McDougall v. Provident Savings Life Assurance Society — 46 N.Y. St. Rep. 502

Majority

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Jane A. McDougall et al., Adm’rs, Pl’ffs, v. The Provident Savings Life Assurance Society of New York, Def’t.

(Supreme Court, General Term, Fifth Department,

Filed June 23, 1892.)

Headnote

1. Insurance (Lire)—Notice.

The policy in question was for one year, with an agreement to renew and extend the insurance each successive year, upon condition that the insured pay by a certain date each year the mortuary premiums and an expense charge. The only provision as to forfeiture was in case the insured impaired his health by an excessive use of stimulants or narcotics. Held, that the contract was in effect to insure during the life of the insured on the payment of certain premiums, and must be regarded like the usual contracts of the insurance companies doing business in this state, and could not be forfeited for non-payment of premiums without service of the notice required by chap. 321, Laws 1877.

2. Same.

A Notice which fails to state that in case of non-payment the policy and all payments thereon will become forfeited and void, is insufficient under the statute.

Motion by the defendant, the Provident Savings Life Assurance Society of New York, for a new trial upon the exceptions taken at the Steuben circuit in November, 1891, and ordered to be heard at the general term in the first instance.

Stephen G. Clarke, for def’t; James H. Stevens, Jr., for pl’ffs.

This action was brought upon a policy of life insurance, issued by the defendant to one John McDougall, which was made payable, in case of his death, to his personal representatives or assigns.

At the close of the evidence, the counsel for the defendant asked the court to direct a verdict in favor of his client, which was refused and an exception was taken by him. Thereupon, counsel for the plaintiffs moved that the court direct a verdict for the plaintiffs, which was accordingly done.

The question presented relates to the application of chap. 321 of the Laws of 1877, pertaining to the thirty day notice to the insured to pay accruing premiums.

The contention made by the learned counsel for the defendant is, that the notice required by this law is not applicable to the particular contract made in this instance; and, further, that if it should be held that such notice is required, the one that was actually served was sufficient under such statute. To neither of these propositions are we able to assent.

The policy was issued on the 23d day of July, 1884, and insured the deceased in the sum of $10,000. In view of the attitude taken by the counsel for the defendant, it may perhaps be necessarjr to quote from the policy the material parts of the contract between the parties. These are as follows:

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“ The Provident Savings Life Assurance Society of New York, in consideration of the application herefor, and which is made a part of this contract, and in consideration, also, of the payment of $184.80, doth hereby promise to pay to John McDougall, the assured.in this policy, or to the legal representatives or assigns of said assured, at its office in the city of New York, the sum of ten thousand dollars, within ninety days after acceptance of satisfactory proof of the death of John McDougall of Hornellsville, county of Steuben, and state of New York (the insured in this policy), provided such death shall occur before twelve o’clock noon on the 23d day of July, A. D., 1885.

“And the said society promises and agrees to renew and extend this insurance during each successive year from the date hereof; upon condition that the assured shall pay, on or before the 23d day of July, in each successive year during the continuance of this contract, the mortuary premiums as called for by the society, in accordance with the schedule rates for the actual age printed ■on the back of this policy, and also an expense charge of three dollars on each one thousand dollars insured herein, the payment of said mortuary premium and the annual expense charge being the consideration for the continuance of the insurance in each successive year, and provided also that the conditions, stipulations and agreements upon which this policy is issued shall be faithfully observed and fully carried out.

“ Premiums shall be paid, as called for, to the society at its office in the city of New York, on or before the dates herein specified.”

Then follow provisions for a deposit in. bank of seventy-five per cent of the mortuary premium, in trust, for the settlement of death claims, the remaining twenty-five per cent to be invested in securities authorized by law. The policy then provides : “Notice of the amount of the quarterly premium falling" due, and demand for its payment, addressed to the within named assured at his post-office address as it appears on the books of the society, deposited in the post-office, postage prepaid, is accepted by the assured as a sufficient personal notice and demand.”

The only provision in the policy enabling the insurance company to terminate the contract is as follows: “ Should the within named insured impair his health by an excessive use of stimulants or narcotics the society reserves the right to cancel its agreement fo continue and extend this insurance, by notice sent to him in the manner above specified in respect to notices of premiums, and agrees to repay to the assured, in that event, on demand at its office in the city of New York, his full share of the aforesaid guarantee fund.”

An ingenious argument has been constructed by the defendant’s counsel, to the effect that this contract does not fall within the provisions of chap. 321 of the Laws of 1877, because it was a contract, originally, for an insurance for one year only, and that a notice to pay an annual premium was not contemplated by its terms. He fortifies his argument by the assertion that the annual premium, which the assured was required to pay, was less than the

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amount that would have been required by the ordinary policies issued upon the life of insured persons. But, as it seems to us, the particular form of this policy is unimportant, provided it appears from the whole instrument, as we think it clearly does, that there was an intention on the part of the contracting parties that the insurance should be continued until the death of the assured, providing he fulfilled his part of the agreement in respect to the payment of the premiums. It was not competent, under this contract, for the defendant at any time to terminate the agreement except under the provision in respect to impaired health through the use of stimulants and narcotics, which provision does not concern the case in its present aspect. On the contrary, it was in the power of the insured to continue the contract .by the payment of the annual premium. Under these circumstances, we do-not see but this is, in effect; the ordinary insurance contract-entered into by insurance companies, organized and doing business-in this state, one of which the defendant is shown to be. No scheme, however ingenious, can be devised by any insurance agent-which the courts can permit to be successful in eluding the provisions of this most reasonable statute, which requires a notice to-the assured thirty days before his premium falls due.

The argument of the learned counsel is, as it seems to us, fallacious in this respect, that while it is evident that the contract might not continue for more than one year, it may, nevertheless, at the option of the assured, continue during his natural life. In this respect the agreement is precisely the same as that of all ordinary insurance contemplated by the act in question. It matters not whether the provision of the contract is called a “ condition ” or not, it is the substance of it which the courts should look to ; and we find in this contract a clearly expressed intention on the part of both parties, the one to insure, and the other to pay for the insurance, during the life of the insured, so long as the premiums were paid in pursuance of the terms of the contract.

In respect to the assertion that the annual premium was less because the 'contract was -only one from year to year, it may well be that the company could afford to make it less, by so much, provided it was not required to give a notice of the accruing premiums, as provided- for by this statute. We think, therefore, that this policy must be regarded like the usual contract of the insurance companies organized and doing business in this state; and we accordingly hold that the company is amenable to this-statute, which requires it to send notice in pursuance of the act of 1877.

But it is further contended by counsel for the defendant that the notice which they did, in fact, send, was sufficient under the statute. This policy, which was issued on- the 23d day of July, 1884, was continued from year to year by the payment of the annual premium, the last of which was in July, 1887, and this kept alive the contract until July 23, 1888. The insured died in the month of November, 1888, not having paid the annual premium maturing July 23, 1888.

The notice which the defendant sent to the insured thirty days

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preceding the 23d of July, 1888, was, so far as this question is concerned, as follows: “ In order to continue and extend the insurance it will be necessary that .the premiums required for that purpose should be paid on or before the date above mentioned, as stipulated in the policy contract. This notice is given to meet the requirements of the New York law.”

This notice was not prepared in conformity with the provisions of the statute. The part of the statute material to this inquiry is as follows: “ Provided, however, that a notice stating when the premium will fall due, and that if not paid the policy and all payments thereon will become forfeited and void, served in the manner heretofore provided, at least thirty days and not more than-sixty days prior to the date when the premium is payable, shall have the same effect as the service of the notice hereinbefore provided for.” ' "

Under this clause of the statute it -is evident that the notice which was actually mailed by the defendant, within the statutory period preceding the 23d day of July, 1888, was insufficient. In the case of Phelan v. The Northwestern Mut. L. I. Co., 113 N.Y., 147 ; 22 St. Rep., 305 , the notice was as follows: “The conditions of your policy are that payment must be made on or before the premium is due, and members neglecting so to pay are carrying their own risk. Agents have no right to waive forfeitures. * * * Prompt payment is necessary to keep your policy in force,” but the court held that such notice did not, in its terms, conform to the statute, and says: “ Many ignorant and unlearned people seek to avail themselves of the advantages proposed by these companies. The statute is designed for the protection of all classes, and the language it prescribes for notice is intelligible to all. To say that in a declared event ‘ a policy will become forfeited and void,’ conveys a meaning easily to be comprehended. To refer to the policy and conditions and say that ‘ members neglecting so to pay are carrying their own risk,’ is quite another thing; and while it may be comprehensible to those versed in the language of insurers and accustomed to their phraseology, it is not the language of the statute and does not embody the notice which the statute requires.” See, also, cases there cited, and Merriman v. Keystone Mut. Benefit Ass., 44 St. Rep., 797 .

If these views are correct, it follows that the direction made by the learned justice at the circuit was correct, and, consequently,, that the exception taken by the defendant should be overruled.

Defendant’s motion for a new trial denied, with costs, and judgment ordered for the plaintiff on the verdict.

Dwight, P. J., and Lewis, J., concur.