McMaster v. New York Life Ins. Co., 183 U.S. 25 (1901)
U.S. Supreme CourtMcMaster v. New York Life Ins. Co., 183 U.S. 25 (1901)
McMaster v. New York Life Insurance Company
Argued March 18, 1901
Decided October 28, 1901
183 U.S. 25
The policies sued on provided for forfeiture on nonpayment of premiums, and as to payments subsequent to the first, which were payable in advance, for a grace of one month, the unpaid premiums to bear interest and to be deducted from the amount of the insurance if death ensued during the month. The applications, which were part of the policies, were dated December 12, 1893, and by them McMaster applied, in the customary way, for insurance on the ordinary life table, the premiums to be paid annually; the company assented and fixed the annual premium at $21, on payment of which, and not before, the policies were to go into effect. After the applications were filled out and signed, and without McMaster's knowledge or assent, the company's agent inserted therein: "Please date policy same as application;" the policies were issued and dated December 18, 1893, and recited that their pecuniary consideration was the payment in advance of the first annual premiums, "and of the payment of a like sum on the twelfth day of December in every year thereafter during the continuance of this policy." They were tendered to McMaster by the company's agent, December 26, 1893, but McMaster's attention was not called to the terms of this provision, and on the contrary he
"asked the agent if the policies were as represented, and if they would insure him for that period of thirteen months, to which the agent replied that they did so insure him, and thereupon McMaster paid the agent the full first annual premium or the sum of twenty-one
dollars on each policy and without reading the policies he received them and placed them away."
McMaster died January 18, 1895, not having paid any further premiums, and the company defended on the ground that the policies became forfeited January 12, 1895, being twelve months from December 12, 1893, with the month of grace added. Held that,
(1) The statutes of Iowa, where the insurance was solicited, the applications signed, the premiums paid, and the policies delivered, govern the relation of the solicitor to the parties.
(2) Under the circumstances, plaintiff was not estopped to deny that McMaster requested that the policies should be in force December 12, 1893, or, by accepting the policies, agreed that the insurance might be forfeited within thirteen months from December 12, 1893.
(3) The rule in respect of forfeiture that, if policies of insurance are so framed as to be fairly open to construction that view should be adopted, if possible, which will sustain, rather than forfeit the contract is applicable.
(4) Tested by that rule, these policies were not in force earlier than December 18, 1893, and as the annual premiums had been paid up to December 18, 1894, forfeiture could not be insisted on for any part of that year or of the month of grace also secured by the contracts.
This was an action brought by Fred A. McMaster, administrator of the estate of Frank E. McMaster, deceased, against the New York Life Insurance Company on five policies of insurance of $1,000 each upon the life of Frank E. McMaster.
The applications were dated December 12, and the policies December 18, 1893. The premiums for a year in advance were paid and the policies delivered December 26, 1893.
McMaster died January 18, 1895, and the defense was that the insurance had been forfeited by failure in payment of the second annual premiums on or before January 12, 1895, that is to say, within thirty days after December 12, 1894, when the company contended they became due.
The company alleged in a substituted and amended answer that the policies were executed and delivered December 12, 1893, and set forth:
"2. This defendant, for further answer, says that said application is dated the 12th day of December, 1893, and asked the issuing of five policies of $1,000 each upon the life of the said
Frank E. McMaster, deceased. Said application also contained a request that said five policies each should be issued, dated, and take effect the same date as the application, namely, the 12th day of December, 1893, and said request was complied with, and the policies were so issued."
"This defendant grants to the insured in said defendant company a grace of one month on the payment of premiums, which extended the day of payment of premiums from December 12th, 1894, as in the policies issued to said Frank E. McMaster, deceased, late as the 12th day of January, 1895, but not later."
"3. This defendant, for further answer, says that payment of the premiums due upon said policies were not paid within the time prescribed as aforesaid, and that said Frank E. McMaster died on the 18th day of January, 1895, six days after said policies had lapsed and were forfeited for nonpayment of premiums as required."
"* * * *"
"6. This defendant, further answering said petition, says that said application is a part of said policies, in each case, that said assured received and accepted said policies during his lifetime, and had them all in his possession for a long time, and was aware and knew, or could have known, the contents in each policy."
"That said assured had paid the premiums when said policies were delivered to him; that, by reason of said assured's acceptance of said policies, his representative, the plaintiff herein, is estopped from denying the date of said policies or claiming that said policies should have a different date from the application, and is estopped for the reasons above stated from claiming that said words, to-wit,"
"Please date policy same as application, were not in said application when insured signed same, for by accepting said policies the assured waived said right to object, if said words were inserted, as alleged in petition, after the signing of the application, which this defendant denies."
The case was tried by the circuit court without a jury; special findings of fact made, and judgment rendered in favor of defendant. 90 F. 40.
Plaintiff prosecuted a writ of error from the circuit court of
appeals, and the judgment was affirmed. 99 F. 856. The writ of certiorari was then allowed.
Pending the trial below, plaintiff filed a bill in equity for the reformation of the policies, and the circuit court granted the relief prayed. 78 F. 33. On appeal, this decree was reversed, 57 U.S.App. 638, and an application to this Court for certiorari was denied. 171 U.S. 687. The circuit court of appeals expressed the opinion in that case that no recovery could be had at law or in equity, and accordingly the circuit court in this case, although of opinion that plaintiff was entitled to recover, gave judgment for defendant.
Separate opinions were given by the judges of the court of appeals, Sanborn and Thayer, JJ., concurring in affirming, and Caldwell, J., dissenting.
The findings of fact by the circuit court were as follows:
"1st. The plaintiff, Fred A. McMaster, was when the suit was brought and is now, the lawfully appointed administrator of the estate of Frank E. McMaster, deceased, having been appointed administrator of the named estate by the probate court of Woodbury County, Iowa, and furthermore said plaintiff was, when this suit was brought and is now a citizen of the State of Iowa, and a resident of Woodbury County, Iowa."
"2d. That the defendant, the New York Life Insurance Company, was, when this suit was brought and is now, a corporation created under the laws of the State of New York, having its principal office and place of business in the City of New York, in the State of New York, but being also engaged in carrying on its business of life insurance in the State of Iowa and other states."
"3d. That in December, 1893, F. W. Smith, an agent for the New York Life Insurance Company, residing at Sioux City, Iowa, solicited Frank E. McMaster to insure his life in that company, and, as an inducement to taking the insurance, pressed upon McMaster the provision adopted by the company, and set forth in the circular issued by the company, and printed on the back of the policies issued by the company, under the heading, 'Benefits and Provisions referred to in this Policy,' in the following words:"
"After this policy shall have been in force three
months, a grace of one month will be allowed in payment of subsequent premiums, subject to an interest charge of 5 percent per annum for the number of days during which the premium remains due and unpaid. During said month of grace the unpaid premium, with interest as above, remains an indebtedness due the company, and in the event of death during said month, this indebtedness will be deducted from the amount of the insurance."
"4th. Relying on the benefits of this provision and in the belief that, if he accepted a policy of insurance upon his life from the New York Life Insurance Company, paying the premiums thereon annually, the company could not assert the right of forfeiture until thirteen months had elapsed since the last payment of the annual premium, the said Frank E. McMaster signed an application for insurance in said company, dated December 12, 1893, of the form which is made part of the policies sued on and attached to the petition, the same being made part of this finding of facts."
"5th. In the application when signed by Frank E. McMaster, it was provided that the amount of insurance applied for was the sum of $5,000, to be evidenced by five policies for $1,000 each, on the ordinary life table, the premium to be payable annually."
"6th. There now appears on the face of the application, interlined in ink, the words, 'Please date policy same as application.' These words were not in the application when it was signed by McMaster, but after the signing thereof, they were written into the application by F. W. Smith, the agent of the New York Life Insurance Company, without the knowledge or assent of Frank E. McMaster, and were so written in by the agent in order to secure to the agent a bonus which the company allowed to agents for business secured during the month of December, 1893, and it does not appear that Frank E. McMaster ever knew that these words had been written into the application, and it affirmatively appears that he had no knowledge thereof when the application was forwarded to the home office of the company and was acted on by the company."
"7th. By the express understanding had between F. W. Smith,
the agent of the New York Life Insurance Company, and Frank E. McMaster, when the application for insurance was signed, it was agreed that the first year's premium was to be paid by McMaster upon the delivery to him of the policies, and that the contract of insurance was not to take effect until the policies were delivered."
"8th. The defendant company at its home office in New York City, upon receipt of the application, determined to grant the insurance applied for, and issued five policies each for the sum of $1,000 dated December 18th, 1893, and reciting on the face thereof that the annual premium on each policy was $21.00, and forwarded the same to its agent F. W. Smith at Sioux City, Iowa, for delivery to Frank E. McMaster. These five policies are in the form of the one attached to the petition in this case, which is hereby made a part of this finding of fact, and each policy contains the recital:"
"This contract is made in consideration of the written application for this policy, and of the agreements, statements, and warranties thereof, which are hereby made a part of this contract, and in further consideration of the sum of twenty-one dollars and __ cents, to be paid in advance, and of the payment of a like sum on the twelfth day of December in every year thereafter during the continuance of this policy."
"9th. The five policies enclosed in envelopes on or about December 26th, 1893, were taken by F. W. Smith, the agent of the defendant company, to the office of Frank E. McMaster, who asked the agent if the policies were as represented, and if they would insure him for the period of thirteen months, to which the agent replied that they did so insure him, and thereupon McMaster paid the agent the full first annual premium, or the sum of $21 on each policy, and, without reading the policies, he received them and placed them away. The agent did not in any way attempt to prevent McMaster from reading the policies, and he had the full opportunity for reading them, but in fact did not read them, and accepted them on the statement of the agent of the company, as hereinabove set forth."
"10th. That, not later than November 17th, 1894, notice was sent to Frank E. McMaster of the coming due of the premiums
on the policies issued to him by the defendant company, in accordance with the requirements of the statutes of the State of New York."
"11th. The renewal receipts for the second annual premium on the five policies held by Frank E. McMaster in the defendant company were sent for collection to Mary A. Ball at Sioux City, Iowa, who on the 11th or 12th day of December, 1894, called on said McMaster for payment of the premiums in question. At that time, McMaster declined making payment thereon, saying that he had seen other policies which promised better results, and that he did not think he would renew the insurance in the defendant company. Miss Ball told him the New York contracts had some nice provisions, like thirty days of grace and loans, and, in reply to an inquiry from McMaster, stated that his policies entitled him to the month's grace in the payment of the premiums, and that, as she understood it, the grace on the second premiums would expire January 11, and McMaster said if he concluded to keep any of the insurance, he would call and pay for it before the grace expired."
"12th. That, in November or December, 1894, Frank E. McMaster was examined for the purpose of obtaining life insurance by the agents of the Union Central Insurance Company, it being understood between the parties that the policies were not to issue until in January, 1895, and it being the purpose of McMaster to take $1,000 or $2,000 insurance in the Union Central Company at the expiration of his insurance in the defendant company, but also to continue part of the policies held in the defendant company."
"13th. That, on or about January 15th, 1895, the agent of the Union Central Company, meeting McMaster on the street in Sioux City, told him the policies issued by the Union Central Company had been received, and in reply McMaster said: 'All right. Just hold them. There is no hurry about them.' And in the same conversation, he stated that he had other insurance -- referring to the policies in the defendant company."
"14th. That the action of Frank E. McMaster shows, and the court so finds the fact to be, that the said McMaster believed that the policies issued to him by the defendant company would
continue in force for the period of thirteen months from the date of the policies, and his action with respect to the policies in the defendant company and the proposed insurance in the Union Central Company was based upon and governed by this belief on his part."
"15th. That Frank E. McMaster died at Sioux City on the morning of January 18th, 1895."
"16th. That up to the time of his death the said Frank E. McMaster had not paid the second year's premiums on the policies issued to him by the defendant company, nor have the same been paid since his death, nor had the said McMaster received or paid for the policies issued by the Union Central Company, and the same had not been delivered or become effectual."
"17th. That due and sufficient notices and proofs of the death of said Frank E. McMaster were immediately sent to and received by the defendant company, and due demand for the payment of the five policies sued on was made by the plaintiff, as administrator of the estate of Frank E. McMaster, and refused by the defendant company on the ground that the policies in question had lapsed and were not in force at the time of the death of said Frank E. McMaster, by reason of the failure to pay the second year's premiums coming due on said policies."
"18th. That the defendant company has not paid said policies or any part thereof, and, assuming the same to be valid, there is due thereon November 1, 1898, the sum of ($5,965) five thousand nine hundred and sixty-five dollars, after deducting form the face of the policies the amount of the second premiums, with interest thereon to March 14, 1895."
The policies were dated December 18, 1893, and provided:
"Annual Premium $21.00"
"This contract is made in consideration of the written application for this policy, and of the agreements, statements, and warranties thereof, which are hereby made a part of this contract, and in further consideration of the sum of twenty-one dollars and _____ cents, to be paid in advance, and of the payment of a like sum on the 12th day of December in every year thereafter during the continuance of this policy. "
"After this policy shall have been in force one full year, if it shall become a claim by death, the company will not contest its payment, provided the conditions of the policy as to payment of premiums have been observed."
"The benefits and provisions placed by the company on the next page are a part of this contract as fully as if recited over the signatures hereto affixed."
"Benefits and provisions referred to in this policy."
"Benefits at end of Accumulation period"
"If the insured is living on the 12th day of December in the year nineteen hundred and thirteen, on which date the accumulation period of this policy ends, and if the premiums have been paid in full to said date, the insured shall be entitled to one of the six benefits following: [cash value; annuity; paid up policy, etc., etc.] If the insured made no selection, dividends were to be apportioned as provided."
"(Any indebtedness to the company, including any balance of the current year's premium remaining unpaid, will be deducted in any settlement of this policy or of any benefits thereunder.)"
"Powers not Delegated"
"No agent has power in behalf of the company to make or modify this or any contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the company by making any promise or making or receiving any representation or information. These powers can be exercised only by the president, vice-president, second vice-president, actuary, or secretary of the company, and will not be delegated."
"Payment of Premiums"
"All premiums are due and payable at the home office of the company unless otherwise agreed in writing, but may be paid to agents producing receipts signed by the president, vice-president, second vice-president, actuary or secretary, and countersigned by such agent. If any premium is not thus paid on or before the day when due, then (except as hereinafter otherwise provided) this policy shall become void, and all payments previously made shall remain the property of the company. "
"After this policy shall have been in force three months, a grace of one month will be allowed in payment of subsequent premiums, subject to an interest charge of 5% per annum for the number of days during which the premium remains due and unpaid. During the said month of grace, the unpaid premium, with interest as above, remains an indebtedness due the company, and in the event of death during the said month, this indebtedness will be deducted from the amount of the insurance."
The applications were dated December 12, 1893, and contained, among other things, the following:
"Sum to be insured, $5,000."
"Five policies of $1,000 each."
"Please date policy same as application. [It was averred in the complaint and found by the circuit court that these words in italics were inserted by the agent after the applications were signed and without applicant's knowledge.]"
"Premium payable Annually"
"Note: Strike out the rates not desired."
"On what table: Ordinary Life. Life premium. Endowment payable in ___ years. Limited endowment payable in ___ years."
"I do hereby agree as follows: . . . 2. That inasmuch as only the officers at the home office of said company, in the City of New York, have authority to determine whether or not a policy shall issue on any application, and as they act on the written statements and representations referred to, no statements, representations, promises or information made or given by or to the person soliciting or taking this application for a policy, or by or to any other person, shall be binding on said company, or in any manner affect its rights, unless such statements, representations, promises, or information be reduced to writing and presented to the officers of said company at the home office in this application. . . . 4. That any policy which may be
issued under this application shall not be in force until the actual payment to and acceptance of the premium by said company or an authorized agent, during my lifetime and good health."