New York Life Insurance Company v. Statham - 93 U.S. 24 (1876)
U.S. Supreme Court
New York Life Insurance Company v. Statham, 93 U.S. 24 (1876)
New York Life Insurance Company v. Statham
93 U.S. 24
1. A policy of life assurance which stipulates for the payment of an annual premium by the assured, with a condition to be void on nonpayment, is not an insurance from year to year, like a common fire policy, but the premiums constitute an annuity, the whole of which is the consideration for the entire assurance for life, and the condition is a condition subsequent, making, by its nonperformance, the policy void.
2. The time of payment in such a policy is material, and of the essence of the contract, and a failure to pay involves an absolute forfeiture which cannot be relieved against in equity.
3. If a failure to pay the annual premium be caused by the intervention of war between the territories in which the insurance company and the assured respectively reside, which makes it unlawful for them to hold intercourse, the policy is nevertheless forfeited if the company insist on the condition; but in such case the assured is entitled to the equitable value of the policy arising from the premiums actually paid.
4. This equitable value is the difference between the cost of a new policy and the present value of the premiums yet to be paid on the forfeited policy when the forfeiture occurred, and may be recovered in an action at law or a suit in equity.
5. The doctrine of revival of contracts suspended during the war is based on considerations of equity and justice, and cannot be invoked to revive a contract which it would be unjust or inequitable to revive, as where time is of the essence of the contract or the parties cannot be made equal.
6. The average rate of mortality is the fundamental basis of life assurance, and as this is subverted by giving to the assured the option to revive their policies or not after they have been suspended by a war (since none but the sick and dying would apply), it would be unjust to compel a revival against the company.
The first case is a bill in equity, filed to recover the amount of a policy of life assurance granted by the defendant (now appellant) in 1851 on the life of Dr. A. D. Statham, of Mississippi, from the proceeds of certain funds belonging to the defendant attached in the hands of its agent at Jackson in that state. It appears from the statements of the bill that the annual premiums accruing on the policy were all regularly paid until the breaking out of the late civil war, but that in consequence of that event, the premium due on the 8th of December, 1861, was not paid; the parties assured being residents of Mississippi, and the defendant a corporation of New York. Dr. Statham died in July, 1862.
The second case is an action at law against the same defendant to recover the amount of a policy issued in 1859 on the life of Henry S. Seyms, the husband of the plaintiff. In this case also the premiums had been paid until the breaking out of the war, when, by reason thereof, they ceased to be paid, the plaintiff and her husband being residents of Mississippi. He died in May, 1862.
The third case is a similar action against the Manhattan Life Insurance Company of New York, to recover the amount of a policy issued by it in 1858, on the life of C. L. Buck, of Vicksburg, Miss., the circumstances being substantially the same as in the other cases.
Each policy is in the usual form of such an instrument, declaring that the company, in consideration of a certain specified sum to it in hand paid by the assured, and of an annual premium of the same amount to be paid on the same day and month in every year during the continuance of the policy, did assure the life of the party named, in a specified amount, for the term of his natural life. Each contained various conditions, upon the breach of which it was to be null and void, and amongst others the following:
"That in case the said [assured] shall not pay the said premium on or before the several days hereinbefore mentioned for the payment
thereof, then and in every such case the said company shall not be liable to the payment of the sum insured, or in any part thereof, and this policy shall cease and determine."
The Manhattan policy contained the additional provision that in every case where the policy should cease or become null and void, all previous payments made thereon should be forfeited to the company.
The nonpayment of the premiums in arrear was set up in bar of the actions, and the plaintiffs respectively relied on the existence of the war as an excuse, offering to deduct the premiums in arrear from the amounts of the policies.