Sanford v. Commercial Travelers' Mutual Accident Ass'n of America , 147 N.Y. 326 ( 1895 )

The certificate of insurance, to recover upon which this action was brought, contained this clause: "It is hereby stipulated and agreed, by and between this association and the member named herein and his beneficiary, that the issues in any action brought against it under this certificate shall, on the demand of this association or its attorney, be referred for trial to a referee to be appointed by the court in which such action is brought." An order of reference of the issues in the action has been reversed at the General Term below and the motion for a reference denied; and the question is whether such an agreement is valid and binding upon the parties.

Little, if anything, can be added to the opinion of the General Term. Such a provision, if beneficial at all to the company, can only be so through superseding the law established for the trial of actions and compelling the beneficiary practically to submit an issue. That is vicious for tending to limit the court, having cognizance of the action, in its jurisdiction and for militating against the constitutional provision which secures to a party the right of trial by jury The cases, cited in the opinion below, abundantly show that a general covenant to submit any differences that may arise in the performance of a contract, or under an executory agreement, is a nullity. In the case of The President,etc., D. H. Canal Co. v. Pennsylvania Coal Co. (50 N.Y. 250), where that proposition was so stated, Judge ALLEN, in his opinion, was inclined to question the rule if res nova; but he regarded it as too well established to be now questioned. The rule, in its application to such a case as this, seems to me, however, to be well supported by reason. The defendant is a corporation which owes its existence to the laws of this state and to which has been granted the right to do the business of insuring the lives of individuals. The dictates of a sound public policy would seem to require that its contracts of insurance, while providing every wise and reasonable restriction, should not compel the individual who seeks to insure his life, to submit, as a condition of obtaining that insurance, to conditions which are in violation of constitutional rights. Such a provision in the policy has no reasonable relation to the contract of insurance. Its insertion is unnecessary to the protection of the insurance company and may be regarded, therefore, as an unimportant provision. I think we may safely base the reason for the application of this rule upon the proposition that public policy is opposed to the enforcement of an agreement, which supersedes the law and deprives the individual of the protection which it was designed and framed to afford.

The order appealed from should be affirmed, with costs.

All concur.

Order affirmed.