August 17, 1945. This action was brought for the recovery of damages for the alleged wrongful and fraudulent refusal of appellant to accept a renewal premium on an accident insurance policy issued and delivered by it to the respondent. It is alleged that such conduct on the part of the appellant was part of a scheme or design to defraud respondent in his rights under the policy. The trial of the case resulted in a verdict and judgment against appellant in the sum of $46.50, actual damages, and $1,250.00, punitive damages. From this judgment the appeal is taken.
The insurance policy in question is styled "Special Automobile Accident Policy", and was issued by appellant. Mutual Benefit Health and Accident Association, to the insured, who is respondent herein, on March 5, 1934. It was terminated by the appellant on May 1, 1943, by its refusal to accept further annual premium payments.
The main contention of appellant is that the trial Court erred in holding that the policy was terminated without lawful authority, whereas it should have held that the appellant had the right under the terms of its policy to decline to accept such renewal premium; and erred in refusing to grant appellant's motions for a nonsuit and for a directed verdict.
Under the policy, the insurance coverage is confined exclusively to injury or loss of life arising out of automobile accidents; and the contention of respondent is that the provisions *Page 153 of the policy are so ambiguous, and so equivocally expressed that it should not be construed as term insurance, but as a continuous non-cancellable contract.
At the top of Page 1 of the Policy, this promise is held forth:
"Death Benefit Without Increase .................. $1,000.00The figures are printed in heavy black type so as not to escape attention."Death Benefit With Full Increase ................ 2,000.00"
On the bottom of Page 1, under Part B, the policy provides:
"Annual Increase One Hundred Dollars Per Year. After the first year's premium has been paid, each year's renewal premium paid in advance on this policy shall add One Hundred Dollars to the death benefit until the same amounts to Two Thousand ($2,000.00) Dollars."
There is nothing on the first page of the policy, in big print or small type, to put the insured upon notice that the insurance company reserved any right to refuse the acceptance of any renewal premium. Following the above-quoted portion of the policy, on the second page, provision is made for double death benefit, total accident disability, partial accident disability, medical attendance, financial aid if injured on automobile trip, special coverage, and additional benefits if confined to hospital. These various clauses are followed by the policy's standard provisions. This is all that appears on Page 2.
It is not until Page 3 is reached, at the end of the policy, under the casual heading, "Additional Provisions", do we find any suggestion that the acceptance of an annual renewal premium shall be optional with the Association. Under this heading, in fine type, it is provided, in Section (c): *Page 154
"The copy of the application endorsed hereon is hereby made a part of this contract and this policy is issued in consideration of the statements made by the Insured in the application and the payment in advance of Six Dollars and Fifty Cents ($6.50) the first year; and the payments in advance of Five ($5.00) Dollars annually thereafter, beginning with March 1, 1935, is required to keep this policy in continuous effect. If such dues be unpaid, at the office of the Association in Omaha, Nebraska, this policy shall terminate on the day such payment is due. The mailing of notice to the Insured at least fifteen days prior to the date they are due shall constitute legal notice of dues." (Emphasis added.)
At no point in the foregoing provision is there any intimation that appellant reserves any right to refuse the acceptance of a premium. An ambiguous reservation of this kind appears for the first time in small type as a second paragraph in Section (c). It reads as follows:
"The acceptance of any renewal premium on this policy shall be optional with the Association, and should the premium provided for herein be insufficient to meet the requirements of the Association it may call for the difference as required."
It is further provided, in Section (d):
"The term of this policy begins at 12 o'clock noon, Standard Time, on date of delivery to and acceptance by the Insured and ends at 12 o'clock noon on date any renewal is due."
Appellant takes the position that the insurance involved here was term insurance only, for the term for which the premium was paid in advance; that acceptance of any renewal premium was optional with the Association; and that it rightfully exercised this option and rejected the premium tendered after May 1, 1943. *Page 155
Respondent contends that the quoted provisions of the policy worked such a change in the insurance, by reason of their equivocal and inconsistent terms, that it ceased to be term insurance, and became in effect assimilated to lifetime insurance, terminable like life insurance only upon failure to pay the premiums as they fell due. The trial Court, in a well-reasoned order, overruled a motionnon obstante veredicto, or in alternative, for a new trial, and adopted the view of the respondent. After a careful examination of the policy provisions, we reach the same conclusion.
It is true that the policy does provide, in fine print at its end, that the acceptance of any renewal premium shall be optional with the Association, but too much has gone before which, to our mind, conflicts with this provision, and conflicts to such an extent as to justify the construction that the policy was a continuous, non-cancellable contract.
It appears to us that the optional clause itself is not free from ambiguity. After providing that the acceptance of any renewal premium shall be optional, it continues in the same sentence, "and should the premium provided for herein be insufficient to meet the requirements of the Association it may call for the difference as required." This clause can reasonably be construed to mean, as contended by respondent, that the Association could refuse the five dollar premium and demand an adjusted premium based upon its needs. In the light of the contradictory provisions of the policy, this is one of the meanings which may be assigned to the optional clause so as to keep the insurance in "continuous effect", and effectuate the intention of the parties.
The trial Court, discussing the provisions relating to the annual cumulative benefits under Part B, soundly reasoned as follows: *Page 156
"This provision is made conspicuous by its designation as one of the major portions of the policy, and by its prominence on Page 1 with the above-quoted heading in heavy black type. The prominence of the clause is made even more striking by the following stipulation at the top of Page 1, in which the figures are emphasized in very large type:
"`Death Benefit Without Increase .............. $1,000.00"Two points, I think, are significant in connection with this portion of the policy. The annual increase in death benefits was in the first place, at the inception of the contract, held out to the insured by the defendant as an inducement to not only purchase the insurance, but more particularly as an incentive to maintain it in force over a period of years. It is also noteworthy that if it were the intention of the defendant to invoke the absolute right now claimed by it to reject annual renewal premiums, that right could have been made manifest by the insertion following the words `paid in advance' of the words `and accepted by the Association.' The language of Part B as it stands may be fairly construed as showing the intention on the part of the defendant of conferring upon the insured the right to maintain the insurance in continuous effect for the specific purpose of increasing the death benefit protection from year to year. In this connection it is of more than passing interest that the insured in this case, over a period of seven years by successive annual renewals, had increased the death benefit value of the policy from One Thousand ($1,000.00) Dollars to One Thousand Seven Hundred ($1,700.00) Dollars.""`Death Benefit with Increase ................. 2,000.00'
We recognize, of course, the general rule that the ordinary insurance policy covering accident is generally regarded as a species of term insurance, not renewable except with the consent of the insurer. But this formula is not so rigid that it may not undergo modification when the particular provisions *Page 157 of a policy require it. The policy contract in the case at bar must be considered as being of a dual nature, having incongruous elements in its composition. It is not only so phrased as to be deemed term insurance, but it reaches further and is susceptible of the construction that it is continuous insurance, provided only that the premiums be paid.
Policies carrying substantially the same optional clause, reserving the right to refuse the acceptance of premiums, have been up for construction in quite a number of other jurisdictions. Mutual Benefit Health Accident Ass'n v.Caver, 169 Miss., 554, 152 So., 897; Massachusetts Bonding Ins. Co. v. McConnel, 50 Ga. App., 87,176 S.E., 911; Davis v. Mutual Ben. Health Accident Ass'n,168 Okla. 514, 34 P.2d 579. See Annotation, 119 A.L.R., 530.
In the foregoing case, it was held to be not entirely inconsistent with the terms of the policy to give the insurance company the option to refuse any premium. However, the policies in these cases carried no provision, as does the policy in this case, for cumulative benefits.
It seems to us only fair that an insurer acting in good faith should insert in a conspicuous place in a policy an express unequivocal provision with respect to the right of renewal, especially where, as in this case, no provision is made for the cancellation of the policy.
Our attention has been directed to two cases in which courts of other jurisdictions have passed upon policies containing practically the same provisions as the one now before us, and including the provision promising that the benefits shall be progressively increased upon the payment of successive annual premiums. Prescott v. Mutual Benefit Health Accident Ass'n, 133 Fla., 510, 183 So., 311, 119 A.L.R., 525; and Mutual Ben. Health Accident Ass'n v. Lyon, 8 Cir., 95 F.2d 528, 532. *Page 158
In the Prescott case, after quoting the various pertinent provisions of the policy, the Court held that it was not an unconditionally continuing contract, but was a contract for a stated term, renewable for additional stated premiums, on conditions named in the policy. It gives paramount importance to that provision of the policy which reserves the right of the insurance company to reject the renewal premium. But we find practically no discussion as to whether the policy involved, by reason of the provision relating to cumulative benefits, was ambiguous or conflicting. Apparently, the disposition of the case rested upon the meaning and effect to be given the word "acceptance", as used in the optional clause of the policy.
In the second case above noted (Mutual Ben. Health Accident Ass'n v. Lyon), the Court held that it was not persuaded that the promise to make the additions to the benefits in case of accident if the policy should be continued, changed the nature of the insurance; and held that the declaration of clause (c) of the policy, "`the acceptance of any premium on this policy shall be optional with the association.' is equally unequivocal (notwithstanding other provisions found in the same clause)." The Court also noted, apparently as supporting these conclusions, that the increases in the amounts promised by the policy did not apply to the numerous other hazards covered, but only to loss by accidental death. And it was further stated that it was not contended that the increase would cause the insurance to become unprofitable to the Association or that there was any fraud in the transaction. The foregoing case was appealed to the Supreme Court of the United States (Lyon v. MutualBen. Health Accident Ass'n, 305 U.S. 484,59 S. Ct., 297, 83 L.Ed., 303), where it was reversed upon other grounds. The Court refused to decide the question whether the insurer had the right to terminate the policy under the provision — "the acceptance of any premium on this policy *Page 159 shall be optional with the association * * *." Although persuasive, we are not disposed to accept the conclusions reached in the above-mentioned cases.
The terms of an insurance policy should be construed most liberally in favor of the insured, and in case of conflict or ambiguity, a construction will not be adopted that will defeat recovery if the policy is susceptible of a meaning that will permit recovery. Insurance companies frame their own policies, use their own language, except when compelled by the legislature to use a standard policy; insert their own complicated, and in some instances obscure and equivocal, conditions; and courts uniformly give the insured the benefit of any doubt in the construction of the terms used in such policy. Walker v. Commercial CasualtyIns. Co., 191 S.C. 187, 4 S.E.2d 248; Prosser v. CarolinaMut. Ben. Corporation, 179 S.C. 138, 183 S.E., 710;Parker v. Jefferson Standard Life Ins. Co., 158 S.C. 394,155 S.E., 617; Jennings v. Clover Leaf Life CasualtyCo., 146 S.C. 41, 143 S.E., 668.
As was said `in American Indemnity Co. v. Mexia IndependentSchool Dist., Tex. Civ. App.,47 S.W.2d 682, 685: "Insurance companies cannot thus couch their contracts in doubtful language and allow their salesmen to employ the construction most favorable to the insured to catch the unwary, and then, when the company is haled into court, claim the benefit of the construction most favorable to it."
In our own case of Schultz v. Benefit Ass'n of RailwayEmployees of Chicago, 175 S.C. 182, 178 S.E., 867, the policy in question (health and accident) was designated in large type as "Non-Cancellable". It was held under the peculiar facts of that case that the evidence was sufficient to sustain a verdict in favor of the insured in an action for damages for wrongful refusal of the insurer to accept any *Page 160 further premiums on the policy; although, among the miscellaneous provisions in the policy, written in small type, the insurer was given the right to refuse to accept premiums for any renewal period.
In our opinion, the provisions of the policy here are inconsistent, and produce an ambiguity which renders applicable the rule that equivocal or doubtful language in the terms of a policy must be given the strongest interpretation against the insurer which they will reasonably bear. It follows that we find no error in the trial court's judgment on this issue to the effect that the contract was a continuing one so long as the insured paid the premiums as they became due.
We next consider whether the Court erred in refusing to withdraw the issue of punitive damages from the jury. Appellant contends that there was no proof either of fraudulent intention or fraudulent act in connection with the breach — even assuming that the appellant had no right to decline the renewal premium.
As shown by the application attached to the policy, the insured was a banker and obtained the policy in question in 1934. His testimony, which is not contradicted, shows that from the date of the issuance of the policy, the Association established the custom of mailing him a notice fifteen to twenty days prior to the due date of the annual premium. In addition to this, the Association's local agent would invariably call at the insured's place of business and receive and receipt for the annual payment. It appears that Mr. Dabney, the local agent, withdrew from the employment of the Association some time prior to May 1, 1943, on which date the annual payment fell due, and the appellant failed and neglected to mail the insured any notice to remind him of the due date. The matter escaped the attention of the insured until June 12th, when upon looking through his policies, he discovered *Page 161 covered that the premium had not been remitted, due to the omission of the local agent to call for it, and to the fact that he had received no notice. He promptly called Mr. Dabney (he did not know Dabney had left the employ of the company), and as a result of their conversation he sent a check for the premium payment direct to the company on June 12th, together with a letter explaining the circumstances accountable for the delay, and advising the appellant that he would thereafter mail premiums promptly direct to their office in Omaha, Nebraska. The company refused to accept the premium payment, and replied to the insured as follows, on June 21, 1943:
"Here is your check for $5.00 which you recently tendered in payment of the premium on your policy 5-32 688.
"You have our assurance that if at any time in the future we design a form of coverage suitable to your needs, we will have one of our local representatives contact you at your present address."
Appellant alleges in its answer, which is supported by the evidence, that even had the plaintiff tendered his premium on May 1, 1943, it would, acting pursuant to the optional clause, have declined to accept the same. It also appears from the testimony offered by appellant, that after the action was commenced, it offered to reinstate the policy upon payment of the annual premium.
Respondent points to the following circumstances as showing a fraudulent intent on the part of the appellant in breaching the contract: (a) By so wording its contract as to deceive the insured into purchasing what appellant now claims is, at its option, not a continuous policy, although, from its major provisions, it appears to be a continuous contract with cumulative benefits; (b) cancelling the policy only after the accumulated benefits had nearly reached their maximum; *Page 162 (c) after its local agent had withdrawn from its employment, appellant deliberately failed to notify the insured that it would no longer have an agent to collect its premiums; (d) establishing a custom over a long period of time of collecting the annual premium by its agent, then suddenly and without warning breaking the custom; (e) failing to send the plaintiff notice (as was its practice) of the due date of the annual premium; (f) refusing the plaintiff's renewal premium after having maneuvered him into default and continuing to refuse to reinstate the policy until this action had been instituted.
The last sentence in Section (c), under "Additional Provisions", provides, "The mailing of notice to the insured at least 15 days prior to the date they (premiums) are due shall constitute legal notice of dues."
The trial Court held that the mailing of notice under this provision was not mandatory. But, even so, we think it has a bearing upon the charge of fraud when, having been commenced and continued for a long period, the custom was suddenly stopped, and no notice was mailed to the insured immediately prior to May 1, 1943, when the premium fell due.Jamison v. American Workmen Ins. Co., 169 S.C. 400,169 S.E., 83; Schultz v. Benefit Ass'n of Railway Employeesof Chicago, 175 S.C. 182, 178 S.E., 867.
We also consider as an element supporting the charge of fraud in some measure, the peculiarly evasive and obscure phraseology of the letter from appellant to the insured of June 21st, above quoted.
The established rule in this state is that punitive damages are not recoverable for a mere breach of contract. To recover damages of that character, the plaintiff must show that the breach was accomplished with fraudulent intention, and was accompanied by a fraudulent act. Calder v. Commercial Casualty *Page 163 Ins. Co., 182 S.C. 240, 188 S.E., 864, and cases cited therein.
After careful examination of the record, in the light of previous decisions, we are unable to conclude as a matter of law that the evidence in the case excludes all reasonable inference of fraud. Bradley v. Washington Fidelity Nat. Ins.Co., 170 S.C. 509, 171 S.E., 243; Mack v. Life CasualtyIns. Co. of Tennessee, 171 S.C. 350, 172 S.E., 305.
Nor are we persuaded that the trial Court erred in refusing to order a mistrial, the motion being based upon the following incident: When the plaintiff was testifying, he was asked by his attorney whether he had been offered a reinstatement of his policy, which offer had been alleged in the answer of the appellant. He replied: "I have never seen anybody from that company. A fellow, Dobbs, came over here from Atlanta, and offered to settle with me."
Timely objection was made on behalf of the appellant, the jury was excluded, and the motion for mistrial followed, based upon the ground that any testimony with reference to a settlement was not only inadmissible, but so prejudicial as to make a new trial necessary.
In answering the question, the plaintiff was a volunteer, as his answer was in no sense responsive to the question asked.
The trial judge reserved his ruling until the next morning. He agreed with counsel for appellant the day before, when the motion was made, that the volunteered statement was prejudicial, but evidently upon reflection, decided that the matter could be cured by a proper instruction to the jury, and overruled the motion. When the jury was recalled, the Court fully instructed them that the statement with reference to the offer of settlement in the testimony of plaintiff was irrelevant, and had no place in the case; had nothing to do with any of the issues involved in the case, and that it was *Page 164 improper and should not have been made. He told the jury to completely disregard the statement.
We think any prejudice to the defendant was eliminated by the foregoing emphatic statement of the trial court to the jury. Neal v. Clark, 199 S.C. 316,19 S.E.2d 473. The ordering of a mistrial as a general rule is left to the sound discretion of the trial judge. James v. Atlantic CoastLine R. Co., 199 S.C. 45, 18 S.E.2d 616; Neal v.Southern Ry., Carolina Division, 162 S.C. 288,160 S.E., 837.
In addition to this, we think the prejudice, if any, was neutralized by the pleading and evidence of the defendant that despite its refusal to accept the premium prior to the action, it had, subsequent to the bringing of the action, offered to reinstate the policy upon payment of the annual premium. The average jury is not apt to make any worthwhile distinction between an offer of settlement and an offer to reinstate.
Finally, it is urged that the verdict of punitive damages was so excessive that the trial court should have granted a new trial. Punitive damages in cases of this kind bear no particular ratio to actual damages, and while the verdict is large, it is not out of line with verdicts sustained by this court in cases involving similar issues. Riley v. Life CasualtyIns. Co. of Tennessee, 184 S.C. 383, 192 S.E., 394;Smith v. Benefit Ass'n Railway Employees, 178 S.C. 449,183 S.E., 318; Barber v. Industrial Life Health Ins. Co.,189 S.C. 108, 200 S.E., 102; Sturkie v. CommonwealthLife Ins. Co. of Louisville, Ky., 180 S.C. 177,185 S.E., 541.
Judgment is affirmed as to actual damages and should be affirmed as to punitive damages.
MR. ASSOCIATE JUSTICE STUKES concurs. *Page 165
MR. CHIEF JUSTICE BAKER and MESSRS. ASSOCIATE JUSTICES TAYLOR and OXNER concur in part and dissent in part.