51. McGUIRE v. THE MANUFACTURERS LIFE INSURANCE CO.

(1950)
(Reinstatement of Lapsed Life Insurance Policy)
Luciano, Noel

Facts:
1. The Manufacturers Life Insurance Co. (TMLIC) issued an insurance policy on the
life of Jaime McGuire for the sum of $5,000 and an additional $5,000 as double
indemnity accident benefit, payable to McGuire as beneficiary.
a. McGuire paid the premiums up July 1940.
2. On June 1940, McGuire secured from TMLIC a loan of $760 on the insurance
policy. This he failed to pay with interest when it became due. He also failed to
pay the premiums which fell due on July 1941.
3. Upon default, TMLIC applied the stipulation in Clause 8 (Automatic Premium
Loan) and the policy was carried on under nonforfeiture clause up to and
including March 1942, the date the policy lapsed.
4. McGuire died on August 1943 in a motorcycle accident.
5. During the interim period between March 1942 (lapse of policy) and August 1943
(death of insured), McGuire attempted to reinstate the policy under Clause 3 but
this failed because of his inability to communicate with TMLIC’s branch office due
to the then existence of war.
6. McGuire’s theory was that although the policy lapsed on 1942, he had the
privilege of reinstating it so as to keep it in force up to the time of his death upon
a written application within 3 years from the date of lapse and upon production of
evidence of insurability and payment of premiums.

Issues: WON TMLIC is liable under the policy on the ground that this was validly
reinstated by the insured.

Held: NO.

McGuire’s theory is untenable. Even if he had applied for reinstatement within

3 years after the policy had lapsed, his right thereto was not absolute under the terms of
the policy but discretionary on the part of the insurance company, which had the right to
deny the reinstatement if it was not satisfied as to the insurability of the insured and if
the latter did not pay all overdue premiums and all other indebtedness to the company.

The stipulation in a life insurance policy giving the insured the privilege to
reinstate it upon written application within three years from the date it lapses and upon
of evidence of insurability satisfactory to the insurance company and the payment of all
overdue premiums and any other indebtedness to the company, does not give the
insured absolute right to such reinstatement by the mere filing of an application therefor.
The company has the right to deny the reinstatement if it is not satisfied as to the
insurability of the insured and of the latter does not pay all overdue premiums and all
other indebtedness to the company. After the death of the insured the insurance
company cannot be compelled to entertain an application for reinstatement of the policy
because the conditions precedent to reinstatement can no longer be determined and
satisfied.

TMLIC not liable.