Gardner v. National Life Insurance

There is no error in the judgment in this action. The insured had directed in his application for the policy of insurance sued on, a copy of which is attached to and made a part of the policy, that dividends declared thereon in accordance with its provisions, should be left with the company, at interest, unless otherwise ordered by him. The policy provides that unless the insured shall elect otherwise prior to thirty days after any dividend is due, the same shall be held by the company, at interest, to be withdrawn by the insured at any time, or to be included in any cash settlement of the policy. Although he had notice of the dividend due on 11 May, 1930, and of his right to direct its application to the payment on the premium due on said date, or to the purchase of extended insurance, the insured did not order such application. He elected that the dividend should remain with the defendant, at interest, in accordance with his direction given in his application for the policy. In view of the express provisions of the contract between the insured and the defendant, as clearly and plainly expressed in the policy, the defendant had no right, in law or in equity, to apply the dividend declared prior to 11 May, 1930, and due at said date, as a payment on the semiannual premium due on 11 May, 1930, or to the purchase of extended insurance. If in violation of its contract with the insured, with respect to this dividend, the defendant had so applied it, it would have nevertheless been liable to the insured for the amount of the dividend, with interest, when called upon by him for its payment. There is no principle of law or equity upon which the defendant can be held liable to the plaintiff because after the death of the insured within the time for which the policy would have been extended, if the insured had directed that the dividend be applied to the purchase of extended insurance, it appeared that such application would have been to the interest of the plaintiff, as beneficiary in the policy.

It is true as said in Mutual Life Insurance Co. v. Breland (Miss.), 78 So., 862, L. R. A., 1918D, 1009, that it is well settled that the law *720 abhors a forfeiture. In that ease it was held that upon nonpayment of a premium due on a life insurance policy, when surplus and dividends have accrued upon the policy sufficient to pay the premium, the company must in the absence of notice to the insured to exercise his option as to application, apply it to the premium so as to prevent a forfeiture, although the policy provides that upon failure of the insured to exercise his option, the dividends shall be applied to purchase of paid-up additions to the policy. In the instant case, the option had been exercised by the insured when he applied for the policy, and he had notice after the dividend had been declared and was due that he had the right to elect as to its application. By the terms of its contract with the insured, the defendant had no option as to the application of the dividend. Having applied the dividend as directed by the insured, the defendant cannot be held liable, after the death of the insured, upon the contention of the beneficiary, that it should have applied it otherwise. The judgment is

Affirmed.