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Williams v. Union Central Life Ins. Co., 291 U.S. 170 (1934)

Williams v. Union Central Life Ins. Co.

No. 208

Argued December 14, 1933

Decided January 15, 1934


1. A paid-up addition to a policy of life insurance is an amount added to the face of the policy, paid for by a single premium, for which there must be a legal reserve. P. 291 U. S. 173.

2. This is the meaning of the term " dividend additions," as used in Art. 7432, Par. 7, Rev.Civ.Stats. of Texas, 1925. P. 181.

3. A paid-up addition is distinct from extended insurance. P. 291 U. S. 173.

4. The policy provided:

"In the event of the death of the insured during the days of grace, the current premium being unpaid, if no other option has been elected, or if the policy shall lapse, the dividend then due shall be paid in cash."

Held applicable where the policy lapsed and the insured died after the days of grace. P. 291 U. S. 174.

5. A level premium participating policy provided that, upon lapse for nonpayment of premium, if the insured failed to exercise specified options, the dividend due him for the current year should be paid him in cash, and the surrender value of the policy (defined as equal to the reserve at the end of the policy year, less surrender charges), together with the value of any paid-up additions, and accumulations of dividends at interest, should be applied to the extension of the policy as term insurance from the date to which premiums had been paid, first deducting any indebtedness or advances on the policy. Held:

(1) That a current dividend as to which the insured had exercised no option was inapplicable to increase the extension of insurance, but was payable in cash. P. 291 U. S. 176.

(2) A dividend is no part of the surrender value. P. 291 U. S. 176.

(3) The provisions as to paid-up additions and accumulations of dividends at interest have no relation to such current dividend or to earlier dividends applied in reduction of premiums. P. 291 U. S. 178.

Page 291 U. S. 171

6. Advances against surrender value do not create a personal liability or debt of the inured, but are merely deductions from the sum that the company ultimately must pay. P. 291 U. S. 179.

7. The company has no right, without agreement with the insured, to apply dividend payable in cash under the policy to the reduction of an advance against the policy. P. 291 U. S. 180.

8. While it is highly important that ambiguous clauses should not be permitted to serve as traps for policyholders, it is equally important to the insured, as well as to the insurer, that the provisions of insurance policies which are clearly and definitely set forth in appropriate language, and upon which the calculations of the company are based, should be maintained unimpaired by loose and ill considered interpretations. P. 291 U. S. 180.

65 F.2d 240 affirmed.

Certiorari, 290 U.S. 613, to review a judgment reversing a recovery obtained by the present petitioner in an action on a policy of life insurance. The case was removed to the District Court from a court of Texas on the ground of diversity of citizenship.

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