Plaintiff Dorothy M. Feder sues for the proceeds of a life insurance policy issued by defendant Bankers National Life Insurance Co. upon the life of her deceased husband David Feder. The policy issued and was dated June 4, 1962 for the face amount of $50,000. The annual premiums were $854.40 and the insured elected to pay the premiums on a monthly basis of $77 each. The initial June and July 4 premiums were paid by the insured but the premium due August 4 was not paid. Under the standard nonforfeiture provisions of the policy the insured was entitled to a grace period for payment of the overdue premium of 31 days, during which time the policy would remain in force. Paragraph 2 of the policy relating to the grace period provides:
"In the payment of any annual premium or installment thereof under this policy, except the first, a grace of 31 days will be allowed, during which time the policy will remain in force."
On September 5 the grace period expired. On September 11, 1962 the insured executed a written application for reinstatement of the policy which was submitted to the company, together with two monthly premium payments on September 24, representing the monthly payments due in
August and September. Following investigation the company approved of reinstatement of the policy on September 24, 1962. The subsequent premium for October was not paid, and again pursuant to the grace period provisions of the contract, the insured was permitted 31 days to make payment of that premium. The insured died on November 10, 1962.
The foregoing represents agreed facts. Only two factual determinations were required to be submitted to the jury.
Plaintiff contended that on November 7, 1962 (three days before death) the insured paid in cash $77 (the monthly premium charge) to defendant through its agent, and that acceptance of the premium constituted a waiver by defendant. Defendant denied that any such payment was made, and the jury agreed. There is therefore no substance to this contention of plaintiff.
Plaintiff then takes the position that the premium payment made on September 24 created a new premium period and that subsequent premiums were not due on the fourth of each month. She argues that the payment made on that date was for the period September 24 to October 24 and therefor the grace period would have terminated on November 24. Accordingly, it is urged that the assured's death on November 10 occurred within the grace period. Relying for the most part on cases treating with accident and health policies, plaintiff states that the company cannot claim a premium for any period of time in which no coverage is afforded. These contentions implicitly contain the acknowledged rule that no contractual obligation is supportable without underlying consideration.
The question then is: Does the acceptance on September 24 of the reinstatement application and premium create a new and different contract or is it the revival of the old.
Plaintiff contends that it is a new contract, with September 24 as its premium date. Defendant asserts that it is a reinstatement of the old contract, the premium date of which is fixed at September 4.
The authorities support defendant's view. The following relevant language is found in 3A, Appleman, Insurance Law and Practice, § 1971, p. 700 (1967):
"It has been held that a reinstatement can only be brought about by a valid contract between the parties. To this end, there must be a meeting of minds of the parties, application and acceptance, valid consideration, and full knowledge of the circumstances under which the application is made and the money paid. Under this rule, the parties have the right to fix the terms of such reinstatement.
The foregoing rule concerns the contract governing the reinstatement, which contract has its inception when the insured applies for reinstatement and its termination upon the acceptance by the insurer of that application. The question logically arises, then, as to whether the new policy is itself a different contract, a continuation of the intermediate contract, or a revival of the old.
On this point, no case seems to hold that the intermediate contract, that is, the contract inducing the reinstatement, continues. There is a division of authority, however, upon the question as to whether the old contract is thereby automatically revived. A few courts have held that a new contract of insurance is thereby created, containing new warranties, new conditions, and the like, just as if no prior policy had ever existed. This is definitely a minority holding. The overwhelming majority of courts hold that the old contract is thereby reinstated and revived, and the new policy is merely a continuation of the old coverage."
As noted, most of the cases cited by plaintiff deal with reinstatement of accident or health policies. It is clear that life insurance policies must fall into a different category. A reinstated life policy continues at the same premium rate, instead of increasing to the age at which insurance is reinstated; the incontestability clauses and suicide provisions run from the earlier date; the cash surrender and loan value are reached at an earlier date; paid-up extended term options are sooner reached. There can be no doubt about the essential and important equities and reservations of right in a life policy over and beyond those of a reinstated accident and health policy. Cf. Kampf v. Franklin Life Ins. Co., 33 N.J. 36 (1960), where the court stressed the importance of the "birth" date of a life policy and the advantages of an earlier "birth" date.
In Acacia Mutual Life Ass'n v. Kaul, 114 N.J. Eq. 491 (Ch. 1933), the court said:
"The reinstatement of the policy was not the issuance of a new policy nor the reissuance of the original policy. It was the waiver of the lapse of the original policy, and the reinstatement of that policy in full force and effect according to its terms, all its terms. One of those terms is the incontestability clause. No contest can be made therefore on the original policy itself * * *" (at p. 492)
This language was directed to the insurer's claim, in its action for rescission of the policy, of fraudulent misrepresentations inducing the original insurance of the policy. (Rescission was granted in the case of the reinstatement contract and judgment rendered for the insurer). The above quotation is set forth for its reference to "all the terms" of an insurance contract being given full effect upon reinstatement.
The case of New York Life Ins. Co. v. Weiss, 133 N.J. Eq. 375 (E. & A. 1943), cited in the briefs of both parties, was a suit by the insurer to cancel and rescind a life insurance policy for fraudulent representations. Insofar as it is relevant at all, it stands only for the proposition that reinstatement is a contract separate and distinct from the original contract of insurance.
A foreign decision very similar to, if not indistinguishable from, the present case is Travelers Protective Ass'n of America v. Ziegler, 250 S.W. 1115 (Tex. Cir. App. 1923). The insured in that case paid his last premium on January 15, 1921, covering the six months ending on June 30, 1921. The "dues" for the next six-month period should have been paid on or before June 30 to avoid the lapse which occurred by virtue of the Association's by-laws. The insured died on July 2, 1921.
"It [was] the contention of appellee that, as deceased was reinstated on January 15, 1921, and on that date paid the semi-annual dues of $5.50, he had fully paid up to July 15, and consequently was not in arrears for dues when he was killed on July 2." (at p. 1116)
In answer the court said:
"Under that contention deceased suffered no penalty whatever for becoming delinquent, but could by becoming delinquent at the end of each successive 6 months gain nearly a month free from dues and return to the fold." (at p. 1117)
It must therefore be concluded that notwithstanding the reinstatement, the original premium dates and policy dates remained and that the grace period had expired five days before death.
Plaintiff next contends that when the insurance agent assisted the widow in the completion of a "proof of death" or "proof of claim" form at the funeral parlor, the widow did not understand its limiting statement and therefore the insurance company waived its right to claim that the policy had lapsed, or is estopped from denying its validity. The proof of claim contained the following language:
"* * * I (we) understand that the furnishing of forms by the company does not constitute an admission that ...