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Barnett v. Southwestern Life Insurance
Citations: 269 Ark. 940; 601 S.W.2d 604; 1980 Ark. App. LEXIS 1317Docket: CA 80-127
Court: Court of Appeals of Arkansas; July 9, 1980; Arkansas; State Appellate Court
Two life insurance policies issued by Southwestern Life Insurance Company to Vernal E. Barnett are at the center of this appeal. The first policy, for $10,000, was issued on April 19, 1962, and the second, for $90,000, on June 10, 1968. Both policies included "Premium Waiver Riders," which stipulate that if the insured became totally disabled before the policy anniversary following his 60th birthday, the company would refund premiums paid in the prior six months and waive future premiums while the disability continued. The riders specified that they would automatically terminate on the anniversary nearest the insured's 60th birthday unless total disability was proven within nine months after that date. Total disability is defined as an inability to engage in any business or occupation due to bodily injury or disease occurring after the policy issuance and before the insured's 60th birthday. The riders included a "NOTICE OF CLAIM" clause requiring written notice during the insured's lifetime and total disability, with allowances for delays if it was not reasonably possible to provide timely notice. Additionally, the "PROOF OF TOTAL DISABILITY" section mandated that written proof of total disability must be provided while the rider was active or within nine months post the 60th birthday anniversary, with this requirement being a condition precedent for benefits. Barnett claims he became totally disabled by December 15, 1975, but did not notify the insurer until June 28, 1978, because he was unaware of the waiver benefits. The insurer denied his request for premium waivers, leading to a lawsuit for recovery of paid premiums and a declaration for future waivers. The court ruled that Barnett failed to provide timely proof of disability, which was a condition precedent, and found no sufficient evidence to excuse his failure to notify due to mental disability. Barnett is appealing this decision, arguing that the "NOTICE OF CLAIM" clause allows proof of disability to be submitted at any time while he remains disabled. The rider explicitly states that the occurrence of disability has a cut-off date at the policy anniversary closest to the Insured's 60th birthday, and it includes a termination clause that reinforces this point. An interpretation allowing proof of disability to be submitted at any time after the occurrence would disregard this clear language. The argument that late notice of disability does not hinder the Insurer's ability to investigate is rejected, as the Insurer had the right to assess the proof at the original time of the disability claim. The Chancellor determined that the Insured's mental disability did not reach the required level to excuse the failure to provide timely notice under the savings clause, as previous cases establish a higher standard for mental infirmity. The Chancellor also ruled that providing evidence of total disability was a condition precedent to liability, which was not satisfied by a letter sent in June 1978. While the denial of premium waiver could resemble a forfeiture—an outcome generally disfavored in equity—this situation does not constitute a true forfeiture. Equity recognizes forfeitures where not doing so would be inequitable. The ruling maintains that the clear language of the policy should be upheld, as the Insured's failure to act timely was due to his own omission, and altering the policy language would unfairly shift the burden to the Insurer. The decision is affirmed, emphasizing adherence to the explicit terms of the policy.