Summary
In Rogers v. Jefferson Standard Life Ins. Co., 182 S.C. 51, 188 S.E. 432, the decree of Judge Oxner, reported and affirmed, contains this language: "It is almost uniformly held that where the insurance company wrongfully revokes its policy, and refuses further to be bound by it, the holder may elect whether to enforce the contract or to treat it as rescinded. If he elects to pursue the latter course, there is much conflict among the courts of the various jurisdictions as to the measure of damages."
Summary of this case from Pacific Mut. Life Ins. Co. of California v. RhameOpinion
14383
November 17, 1936.
Before OXNER, J., Darlington, March, 1935. Appeal dismissed, and judgment affirmed.
Actions by William Coker Rogers against the Jefferson Standard Life Insurance Company, which by consent were tried together. From a judgment for the plaintiff, the defendant appeals.
The order of G. Dewey Oxner, Circuit Judge, directed to be reported, follows:
These two actions by consent were tried together. Plaintiff seeks in each action to recover actual and punitive damages for alleged fraudulent breach of contract. By agreement between the parties, the question of punitive damages was adjusted, and the issue as to actual damages was heard by me without a jury. Testimony was taken, at the conclusion of which oral arguments of counsel were heard. For the purposes of this trial, defendant admits a simple breach of the insurance policies involved, and the only question before me is the amount of actual damages, if any, which should be awarded. Each of the policies involved was issued on April 15, 1918, with an annual premium of $122.20, and providing for a death benefit of $5,000.00, and further contained the usual provisions for double indemnity and total and permanent disability.
It is almost uniformly held that where the insurance company wrongfully revokes its policy, and refuses further to be bound by it, the holder may elect whether to enforce the contract or to treat it as rescinded. If he elects to pursue the latter course, there is much conflict among the Courts of the various jurisdictions as to the measure of damages.
Perhaps a majority of the Courts have adopted the rule that the measure of damages is the amount of premium paid, with interest, without any deduction for the protection afforded insured under the policy from its inception to the time of its breach by the insurer. Among the leading cases supporting this rule are the following: Van Werden v. Equitable Life Assurance Society (1896), 99 Iowa, 621, 68 N.W., 892; Strauss v. Mutual Reserve Fund (1900), 126 N.C. 971, 36 S.E., 352, 54 L.R.A., 605, 83 Am. St. Rep., 699; Gaskill v. Pittsburgh Life Trust Co. (1918), 261 Pa., 546, 104 A., 775; Glover v. Bankers' Health Life Ins. Co. (1923), 30 Ga. App., 308, 117 S.E., 665; Industrial Life Health Ins. Co. v. Thomas (1931), 43 Ga. App., 679, 159 S.E., 885; Bankers' Health Life Ins. Co. v. James (1933), 177 Ga. 520, 170 S.E., 357 (combination of life and health policy), also Id., 47 Ga. App., 534, 171 S.E., 161; Supreme Council v. Black (C.C.A., 1903), 123 F., 650. The reason for the foregoing rule is stated by some authorities as follows: "Rescission or voidance, properly so called, annihilates the contract, and puts the parties in the same position as if it had never existed", and insured "may take the defendants at their word, treat the contract as rescinded, and recover back the premiums paid, as so much money had and received for their use." A few of the Courts, although the greater number do not, allow a deduction for the protection afforded assured prior to the breach. Grand Lodge et al. v. Martin (Tex.Civ.App., 1919), 218 S.W. 40.
On the other hand, the following rule has been adopted by many authorities: If the insured is in a state of health that he can secure other insurance of like nature and kind, his measure of damages is the difference between the cost of carrying the insurance which he has, for the term stipulated, and the cost of new insurance at the rate he would then be required to pay for a like term. (Replacement rule.) If, however, he is unable to obtain other insurance, then his measure of damages will be the present value of his policy as of the date of his death, less the estimated cost of carrying the same, from the date of cancellation, at his then age. (Rule of commuted value.) Among the leading cases in support of this rule are the following: Krebs v. Security Trust Life Ins. Co. (U.S.C.C., 1907), 156 F., 294; Ebert v. Mutual Reserve Fund (1900), 81 Minn., 116, 83 N.W., 506, 834, 84 N.W., 457; Mutual Reserve Fund v. Ferrenbach (C.C.A., 1906), 144 F., 342, 7 L.R.A. (N.S.), 1163; Illinois Bankers' Life Assur. Co. v. Payne (Tex.Civ.App.), 62 S.W.2d 315.
For excellent annotations reviewing the various authorities on this question, see 48 A.L.R., 102.
The question at issue apparently was never before the Supreme Court of this State until the recent case of Pack v. Metropolitan Life Insurance Co., 178 S.C. 272, 182 S.E., 747, 749, filed Nov. 29, 1935. The following rule was there announced: "What is the measure of actual damages in such case? It is the sum of the premiums which have been paid by the insured, and lost by the lapse of the policy, and, the damage which the plaintiff has sustained by such lapse, to be ascertained, as for example, by ascertaining her life expectancy and the amount she would be required to pay for insurance of like character during such period, but such sum cannot equal the amount of the lapsed policy; and, of course, any special damages which plaintiff has suffered."
All of the Courts recognize that none of the rules laid down are entirely satisfactory in every case. One rule may result in just compensation under certain circumstances, and under different circumstances may be unjust to the insurer or insured. Necessarily all the circumstances must be taken into consideration in undertaking to arrive at a just measure of damages.
In the case at bar it appears that insured is an insurable risk and can therefore procure other ordinary life insurance of the standard form now written, but it is undisputed that assured cannot procure, at least not at the rate stipulated in the policies involved, insurance with total and permanent disability benefits. The testimony shows it would be practically impossible for him to procure such insurance, particularly at his present age. The testimony further shows that (and it is a matter of common knowledge) nearly all standard life insurance companies have discontinued writing life insurance with disability clauses. These clauses constitute a vital part of insured's contract. The protection afforded by them is a matter of great consequence. It cannot be said that assured can procure a similar insurance contract elsewhere. The rule that if insured is an insurable risk, the measure of damage is the difference in the cost of carrying the present policy and the cost of new insurance, cannot be applied in this case, even though such rule was adopted by our Supreme Court, which it has not been.
Taking into consideration the circumstances presented, and applying the rule which the Supreme Court of this State has recently announced as hereinabove quoted, I am inclined to think that the proper measure of damages would be the total premiums paid with interest at the legal rate (amounting to $6,291.20), less the principal and interest owing on the policy loans now held by the company (amounting to $2,531.36). The parties have agreed upon punitive damages in the sum of $250.00.
It is, therefore, ordered that plaintiff have judgment against the defendant for the sum of $3,759.84 actual damages, and the sum of $250.00 punitive damages, amounting in the aggregate both actual and punitive damages, to the sum of $4,009.84.
Messrs. Willcox, Hardee Wallace, for appellant, cite: Measure of damages where contract terminated by act of company: 28 L.Ed., 423; 7 L.R.A. (N.S.), 1163; 144 F., 342; 48 A.L.R., 107; 83 N.W., 506.
Messrs. Royall Wright, for respondent, cite: Measure of damages: 182 S.E., 747; 48 A.L.R., 102.
November 17, 1936. The opinion of the Court was delivered by
The respondent was insured under two policies in the appellant company, each in the amount of $5,000.00 with double indemnity in case of death from bodily injury, and a provision for annuity in case of permanent disability. He brought action on each of the policies to recover damages, actual and punitive, for the alleged wrongful breach of the contracts of insurance by the refusal to accept payment of the annual premiums when tendered.
It is gathered from the statement set out in the record that: A jury trial was waived by the parties. That the question of the amount of punitive damages was adjusted by agreement of the parties; the defendant admitted a simple breach of the policy contracts involved, and it was submitted to the Court, Judge Oxner presiding, to determine the amount of actual damages sustained by plaintiff.
The policies of insurance were introduced in evidence, and it was admitted in open Court that at the time of the breach of the contracts plaintiff was an insurable risk, and that at the time of the trial he had procured a policy for $5,000.00 in the Penn Mutual Life Insurance Company. This was a plain "Ordinary Life" policy, and did not contain the double indemnity and disability provisions of the policies involved herein. It was also admitted that there was outstanding against the policies a loan due by plaintiff in the sum of $1,050.00 on each of said policies, and a premium note of $84.91 against each policy; the premium notes bore date April 15, 1933, and fell due October 15, 1933.
With the introduction of these papers and the admission of the stated facts the plaintiff closed his case, and the defendant examined its witness, Mr. D.E. Buckner.
December 4, 1934, Judge Oxner filed his order by which he fixed the amount of damages, including the amount of punitive damages agreed upon by the parties, at the sum of $4,009.84, for which sum he ordered judgment in favor of the plaintiff.
The defendant appeals upon four exceptions, which impute error to the Circuit Judge; for that he holds that the proper measure of damages in this case is the amount of premiums paid, with interest, without any deduction for the protection afforded up to the time of the alleged breach. Error in not holding that since it is admitted that plaintiff did obtain other insurance, the proper measure of damages is the difference between the cost to plaintiff of the protection obtained by the new insurance and the cost of the protection which he lost, less a proper deduction for the difference in value of the policy obtained by him and the policies lost by him; error in taking into consideration in estimating damages plaintiff's inability to obtain policies containing the indemnity and disability provisions which were contained in the policies lost.
Appellant's counsel ably and learnedly discuss their exceptions, and frankly admit that the decisions of the Courts of the several jurisdictions are in inextricable difference in the declaration of a universal rule for fixing the measure of damages in action for the wrongful breach of insurance contracts. Counsel refer the Court to the annotation affixed to the case of American Insurance Union v. Woodward, 48 A.L.R., 107, and which is discussed in the circuit order here appealed from, where the whole subject is reviewed. But after all is said and written, it remains true that the facts of each case are necessarily of potent influence in determining the measure of damages.
Counsel argue strenuously against the application of the rule laid down by this Court in the case of Pack v. Metropolitan Life Ins. Co., 178 S.C. 272, 182 S.E., 747, and they maintain that Judge Oxner was in error in holding that this case is governed by the Pack case; for that, "every case like this has to be determined upon the particular facts of the case." In this last statement we concur, as we have just said above, but that statement is in accord with the views stated in the Pack case, based upon the general principle that the fundamental rule for the measure of damages is the refunding of the premiums paid. Appellant seeks to find comfort in the case of Latta v. W.O.W., 179 S.C. 376, 184 S.E., 157, but it cannot there be found. The prevailing opinion expressly reaffirms the rule laid down in the Pack case, and the dissenting opinion, upon which appellant relies, turns upon a state of facts essentially different from those in this case.
This Court is satisfied with the conclusion reached by the order appealed from. Let it be reported.
The appeal is dismissed, and the judgment of the lower Court is affirmed.
MR. CHIEF JUSTICE STABLER and MESSRS. JUSTICES BAKER and FISHBURNE and MR. ACTING ASSOCIATE JUSTICE A.L. GASTON concur.