Case Name: STEINBACH v. PRUDENTIAL INS. CO. OF AMERICA
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901-06-07
Citations: 70 N.Y.S. 809
Docket Number: 
Parties: STEINBACH v. PRUDENTIAL INS. CO. OF AMERICA.
Judges: 
Reporter: West's New York Supplement
Volume: 70
Pages: 809–815

Head Matter:
STEINBACH v. PRUDENTIAL INS. CO. OF AMERICA.
(Supreme Court, Appellate Division, First Department.
June 7, 1901.)
1. Insurance—Suit on Policy—Defect of Parties—Waiver.
Where the executor of insured was not made a party in a suit to reform and recover on an insurance policy in favor of a debtor of the deceased, the insurance company’s failure to answer or demur on that-ground is a waiver of the defect.
■2. Same—Reformation and Recovery in Same Action.
Where an insurance company, through its agent, agreed that a policy should be issued on the life of plaintiff’s debtor, payable to plaintiff, who was to pay the premiums thereon, and plaintiff received and retained the policy, and paid the premiums, relying on the agent's representations, plaintiff was entitled to have the contract reformed so as to be made payable to her according to the agreement, and to recover thereon in the same action.
3. Same—Evidence—Declarations of Agent.
Conversations of an insurance agent at the time of and prior to the making of an application for a policy, and his declarations at the delivery thereof, are admissible in a suit to reform the policy.
4. Same—Principal and Agent—Fraud of Agent.
An insurance company, having collected and retained the premiums on a policy, is chargeable with the fraud or mistake of its agent in inducing the making of the contract and acceptance of the policy, regardless of whether it had knowledge of such fraud.
Patterson and McLaughlin, JJ., dissenting.
Appeal from special term, New York county.
Action by Caroline Steinbach against the Prudential Insurance Company of America. From a judgment for plaintiff, defendant appeals.
Affirmed.
Appeal by defendant from a judgment entered in the clerk’s office of the county of New York on the 9th day of July, 1900, reforming the policy of insurance set forth in the complaint by striking therefrom the words “unto the executors, administrators, or assigns of the person named as the insured in this policy,” and by substituting in place thereof the words “unto Caio1-ine Lampp [the plaintiff], her executors, administrators, or assigns,” and allowing plaintiff to recover thereon the sum of $164.90, principal and inter est, together with costs and an extra allowance.' The evidence'showed that one Max Fehrman was indebted to plaintiff in the sum of $403.70. The policy in question was taken out upon the life of Fehrman at the suggestion of plaintiff, and with his consent, to secure said indebtedness to her. Fehrman boarded with plaintiff, and at the time she held by assignment two other policies on his life, issued by the same company, upon which, at his request, she had been and was paying the premiums. Plaintiff made known the fact to defendant’s local agent that Fehrman was owing her, and asked if she could have his life insured for her benefit, to which he replied that he would See about it. Two weeks later he informed her that it could be done, but that he would have to see Fehrman first, and that Fehrman would have to undergo a medical examination. He asked her how much she wanted the insurance for, and whether she could pay a premium of 50 cents per week, to Which she replied that she was not able to pay that amount, but could pay 25 cents per week. At his suggestion she arranged for an interview between him and Fehrman at her house, at which she and her husband were present. At that time he asked Fehrman questions, and filled out a blank application, which Fehrman signed. Speaking of the application, she testified: “I saw the paper. I did not read it through. I did not understand everything, but I saw it, and I saw that he (meaning Fehrman) signed it. I said, ‘Have I got to write my name?’ He (meaning the agent) said: ‘It is not necessary. The small policies are all made out the same. If' it is a big policy, then they have the name,—the party’s name; but the small policy it is all made out the same;’ and he said, ‘Who keeps the policy and pays the premiums gets the money, if anything happens.’ ” Subsequently the doctor came, examined Fehrman, and he and Fehrman signed a paper. The agent subsequently brought plaintiff the policy in question, and informed her that Fehrman had passed the examination, and that she would have to-pay 25 cents on a new book (evidently a pass book relating to the premiums on this policy), which he brought her. She paid the premium, and regularly paid the premiums thereafter, aggregating $10.50, until the death of Fehrman. Plaintiff testified that the agent delivered to her “a new book and the-policy, and he said to keep this policy and the book. I looked at it, and I said, ‘Don’t I have to have my name in it?’ He said: ‘No, the policy is; made out for a small amount. It is not necessary. Who keeps the book and the policy and pays the premiums gets the money, if something happens.’ ” The testimony of plaintiff was corroborated by her husband as to-what occurred at the time the application was signed. The written application contained no question requesting information as to the name of the beneficiary, and no suggestion was made therein concerning the same. The local agent of the company was not called as a witness, and the testimony of plaintiff and her husband was not controverted. The district superintendent testified that the local agent delivered the application to him, and that the policy was made out in Newark, N. J. He also testified that the local agent was authorized to take applications. The policy is not printed in full in the record, but the following extract therefrom is given: “Seventh. 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 beyond the time allowed by the rules of the company, which in no case shall exceed four weeks; to waive any forfeiture; or to bind the company by making-any promise or representation or receiving any information. These powers-can be exercised only by the president or secretary of the company, and will not be delegated.” The death of Fehrman, and due proofs thereof to defendant, were admitted.
Argued before McLAITGHLIN, PATTERSON, O’BRIEN, INGRAHAM, and LAUGHLIN,. JJ.
William Ogden Campbell, for appellant.
Walter Large, for respondent.

Opinion:
LAUGHLIN, J.
The trial court, upbn this evidence, found that plaintiff was not designated as beneficiary in this policy through. mistake or fraud of defendant or its officers or agents, and that the policy was accepted by plaintiff by mistake, and upon the supposition and in the belief that it was payable to her. The policy, as issued, did not express the contract as made, and the defendant gave no explanation as to how it came to make the policy payable to Fehrman's estate. It being within the power of the company, by calling its local agent or otherwise, to show its authority for issuing the policy in a form different from that required by the contract as testified to by plaintiff and her husband, the court would have been warranted in finding that the company was guilty of fraud, and it is not in any position to successfully impeach the finding as made. Hay v. Insurance Co., 77 N. Y. 240, 33 Am. Rep. 607. Fehrman's executor or administrator should have been joined (Conkling v. Davies, 53 How. Prac. 409); but the defect has been waived by defendant's failure to answer or demur upon that ground. The reformation of the insurance policy as to the name of the beneficiary, and recovery thereon in the same action, are warranted by precedent. McCoubray v. Insurance Co., 50 App. Div. 416, 64 N. Y. Supp. 112. In the case at bar the agreement was that a policy should be issued by the defendant upon the life of Fehrman, payable to plaintiff as beneficiary, and that she should pay the premiums thereon. This agreement was definite and certain, but it was not correctly embodied in the policy subsequently issued by defendant. Plaintiff, however, received and retained the policy, and paid all premiums thereon, relying upon the agent's representations previously made, and then reiterated, that, it being a small policy, the party holding and paying the premiums would receive the insurance. In these circumstances plaintiff was entitled to have the contract reformed, and to recover thereon. McCoubray v. Insurance Co., supra; Maher v. Insurance Co., 67 N. Y. 283; Pitcher v. Hennessey, 48 N. Y. 415; Kirchner v. Machine Co., 135 N. Y. 182, 31 N. E. 1104; Kilmer v. Smith, 77 N. Y. 226, 33 Am. Rep. 613; Welles v. Yates, 44 N. Y. 522. In Pitcher v. Hennessey, supra, the court say:
"It is claimed on the part of the plaintiff that, if the mistake occurred because both parties misunderstood the meaning of the terms 'risk of navigation,' both parties believing that these terms would include the risk in question, then no reformation of the contract can be had. This claim is not well founded. When parties have made an agreement, and there is no allegation of any mistake in it, and in reducing it to writing they, by mistake, either because they did not understand the meaning of the words used, or their legal effect, failed to embody their intention in the instrument, equity will grant relief by reforming the instrument, and compelling the parties to execute and perform their agreement as they made it; and it matters not whether such a mistake be called one of law or fact."
The conversations with defendant's agent before and at the time the application was made and at the time of the delivery of policy to plaintiff was received under defendant's objection and exception that the evidence was incompetent, and not binding upon it. It is now too well settled to require the citation of authorities that conversations with an insurance agent at the time of and prior t« the making of an application are competent in an action to reform the policy. The declarations of the agent at the time of delivering the policy constituted merely a reiteration of the assurances he had .given plaintiff previously. He was the agent of the company to deliver the policy and collect the premiums, and the conversation was in relation to delivering the policy, and before it had its inception by being received and retained by plaintiff. It was competent, at least, as tending to relieve plaintiff from the charge of negligence in accepting the policy. The company, having collected and retained the premiums, is chargeable with the fraud or mistake of its agent—constructively at least—in inducing the making •of the contract and the acceptance of the policy, regardless of whether it had knowledge of such fraud. McGuire v. Insurance Co., 7 App. Div. 575, 40 N. Y. Supp. 300; McCoubray v. Insurance Co., supra; Maher v. Insurance Co., supra; Stewart v. Insurance Co., 155 N. Y. 257, 49 N. E. 876; Mayer v. Dean, 115 N. Y. 561, 22 N. E. 261, 5 L. R. A. 540; Bridger v. Goldsmith, 143 N. Y. 424, 38 N. E. 458; Bennett v. Judson, 21 N. Y. 238; Fashion Co. v. Skinner, 64 Hun, 293, 19 N. Y. Supp. 62.
The judgment should be affirmed, with costs.
O'BRIEN and INGRAHAM, JJ., concur.