Lantz v. Vermont L. Ins.

OpinioN,

Mb. Chief Justice Paxson :

This was an action on a policy issued by the defendant company, insuring the life of Simeon B. Lantz, for the benefit of his wife, Evalina E. Lantz, the plaintiff below. The policy stipulated that the premiums should be paid quarterly, on the nineteenth days of February, May, August, and November in each year; that if the said premiums should not be paid on the days named and in the lifetime of the assured, the policy should cease and determine; that the acceptance of a premium after maturity should not be deemed or construed as a waiver, or as any evidence of an agreement to waive the payment of any future premiums at the time the same shall, by the terms of the policy, become payable; and that no person except the president and secretary, acting together, are authorized to make, alter, or discharge contracts, or waive forfeitures.

Upon the trial below it was among the admitted facts of the case that the premiums falling due in May, August, and November, 1887, were not paid at maturity, but were paid after maturity, and accepted by the company ; that the premium due on February 19,1888, was not paid at maturity; that on March 2, 1888, a brother of the insured, who was also a policy-holder, called on the general agent of the company in Philadelphia, and informed the latter that Simeon B. Lantz would be down on March 6th to pay his premium, and was told that he, the agent, did not make out his monthly report until the tenth of the month, and that if the premium was .paid by the ninth it would be all right. So far there is no dispute. But Mr. Lantz, the witness, testified that there was no condition annexed to the promise to receive the money, while Mr. Ryer, the agent, testified that he said he would receive the money provided the insured was in his usual health at the time; that he would have to be satisfied upon this point, either by a health certificate, or by seeing the insured personally, and that in the meantime the latter was carrying the risk himself. This question of fact was submitted to the jury, and they have found there was no condition annexed to the promise. We must, therefore, treat the case upon this basis.

It may simplify the discussion somewhat to note the following admission of the learned counsel for the company, to be found on page 12 of his paper-book:

“ It was admitted on the trial that the insured had paid three prior premiums after maturity, which had been received by the defendant; and also that the manager was in the habit of, and practically had authority to receive premiums and deliver renewal receipts after maturity, provided that the insured was at the time of the payment in good health. This was as far as the testimony went. There was no evidence which, even the plaintiff pretends, goes to show that the agent had authority, or has ever acted beyond this, or that the company had ever known of or ratified such agreement; and it was further admitted, that, if Simeon B. Lantz, the insured in this case, had on March 9th been alive and in good health, and had tendered payment of the premium, it would have been received.”

Simeon B. Lantz, the insured, was in good health on March 2d, but was taken ill on the next day, and died on March 6th.

The above admission disposes of any question as to the authority of the general agent to receive overdue premiums. But we must stop where the admission ends, unless a further or greater authority is to be found in the evidence. In order to establish an authority to receive an overdue premium, after the dehth of the insured, one of two things must be shown, viz.: (a) An express authority to do so, conferred upon him by the company; or (5) such a course of dealing on the part of the company, by ratifying or recognizing such acts of the agent, as would justify persons dealing with said company in assuming that he possessed such authority. There is not a word in the testimony to sustain either of these propositions. All that it shows was the receipt of overdue premiums on three occasions. But the insured was in full life and health at the time. The case of the plaintiff, if sustained at all, must rest upon the promise of the agent to receive the premium up to the ninth day of March. This promise, as before observed, the jury have found to be an unconditional one. This I understand to mean, that the money would be received as late as the ninth of March, without regard to the health of the insured, or even his death prior to that time. It remains to consider the legal effect of such promise.

The first question which logically suggests itself is, what was the legal effect upon the status of the policy, by the default or failure to pay the premium due on the nineteenth of February ? Did it continue to bind the company and protect the insured thereafter ? And, if so, how long did it remain in force ? Was it for a week, a month, or a year ? I know of no instance in which a policy was held to be in force after such a default, unless in pursuance of a contract made between the company and the insured contemporaneous with the insurance, or during the life of the policy. In Helme v. Insurance Co., 61 Pa. 107, the plaintiff offered to prove “ that it is the custom among insurance companies to receive premiums if tendered at any time within thirty days of the time they fall due, provided the insured is in usual health, and that this is the custom among companies issuing policies stipulating that non-payments of premiums at the day shall be a forfeiture.” This offer was rejected by the court below, and the rejection was held to be error, Chief Justice THOMPSON saying: “ It might have been a difficult thing,to prove such a custom, but that was not a good ground on which to refuse the offer.” The grounds of this decision are obvious. While a custom which has grown into a law may not be heard, as a general rule, to affect the terms of a statute, nor a contract, to the extent of enlarging or abridging the force of it, yet it may interpret either: Rapp v. Palmer, 3 W. 178. The Chief Justice gives a number of examples of the application of this principle ; among others, the familiar instance of the days of grace on commercial paper. By the custom of merchants, so universal as to have grown into law, such paper is not due until three days after it purports to be due; or rather, the remedy is suspended during that period.

It was not alleged that any such custom existed in this case. There was not even an offer to show it, much less proof to support it. Did the fact that the company upon three prior occasions accepted the premium from the insured after maturity, the insured being in good health at the time, continue the policy in force after the default on the nineteenth of February? I know of no authority for such a proposition, and none has been called to our attention. It was at most a mere personal indulgence, a matter of grace on the part of the company; and all that can be claimed for it is that it may have led the insured to believe that, if he again neglected to pay on the day, the money would be accepted if paid shortly thereafter, provided no change had occurred in his condition of health. The law upon this subject is so clearly stated by Mr. Justice Bradley, in Thompson v. Insurance Co., 104 U. S. 252, that I need make no apology for quoting it at length:

“ The last replication sets up and declares that it was the usage and custom of the defendants, practiced by them before and after the making of said note, not to demand punctual payment thereof at the day, but to give dajs of grace, to wit, for thirty days thereafter; and they had repeatedly so done with Thompson and others, which led Thompson to rely on such leniency in this case. This was a mere matter of voluntary indulgence on the part of the company, or, as the plaintiff himself calls it, an act of leniency. It cannot be justly construed as a permanent waiver of the clause of forfeiture, or as implying any agreement to waive it, or to continue the same indulgence for the time to come. As long as the assured continued in good health, it is not surprising and should not be drawn to the company’s prejudice, that they were willing to accept the premium after maturity, and waive the forfeiture which they might have insisted upon. This was for the mutual benefit of themselves and the assured, at the time ; and, in each instance in which it happened, it had respect only to that particular instance, without involving any waiver of the terms of the contract in reference tó their future conduct. The assured had no right, without some agreement to that effect, to rest on such voluntary indulgence shown on one occasion, or on a number of occasions, as a ground for claiming it on all occasions. If it were otherwise, an insurance company could never waive a forfeiture on an occasion of a particular lapse, without endangering its right to enforce it on occasion of a subsequent lapse. Such a consequence would be injurious to them and to the public.”

The consequence of a default in the payment of the premium is defined in the policy itself. It declares that, if not paid oil the days named and in the lifetime of the insured, the policy should “ cease and determine.” By this I understand that it is suspended; it ceases to bind the company and to protect the assured, and this without any act or declaration on the part of the former. It does not require a formal forfeiture. This term is often used, and, I think, inaccurately, in such cases. Nor, is the policy void in the general sense of that term. It is voidable at the election of the company, and that election can be exercised without notice to the assured, for the reason that the policy itself is notice that his rights cease with the non-payment of the premium. As to him it is a dead policy. It is true it may be restored to life, by the subsequent payment of the premium and its acceptance by the company. This, however, is a new contract by which the compan3r agrees in consideration of the premium to continue in force a policy which had previously expired; in other words, it is a new assurance, though under the former policy : Want v. Blunt, 12 East 183. I do not understand it to be contended that, had the assured died between the nineteenth of February and the second of March, there could have been a recovery on this policy. It seems almost a work of supererogation to cite authorities for so plain a proposition, and I will refer to but few, out of an abundance.

In Washington Ins. Co. v. Rosenberger, 84 Pa. 873, which was a case of fire insurance, our Brother Stekrett, after saying that the default suspended the protection of the policy, continued: “ Upon the payment of the assessment the policy would have been revived in its full vigor; but it was never paid, or even tendered, until after the fire, and, as delinquent policy-holders, they had no right to maintain the action without showing that the default was either waived or excused by the company. There is no evidence of waiver, nor do we think there is any evidence to excuse the default. There was considerable testimony showing that great indulgence was extended to delinquent members, and that the company was accustomed to receive assessments long after they were due; but this is entirely consistent with the fact that, while the default continued, the protection of the policy was suspended.” In Lycoming Ins. Co. v. Rought, 97 Pa. 415, it was said by Mr. Justice Merctjb : “ It is well settled, if a member of a mutual insurance company is in default in the payment of an assessment upon his policy, after due notice according to the by-laws and rules of the company, the protecting power of the policy is suspended until the assessment is paid. No recovery can be had for a loss sustained during the continuance of such default: ” citing Hummel’s App., 78 Pa. 320; Columbia Ins. Co. v. Buckley, 83 Pa. 293; Washington Ins. Co. v. Rosenberger, 84 Pa. 373; Crawford Co. Ins. Co. v. Cochran, 88 Pa. 230. It is true, these were cases of fire insurance companies, but the principle is equally applicable to a case of life insurance.

This we think sufficient to show that no recovery could have been had upon this policy, had the assured died between the date of the maturity of the premium, and the promise of the agent to accept the premium on the ninth of March. Regarding that' as a promise to accept the premium, even in the ease of the previous death of the assured, we are led to inquire, in the first place, what authority had the agent to make such a promise ? The condition of the policy is explicit that the premium must be paid “ in the lifetime of the insured.” Had the agent the authority to waive this condition? The policy not only declared that no person except the president and secretary, acting together, are authorized to make, alter, or discharge contracts, or waive forfeitures, but a notice to the same effect was printed on the back of each renewal receipt given to Mr. Lantz. It was not alleged that the president and secretary, acting together or singly, had ever waived this condition in the policy, or that they, or either of them, had given authoi'ity to the agent to waive it in this or any other instance. No course of dealing was shown on the part of the company by which the grant of such authority to the agent could be implied. There was not even an attempt to prove that the company or its agent had ever received an overdue premium after the death of the assured. There is nothing within the four corners of this record to show that the agent had authority, express or implied, to waive this condition. What right had the assured to. suppose, with this condition in the very front of his policy, that the agent would receive his overdue premium after his death ?

We are not without authority upon this point. The leading case is Want v. Blunt, 12 East 183. The following statement of the facts is condensed from the opinion of Lord ElleN-BOBOTJGH: The policy provided for the payment of quarterly premiums on March 25th, June 24th, September 29th, and 20th of December, during the life of the said W. W. Want, or within such time after those days, respectively, as is or shall be allowed for that purpose by the rules of the said society. It was provided by the rules of the society that if any member neglected to pay the quarterly premiums for fifteen days after the same become due, the policy will be void. This provision was attached to the policy. The quarterly payments were all paid at maturity, until the one that came due on December 20th, which was not paid, and Want died on December 25th; and on December 27th, two days after his death, but within the fifteen days, his executors tendered the payment of the premium, which was refused. The court sustained the refusal, Lord ElleNBOROTJG'H saying, inter alia : “ This is a contract of assurance, and must be construed according to the meaning of the parties as expressed in the deed or policy. The risk insured against is his death, and the premium is a quarterly payment, to be made by him to the society during his life. The duration of the insurance is so long as he shall continue to make those quarterly payments; but the insurance is not to be void if he pay the quarterly premium within such time after the quarter day as is allowed by the rules of the society. The covenant on the defendant to pay the wife’s annuity after Want’s death is, ‘if Want shall pay, or cause to be paid, the quarterly premium on every quarter day during the life of Want, or within such time after as shall be allowed by the rules of the society for that purpose; ’ in construing which sentehce, the expression, ‘ during the life of Want,’ must be understood as applying to and carried on to the latter part of the sentence, and is the same as if the words ‘ during the life ’ had been repeated after the words ‘ within such time after,’ i. e., or ‘ within such time after, during the life ’. For these reasons we are of opinion that the death of W. W. Want, which happened on the 25th of December, was during a period of time not covered by the policy, and that, on the true construction of the policy and rules of the society, the insurance could not be continued beyond the expiration of the quarter which ended on the 20th of Decern-ber, by a tender of the premium by his executors after his death, though within fifteen days after the quarter day, so as to include within the policy the period of his death.” In Simpson v. Insurance Co., 2 C. B., N. S., 257, the words of the policy were: “ Provided he, the said insured, on or before .pay or cause to be paid to the defendant the annual premium;’’and on this point the court said: “The policy was to continue, provided he, the insured, paid the premium within the twenty-one days; and this, we think, did not give the executors the right to pay it after his death.” To the same point is Pritchard v. Society, 3 C. B., N. S., 622; Insurance Co. v. Ruse, 8 Ga. 534. The rule laid down in Want v. Blunt, supra, appears to have been followed in all subsequent cases where the same point arose. If there has been any departure it has not been called to our attention.

If, however, we are wrong in this; if we regard the condition in the policy that the premium must be paid in the lifetime of the insured, as of no effect, or, if effective, that it has been waived, there is another reason why the company was not bound to receive the premium after the death of the assured.

I have endeavored to show that by the failure to pay the premium, the policy lapsed, or was suspended, on the nineteenth of February. With the policy in this condition, the plaintiff proved, as already stated, an unconditional promise, on the part of the agent of the company, to accept the premium up to the ninth of March. In the ordinary case of the payment of an overdue premium, as all the authorities show, the policy does not bind between the default and the payment. The plaintiff claims that this case does not come within the rule; that the promise enlarged the time of payment, precisely as if March 9th had been the period stipulated in the policy; and that from the time the promise was made until the time it was to be fulfilled the policy was in full force. But if, as I have at least endeavored to show, the policy did not bind between the default and the promise, what occurred on the second day of March to change the situation of the parties and restore this dead policy to life? Was it the payment of the premium? The premium was not paid. Was it a promise to pay it? There was no such promise. There was nothing bat the bare promise of the agent to accept the premium if paid by the ninth of March. Had it been paid by the assured prior to that date, and accepted by the company, the policy undoubtedly would have been restored to life. This would result, not by virtue of the promise of the agent, but from the acceptance of the premium as a consideration for the renewal. It would have been a new assurance under the old policy. The mere promise of the agent, made after the default had occurred, to receive the premium up to March 9th, was a nudum pactum. It was not a contract, because there were no contracting parties. The assured gave nothing; promised nothing. A lapsed policy can only be restored to life, so far as the assured is concerned, by the actual payment and acceptance of the premium, or a contract based upon a sufficient consideration. What consideration did the company receive for carrying this risk from the nineteenth of February until the ninth of March ? Had the insured lived until the latter date, and then refused or neglected to pay his premium, he would have had the benefit of an insurance on his life during said period without paying a dollar of consideration. For, as before stated, he did not give anything, nor did he promise anything. It was optional with him to pay; the company could not have enforced it against him had he declined. There is no provision in the policy which covers such a case. If the insured does not pay, the policy drops, and the contract relation ceases.

Marvin v. Insurance Co., 85 N. Y. 282, is so exactly like the case in hand upon the facts that a reference to it will not be out of place. In that case one Milton B. .Marvin had a policy of |3,000 on his life, payable to his wife in case of his death. The premium due on the thirteenth of April was unpaid. On the 27th of April, Hinkle, the agent of the company, told the assured that if he paid the premium the next morning, the 28th, he, the agent, would receive the same. Hinkle went to the house of the assured the next day, and there found him lying sick upon his bed, and, on being offered the overdue premium by the assured, declined to receive it at that time because the assured was then sick, but told him to keep the money, and when he got well, he, Hinkle, would receive it, and keep the policy alive. The assured never did recover from his sickness, the premium was not paid, and the company notified the assured that it would hold itself absolved from the contract by reason thereof. The assured died in the following September. Under this state of facts it was held there could be no recovery upon the policy, the court below saying:

“We think the plaintiff was properly nonsuited. As we understand the law, as laid down by the court of last resort in such cases, in order to a valid extension of the time for the payment of a premium upon a life-policy after the time of payment has gone by, there must be some valid consideration for the extension or waiver of the condition of payment, or there must be something said by or on behalf of the insurance company while the party bound to make the payment has still time and opportunity for so doing, by which the insured is induced to believe the condition is waived, or that strict compliance will not be insisted on. This introduces an element of estoppel in the case. In such a case, it would be unjust to allow the insurance company to repudiate the agreement, and to insist that, because of the non-payment of the premium punctually, which omission had beep, induced or countenanced by its own act, it should be absolved from the performance of its part of the contract.”

This case was affirmed in the Court of Errors and Appeals in an opinion by FINCH, J., principally upon the ground that, even if Hinkle was the general agent of the company, he had no authority to waive the condition as to payment, the clause in the policy containing a condition similar in this respect to that in the policy in this case. For this reason, the court did not deem it necessary to express an opinion upon the ground upon which the court below rested the case, viz., the want of consideration for the promise, but said expressly: “It must not be inferred that we deem the ground of the decision below incorrect.”

This case is valuable for the further reason that it shows very clearly the ground of the distinction between a promise to extend the time of payment, made before the time of such payment, and one made after the default. In the former instance the assured may have relied upon the promise, and allowed the time to slip by; whereas, without such promise, he might have procured the money and paid the premium. Hence, the cases hold that the company, having misled the assured to his harm, are estopped from alleging a default because of non-payment on the day. But, where a promise is made after the default, the assured has not been misled or injured in any manner. He has allowed his policy to lapse by his own neglect; it can only be restored by the consent of the company, and he has no reason to suppose that if he dies before the matter is perfected by the payment and acceptance of the premium the company will pay as in the case of a live policy.

In nearly every case cited to show the authority of an agent to bind the company, by a promise made after a default to pay the premium, the decision of the court was rested upon the ground of estoppel, a principle which I do not think has any application to the case in hand. In Dean v. Insurance Co., 62 N. Y. 642, the agreement to extend the time was not only made before the premium became due, but the company had actually received the notes of the assured for the payment of three fourths of the premium. This not only introduced the element of estoppel, but the notes received constituted a valid consideration for the waiver of punctual payment. In Homer v. Insurance Co., 67 N. Y. 478, the agreement extending the time of payment was also made before the premium fell due, and thus the policy-holder was prevented from paying the premium on the day it became due by the terms of the policy. In Tennant v. Insurance Co., 81 Fed. R. 322, the credit was extended while the policy was in full force. In Church v. Insurance Co., 66 N. Y. 222, the dealings were between the assured and the home office, and no question was involved as to the authority of the agent. The court held there was evidence to go to the jury that a credit was intended, inasmuch as it showed a prior dealing with the assured for many years, and that he was in the habit of getting policies without paying for them at the time. In Insurance Co. v. Norton, 96 U. S. 234, there is an expression by Mr. Justice Bradley which indicates that he did not see any difference between a promise to extend the time of the payment of the premium, made before the default, and a promise made after such default. In this case, however, there was not only a promise made to pay, but this was followed up by an actual tender of the premium, and a refusal by the company of such tender. This presents an entirely different state of facts from the case I am discussing, and Mr. Justice Bradley’s remark must be taken in connection with the particular facts to which he was referring. In Insurance Co. v. Eggleson, 96 U. S. 572, the question was whether the assured was excused for not paying his premium at maturity. This clearly appears from the concluding portion of the opinion of Mr. Justice Bradley. It is as follows: “ The insured, residing in the state of Mississippi, had always dealt with agents of the company, located either in his own state or within some accessible distance. He had originally taken his policy from and had paid his first premium to such agent, and the company had always, until the last premium became due, given him notice what agent to pay to. This was necessary, because there was no permanent agent in his vicinity. The judge rightly held that, under these circumstances, he had reasonable cause to rely on having such notice. The company itself did not expect him to pay at the home office; it had sent a receipt to an agent located within thirty miles of his residence; but he had no knowledge of the fact, at least such was the finding of the jury from the evidence.” Insurance Co. v. Doster, 106 U. S. 30, is somewhat similar as to its facts. The assured was entitled to a dividend on the business of the company, which was set apart to the insured in part discharge of his premium. The company failed to notify him of the amount, and it was the cause of the delay in the payment.

In Universal Ins. Co. v. Block, 109 Pa. 535, the premium had been paid, and the question was whether it had been paid to the proper person. In Lebanon Ins. Co. v. Hoover, 113 Pa. 591, which was the case of a payment of the premium'on a fire policy after maturity, there was a course of dealing by which the agent gave the assured a credit in his accounts, and became himself the debtor of the company therefor. This clearly appears from the following extract from the opinion of Mr. Justice Stbrrett: “ On the trial, evidence was received tending to show that Fredrick, through whom the insurance was placed, was the recognized agent of the company for the purpose of securing risks, receiving and remitting premiums, etc.; that in his dealings with the company he was made its personal debtor for premiums on all policies issued through him, and that he periodically accounted to it therefor, whether the money was received by him from the persons to whom the policies were issued' or not; that he made the persons or firms to whom he delivered policies his personal debtors, and dealt with them in that relation, charging them with the premiums on his books, sending them bills in his own name, and making himself responsible to the company for the same; and that the bills for premiums were generally rendered some time during the month after the insurance was effected.”

I have not of course, reviewed all the authorities cited; I have considered the most important. To review them all would protract this opinion to such a length that no one would probably read it. No Pennsylvania case was cited which is in serious conflict with the views above expressed, nor have I been able to find one after a careful examination of the digests. It is possible I may, in the press of business, have overlooked some such case. We have little leisure to search for cases that are not cited. But I regard the overwhelming weight of authority, both in this state and elsewhere, to be in accord with the principles above stated; moreover, I believe them to be sustained by the sounder reason.

Under the circumstances, we think it was error for the learned judge below to charge the jury as follows: “ Therefore I think the question arises, and it is for you to say, in this case, whether this general superintendent, residing here in Philadelphia, with his principal in Vermont, and in the constant habit of doing this very thing, — because we find a number of receipts where he did receive the money subsequent to the time fixed, and it is testified to in this case that he certainly agreed to do it, and had done it in the case of Mr. Lantz, his brother, so that, if the rule was to be enforced as it is written, he would have no right to do this thing which he was in the habit of doing, and that therefore it is a question for you to say whether he had any authority; whether the company, having permitted him to do this thing constantly and knowingly, had not authorized him, — the secretary and president had not authorized him, — to perform the acts that he was doing.” See first assignment.

The “ thing ” which the agent had done and which the company had ratified was the acceptance in three instances of overdue premiums from the assured, he being in full life at the time. Authority beyond this could not be inferred from any act of the company or its agent. It was not denied, — indeed, it was expressly admitted, — that had the assured tendered the premium during his lifetime, it would have been accepted, and the policy reinstated. No inference can be properly drawn from this, however, that the company would receive the premium after the death of the assured. The learned judge failed to note the difference between the renewal of a lapsed policy by the actual payment and acceptance of the premium, and a mere attempt to renew it without any consideration moving from the assured to the company. The one is a completed transaction, and therefore binding; the other is uncompleted, and does not even amount to a contract. The same error runs through the charge. The assignments are all sustained. We think there should have been a binding instruction in favor of the defendant.

Judgment reversed.

Mr. Justice Sterrett and Mr. Justice Clark noted their dissent.