Opinion
Argued February 5, 1946 —
Decided May 3, 1946.
On appeal from a judgment of the Supreme Court, in which Circuit Court Judge Oliphant filed the following opinion:
"This cause came on for trial before the court, sitting without a jury upon stipulation of the parties on Tuesday, January 16th, 1945.
"The suit was based upon an accident and health policy issued by the defendant to the plaintiff, bearing date February 25th, 1941, insuring plaintiff from that date and expiring March 31st, 1941, at midnight and continuing the insurance thereafter at a monthly premium of $2.10, payable in advance.
"Plaintiff paid the premiums from March 1st, 1941, consecutively until and including the month of July, 1941.
"On August 27th, plaintiff's wife sent to a general agent of the defendant company, a check for $4.20 to cover the monthly premium for August and September, 1941. That check was received by the agent Ford, recorded on the books of the Company and marked in the premium receipt book of the plaintiff as paid on August 28th, 1941, for the months of August and September with the annotation "accepted subject to policy provisions." The receipt of the payment by the company was without any knowledge or notice to it of any prior accident or injury received by the plaintiff.
"On September 3d 1941, the Ford Agency received a letter dated August 29th, 1941, signed by the plaintiff, stating that he had had an accident on August 13th, 1941, at Carlisle Barracks, Pennsylvania. He was in the armed forces and had entrusted the payment of his insurance premiums to his wife.
"It can be seen that the receipt of the premium aforesaid was mailed by or on behalf of the plaintiff fourteen days after the accident and the notice of the accident was not received by the defendant's agent until more than twenty days after the accident.
"On September 10th, 1941, defendant notified plaintiff by letter as follows:
"`As your disability began more than 2 weeks before you mailed your premium to our agent, we regret you will not be entitled to indemnity as your policy was not in force due to the non-payment of your August premium.'
"The premium was sent to the company on behalf of the plaintiff by his wife following receipt by her of a letter from Ford advising plaintiff of the non-payment and enclosing a stamped envelope for its remittance.
"The premium has never been returned to the plaintiff.
"The policy in suit contained the following standard provision:
"`If default be made in the payment of the agreed premium for this policy, the subsequent acceptance of a premium by the company, or any of its duly authorized agents, shall reinstate the policy, but only to cover accidental injury thereafter sustained and such sickness as may begin more than ten days after the date of such acceptance.'
"The plaintiff made his contract with the defendant. The court will not make a new one for the parties. He knew its provisions or was charged with knowledge thereof.
"At best from his standpoint, the acceptance of the overdue premium extended his coverage from the date of its receipt on August 28th to October 28th or its receipt and acceptance by the defendant was a privilege granted to him of continuing the policy in force minus the coverage from August 1st to August 28th without the necessity of an application for a new policy and its attendant risks of his being refused future coverage.
"I have been unable to discover any case wherein a health and accident policy containing the provisions of the one in suit was declared to cover an insured for the period during which it was lapsed by the later receipt of an overdue premium even when that premium has been retained by the insurer.
"Plaintiff places much stress on the case of MacDonald v. Metropolitan Life Insurance Co., 304 Pa. 213; 155 Atl. Rep. 491, but it does not uphold his position here. Each case must stand on its own particular facts and in that case the court held that the reinstatement of the policy created a new contract and starts a new period of coverage from the date of the receipt of the overdue premium. In its opinion the court said `Where a policy provides for reinstatement, but only as to losses subsequently occurring, the company upon reinstatement of the policy is not liable for a loss occurring while it was suspended. In such case no part of the premium paid on reinstatement will be applied to the period during which the policy was not in force unless the agreement of the parties so provides.' 32 C.J. 1357.
"Plaintiff contends that standard Provision No. 3 has been waived. There can be no waiver where the facts are not known and the retention of the premium is not sufficient in itself to create a waiver, but is only an acceptance within the term of the contract. Its retention cannot in itself be regarded as a waiver, it was to support the insurance for the future. Wiser v. Central Business Men's Association, 219 S.W. Rep. 102.
"Appleman in his new work entitled 3 `Insurance Law Practice,' 684, § 2033, says that under the majority ruling, which seems to be the better rule, the receipt of an overdue premium with respect to a policy such as the one in suit reinstate it in prospective only and that such reinstatement is not retroactive to include disability occurring during the default period. Jones v. Preferred Accident Insurance Co., 286 N.W. Rep. 598, is cited. On page 683 he says "Premium payments and acceptance after default reinstated a lapsed policy subject to the conditions attendant upon reinstatement set out in the policy."
"The rule is well enunciated in Denton v. Provident Life and Accident Insurance Co., 36 S.W. Rep. (2 d) 657. The facts in that case were very similar to the instant one and the policy contained the same provision as to the acceptance of an overdue premium as the one in suit. The court said `The policy which he had in his possession by its express terms informed him that the subsequent acceptance of a premium by the Company after a default in payment would reinstate the policy, but only to cover such sickness as might begin more than 10 days after the date of such acceptance. With full knowledge of this condition he sent his check of August 13th, and the receipt he got back informed him in substance that the check had been accepted in accordance with the conditions under which it had been sent and of which he knew.' The transaction was simply one of reinstatement of a lapsed policy subject to the conditions attendant upon a reinstatement set out in the policy, which appellant knew or of which he was charged with knowledge. In Matthews v. Travelers Insurance Co., 144 Pac. Rep. 85, it was said `Plaintiff was chargeable with notice of the terms of the policy provision that the payment of a past due premium creates a liability for accidents occurring after the payment.' To the same effect as the decision in Denton v. Provident Life and Accident Insurance Co., supra, is that of Jennings v. Travelers Equitable Insurance Co., 218 N.W. Rep. 104. As was said in the latter case, the provisions of this policy limiting the effect of its reinstatement by the acceptance of a past due premium is authorized by statute. R.S. 17:38-3. In the absence of such provision the acceptance of past due premiums might constitute such a waiver of the conditions of the policy as to avoid a forfeiture of benefits otherwise accrued.
"The reasoning of the court in Greenwaldt v. U.S. Health and Accident Insurance Co., 102 N.Y. Supp. 157, is very apt in the instant case `This is not the case of an insurance company avoiding its policy. It is an effort to make it liable under conditions which it was agreed should not constitute a liability. * * * The policy was not forfeited. The defendant had a right to name the conditions on which it would accept a renewal of a policy where the assured was in default, and the plaintiff having accepted those conditions, and the illness complained of having originated while the policy was not in force as to illness, the plaintiff has no reason to complain.'
"In order to recover here, the plaintiff was under a duty to show a new contract creating a liability on the part of the defendant, a liability established by express terms, by implication from circumstances, or by estoppel or waiver. Cagne v. Massachusetts Bonding and Insurance Co., 78 N.H. 439. This he has not done. There is no competent and persuasive evidence that the premium for August, 1941, was not paid and accepted in accordance with the terms of the policy and the statute, or that the plaintiff understood otherwise. The receipt book ( Exhibit D-1) expressly shows it was accepted `subject to policy provisions,' and there is no evidence to support the plaintiff's case on the theory of either waiver of the policy provision or estoppel by the acts of the defendant.
"The judgment must be for the defendant and upon presentation of a postea to that effect, same will be signed."
For the appellant, Cox Walburg ( William H.D. Cox, of counsel).
For the respondent, Pomerehne, Laible Kautz ( Henry Pomerehne, of counsel).
The judgment under review is affirmed, for the reasons expressed in the opinion of Circuit Court Judge Oliphant, supplemented as follows:
The acceptance by the company on August 28th, 1941, of $2.10 covering the August premium which was payable in advance, reinstated the policy for the month of August, but under the terms of the policy gave no coverage for accidental injury sustained while the policy was in default, and gave no coverage for sickness which began while the policy was in default or within ten days thereafter. By choosing reinstatement of the old policy instead of issuance of a new policy, the plaintiff saved the $5 issuance fee charged on a new policy and received greater coverage, because the policy provides "* * * but the Company will pay only one-half of these several indemnities, as hereinafter promised, for any loss resulting from injury sustained or sickness contracted prior to the payment of the premium required for the first three months insurance hereunder."
I vote to reverse because in my view the affirmance by the majority on the opinion below plus the supplemental observation of this court, are based upon the erroneous theory that an insurer may accept, retain and use the premium paid for and during a defaulting period and then deny liability. Such a theory runs counter to elementary concepts of justice. For, it permits the insurer to enjoy both the penny and the cake. The insurer may not in one breath say the policy was not in full force and effect during the defaulting period (August 1st to August 28th, 1941), and in the same breath say that it is, nonetheless, its right to retain and use the premium paid to it covering the defaulting period. The insurer's legal right to accept, retain and use the premium paid to it, can only be sustained upon the theory that the policy was in full force and effect during the aforestated period of default. Cf. Kosloski v. Prudential Insurance Co., 95 N.J.L. 101, 104; 113 Atl. Rep. 135; Melick v. Metropolitan Life Insurance Co., 84 N.J.L. 437; 87 Atl. Rep. 75; affirmed, 85 N.J.L. 727; 91 Atl. Rep. 1070. I think that the policy was in full force and effect.
When the insurer ascertained, after August 1st, 1941, that the insured suffered an accident, it could have offered, as pointed out for the insured, (1) to retain the premium for the defaulting period, or (2) it could have applied the premium for the period from August 28th, 1941, to October 28th, 1941, or (3) it could have continued to retain the premium and cover the accident. It chose the third alternative and credited the insured for the months of August and September, 1941. Thus the insurer treated its policy as if it were in full force and effect. It may not now avoid its liability.
The added clause of the policy, relied upon by the majority, in nowise mitigates the insurer's liability. That clause is part of the entire policy and the insured was entitled to the full benefits thereof. It beggars understanding how the stated saving of $5 to the insured can compensate him for the sum of $1,950 which is concededly due him, if the insurer is liable. No reference is made to this clause relied upon by the majority in the brief for the insurer. It was suggested during the argument of the cause. It was purely an afterthought. At all events, it lacks substance.
I think that, in the stated circumstances, the policy was in full force and effect during the period in question and therefore the insurer is liable.
For affirmance — THE CHANCELLOR, CHIEF JUSTICE, PARKER, BODINE, DONGES, HEHER, WELLS, DILL, McGEEHAN, JJ. 9.
For reversal — PERSKIE, RAFFERTY, JJ. 2.