Opinion
February Term, 1900.
Roger Foster, for the appellant.
Herbert H. Gibbs, for the respondent.
The action was brought to recover on a policy of life insurance issued to the plaintiff's husband in September, 1895, and payable at his death to her. The insured died on the 27th of March, 1898. The necessary steps were taken to entitle the plaintiff to the payment of the policy, and the only defense is that it has been forfeited by non-payment of the premium said to be due on the 21st day of March, 1898. The learned justice at the Trial Term held that the defendant was estopped by its manner of dealing from insisting that the payment was not made in time; and for that reason he ordered a judgment for the plaintiff for the amount of the policy. From that judgment the defendant appealed.
The policy was made on the 21st day of June, 1895, upon an application which is found in the case and dated the twenty-fourth of April in the same year. It was stated in the application that the premiums were to be paid quarterly — twenty-three dollars and fifty cents. The policy purports to have been issued in consideration of the application, and of all statements made therein and to the medical examiner, and of the stipulations and agreements on the back of the policy, all of which were made a part of the contract; and "in further consideration of the sum of twenty-three dollars and fifty cents in full payment of the first premium on this policy from its date until the 21st day of September, 1895, and the further payment of all premiums coming due on this policy in accordance with its terms and the constitution and by-laws of the company." The policy itself contains upon its face nothing further with regard to the payment of the premiums. There is upon the back of the policy something over a page of print, which is headed, "Stipulations and agreements." All that is said with regard to the payment of premiums in these stipulations is that they "may be paid annually, semi-annually or quarterly, in accordance with the rates in the following table, subject to reduction by dividends as aforesaid. Any unpaid semi-annual or quarterly installment of the current year's premium, or any indebtedness to the company, will be deducted in the settlement of this policy;" and the further provision that each premium is due and payable at the home office of the company, but for convenience it will be accepted by an authorized agent at some other place. There is nothing else, either in the policy or in the stipulations and agreements, with regard to the payment of premiums. The by-laws contain a provision that premiums must be paid on the day they become due by the terms of the policy, and a failure to pay the same on that day will work a forfeiture of the policy and all benefits thereunder. But this provision is not made a part of the policy by its terms.
It is alleged that a premium which was due on the 21st of March, 1898, was not paid; and for that reason it is said that the policy had become forfeited. The rule is well settled that no strained or forced construction of a contract will be resorted to for the purpose of establishing a forfeiture, but that to warrant a party in insisting that his adversary has forfeited any rights which he would be entitled to by a contract between them, he must put his finger upon the specific provision of the contract which requires the party against whom the forfeiture is alleged to do the thing the failure to do which is relied upon to work a forfeiture. The breach of the contract here upon which the defendant insists as constituting a forfeiture is a failure to pay the premium when it became due by the terms of the policy; and so it is essential to see when it did become due by those terms.
It will be noticed that there is no direct agreement on the part of the plaintiff, nor any requirement in the policy or in the stipulations and agreements which are made a part of it, or in the application, that the premiums shall be paid on any particular day. The amount of the premiums is fixed. It is to be twenty-three dollars and fifty cents, payable quarterly; and the first premium paid at the date of the policy is said to be a payment up to the 21st day of September, 1895, and it is said that the other premiums are to be paid quarterly. But it is nowhere said, either in the application or the policy or the stipulations and agreements, that they are to be paid on any particular day; and from the provision in the stipulations and agreements, that any unpaid quarterly installment of the current year's premium will be deducted in settlement of the policy, it is fairly to be inferred that there was in the minds of the parties, at the time the contract was made, an intention that the quarterly premiums might not necessarily be paid at the end of the quarter — which in this case was the 21st of March, 1898.
In order to establish that the payment of the premiums was to take place on the twenty-first of March the defendant resorts to an indorsement on the back of the policy, which is as follows:
`NO. 1544.
"BANKERS LIFE INSURANCE COMPANY OF THE CITY OF NEW YORK. "Insurance on the Life of "N.W. Perry.
"Amount $5,000. "Premium $23.50. "Payable on the 21st day of June, Sept., Dec., Mch. "Dated June 21, 1895."
This is the usual indorsement put upon every insurance policy by the company before it is issued, and although it is on the back of this policy, it is no part of the stipulations and agreements — which alone are made a part of the policy and constitute the contract between the parties. Therefore, although this indorsement may be regarded perhaps as a suggestion of what was intended by the defendant, it cannot, except by a very strained construction, be said to be any part of the policy so as to be binding upon the plaintiff, or to constitute any of its terms so that a violation of a suggestion contained in it shall be sufficient to forfeit the policy.
But it is said that a construction has been put upon the policy by the act of the parties, as the result of which the premium became payable on the 21st of March, 1898. It is undoubtedly true that a notice was given to Perry from time to time that a particular premium coming due at a particular time had not been paid; and it is quite probable that whenever he received that notice he complied with the demand of the defendant by giving it a certificate of health if he paid the premium after the twenty-first day of the month. But those acts do not constitute any part of the terms of the policy for the purpose of authorizing a forfeiture. If when this notice had been served upon Perry he had said that the contract did not provide for the payment of a premium on the 21st day of September, 1895, but that he had a reasonable time to pay it, no one could have said that he had violated the terms of the policy; and the fact that he acceded to this demand does not change his rights to insist upon the precise terms of the policy when the defendant tries to forfeit the terms of the contract.
The judgment must be affirmed, with costs.
VAN BRUNT, P.J., O'BRIEN and INGRAHAM, JJ., concurred; PATTERSON, J., dissented.
This action was brought by the beneficiary named in a policy of life insurance to recover the amount of insurance therein granted upon the life of Nelson W. Perry, her husband. The policy was issued by the defendant, is dated the 21st day of June, 1895, and reads as follows:
"No. 1544.
"BANKERS LIFE INSURANCE COMPANY OF THE CITY OF NEW YORK.
"Amount, $5,000. Age, 42.
"In consideration of the application for this policy, and all Statements made therein and to the Medical Examiner, and of the Stipulations and Agreements on the back of this policy, all of which are made a part of this Contract, and in further consideration of the sum of Twenty-three Dollars and Fifty cents in full payment of the first Premium on this policy from its date until the twenty-first day of September, 1895, and the further payment of all Premiums coming due on this Policy in accordance with its terms, and the Constitution and By-laws of the Company,
"Promises to pay to Marie B. Perry, wife of insured, her executors, administrators or assigns, the sum of Five Thousand Dollars (less any indebtedness on account of this policy) within ninety days after acceptance at the Home Office of the Company in the city of New York, of satisfactory Proofs of Death of Nelson W. Perry, of Hillsdale, State of New Jersey (the insured under this Policy), during the continuance of this Policy. * * *"
There were certain stipulations and agreements on the back of the policy, among which was one that premiums may by paid annually, semi-annually or quarterly. "Any unpaid semi-annual or quarterly instalment of the current year's premium or any indebtedness to the company will be deducted in the settlement of this policy." Indorsed on the policy was the following:
"No. 1544.
"BANKERS LIFE INSURANCE COMPANY OF THE CITY OF NEW YORK. "Insurance on the Life of N.W. Perry.
"Amount, $5,000. "Premium, $23.50. "Payable on the 21st day of June, "Sept., Dec., Mch. "Dated June 21, 1895."
In the by-laws of the defendant, subject to which the policy was issued, it is provided in the article relating to forfeitures as follows: "Section 18. Premiums must be paid on the day they become due by the terms of the policy, and a failure to pay the same on that day will work a forfeiture of the policy and all benefits thereunder." It appears that the assured, electing to pay premiums quarterly, paid the first quarterly premium in cash, and he paid the three subsequently accruing quarterly premiums on the twenty-first days of September, December and March, respectively, they being the dates named on the indorsement of the policy as those upon which the quarterly premiums were to be paid. During the second year of the currency of the policy, he paid the first quarterly installment on July 15, the second on October 21, 1896, the third and fourth on January 20, and April 21, 1897, respectively. During the third year of the currency of the policy, he paid the first, second and third installments of twenty-three dollars and fifty cents each, on July 21, October 21, 1897, and January 18, 1898, respectively. Thus it appears that after March, 1896, none of the quarterly premiums were paid on the particular dates named as the due dates in the above-mentioned indorsement on the policy. The last payment made by the assured on the policy was on the 18th of January, 1898. He died on the 27th day of March, 1898. After his death, and on the 11th of April, 1898, the plaintiff tendered to the defendant a sum of money, which the trial court has found to be the fourth quarterly installment of premium for the current year ending June 21, 1898. The tender was declined on the ground, as would appear from a specific defense set up in the answer, that the policy lapsed by reason of the failure of the assured to pay, at the required time, a quarterly premium which the defendant asserts fell due on the 21st of March, 1898.
The defendant refusing to recognize any existing claim upon this policy, the plaintiff brought her action, declaring upon the policy itself, and upon the contract thereby made, and also in her complaint making allegations of a modification of the strict terms of the contract (if there were such terms), brought about by a course of dealing had between the defendant and the assured, constituting a claimed new arrangement, with respect to the particular times at which the quarterly premiums were to be paid in order to keep the policy alive.
The learned trial judge made the following, among his findings of fact, namely: "4th. That it was the custom and practice between the said insured and defendant, after the first premium year, for the insured to pay the said quarterly installments of annual premium and for the defendant to receive the same at its Home Office within thirty days from and after the 21st days of June, Sept., Dec. and March, respectively, in each premium year." In his conclusions of law he determined "That under the course of dealing adopted and followed by the insurer and insured as to the time and manner of paying the quarterly installments of premium, the policy of life insurance sued on herein did not lapse, but was in force when the insured died," and that "by reason of the course of dealing" aforesaid, the defendant "waived and relinquished its right, if any it had, to insist upon or require the payment of a quarterly installment of premium upon the 21st day of March, 1898." The opinion of the learned trial judge shows that his decision of the cause was placed altogether upon the relationship of the parties as affected by the question of waiver. The conclusion he reached upon that subject, I think, was not justified by the evidence when that evidence is examined in the light of the authoritative decisions of the courts announcing the principle upon which new contract relations, as to the payment of premium, may be said to be established between an insurer and the assured in consequence of a waiver of strict performance as to the time and method of paying premiums.
Waiver of payment of premium upon the day on which it falls due, inferred from a course of dealing established between the parties, results from the fact that by some arrangement, declaration or course of action on the part of the insurer, a party insured is honestly led to believe that by conforming to such agreement, declaration or course of dealing a forfeiture of his policy will not be incurred; and, where that is followed by conformity on his part, the insurer will not be permitted to insist upon a forfeiture, although it might be claimed under the express letter of the contract. That rule was announced in the case of Insurance Co. v. Eggleston ( 96 U.S. 572), in which it is also said that courts are always prompt to seize hold of any circumstances that indicate an election to waive a forfeiture or an agreement to do so on which the party has relied and acted. That rule was substantially reiterated in the case of Phœnix Ins. Co. v. Doster ( 106 U.S. 35). In the Supreme Court of the United States such a waiver seems to have been placed upon the ground of estoppel. In the Court of Appeals of this State ( Titus v. Glens Falls Ins. Co., 81 N.Y. 419) the rule is announced in the following terms: "But it may be asserted broadly that if in any negotiations or transactions with the insured, after knowledge of the forfeiture, it (the insurer) recognizes the continued validity of the policy, or does acts based thereon, or requires the insured by virtue thereof to do some act or incur some trouble or expense, the forfeiture is, as matter of law, waived; and it is now settled in this court, after some difference of opinion, that such a waiver need not be based upon any new agreement or an estoppel." (Citing Allen v. Vermont Mut. Fire Ins. Co., 12 Vt. 366; Webster v. Phœnix Ins. Co., 36 Wis. 67; Gans v. St. Paul F. M. Ins. Co., 43 id. 108; Insurance Co. v. Norton, 96 U.S. 234; Goodwin v. Mass. Mut. Life Ins. Co., 73 N.Y. 480, 493; Prentice v. Knickerbocker Life Ins. Co., 77 id. 483; Brink v. Hanover Fire Ins. Co., 80 id. 109.) In Armstrong v. A. Ins. Co. ( 130 N.Y. 564) it is said that "the rule is now established, however, that if in any negotiations or transactions with the assured, after knowledge of the forfeiture, it recognizes the continued validity of the policy, or does acts based thereon, or requires the insured to do some act or incur some trouble or expense, the forfeiture is waived." (Citing cases.) And it is also said in that case that "while the later decisions all hold that such waiver need not be based upon a technical estoppel, in all the cases where this question is presented, where there has been no express waiver, the fact is recognized that there exists the elements of an estoppel." (Citing authorities.) The case principally relied on by the plaintiff to establish the waiver is De Frece v. National Life Ins. Co. ( 136 N.Y. 144). There the defendant set up a different arrangement respecting the payment of premiums from that contained in the policy. The only evidence to establish the new arrangement showed that for a period of five years the insured paid quarterly instead of annual premiums, and that they were received and accepted by the defendant and receipts given for them, and that those premiums were paid at intervals of from twenty days to five months after they became due, and it was held that while the evidence was sufficient to show a modification of the original agreement respecting the time of payment, it also established an agreement on the part of the defendant to receive payments after they became due, if made within a reasonable time, and that, consequently, no forfeiture was established.
But the question comes back to the consideration of the point whether anything done by the insurer fairly and honestly authorized the assured to believe that his premiums would be accepted in all instances when payment was delayed or overran the stipulated time contemplated in the original contract between the parties. The proofs in this case show conclusively that there was nothing in the course of dealing between this defendant and the assured which would authorize or justify him in the belief that forfeitures were actually or absolutely waived if the premiums were not paid ad diem, or that an extension of time for the payment of those premiums would be granted when each fell due according to the contract between the parties. The documentary evidence before us shows that after the first so-called premium year, when quarter annual payments were not made on the dates named in the indorsement on the policy, a notification to that effect was given to the assured, and in the same notification the assured was informed that the company would accept the quarter annual payment to which the notice applied if paid at its office on or before a certain date, subject to an interest charge of six per cent for the number of lapsed days, and provided that the assured should sign a health warranty annexed and file the same, together with the notice at the time of making payment, and the notice also contained an express provision that it was not to be construed as extending the dates on which future premiums might fall due, the company reserving to itself the right to refuse or accord further extensions at its option. With each of these notices was sent a paper called a health warranty. On the receipt of them the assured would sign the health warranty, which recited that he, the assured, desired to take advantage of the offer made as contained in the notice and proceeded as follows: "And in conformity therewith I hereby declare and warrant that I am now in good health, and that nothing has occurred to impair my health since the time that said delinquent premium fell due; and I agree that my policy shall not be deemed as in force unless I am alive and in good health at the time said premium is received at the home office of the company in the city of New York, and I further agree that the foregoing warranty and agreement shall be considered by the company as an amendment to, and is hereby made a part or my application for, and policy of insurance."
Sic.
Now, the situation of the parties under these notifications, and the action of the assured, show conclusively that there was no course of dealing instituted between them by which the assured could be led to believe that an extension of the time of the payment of each overdue premium would be accorded to him. Each notice expressly contained the declaration that it should not be regarded as a precedent for future action. Each acceptance of the grace of the insurance company was based upon the condition that the assured was in good health, that nothing had occurred to impair his health, and that the policy should not be deemed as being in force unless he was alive and in good health at the time the premium reached the office of the insurer. In other words, the assured knew that in each and every instance the continuance of the policy as an enforcible contract against the underwriter would depend upon his being alive at the time the unpaid quarterly premiums reached the company, and that each extension of time stood as a separate, isolated, independent thing, and should not be construed as indicating a general course or general policy which would permit him to be dilatory in the payment of the premiums.
We must take the transaction between the parties as it was, and not distort it to favor the contention of an assured against the express terms upon which the extensions were granted. The arrangement must be so regarded that the intent of both parties to it will be effectuated; and it is plain that both did intend that each extension should stand as a separate thing, and that the company should not be bound to a new arrangement except upon the precise terms, time and time again reiterated, expressed in the notifications to, and acceptances by, the assured of the privileges granted of paying the quarterly premiums within thirty days after the dates at which they became due. The acceptances of the assured (on this branch of the case) constitute recognitions of the claim of the insurer that the policy had become forfeited by the non-payment of the premium at the due dates, or, in other words, that the policy had lapsed. Such was the decision in Teeter v. United Life Ins. Assn. ( 159 N.Y. 411), in which it was held that, where a contract of life insurance provides that the policy shall lapse on the failure of an assured to pay certain assessments, and that it may be reinstated at the option of the company, and the company notifies the insured that his policy has lapsed, and that before he can be given credit for an assessment which has been sent he must sign and return a health certificate, and the insured signs and remits the health certificate, he thereby recognizes the claim that the policy has lapsed and consents to its reinstatement and the retention of his assessment on the basis of a reinstated policy. That rule would apply here. Time and again the assured was notified that at a particular date his premium was due and was unpaid; that it would be accepted, if paid at a certain time under certain conditions, his acceptance of those conditions to be testified to by his signing a particular document. He deliberately stated that he accepted the arrangement; he signed the certificates and transmitted them, and thereupon his premium was received and his policy continued; and thus when the last premium was paid preceding his death, it was so paid under the distinct understanding that it should not be regarded as a precedent for any future premium, and all that he was entitled to believe and to act upon was that if he were alive and in good health and a premium should be paid to the company and actually received by it before his death, then the policy should not lapse, but be regarded as in full force. Under these circumstances, it cannot be said that any such course of dealing or business was instituted between these parties as would entitle the assured or the beneficiary to rest upon the claim that the payment of the premium had been extended and a forfeiture waived.
Another question, however, is raised on this appeal which did not enter into the consideration of the court below, but which is properly here. It arises upon a construction of the policy. It is urged that the quarterly premiums did not fall due on specific dates; that the policy itself provides that the quarterly premiums are to be paid according to its terms or according to its terms as associated with the conditions and agreements indorsed upon the policy or of the constitution and by-laws of the defendant with reference to the payment of premiums and the forfeiture of a policy for the non-payment of such premiums. There is nothing in the policy itself, nor in the constitution and by-laws or stipulations or agreements specifying the precise dates at which the quarterly payments of premiums shall be made, from which circumstance an inference is sought to be drawn that the assured had the right to make those payments at any time within the quarter. All that the policy says respecting the time at which the payments shall be made is that "the sum of Twenty-three dollars and fifty cents in full payment of the first premium on this policy from its date until the 21st day of September, 1895." It is quite apparent that the first premium paid for the insurance only until the 21st of September, 1895; further payments were then required, for the policy recites that it is issued in consideration of that payment and the further payment of all premiums coming due on this policy in accordance with its terms and the constitution and by-laws of the company. It cannot be assumed that the defendant would carry this insurance without the payment of premium after the expiration of the three months for which the insurance was paid by the first premium. If the premium were an annual one payable in quarterly installments it would seem to follow, as a matter of course, that those installments were payable in advance. The reasonable interpretation of the contract would seem to be that this policy made insurance from quarter to quarter, the subsequent premiums after the first to be paid in the same manner as the first. It is said in Holly v. Metropolitan Life Ins. Co. ( 105 N.Y. 444) that punctuality in the payment of premiums in the case of a life insurance company is of the very essence of the contract, and when payment is not made at the time, the company has the right to forfeit, if such is the contract. ( Attorney-General v. North Am. Life Ins. Co., 82 N.Y. 172; People v. Knickerbocker Life Ins. Co., 103 id. 480; New York Life Insurance Co. v. Statham, 93 U.S. 24.)
But if this strict construction of the contract is not independently justified because of the peculiar phraseology of the policy as to the premiums subsequent to the first being payable in accordance with the terms of the policy and the constitution and by-laws of the company, we have the clearest possible proof of what the parties meant and intended by their contract in their acts under that contract and their own interpretation of it. On the back of the policy is a distinct notification to the assured of the exact days on which the quarterly premiums fell due, and while that indorsement may not be regarded in strictness of law as a part of the contract itself, yet it was a notification to the assured of what the company understood to be his obligation to it with respect to the time of payment of those premiums. It must be said with reference to the terms of the policy, that they are at least ambiguous or indefinite, and in such a case, what was remarked by Judge PECKHAM in Woolsey v. Funke ( 121 N.Y. 92) is directly applicable, viz.: "But if I am not clearly right in this interpretation of the language, it must at least be admitted, as it seems to me, that the language is somewhat ambiguous or indefinite. Under such circumstances, the practical interpretation of this agreement by both parties is a consideration of very great importance. As was said by Mr. Justice SWAYNE in Insurance Company v. Dutcher ( 95 U.S. 269, 273) `the construction of a contract is as much a part of it as anything else. There is no surer way to find out what parties meant than to see what they have done.'" And in Nicoll v. Sands ( 131 N.Y. 24) the same learned judge says: "The practical construction put upon a contract by the parties to it is sometimes almost conclusive as to its meaning." What this policy meant and what was agreed upon by the parties respecting the time of payment of the premium is established by the acts of the assured. He knew and recognized that those premiums were payable at certain fixed dates; he knew and recognized the fact that the policy was forfeited by the non-payment of the premium at those dates; he accepted in many instances the grace of the company in the re-establishment of the policy, by paying those premiums under certain conditions, after the policy had lapsed, and the custom and dealing between the parties under their interpretation of the terms of the contract shows that it had lapsed before his death and that it could not be reinstated; and the company was absolved from liability upon it at the time the assured died, for he was incapable of performing those conditions under which alone the policy could have been re-established and made enforcible.
I think, therefore, that the plaintiff was not entitled to recover on this policy, and that the judgment should be reversed and a new trial ordered, with costs to appellant to abide the event.
Judgment affirmed, with costs.