Attorney-General v. Empire Mutual Life Insurance — 35 N.Y. Sup. Ct. 358

Majority

p. 358

In the Matter of the ATTORNEY-GENERAL, v. THE EMPIRE MUTUAL LIFE INSURANCE COMPANY.

Headnote

Insu/ranee Company — reinsurance of its risks — policyholders are not obliged, to accept the reinsurance — they are not bound to pay premiums in the future.

June 7, 1872, the Empire Mutual Life Insurance Companymade an arrangement with the Continental Life Insurance Company by which the latter was to rein-sure all the policies of the Empire company, and the latter was to go out of business. This arrangement was carried into effect and the Empire company transferred its property to the Continental and went out of business; the Continental reinsuring all of the policyholders of the Empire who desired it so to do. Certain of the policyholders did not accept the reinsurance offered. Thereafter they paid no premiums either to the Empire or to the Continental

Held, that the act of the Empire company in thus going out of business and transferring its property and business to the Continental excused its policyholders from paying future premiums to it.

That they were not' bound to accept the reinsurance offered to them.

That they were entitled to recover from the Empire company or its receiver the damages occasioned by its breach of contract.

Appeal from an order made at a Special Term, rejecting and disallowing appellants’ claims against the Receiver of the Empire Mutual Life Insurance Company.

The Empire Mutual Life. Insurance Company was organized under the laws of this State as a life insurance company on the 3d day of April, 1869, and immediately comjnenced the transaction of business. On the 7th of June, 1872, by an agreement in writing, the Empire company reinsured its risks with the Continental Life Insurance Company, and stipulated to withdraw from the business of life insurance, and to do all things necessary and proper, according to law, for the purpose of winding up its business. Most of its policyholders surrendered their policies and accepted new ones instead from the Continental. Some, however, did not, and the Empire, therefore, notwithstanding the agreement, was obliged to keep up an organization and a place for the transaction of such business as it found necessary to do. Its office was removed to the office of the Continental Life Insurance Company, whose employes transacted the Empire’s business.

Prior to June 7, 1872, the day of the making of the agreement

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between the Empire and the Continental Insurance Companies for the reinsurance of the Empire’s risks, appellants had insured with the Empire. They paid no premiums after June 7, 1872.

In December, 1878, proceedings were taken to wind up the affairs of the Empire company and to distribute the $100,000 fund on deposit with the superintendent of the insurance department. Subsequently, and on the 14th day of January, 1879, John P. O’Neill, who had been appointed receiver of the Continental Life Insurance Company, was appointed receiver of the Empire.

In February, 1881, Mr. O’Neill, receiver of the Empire, petitioned the court for the appointment of a referee to report upon the validity of these claims against the Empire. The referee reported to the court that the claims of appellants were valid and recommended their payment by the receiver. The matter was heard at a Special Term, and an order made rejecting appellants’ claims.

Raphael J. Moses, Jr., for J ohn G. Simmons and sundry policyholders, appellants.

William Barnes, for Dr. Edward Young and divers policyholders.

Leslie W. Russell, attorney-general, for the respondent.

The policies in question were in force in June 1872. At that time the defendant made the arrangement with the Continental Insurance Company, by which the latter was to reinsure all the defendant’s policies and the defendant was to go out of business. This arrangement was carried into, effect, and the defendant did go out of business ; the Continental Insurance Company reinsured those of the defendant’s policyholders who desired, such reinsurance. After that time the present claimants made no payments of premiums on their policies and they did not accept the offered reinsurance.

"We think that the act of the defendant in thus going out of business and transferring its property and its business to the Continental Life Insurance Company excused these claimants from

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the obligation to pay future premiums. They were not bound to accept another company as their insurer. And they could not be bound to continue to pay premiums to a company which had ceased to do business. Practically the defendant had broken the contract, by putting itself in a condition in which it was disabled from carrying out the contract. Therefore the defendant was bound to compensate the claimants for the damages occasioned by this breach of contract. It is not claimed that the rights of these policyholders are barred by the statute of limitations. There is no reason therefore why they should not be paid out of the fund in question, as was reported by the referee.

We think, therefore, that the order of the Special Term should be reversed, and that the report of the referee should be confirmed, with ten dollars costs of appeal, and printing disbursements.

Bockes L, dissenting.

-Present —Learned, P. J., Boardman and Bookes, «LL

Order of special term .reversed, and report of referee confirmed.