On appeal from Superior Court of New Jersey, Chancery Division, Middlesex County.
J. H. Coleman and Havey. The opinion of the court was delivered by J. H. Coleman, P.J.A.D.
The issue raised in this appeal is whether a retirement and life insurance policy had been cancelled under its cash surrender provision before the death of the named insured. In an action against the insurer for payment of death benefits, the trial judge determined that the insurer was obligated to pay death benefits less premium loans and interest. Following the denial of a motion for a new trial, the insurer filed this appeal. We now affirm.
On December 15, 1978 the New England Mutual Life Insurance Company (New England) issued a retirement income/death benefit policy # 5652610 to the Knight Trucking Retirement Plan insuring the life of William G. Knight. The primary beneficiary of the policy was the wife of the insured, Marie Knight. New England received premium payments from March 5, 1979 through December 15, 1981. The policy, however, contained an automatic premium loan clause which prevented the policy from lapsing. Premiums were paid automatically
when due from the policy's current cash surrender value. New England charged interest on the loan. The policy provided that automatic premium loans would continue until the cash surrender value of the policy was no longer sufficient to cover the unpaid premiums.
The contract also contained a disability premium waiver clause which suspended the premiums and the automatic premium loan provision, while keeping the policy in effect, should the insured become disabled within the terms provided by the contract.
This retirement income/death benefit policy was one of two policies issued by New England to the Knights. The other policy, # F129464, was also a life insurance policy which named William G. Knight as the insured. The latter policy is not involved in this case.
On December 7, 1983 Marie Knight, the named beneficiary, sent a letter to New England stating, "We wish to surrender policy # 5652610 as of December 15, 1983. Please send me the necessary forms to complete." With respect to cancellation, the policy provides, "this policy may be surrendered for its net cash value, which shall be the cash value of the Policy and of any additions and accumulated dividends and unpaid dividend, less any indebtedness to the Company on the Policy." The contract is silent as to what procedure should be followed to effectuate its cash surrender provision.
After receipt of the December 7, 1983 letter, New England in February 1984 mailed a check for $8,595.71 to the Knight Trucking Retirement Plan as the cash surrender value of the policy. The check contained the statement that the "endorsement of this check constitutes ratification of election to surrender the above contract(s)." The Knights returned this check shortly after receiving it in February of 1984. They contended that the amount was too little because the insured had been disabled from October 10, 1981 to February 15, 1982, and that
there should have been a waiver of premiums for that period. They thought the check should have been for about $23,000.
On March 1, 1984 William Knight wrote to his insurance agent. The agent was employed by the Kronish Agency, an independent agency authorized to write insurance for New England. The March 1 letter informed New England that the insured was disabled from October 1981 until February 1982 when he returned to work for a new employer and that the premium should have been discontinued as of October 1981. The letter also stated ...