In Wheeler v. Connecticut Mutual Life Ins. Co. (82 N.Y. 543) an application was made to a court of equity to prevent the defendant from enforcing a clause in its policy forfeiting the same for non-payment of premiums when such non-payment resulted from the insanity of the insured.Summary of this case from Whiteside v. North American Acc. Ins. Co.
Argued October 14, 1880
Decided November 16, 1880
Everett P. Wheeler for appellant. W.A. Beach for respondent.
The complaint in this action sets forth alleged causes of action upon two separate policies of insurance, claiming to recover the amount named in each, and also alleges that a dividend was declared out of the surplus earnings and receipts of the company, for a portion of which the insured was entitled to a paid-up policy, which on demand was refused. The demurrer to the complaint presents the question whether any cause of action is set forth therein.
The policies upon which this action was brought provided for the payment of an annual premium, and contained a condition as follows: "That this policy shall not take effect until the advance premium hereon shall have been actually paid, during the life-time of the insured, and that if any subsequent premium on this policy be not paid when due, then this policy shall cease and determine (except as hereinafter provided), and this company shall not be liable for the payment of the sum insured herein, nor of any part thereof." The annual premium due on the 28th of October, 1873, was not paid; the complaint alleges, and upon demurrer it must be taken as true, that previous to the day last mentioned, Vose, the insured, became and was by the visitation and act of God insane, and consequently unable to and did not pay the premium, although he had means to pay the same; but he was bereft of his reason and so continued until his death which occurred March 17, 1874, and in consequence thereof did not know nor remember that said premium was then due, nor that he had agreed to pay the same.
Vose having died without a payment of the premium, according to the terms of the contract, the question arises whether his insanity is an excuse for non-payment and the forfeiture is thereby waived. Courts of equity will relieve against a forfeiture in many cases, but none of the decisions have gone to the extent of holding that insanity will constitute an excuse for failing to comply with the terms of the condition referred to. In Rose v. Rose (Amb. 332), Lord HARDWICKE, laid down the rule thus: "Equity will relieve against all penalties whatsoever; against non-payment of money at a certain day; against forfeitures of copyholds; but they are all cases where the court can do it with safety to the other party; for if the court cannot put him into as good condition as if the agreement had been performed, the court will not relieve." Even if a condition subsequent becomes impossible by the act of God, or of the law, or of the obligee, etc., the estate will not be defeated. (Co. Litt. 206 b.) The defendant here could not well be placed in as good a condition as it had been by the payment of the premium after a forfeiture, for by such payment it would be compelled to pay the amount named in the policies, thus adding to its obligation.
So also where the contract is for personal services, which none but the person contracting can perform, inevitable accident, or the act of God, will excuse non-performance. But when the thing or work to be performed may be done by another person, then all accidents are at the risk of the promisor. (Story on Bailments, § 36 and notes; Wolfe v. Howes, 20 N.Y. 197; Clark v. Gilbert, 26 id. 279; Spalding v. Rosa, 71 id. 40.) In the present case, the condition did not require the insured himself to pay the premiums, and it could have been done quite as well by any one on his behalf. After Vose became insane he was not really the party in interest. He had assigned the policies to his children, and they were the parties interested therein and to be affected by a failure to perform the condition of the contract. Although Vose was their guardian, if incapacitated by his insanity a competent person could have been appointed in his place; and hence his insanity was not necessarily an insuperable obstacle to their performance of the condition of the policy, and they were not relieved thereby. So long as the act could be performed by any other person, its performance did not depend upon Vose's continued capacity; and although rendered incapable by his insanity, the case is not within the rule which relieves a party from the consequences of an omission to do an act rendered impossible by omnipotent power. (Broom's Legal Maxims [6th Am. ed.], 178, 179; Howell v. Knickerbocker Life Ins. Co., 44 N.Y. 276.)
While as a general rule, where the performance of a duty created by law is prevented by inevitable accident, without the fault of a party, the default will be excused, yet when a person by express contract engages absolutely to do an act not impossible or unlawful at the time, neither inevitable accident, nor other unforeseen contingency not within his control, will excuse him, for the reason that he might have provided against them by his contract. ( Dexter v. Norton, 47 N.Y. 62; Harmony v. Bingham, 12 id. 99, 107; Tompkins v. Dudley, 25 id. 275.) The principle thus established has been especially applied in reference to policies of insurance, where the payment of the premium is held to be a condition precedent which must be kept or the policy falls. ( Roehner v. Knickerbocker Life Ins. Co., 63 N.Y. 160; Evans v. U.S. Life Ins. Co., 64 id. 304; Beebe v. Johnson, 19 Wend. 500.) In the case last cited, it was laid down that to excuse non-performance, it must appear that the act to be done could not by any means have been accomplished.
The learned counsel for the plaintiff seeks to distinguish 63 N.Y. 160 and 64 id. 304, above cited, from the case at bar; but we are unable to perceive any such difference as prevents an application of the principle decided in these cases, and we think that they are directly in point upon the question discussed. Reliance is also placed upon the decisions of this court in Cohen v. The N.Y. Mut. Life Ins. Co. ( 50 N.Y. 610) and Sands v. The N.Y. Life Ins. Co. (id. 626), to sustain the theory of the plaintiff. Those decisions hold that the occurrence of war between two States forbid and excused the transmission and payment of premiums on the policies then in question from one State to another, and legally excuses their payment; and as the premiums could not be paid as they fell due, they were suspended, and a tender, after the termination of the war, with interest, renewed the policies. This condition of affairs arises from the belligerent attitude between the hostile States, which rendered it impracticable to comply with the terms of the contract. War necessarily prevented communication between the citizens of such States; and as it existed without the fault of the insured, in the cases cited, and for that reason no intercourse could be maintained for business purposes, the insured were not in any sense in fault for a failure to comply with the conditions contained in the policies in question. As it was impossible for either one of the insured to pay the premium required, or to procure any one else to do so upon his behalf, there is no satisfactory reason why he should not be excused. This rule, which is well settled by the law of nations, rests upon grounds of public policy by which contracts between belligerent States are suspended during the war, but are not annulled. This doctrine is founded upon the principle that the State, and not the individual, wages the war. (Phill. Int. Law, 666; Wheat. Int. Law [8th ed.], 403, § 317.) The cases cited are not analogous; for while here the individual can pay or provide for payment through another, in case of war he is entirely helpless to fulfill and carry out the contract, and at the mercy of the government. The authorities of the hostile States have placed it beyond his control, suspended all intercourse, stopped all business relations, and laid a heavy arm upon all communications between their citizens. As there is no ability to fulfill, no means of paying, the justice and propriety of the rule is apparent, while its application in the case at bar cannot be upheld upon any such ground. There is, we think, a wide distinction in principle recognized in the books between inability to fulfill the terms of the contract, where, by the act of two governments war intervenes and prevents a fulfillment, and where the default arises from a duty or charge which has been assumed by the party and is capable of fulfillment either by himself or by another on his behalf.
While a court of equity will interpose its power to relieve against forfeitures for a breach of a condition subsequent caused by unavoidable accident, by fraud, surprise or ignorance, in many cases, that power has never been extended so as to excuse a breach of a contract of this description arising from the disability of a party caused by sickness or insanity.
The case of Baldwin v. The N.Y. Life Ins. Co. (3 Bosw. 530), which is cited and relied upon by the appellant, involved no question as to the non-payment of the premium, but related to a provision in the contract whereby the insured was licensed to travel in prohibited localities, returning within a specified period, and was prevented by illness from performing the condition. It was analogous to contracts for personal services, to which reference has been had, and the authority has no application in the case considered. Besides it is overruled by Evans v. U.S. Life Ins. Co. ( supra). In the case at bar, it is not claimed that the performance was strictly impossible, and therefore that it was excused by law or that equitable relief should be granted upon that ground; and we are unable to discover that a case is made out, within any acknowledged principle, which authorizes the interposition of a court of equity.
Nor is there any ground for claiming that, by the provisions of the contract, the intention of the parties was that the terms of payment should not be obligatory in case of unavoidable sickness or of insanity. The law places a reasonable construction upon all contracts, but in cases of insurance policies, where the prompt payment of premiums is an important element of the business, and forms the basis of its calculation by the compounding of interest thereon, it is scarcely to be supposed that such payment can be waived, except in conformity with some established rule of law or by express agreement.
The claim of the plaintiff that the moneys in possession of the company belonging to Vose, being dividends on the policies in question, should be applied in payment of the premiums falling due, is without merit, as such dividends would have been insufficient to pay the premiums due, even if applied. Nor were the company bound to pay such dividends to the insured and notify him that the policy was forfeited if not applied. The money was never demanded, nor any request made to apply the same; and hence the defendant was under no obligation to apply or to pay the dividends on account of the premiums. The views expressed lead to the conclusion that no action lies to recover the amount named in the several policies mentioned in the complaint, or the dividends, and the demurrer must be sustained, unless it can be upheld upon some other ground.
The allegations in the complaint in regard to dividends which have been earned, and the refusal of the defendant to issue a paid-up policy, stand, we think, in a different position. The sixth condition of the policy provides: "That if, after the payment of two or more annual premiums upon this policy, the same shall cease and determine by default in the payment of any subsequent premium when due, then, notwithstanding such default, this company will grant a `paid-up policy' (payable as above) for such amount as the then present value of this policy will purchase as a single premium, provided that this policy shall be transmitted to and received by this company, and application made for such `paid-up policy' within one year after default in the payment of premium hereon, shall first be made." The complaint shows that under this clause a dividend was declared out of the surplus earnings and receipts for the preceding year, on the 1st day of January, 1873, payable to its several policy-holders, and to Vose as one of them; that none of this has been paid, and it was still retained by the defendant, and was in its possession when the premium not paid became due and at the time of Vose's death. Three annual premiums had been paid upon the policies, and the provision cited entitled the insured or his assignees to the benefit of the dividends actually made. As the complaint avers that when the proofs of loss were presented to the defendant, the policy of $20,000 was transmitted to and received by it, and that it refused to grant a paid-up policy for such amount, as the then present value of the policy on the 28th day of October, 1873, the day when default was made, would purchase as a single premium, or to pay such amount, a cause of action is made out which entitles the plaintiff to relief. The facts stated establish a demand for a paid-up policy, within one year after default in payment of the premium, in the mode prescribed, and a refusal to comply with such demand. The fact that Vose was dead does not relieve the defendant from liability, as no such contingency by the terms of the policy is provided for as an excuse for not granting such paid-up policy. The conditions were, first, that two or more annual premiums should be paid; and, second, that the application should be made within one year after default. All this has been done, and the company were bound to comply with these conditions. Although the insured was dead, the right to a paid-up policy, or its value, remained to his assignees. If the insured had lived he was entitled to it, and his assignees succeeded to his right. The same rule applies as when insurance companies, or their agents, have made contracts to issue policies which have neither been made out nor delivered. In such cases the loss is payable the same as if a policy had been actually issued and delivered. Although not very distinctly or precisely set forth, a cause of action was stated in substance which entitled the assignee of Vose to a paid-up policy or its equivalent. A refusal to perform this condition created a liability for the amount for which the paid-up policy might have been issued, and this was a good cause of action, for which the plaintiff was entitled to recover.
As the complaint contained distinct causes of action, and a demurrer to the whole complaint was interposed, and one of them is good and sufficiently pleaded, the result is that the judgment of the General Term should be reversed and that of the Special Term affirmed, with leave to the defendant to answer upon the usual terms.
All concur, except FOLGER, Ch. J., and ANDREWS, J., who being interested as policy-holders in the defendant, took no part.