Mayer v. Equitable Reserve Fund Life Ass'n — 5 N.Y. St. Rep. 87

Majority

p. 87

John M. Mayer, Resp’t, v. The Equitable Reserve Fund Life Association, Appl’t.

(Supreme Court, General Term, Third Department,

Filed December, 1886.)

Headnote

1. Insurance (Life) — Evidence — Invalidity of policy may be shown AS DEFENSE TO AN ACTION FOB NON-PAYMENT.

Where the contracts of a Life Insurance Association with its members provide that upon the occurrence of the death of any of its members, an assessment might be levied, and upon the death of one of its members holding the company’s contract of insurance on his life, such an assessment was levied. Held, that this contract by its terms, and by the terms of the constitution of the company, which were also a part thereof, being dependent for its validity upon the truth of the material representations made upon procuring it, the company was warranted in refusing payment of a claim of which it could show the invalidity.

2. Same — Evidence of invalidity admissible.

In an action brought for the refusal to pay insurance money under such a contract. Held, that evidence showing the invalidity of the contract was admissible in defense of the non-payment.

E. S. Wood, for resp’t; Fleischman & May, for appl’t.

The defendant offered evidence tending to show

p. 88

the invalidity of the plaintiff’s claim. This evidence was excluded upon the assumption that the defendant acquired the money in question by virtue of assessments, levied upon and paid by its members for the purpose of paying the claim, and thereby the defendant became the agent of the members for the purpose of paying the money upon the claim, and therefore had no right to contest its validity or withhold its payment.

We do not think the facts justify such an assumption. The money was assessed by the defendant upon its members, and paid by them under their contracts for insurance with the defendant. These contracts provided that “upon the occurrence of the death of any of its members,” the assessment might be levied. The assessment in this instance was levied by the defendant upon the occurrence of the death of Charles Stephan, who held at the time of his death the defendant’s contract of insurance upon his life. That contract was either valid or invalid. By its terms, and by the terms of the constitution and by-laws of the defendant, which were a part of the contract, its validity depended upon the truth of the material representations made by Stephan upon procuring it. The right to payment under the contract depended upon its validity, or, at least, upon the inability of the defendant to show its invalidity. That invalidity it offered evidence tending to show: The defendant was, in a certain sense, the agent of the members of the company, but was an agent with-special and defined powers and limitations, and. the true and obvious construction of these powers and limitations forbade payment upon a claim which it was able to show was procured through misrepresentation or fraudulent suppression of facts, concerning which it required answers from Stephan when he applied for membership. That it had realized the money with which to make payment, was no waiver of its duty to see to it that payment was due. That duty it still owed to its members, who had.payed their assessments, trusting to the fidelity of the company to protect them and the fund from invalid claims.

We think the defendant was entitle to prove the facts which it offered in defence.

. Judgment reversed, new trial granted, costs to abide the event.

Learned, P. J., and Bockes, J., concur.