Landau v. New York Life Insurance

BECKEB, J.

Plaintiff seeks to recover of the defendant $1374.75 as for moneys had and received. The petition alleges that the defendant George C. Stinde'acting for and on behalf of the defendant New York Life Insurance Company, procured from the plaintiff certain applications for policies of insurance to be issued by the defendant New York Life Insurance Company, on the life of the-plaintiff, and, as a direct inducement for plaintiff’s taking out the insurance defendant Stinde offered to pay, allow or give to plaintiff a rebate on the premiums payable on said policies; that plaintiff paid to the defendant New York Life Insurance Company $1374.75 as a first premium payable on the purported policies of insurance issued to the plaintiff in pursuance to the applications procured as aforesaid. The petition further alleges that the said policies issued under these circumstances were illegal and void and therefore that no consideration passed to the plaintiff for said sum of money paid by him as premiums therefor; that the plaintiff returned the policies to the defendant New York Life Insurance Company and demanded a return of the money paid by him as the first premiums on the alleged invalid policies of insurance, but that defendant failed and refused to pay the plaintiff said sum or any part thereof.

The defendants filed separate demurrers, each defendant predicating its separate demurrer on the ground that the petition failed to state facts sufficient to constitute, a cause of action. These demurrers were sustained -by the court. The plaintiff stood on his petition and refused to plead further and final judgment was entered on the demurrers m favor of the defendants; whereupon plaintiff brings this appeal.

The sole proposition presented to this court for determination is the question of the sufficiency of the petition to state a cause of action against either or both of the defendants. To determine this question- it will be necessary that we construe sections 6934 and 6935, Revised Statutes of Missouri, 1909, upon which sections plaintiff must rely to warrant a recovery on his part.

Section 6934 prohibits discriminations and rebates or any special favor as an inducement to the taking out of a policy of life insurance. By one of the provisions of this section life insurance companies, or any officer, agent, solicitor or representative thereof are prohibited from paying, allowing or giving, or offering to pay, allow or give directly or indirectly, as inducements to insurance, any rebate of the premium payable on the policy. Section 6935 provides as a penalty for the violation of a(ny of the provisions of section 6934 by any insurance company, the- revocation of its license to do business in the State and the barring of such guilty company for a period of five years from the further transaction of any business in this State, and further provides that any agent who shall violate any of the provisions of said section shall be deemed guilty of a misdemeanor and on conviction thereof shall be fined not less than $50 or more than $500 for each offense, or imprisonment in the county jail for not less than thirty days nor more than six months, or by both such fine and imprisonment.

It is argued by learned counsel for appellant that the penalty inflicted by the statute implies a prohibition against the writing of any insurance upon a promise to rebate a part of the premium, and that policies of insurance entered into in violation of'such prohibition-of the statute are absolutely void even though the statute itself does not mention that the policies so issued shall be void.

After carefully considering the statute and the undoubted intention of the legislators who enacted the same, and considering the said sections in light of the recognized rules of judicial construction, we cannot hold that a policy of insurance which has been duly executed, delivered and accepted by the insured and the first premium for such policy paid for, is void by reason of the fact . that the insurance company or its representatives promised to give the insured a rebate of part of the premium paid for such insurance.

The wording of the statute is plain that it is intended not to prohibit the writing of life insurance but that it prohibits the promising and giving of rebátes on premiums. We concede at the outset that any contract entered into or note given for a rebate would be absolutely void because the statute prohibits the promising or giving of any rebate. But it does not follow from that, that the policy of insurance is void.

It will be noted that the statute places a penalty upon the insurance company or its agent or representative who violates this statute but provides no penality for the insured. To hold the'policies of insurance1'illegal or void, as contended for by appellant, would result in invalidating many contracts of life insurance aggregating perhaps thousands of dollars on which the insured have paid many years ’ premiums, and this because an agent of the company which issued the policies had, with or without the knowledge of the officers of the company, granted a rebate out of the agent’s commission of part or all of the first or other premiums.

We are unwilling to hold the Legislature intended that an insurance company, where a policy has been issued and some part of the premium returned or rebated, should be permitted to proceed for years thereafter to accept the premiums called for under the policy and then upon the demise of the insured be permitted to deny any liability under the policy on the ground that it was void ab initio because a rebate had been allowed the insured upon his original or other premium in violation of the statute. Nor can we conceive that it was intended that an insured who had received a rebate, should be permitted at any time within the period limited by law for the commencement of such action, to recover all premiums which the insured may have paid upon the policy because of his having received such rebate, to the disadvantage of the others insured in such company who had conformed to the law and paid the full amount of the prescribed premiums. To hold otherwise would be to reward the very violators of this statute and that too at the expense of those who strictly adhered to the law.

“Insurance companies are engaged in a public business, and upon grounds of public policy insurance contracts that may, in preliminary verbal arrangements between the soliciting agent and the insured, have been tainted with the vice of rebating, should, when fully executed and reduced to writing be held valid as between the insured and the insurance company, neither of them being allowed to defeat the contract in any part upon the ground that it was secured in the manner stated in violation of the statute. [Laun v. Pac. Mutual Life Ins. Co., 131 Wise. 555, 111 N. W. 660, 9 L. R. A. (N. S.) 1204; Quigg v. Coffy, 18 R, I. 757, 30 Atl. 7947; Rideout v. Mars, 99 Miss. 199, 54 South. 801; Security Life & Annuity Co. v. Costner, 149 N. C. 293, 63 S. E. 304; Interstate Life Assurance Co. v. Dalton, 165 Fed. 176, 91 C. C. A., 210, 23 L. R. A. (N. S.) 722; American National Insurance Co. v. Brown (Ky. App.), 201 S. W. 326.]

“When the purpose of a statute is . . . a regulation of a traffic or business, and not to prohibit it altogether whether a contract which violates the statute shall be treated as wholly void will depend on an intention expressed in the particular statute. Unless the contrary intention is manifest the contract will be valid.” [Sutherland, Statutory Construction (2 Ed.), see. 503.]

It is plain that the purpose of our statute is to regulate contracts of insurance and not to prohibit them. It is equally clear that the statute does prohibit and render void all rebating agreements. Had the Legislature so intended, the statute could have provided that the policy or contract -of insurance be void or' nonenforceable. The statute is silent as to what effect the violation of the statute shall have upon any policy of insurance that may have been fully executed and delivered. It would thus seem that the insured can be required to pay the full amount of the premiums, whilst the agent or company guilty of the rebating can be punished under the statue. Under such a construction of the statute the full purpose of the law is carried out and the ends of justice subserved without invalidating the policy of insurance itself.

We therefore hold that, considering the object of this legislation, its effect upon the nonoffending policy-holders and beneficiaries, and having in mind the particular penalties provided therein for any violation thereof, the contract of insurance itself is neither illegal nor void. Plaintiff received, in consideration of his premiums paid, valid policies of insurance and consequently he cannot recover the premiums or any part thereof. It follows that plaintiff’s petition fails to state a cause of action and the court properly sustained the separate demurrers of each of the defendants. The judgment is accordingly affirmed. .

Reynolds, P. J., and Allen, J., concur.