Case Name: McCORMACK v. SECURITY MUTUAL LIFE INS. CO
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1914-03-04
Citations: 146 N.Y.S. 613
Docket Number: 
Parties: McCORMACK v. SECURITY MUTUAL LIFE INS. CO.
Judges: 
Reporter: West's New York Supplement
Volume: 146
Pages: 613–620

Head Matter:
(161 App. Div. 33)
McCORMACK v. SECURITY MUTUAL LIFE INS. CO.
(Supreme Court, Appellate Division, Third Department.
March 4, 1914.)
1. Insurance (§ 354 )—Life Insurance—Notice.
Under Insurance Law (Consol. Laws, c. 28) § 92, requiring insurance companies to send notices that premiums are due, and providing that no insurance company shall declare any policy forfeited unless a written or printed notice, stating the amount of the premium due, the place and the person to whom it is payable, shall have been sent at least 15, and not more than 45, days prior to the day when the premium is payable, a notice that a premium is payable will not support a forfeiture, where it contained many alternative directions as to payment, and was incumbered by suggestions, intimations, and advice; the notice required by the statute being a danger signal which would not lull the insured into false security.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. §§ 908-911, 913; Dec. Dig. § 354. ]
2. Insurance (§ 378 )—Life Insurance—Power of Officers.
Where the field superintendent and local cashier of the defendant insurance company consented to the reinstatement of a life policy after lapse in payment of premiums, with knowledge that the insured was hopelessly ill, such knowledge is chargeable to the company, and it cannot defeat recovery on the ground that a statement signed by the insured recited that he was in good health.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. §§ 968-997; Dec. Dig. § 378. ]
3. Insurance (§ 365 )—Life Insurance—Incontestability.
A life policy contained a clause providing that it should be incontestable after the expiration of one year. It was forfeited for nonpayment of premiums, but was reinstated a few months later as of the date of the forfeiture, the company accepting the original check for the premium, which the insured’s wife had negligently failed to mail. Held, that the policy as reinstated related back to the time of the forfeiture, and it became incontestable within one year after forfeiture.
[Ed. Note.—For other cases, see Insurance, Cent. Dig. §§ 932, 933; Dec. Dig. § 365. ]
Smith, P. J., dissenting.
Appeal from Trial Term, Albany County.
Action by Agnes L. McCormack against the Security Mutual Life Insurance Company. From a judgment for defendant, plaintiff appeals.
Reversed.
Argued before SMITH, P. J„ and KELLOGG, HOWARD, and WOODWARD, JJ.
Rollin B. Sanford, of Albany, for appellant.
Harvey D. Hinman, of Binghamton (Jay L. Gregory, of Binghamton, of counsel), for respondent.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep'r Indexes

Opinion:
HOWARD, J.
In 1901 the Security Mutual Life Insurance Company wrote a policy for $2,000 on the life of John A. McCormack. He was then a sound and healthy man; afterwards he was stricken with a fatal malady, with which he suffered for several years and then died. On December 12, 1910, a quarter yearly premium became due and payable, with 30 days' grace. On. November 12, 1910, a notice was sent out by the company and received by the assured, whereby the company undertook to apprise the assured of his obligation to make a premium payment on December 12th. Mrs. McCormack, the .wife of the assured, the plaintiff herein, wrote a check on December 5th for the amount due, put it in an envelope, and directed the envelope to the company, but omitted to mail it. On February 13, 1911, the company notified the assured by letter of his default, and suggested that he arrange for a reinstatement of his policy. Mrs. McCormack visited the office of the local agent, Miss M. F. Hearley, the person named in the notice, for the purpose of inquiring into the matter. She was told by Miss Hearley that a reinstatement of the policy was necessary, and that Mr. McCormack must certify that he was then in good health. Mrs. McCormack told the agent, so she says, that no such certificate could be made,- for her husband was then and had been for years in bad health. But the assured did ultimately sign such a certificate, and was, in form, reinstated by the company. He died January 2, 1912.
The defense to this action, brought on the policy, is that the policy was forfeited by the nonpayment of the premium due December 12, 1910, and that the reinstatement was procured by fraud and false statements. And so we must first inquire whether there was a forfeiture.
Section 92 of the Insurance Law requires insurance companies to send out to policy holders a notice that premiums are due. This section provides that no insurance company shall declare any policy forfeited—
"unless a written or printed notice stating the amount of such premium, due on such policy, the place where it shall be paid, and the person to whom the same is payable, shall have been duly addressed and mailed to the person whose life is insured at least fifteen and not more than forty-five days prior to the day when the same is payable. The notice shall also state that unless such premium, then due, shall be paid to the corporation, or to the duly appointed agent or person authorized to collect such premium by or before the day it falls due, the policy and all payments thereon will become forfeited and void except as to the right to a surrender value or paid-up policy as in this chapter provided."
The notice which the company sent to the assured in this case reads:
"Security Mutual Life Insurance Company, Binghamton, N. Y.
"Dear Sir: On or before Dec. 12th, 1910, a premium payment of sixteen & 85/ioo dollars, for the regular % yearly payment required to renew policy No. 34629 on the life of John A. McCormack in this company, will, if such policy be in force on that day, but not otherwise, become due and payable to the comptroller of the company at its office, Security Mutual Life Building, Binghamton, N. Y., and unless said premium shall be paid on or before said date, the policy and all payments made thereon will become forfeited and void, except that this notice shall not affect any right to paid-up or extended insurance, or to 30 days' grace, if provided for in the policy contract.
"The acceptance of any premium by the company after the date when due is subject to the condition that the insured is in good health, and an ex- . pressed warranty upon the part of the holder of the policy to that effect, and shall not be construed as a waiver of the conditions of the policy as to future payments, nor as establishing a course of dealing between the company and the holder of the policy.
"The sending of this notice shall not be held to waive any forfeiture or lapse of the policy, if any previous payment has not been made.
"No agent, collector, or other person, except the president, vice president, comptroller, or secretary, has authority to receive payment of a premium after it becomes due, or to extend the time for the payment of a premium, or to grant permits, or to make, alter, restore, or discharge policy contracts, or to waive any condition thereof.
"Dated Binghamton, N. Y., Nov. 12th, 1910.
• "Return this receipt with your remittance. :
"Chas. A. La'Due, Secretary.
"All premiums are due at the office of the company in the city of Binghamton, N. Y., but for the convenience of policy holders payments may be made jn or before the date when due to an authorized collector in exchange for the company's receipt therefor, signed by the secretary, and countersigned by the collector.
"Payment may be made to M. F. Hearley, SO State Street, Albany, N. X., authorized collector.
"Pay now and avoid overlooking it. M.'F. H."
It is unnecessary to analyze this notice. It is sufficient to say that in our judgment it does not comply with the statute either literally or substantially; this is apparent on its face. Its form, its verbiage, its surplusage; its suggestions, intimations, and advice, intermingled with the language of the statute, are all repugnant to directness and simplicity. The notice is intended to be, as the plaintiff's attorney has well expressed it, a "danger signal." But the danger signal is here confused with a dozen other signals. There is no excuse for this; no necessity for it. If the insurance company wishes to convey this additional information to its policy holders, it must do so at other times than when sending out premium notices, and on other papers. But it is urged that the plaintiff received the notice and attempted to act upon it, and therefore if it was in some degree defective, it served its purpose, and the plaintiff was not harmed. But neither was the company harmed by the default in payment; it received the same amount of money and the same identical check which it would have received if the premium had been paid when due. And we cannot be certain that the plaintiff was not harmed; the peculiar and ambiguous language of the notice may have lulled her somewhat into repose. She may not have been spurred on by fear of forfeiture, as perhaps she would have been by the simple, direct language of the statute. The law abhors the forfeiture of insurance policies on technical grounds, and in order to effect a forfeiture, the statute must be strictly complied with. This court has already taken a position on this subject. Flint v. Provident Life & Trust Co., 157 App. Div. 885, 141 N. Y. Supp. 1119. There is no reason to change that position now. The notice must be held to have been defective and insufficient to work a forfeiture.
Having reached the conclusion that the policy was never forfeited, it is not strictly necessary to make further examination of this case. It may not be unprofitable, however, to do so. Although the adjudicated cases in this state are by no means harmonious on the subject, the weight of authority is to the effect that agents of insurance companies cannot, by any statements which they may make, waive or. alter the written conditions of policies. But that rule is not controlling here, for the situation before us presents a different question. We are now to determine whether knowledge on the part of agents becomes knowledge on the part of the company. That is the question before us now. The jury has found in this case that two agents of the company —a local agent and a "field superintendent"—had full knowledge of the condition of health of the insured at the time the policy was reinstated. The finding' of the jury cannot be doubted, for it comports with the probabilities of the case and with common knowledge as to the methods of insurance agents. The field superintendent, by his title" of office, as well as by his testimony, appears to have been a representative of much importance in the company. His jurisdiction ex tended all over the United States. His duties were general and supervisory in character. If he knew of reasons why a person ought not to be reinstated, it was his duty, so he tells us, to report such information to the company. Under these conditions it should be held that knowledge on the part of this agent was -knowledge on the part of the company. It follows that, the company, having full knowledge of the condition of health of the assured at the time it reinstated his policy, it is estopped from setting up as a defense the false statements in his application for reinstatement. The company knew that Mr. McCormack was desperately sick. Notwithstanding this, with its eyes wide open, it reinstated his policy. It cannot now complain.
And there is still another feature of this case worthy of consideration. The process of reinstatement here consisted of the acceptance by the company of the orginal check drawn by the plaintiff for the payment of the premium and the delivery by the company of the original receipt to the plaintiff. No new written contract was executed. The "reinstatement" was a reissuance of the old policy. That is, the policy having ceased to exist, as the company claimed, on December 12, 1910, it did not make out a new policy when it resumed relations with the plaintiff, but issued the old policy over again, and dated it, in effect, December 12, 1910. This must be so, otherwise the amount received by the company in premiums between December 12, 1910, and about February 18, 1911, was money accepted and retained by the company when there was no policy in existence. This plan avoided all gaps and interims. The old policy, issued anew, was to bear date December 12,1910. That this was the distinct understanding of the parties is clearly apparent. This being so, the incontestability clause must be held to apply to the "reinstated" policy with the same force and effect as it did to the original policy. This is equitable and just, and has been sanctioned by the Court of Appeals. Teeter v. United Life Insurance Association, 159 N. Y. 411, 54 N. E. 72. Therefore it follows that after one year from December 12, 1910, the policy was incontestable.
The judgment of the Trial Term should be reversed, and judgment for the relief demanded in the complaint rendered for the plaintiff, with costs.
We disapprove of the finding of fact made by the Trial Court, to the effect that the defendant duly rescinded the contract of insurance and reinstatement. All concur, except SMITH, P. J., dissenting and LYON, J., not sitting.