Lane v. Insurance Co., 142 N.C. 55 (1906)

Sept. 18, 1906 · Supreme Court of North Carolina

142 N.C. 55

LANE v. INSURANCE COMPANY.

(Filed September 18, 1906).

Insurance — Bights of Delinquent Members — Reinstatement.

1. Where the plaintiff had forfeited his policy of life insurance in defendant’s company by non-payment of dues, and the policy provided that “Delinquent members may be reinstated if approved by the medical director and president, by giving reasonable assurances that they were in good health,” and the plaintiff’s application for reinstatement was accompanied by a certificate of his continued good health, but the officers declined to approve his application, giving-reasons therefor: Held, the plaintiff cannot maintain this action for damages for the cancellation of his policy and the refusal to reinstate him, in the absence of any showing that the action of the officers was fraudulent or arbitrary.

2. A provision in a policy of life insurance that “Delinquent members may be reinstated if approved by the medical director and president, by giving reasonable assurances that they are in continued good, health,” is valid, and the approval required is not a mere ministerial act, but involves the exercise of judgment and discretion.

AgtioN by W. B. Lane against Fidelity Mutual Life Insurance Company, beard by Judge JE. B. Jones and a jury, at tbe October Term, 1905, of tbe Superior Court of CbaveN.

Tbe plaintiff sued for tbe recovery of $2,000, alleged to be tbe damages sustained by tbe cancellation of bis policy, and tbe defendant’s refusal to reinstate bim. He bad taken a policy in tbe defendant company for $3,000 upon bis life for tbe benefit of bis wife, and failed to remit bis annual dues which were payable July 24, 1901. Tbe policy provides as follows: “In tbe event of a failure to pay either dues or assessments tbe day on which they shall become due, then in either case this certificate of membership and policy of insurance shall be ipso facto null and void, and of no effect whatever.” The policy having been forfeited or having become void, as plaintiff admitted, by non-payment of dues, lie applied for reinstatement as a policy-holder and member of tbe company, under Art. IX of sec. 1 of the company’s by-laws, which is as follows: “Delinquent members may be reinstated if approved by the medical director and president, by giving reasonable assurances that they are in good health.” It is declared in the policy that the by-laws are made a part of the contract to the same extent as if they had been inserted therein, and the rights and obligations of the respective parties are to be determined with reference thereto.

The plaintiff’s application for reinstatement was accompanied by a certificate of his continued good health. The president of the company and the manager of its Reinstatement Department wrote to the plaintiff and his agent, T. Gr. ITyman, that the company would not reinstate him, the president in his letter stating his reasons for thus exercising his judgment against the granting or “approving” the application. Among other reasons given, was the advanced age of the applicant, he being then about' 68 years old, and it is suggested that it would not conduce to his interest nor that of the company for him to be readmitted as a member, because at his age his insurability on the mutual plan had ceased and his only proper course would be to seek .some plan by which he could combine insurance with investment.

The Court charged the jury that under the agreement the plaintiff had a right to be reinstated if he made application, and further, that if the jury should find from the evidence he did apply for reinstatement and furnished evidence of his good health, and the defendant refused to reinstate him, the first issue should be answered “Yes.” Defendant excepted.

The statute of limitations was pleaded, and in support of the plea it was shown that the defendant had domesticated under Acts 1899, ch. 62. Plaintiff’s right of action accrued on or before 20 August, 1901. He commenced suit against tbe defendant by issuing a summons 15 January, 1902, wbieb was served 16 January, 1902, but no pleading of any sort was ever filed in tbe case. Tbe plaintiff was permitted to testify, over tbe defendant’s objection, tbat tbe said suit was brought upon tbe cause of action declared on in tbis suit.

Tbe Court instructed tbe jury upon tbe second issue, as to, tbe statute of limitations, tbat tbe action brought by tbe plaintiff’ 15 January, 1902, arrested tbe operation of tbe statute, and tbat. plaintiff bad one year within which to bring a new action after tbe nonsuit in tbat case, which was entered 23 November, 1903. Tbat tbe summons in tbis case was issued 11 November, 1904, or eleven days before tbe one year expired, and if tbe jury find that to be tbe case, they will answer tbe second issue “Tes.”

Tbe issues submitted and tbe answers thereto were as follows :

1. Did tbe defendant wrongfully refuse to reinstate tbe plaintiff’s policy ? Ans.: Yes.

2. Did tbe plaintiff’s alleged cause of action accrue within three years before tbe bringing of tbis action ? Ans.: Yes.

Tbe damages were left to be settled by agreement of tbe counsel, and were afterwards fixed at two thousand dollars.

Tbe defendant, at tbe close of. plaintiff’s testimony and again at tbe close of all tbe testimony, moved for judgment as of nonsuit under tbe statute. Tbe motion was overruled, and it excepted. Tbe defendant also -moved for a new trial upon exceptions filed to tbe rulings of tbe Court. Motion overruled,' and the defendant again excepted. Judgment was entered on tbe verdict, and tbe defendant appealed.

W. D. Melver and O. H. Onion for tbe plaintiff.

Hinsdale & Son and W. W. Olarlc for tbe defendant.

WaleeR, J.,

after stating tbe case: It is conceded that tbe plaintiff, under tbe terms of tbe contract of insurance, had forfeited his policy and consequently his membership, by the non-payment of his annual dues. He had no right to be restored to his former relation without the consent of the defendant, and then only upon the terms and conditions prescribed by it- There is a provision in this policy by which the plaintiff could be reinstated as a member and policyholder, but the condition precedent was ■ imposed that his application for reinstatement shall first be approved by the president and medical director of the company, and that then he shall give reasonable assurance that he is still in good health.

It seems clear to us that the approval -required in the ease is something more than a mere ministerial act and involves the exercise of judgment and discretion. State v. Smith, 57 Pac., 449. The word “approve” is “to regard or pronounce as good; think or judge well of; admit the propriety or excellence of; be pleased with; commend.” Webster’s Intern. Diet. ;'l Words and Phrases, Jud. Def., 475. In the absence, certainly, of any showing that the approval of the officers has been fraudulently withheld and that their denial of the application is purely arbitrary, we do not see why their refusal to reinstate the plaintiff is not fatal to his right of recovery in this action. We are not called upon in this case to say under what circumstances, if any, we would decide that the action of the officers designated to pass upon' the application of a delinquent member1 could be investigated, with a view to ascertain whether they have exercised their judgment properly or have unreasonably deprived him of any right to which he is entitled under the terms of his contract and the by-laws of 'the company. Where there is no suggestion of fraud or other legal wrong, there can be no valid reason why the applicant should be permitted to attack the soundness of their judgment or the justness of their conclusion. We must hold it fir be right, and unassailable in any such manner, because the parties have solemnly agreed that tlie matter shall be decided in that way, and we have no power to change their contract; and, besides, the power lodged with those officers is consistent with the purposes of the organization, and its exercise is necessary for the protection of the rights of other members and is not otherwise at all inconsistent with reason and justice. A -provision for approval by officers most likely to know the facts is one which would naturally be suggested to those engaged in the prudent management of the affairs of the association as essential to conserve the interests of all parties concerned. The validity of such a clause in policies of this kind has been sustained by numerous authorities, and there are none, we believe, to the contrary. 2 Joyce on Ins., sec. 1276; 2 Bacon Ben. Soc., sec. 385c; Butler v. Grand Lodge, 146 Cal., 112; Saerwin v. Jamon, 65 N. Y., Suppl., 501; Coniff v. Jamour, ibid., 317; Brun v. Supreme Council, 15 Col. App., 538; McLaughlin v. Supreme Council, 184 Mass., 298.

As the policy had been forfeited and plaintiff’s connection with the defendant had been severed by his own default, he had no right to be readmitted to membership, but his reinstatement was then dependent upon the mere favor of the company, which cordd be extended to him subject to such terms as it deemed necessary for its protection. The very question was decided in Harrington v. Keystone Assn., 190 Pa., 77, in. which it appeared that the executive committee was “empowered” to reinstate a delinquent member. The Court there said: “Conceding, for the purpose of argument, that her application was in time, and that she complied or was ready and willing to fully comply with all the terms and conditions of the by-laws above quoted, it does not follow that the committee was bound to reinstate her to membership in the association. While the by-laws empowered them to grant her request, they were not bound nor could they be compelled to do so. It neither clothed her with any legal or equitable right, nor did it impose any duty or obligation on tbe association tbat would enable her, as a delinquent member, to maintain tbis action.”

While it may not be necessary for us to go to tbe extent, tbe Court did in tbat case, we yet tbink our case is stronger than tbat one so far as tbe discretionary nature of tbe power is concerned. In tbe case of Lovick v. Life Assn., 110 N. C., 93 (cited and relied on by tbe plaintiff’s counsel), tbe policy provided that tbe delinquent should have tbe “opportunity for reinstatement on similar conditions,” tbe context showing clearly that the term “similar conditions” bad reference to the payment of past-due premiums, assessments, and other indebtedness. Ey opportunity we mean- “fit or convenient time; suitable occasion; time or place favorable for executing the purpose or doing tbe thing in question.” Webster Int. Diet. It was, therefore, properly held in Loviclcs caso tbat if tbe plaintiff seasonably tendered tbe back dues, he was entitled to reinstatement, and, being thus entitled, be could recover tbe premiums paid, if tbe company refused to reinstate him. There was nothing in tbe policy then being construed which required tbe approval of tbe company or any of its officers as a condition precedent to tbe reinstatement or tbe exercise of any discretion or judgment.

Tbe Court charged in tbis case tbat if tbe plaintiff applied for reinstatement and was refused after be bad furnished proof of bis good health, tbe first issue should be answered “Yes.” In tbis there was error. Tbe instruction excludes altogether from tbe consideration of tbe jury tbe question of approval by the president and medical director, and makes tbe recovery depend entirely upon tbe application and proof of good health, contrary to tbe very terms of tbe policy, and without any reference to tbe other valid provisions of tbe bylaws. Tbis of itself entitles tbe defendant to a new trial. But as there was no evidence to warrant a verdict for tbe plaintiff, tbe Court should have granted tbe defendant’s motion to nonsuit, and dismissed tbe action, and there was error in refusing to do so. It is not necessary now to discuss tbe interesting question presented by tbe defendant’s exception in regard to tbe statute of limitations, in view of tbe decision we bave already made, tbat there bas been no revival of tbe policy.

Error.