1. An insurance company may waive any condition of a policy
inserted therein for its benefit.
2. As the company may at any time, at its option, give authority
to its agents to make agreements or to waive forfeitures, it is not
bound to act upon the declaration in its policy that they have no
such authority.
3. Whether it has or has not exercised that option is a fact
provable by either written evidence or by parol.
4. As denoting the power given by an insurance company to a
local agent, evidence is admissible as to its practice in allowing
him to extend the time for the payment of premiums and premium
notes, and the jury, upon such evidence, may find whether he was
authorized to make such an extension and, if so, whether it was in
fact made in the case on trial.
5. In this case, the Court holds that the fact that the premium
note was already past due when the agreement to extend it was made
is not sufficient to prevent that agreement from operating as a
waiver of the forfeiture.
This action was brought by Phoebe A. Norton on a policy of
insurance, issued by the Knickerbocker Life Insurance Company of
New York, on the life of Jesse O. Norton, for the benefit of his
wife and children. The original policy was dated April 20, 1867,
and, being partly destroyed by fire, was reissued in April, 1874.
The premium was $385, payable annually on the twentieth day of
April in each year, and the
Page 96 U. S. 235
policy, amongst other things, contained the following
condition:
"
Second, if the said premium shall not be paid on or
before twelve o'clock noon, on the day or days above mentioned for
the payment thereof, at the office of the company in the City of
New York (unless otherwise expressly agreed in writing), or to
agents when they produce receipts signed by the president or
secretary, or if the principal of or interest upon any note or
other obligation given for the premium upon said policy shall not
be paid at the time the same shall become due and payable, then and
in every such case the company shall not be liable to pay the sum
assured or any part thereof, and said policy shall cease and be
null and void, without notice to any party or parties interested
herein, except that the stipulation for a new policy, as
hereinbefore provided, shall remain in force."
"
Third, in case a loan of or credit for a portion of
said premium shall be made on this policy, said policy shall be
subject to all of the terms and conditions expressed in the
acknowledgment or obligation given for such loan or credit, and to
the payment of interest thereon in advance, and said loan or credit
shall be a just counterclaim against any amount which shall become
due and payable on the policy, and shall be deducted
therefrom."
By an endorsement on the policy, it was declared that "agents of
the company are not authorized to make, alter, or abrogate
contracts, or waive forfeitures."
The insured died on the 3d of August, 1875, and the company
refused to pay the insurance on the ground that the policy was
forfeited by reason of the nonpayment of certain notes given for
the last premium, which was due April 20, 1875. It was conceded
that all the other premiums had been paid.
The declaration, besides a special count on the policy,
contained the ordinary money counts. The defendant pleaded the
general issue and specially, that the premium notes were not paid
at maturity and that the policy thereby became forfeited. The
plaintiff replied first that the agent of the defendant at Chicago,
regularly authorized by the defendant so to do, extended the time
of payment of the first note, which became due on the 20th of June,
to the 20th of July, when she tendered the amount thereof to the
agent, who refused to receive
Page 96 U. S. 236
the same, and that she also tendered the amount of the second
note at its maturity, which was likewise refused; secondly that
after the maturity of the first note, the agent of the defendant,
regularly authorized so to do, waived all advantages the company
might have claimed because of its nonpayment at maturity and
extended the time of payment, as before stated, with an averment of
tender and refusal. The defendant, by way of rejoinder, denied that
it had extended the time of payment or that it had waived any
advantages as alleged. This was the issue at the trial.
It appeared on the trial that the premium in question was
settled by the payment of $50 in cash, and the balance in two
promissory notes given by Jesse O. Norton to the insurance company,
payable respectively in two and three months and maturing one on
the 20th of June, the other on the 20th of July, 1875. Each note
contained a clause, declaring that if it were not paid at maturity
the policy would be void, this being the usual form of premium
notes.
On the issue as to extension of time on the notes and the
authority of the agent to grant it, the plaintiff produced three
witnesses: Randall, agent of the company down to March, 1874;
Frary, his successor, who was agent at the time in question; and
Martin Norton, son of the insured, who acted in behalf of his
father in reference to the alleged extension and to the tender of
payment.
The testimony of these witnesses tended to show that formerly
the company had allowed their agent to extend time on premium notes
for a period of ninety days; that this indulgence was afterwards
reduced to sixty days and then to thirty, and that at the period in
question the agent was required, as a general thing, to return the
notes in his hands if not paid by the 15th of the month following
that in which they became due.
As to what took place with reference to the notes in question,
there is some conflict in testimony between Martin Norton and the
agent, Frary. The former testified in substance that he called on
the agent in behalf of his father in June, 1875, a few days after
the first note became due, and told him that his father wished it
extended for thirty days, to which the agent agreed, his answer
being, "All right." That he called again
Page 96 U. S. 237
on or about the 8th of July to request an extension of the other
note, which would become due on the 20th of that month, and a
further extension of the first note to the 10th of August. That the
agent said he would have to write to the company about this. That
on the 13th he called again and told the agent that his father had
concluded to pay both notes, and the agent gave him the figures
showing what was due on them. That he called again on the 15th,
prepared to pay the notes, when he was informed by the agent that
he could not receive the money, having received orders from the
company to return all the papers to New York, and he had done so.
That he then made a legal tender of the amount due on the first
note, which was refused. Frary testified that he had no
recollection of the first interview or of agreeing to extend the
first note. As to the rest, they did not materially differ.
In addition to the testimony relating to the general practice of
the agents in granting extensions of time for the payment of
premium notes, evidence was given tending to show that Norton, the
insured, had usually received more or less indulgence of that
kind.
The counsel for the defendant moved to strike out the testimony
touching the usages of the company as to nonpayment of prior
premium notes by Norton and prior indulgence thereon to him as
incompetent and in conflict with the terms of the policy and as
showing no authority in Frary to give the alleged extension, which
was without consideration if made, and after the forfeiture had
occurred.
The counsel for the defendant also moved to strike out that
portion of Martin Norton's testimony relative to an agreement for
an extension of the premium notes, such agreement being without
authority on the part of the agent, &c. The court overruled the
latter motion and, as to the first, directed the jury to disregard
so much of Randall's testimony as tended to show the conduct of the
defendant and plaintiff in regard to former payments, but allowed
to stand so much of Randall's and Frary's testimony as tended to
show the powers of the agents in reference to giving extensions on
premiums or premium notes. This ruling was excepted to.
In charging the jury, the court left it to them to say from
Page 96 U. S. 238
the evidence whether the agent of the defendant had power to
waive a strict compliance with the terms of the agreement as to the
time of paying the notes given for the premium, and if he had such
power, whether such a waiver was in fact made; if it was, and if
the insured offered to pay the notes within the time to which they
were extended and the company refused to receive payment, that then
the plaintiff was entitled to recover. The jury were further
instructed that the power vested in Randall, the previous agent,
was only pertinent as it tended to throw light on the powers vested
in his successor, Frary. The defendant's counsel excepted to the
charge and submitted several instructions, the purport of them
being in substance that in view of the express provisions of the
policy, the evidence was utterly irrelevant and incompetent to show
any authority in the agent to grant any indulgence as to the time
of paying the notes, and to waive the forfeiture incurred by their
nonpayment at maturity or to show that any valid and legal
extension was in fact granted or that the forfeiture of the policy
was waived.
These instructions were refused. There was a judgment for the
plaintiff, whereupon the company sued out this writ of error.
Page 96 U. S. 239
MR. JUSTICE BRADLEY, after stating the case, delivered the
opinion of the Court.
The material question in this case is whether, in view of the
express provisions of the policy, the evidence introduced by the
assured was relevant and competent to show that the company had
authorized its agent to grant indulgence as to the time of paying
the premium notes and waive the forfeiture incurred by
Page 96 U. S. 240
their nonpayment at maturity, or to show that any valid
extension had in fact, been granted or the forfeiture of the policy
waived.
The written agreement of the parties, as embodied in the policy
and the endorsement thereon, as well as in the notes and the
receipt given therefor, was undoubtedly to the express purport that
a failure to pay the notes at maturity would incur a forfeiture of
the policy. It also contained an express declaration that the
agents of the company were not authorized to make, alter, or
abrogate contracts or waive forfeitures. And these terms, had the
company so chosen, it could have insisted on. But a party always
has the option to waive a condition or stipulation made in his own
favor. The company was not bound to insist upon a forfeiture,
though incurred, but might waive it. It was not bound to act upon
the declaration that its agents had no power to make agreements or
waive forfeitures, but might at any time, at its option, give them
such power. The declaration was only tantamount to a notice to the
assured, which the company could waive and disregard at pleasure.
In either case, both with regard to the forfeiture and to the
powers of its agent, a waiver of the stipulation or notice would
not be repugnant to the written agreement, because it would only be
the exercise of an option which the agreement left in it. And
whether it did exercise such option or not was a fact provable by
parol evidence, as well as by writing, for the obvious reason that
it could be done without writing.
That it did authorize its agents to take notes instead of money
for premiums is perfectly evident from its constant practice of
receiving such notes when taken by them. That it authorized them to
grant indulgence on these notes, if the evidence is to be believed,
is also apparent from like practice. It acquiesced in and ratified
their acts in this behalf. For a long period, it allowed them to
give an indulgence of ninety days; after that, of sixty; then of
thirty days. It is in vain to contend that it gave them no
authority to do this when it constantly allowed them to exercise
such authority and always ratified their acts notwithstanding the
language of the written instruments.
We think, therefore, that there was no error committed by the
court below in admitting evidence as to the practice of the
Page 96 U. S. 241
company in allowing its agents to extend the time for payment of
premiums and of notes given for premiums as indicative of the power
given to those agents, nor any error in submitting it to the jury,
upon such evidence, to find whether the defendant had or had not
authorized its agent to make such extensions, nor in submitting it
to them to say whether, if such authority had been given, an
extension was made in this case.
Much stress, however, is laid on the fact that the extension
claimed to have been given in this case was not given or applied
for until after the first note became due and the forfeiture had
been actually incurred. But we do not deem this to be material. The
evidence does not show that any distinction was made in granting
extensions before or after the maturity of the notes. The material
question is whether the forfeiture was waived, and we see no reason
why this may not be done as well by an agreement made for extending
the note after its maturity as by one made before. In either case,
the legal effect of the indulgence is this -- the company say to
the insured, pay your note by such a time, and your policy shall
not be forfeited. If the insured agrees to do this and does it or
tenders himself ready to do it, the forfeiture ought not to be
exacted. In both cases, the parties mutually act upon the
hypothesis of the continued existence of the policy. It is true, if
the agreement be made before the note matures and before the
forfeiture is incurred, it would be a fraud upon the assured to
attempt to enforce the forfeiture when, relying on the agreement,
he permits the original day of payment to pass. On the other hand,
if the agreement be made after the note matures, such agreement is
itself a recognition on the company's part of the continued
existence of the policy, and consequently of its election to waive
the forfeiture. It is conceded that the acceptance of payment has
this effect, and we do not see why an agreement to accept and a
tender of payment according to the agreement should not have the
same effect. Both are acts equally demonstrative of the election of
the company to waive the forfeiture of the policy. Grant that the
promise to extend the note is without consideration and not binding
on the company -- which is perhaps true as well when the promise is
made before maturity as when it is made afterwards -- still it does
not take from the company's act the
Page 96 U. S. 242
legitimate effects of such act upon the forfeiture of the
policy. Perhaps the note might be sued on in disregard of the
extension, but if it could be, that would not annihilate the fact
that the company elected to waive the forfeiture by entering into
the transaction. If it should repudiate its agreement, it could not
repudiate the waiver of the forfeiture without at least giving to
the assured reasonable notice to pay the money.
Forfeitures are not favored in the law. They are often the means
of great oppression and injustice. And where adequate compensation
can be made, the law in many cases, and equity in all cases,
discharges the forfeiture, upon such compensation being made. It is
true, we held in
Statham's Case, 93 U. S.
24, that in life insurance, time of payment is material
and cannot be extended by the courts against the assent of the
company. But where such assent is given, the courts should be
liberal in construing the transaction in favor of avoiding a
forfeiture.
The case of leases is not without analogy to the present. It is
familiar law that when a lease has become forfeited, any act of the
landlord indicating a recognition of its continuance, such as
distraining for rent or accepting rent which accrued after the
forfeiture, is deemed a waiver of the condition.
In
Doe v. Meux, 4 Barn. & Cress. 606, there was a
general covenant to repair and a special covenant to make specific
repairs after three months' notice, and a condition of forfeiture
for nonperformance of covenants. The landlord gave notice to the
tenant to make certain specific repairs within three months. This
was held a waiver of the forfeiture already incurred under the
general covenant. Justice Bailey said:
"The landlord in this case had an option to proceed on either
covenant, and, after giving notice to repair within three months,
he might have brought an action against the defendant upon the
former covenant for not keeping the premises in repair. But that is
very different from insisting upon the forfeiture. . . . I think
that the notice amounted to a declaration that he would be
satisfied if the premises were repaired within three months, and
that he thereby precluded himself from bringing an ejectment before
the expiration of that period."
In
Doe v. Birch, 1 Mee. & W. 402, there was a
covenant on
Page 96 U. S. 243
the part of the tenant to make certain improvements on the
premises within three months or that the lease should be void. He
failed to make the improvements in the manner stipulated and, after
the expiration of the three months, the landlord's son, on his
father's behalf, made a demand of a quarter's rent. But, it not
appearing that the landlord knew of the tenant's failure with
regard to the improvements, it was held that the son had not
sufficient authority to waive the forfeiture. Otherwise it seems
that the demand of the rent would have amounted to a waiver. Baron
Parke referred to
Green's Case, 1 Croke 3, where calling
the party a tenant, in a receipt for bygone rent, was held to be
sufficient evidence of a waiver, though the acceptance of that rent
was not such. And he adds:
"If it had been proved that the father had notice of the
alterations, and he had still allowed the son to receive the rent,
the forfeiture might have been waived. But that was not proved, and
the question of waiver does not therefore distinctly arise in the
case. If it had, the authorities cited show that this was a lease
voidable at the election of the landlord. Then I think that an
absolute, unqualified demand of rent by a person having sufficient
authority would have amounted to a waiver of the forfeiture, and it
would have been like the case I cited from Croke's Reports."
In
Ward v. Day, 4 Best & Smith 335, after a
forfeiture of a license to gather minerals off of a manor had been
incurred, the landlord entered into negotiations with the licensee
and his son to grant to the latter a renewal of the license when it
should expire, and terms were agreed on which the landlord
afterwards refused to carry out. It was held that by entering into
these negotiations, he waived the forfeiture of the original
license. The negotiations assumed that the original license was to
continue to its termination. The exaction of the forfeiture was in
the landlord's election, and he evinced his election not to enforce
it by entering into the negotiations. Justice Blackburn says:
"Most of the cases in which the doctrine of election has been
discussed have been cases of landlord and tenant under a regular
lease, in which has been reserved a right of reentry for a
forfeiture -- that is, an option to determine the lease for a
forfeiture; but this doctrine is not, as Mr. Russell seems to
Page 96 U. S. 244
think, confined to such cases. So far from that being so, the
doctrine is but a branch of the general law that where a man has an
election or option to enter into an estate vested in another or to
deprive another of some existing right, before he acts, he must
elect, once for all, whether he will do the act or not. He is
allowed time to make up his mind, but when once he has determined
that he will not consider the estate or lease, whichever it may be,
void, he has not any further option to change his mind."
And then the learned judge cites authorities going back to the
Year Books to show that a determination of a man's election in such
cases may be made by express words or by act, and that if by word
or by act he determines that the lease shall continue in existence
and communicates that determination to the other party, he has
elected that the other shall go on as tenant.
These cases show the readiness with which courts seize hold of
any circumstances that indicate an election or intent to waive a
forfeiture. We think that the present case is within the reason of
these authorities, and that the objection that the note was already
past due when the agreement to extend it was made is not sufficient
to prevent said agreement from operating as a waiver of the
forfeiture.
Several minor points were raised by the defendant, but they are
all either substantially embraced in the main points already
considered or are not of sufficient force to require special
discussion.
We find no error in the record, and the judgment of the circuit
court is
Affirmed.
MR. JUSTICE SWAYNE, MR. JUSTICE FIELD, and MR. JUSTICE STRONG
dissented.
MR. JUSTICE STRONG.
I dissent from the judgment given in this case. The insurance
effected by the policy became forfeited by the nonpayment
ad
diem of the premium note. The policy then ceased to be a
binding contract. It was so expressly stipulated in the instrument.
Admitting that the company could afterwards elect to treat the
policy as still in force, or, in other words, could waive the
forfeiture, the local agent could
Page 96 U. S. 245
not unless he was so authorized by his principals. The policy
declared that agents should not have authority to make such
waivers. And there is no evidence in this case that the company
gave to the agent parol authority to waive a forfeiture after it
had occurred. They had ratified his acts extending the time of
payment of premium notes when the extension was made before the
notes fell due. But no practice of the company sanctioned any act
of its agent, done after a policy had expired, by which new life
was given to a dead contract.
