . .

"This policy is based upon the payment of the premiums annually; but premiums may be paid subject to the Society's written approval, in semi-annual or quarterly installments at the Society's adopted rates for fractional

Page 835

premiums. . . . A grace of thirty-one days, subject to an interest charge at the rate of 5% per annum, will be granted for the payment of every premium after the first, during which period the insurance hereunder shall continue in force. . . . Except as herein expressly provided, the payment of any premium or installment thereof shall not maintain this policy in force beyond the date when the succeeding premium or installment thereof becomes payable payable. . . . If this policy shall lapse in consequence of the non-payment of any premium when due, it may be reinstated [40 Ariz. 243] at any time upon the production of evidence of insurability satisfactory to the Society, and the payment of all overdue premiums, with interest at 5% per annum. . . .

"After three full years' premiums have been paid hereon, upon any subsequent default in the payment of any premium or installment thereof, and within three months after such default, this policy may be surrendered by the Insured (or assignee if any) who may elect one of the following options:

"(a) To receive the Cash Surrender Value of this policy; or

"(b) To purchase non-participating paid-up life insurance payable in a single sum upon receipt of due proof of death of the insured, but without double indemnity or total and permanent disability benefits; or

"(c) To continue the insurance for the Income as originally provided (and any outstanding dividend additions) as paid-up extended term insurance for the period shown in the above table, or for such further period as the dividend additions (if any) will purchase, but without future participation, or right to loans, or double indemnity or total or permanent disability benefits. The Income payable if this policy is thus extended is limited to twenty years, plus any additional Income provided by additional Reserve as explained below.

"In the event of default in the payment of any premium or installment thereof after this policy has been in force three full years, if the Insured (or assignee if any) does not select one of said options within three months of such default, the insurance shall be continued as provided under Option (c) . . .

"Agents are not authorized to modify, or in event of lapse to reinstate this policy, or to extend the time for payment of any premium or installment thereof."

The insured failed to pay when due, or within the grace period thereafter, the premium installments due on January 21st and April 21st, 1922, and the policy lapsed. It was afterwards reinstated upon the insured paying the two delinquent installments and undergoing a medical examination which was reported [40 Ariz. 244] on the usual form used by defendant for that purpose, which form, not only includes details as to the personal health of the insured, but a number of other matters bearing upon his insurability. After such requirements were met by the insured, the policy was reinstated as of June 2nd, 1922. He also failed to pay the April 21st, 1925, installment, and was required, as a condition preliminary to reinstatement, to make an application certifying himself to be in good health. He also failed to pay the January 21st, 1926, installment, and was required again to furnish the medical examination certificate above referred to. All premiums due on the policy up to July 21st, 1930, were paid either on time or else were accepted by the company on reinstatement, as above set forth, and on June 14th, 1930, the usual notice of installment due July 21st of that year was mailed to defendant, together with a notice of an accrued dividend of $229.77. This premium was not paid on or before its due date, so the cashier of defendant's local ...

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