Case Name: Matter of claim of Jane Wright, Appl't, in People of the State of New York v. Knickerbocker Life Insurance Company, Charles H. Russell, Receiver, Resp't
Court: New York Court of Appeals
Jurisdiction: New York
Decision Date: 1886-11-23
Citations: 3 N.Y. St. Rep. 645
Docket Number: 
Parties: Matter of claim of Jane Wright, Appl’t, in People of the State of New York v. Knickerbocker Life Insurance Company, Charles H. Russell, Receiver, Resp’t.
Judges: 
Reporter: New York State Reporter
Volume: 3
Pages: 645–648

Head Matter:
Matter of claim of Jane Wright, Appl’t, in People of the State of New York v. Knickerbocker Life Insurance Company, Charles H. Russell, Receiver, Resp’t.
(Court of Appeals,
Filed November 23, 1886.)
Insurance (life)—New policy—Terms as to bobbeittjbe.
Where a “non-forfeiture” life insurance policy provided that, on failure to pay any premium after the receipt by the company of two or more annual premiums, the company would issue a new policy for as many tenths of the original insurance as there had been premiums paid, without subjecting the assured to any subsequent charge, except the interest annually on all outstanding premium notes. Held, that the insertion in the new policy of a clause of forfeiture of said new policy for non-payment of the interest annually on the outstanding notes was implied in the original policy and valid.
Appeal from an order of supreme court, general term, first department, affirming an order of special term sustaining receiver’s exceptions and denying a motion to confirm a referee’s report.
The original policy contained a provision that if after the receipt by the company of two or more annual premiums, the policy should cease in consequence of the non-payment of premiums, the company on the surrender of the same will issue a new policy for the full value acquired under the old one, subject to any notes that may have been received on account of premiums; that is to say, if payments for two years have been made, it will issue a policy for two-tenths of the sum originally insured; if for three years, three-tenths; and in the same proportion for any number of payments, without subjecting the assured to any subsequent charge, except the interest annually on all premium notes remaining unpaid on this policy.” The claimant allowed the policy to lapse after paying partly in cash and partly in notes six annual premiums. Thereafter she surrendered it, and the company issued a new policy for six-tenths of the amount of the original policy, which contained a recital that it was issued in consideration of the surrender of the old policy and of the representation made in the application therefor, and of the payment of interest annually, every 22d day of Hovember, on all notes or credits given for premiums on the original policy.. The outstanding notes or credits amounted to $1,620, and were charged against the policy. The new policy also contained this clause: “If the interest upon said notes or credits shall not be paid on or before the day or days above mentioned for the payment thereof * * * then, and in every such
case, the company shall not be hable 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.” The claimant paid interest on the notes for three years after the new policy was issued, until lstl, and then ceased to pay interest, and made no further payments. In 1882, the company became insolvent, and a receiver was appointed. It is claimed that the claimant had no actual knowledge that the hew policy contained the clause of forfeiture above quoted, and that it was fraudulently inserted by the company.
John B. Green, for appl’t; Edward II. Ilobbs and Leslie W. Bussell, for resp’t.

Opinion:
Andrews, J.
The words "non-forfeiture policy" were conspicuously printed on the original policy. But a reference to the body of the policy shows that it was not intended to make the policy non-forfeitable, except in a limited sense. The assured was not relieved from the obligation to pay the premium annually on the day specified. By the express terms of the contract an omission to pay the premium on the day it became due avoided the policy. But if at the time of such omission he had paid two or more premiums, the company bound itself to issue a new policy for as many tenths of the original insurance as there had been premiums paid. This was the only sense in which the original policy was non-forfeitable. The assured would not lose all benefit from premiums paid, if the policy should become void by an omission to pay subsequent premiums. An omission to pay the premiums when due terminated the original contract, but the assured, if he had, paid two or more premiums, would, on a surrender of the policy, be entitled to the substituted contract, as provided.
In case of a breach of any of the conditions of the policy other than the omission to pay the premiums when due, the assured was m no way protected against an absolute forfeiture of the policy. It is claimed that the insertion in the new policy of the clause of forfeiture for non-payment of interest annually on the outstanding premium notes given for premiums on the old policy, was unauthorized by the terms of the original policy. We think this claim is not well founded. The company did not undertake to give a new policy free from all conditions. It was expressly provided that the new policy should be " subject to any notes that may have been received on account of premiums." The intention to impose upon the assured, in case a new policy should be issued, an obligation to pay the interest annually on premium notes outstanding, is clearly shown by the further provision in the original policy, that the assured to whom a new policy should be issued was not to be subjected "to any subsequent charge, except the interest annually on all premium notes remaining unpaid on this policy." If the premiums had been paid in cash; no further payment would have been necessary. If paid in part in notes, only the annual interest thereon would be required to be paid, and the principal would remain a charge on the policy, to be settled on the final liquidation. It is true that the original policy did not provide for the insertion in the new policy of a clause of forfeiture for nonpayment of the interest. But it was made forfeitable on the non-payment of the premiums at the day, with a provision for a substituted contract, and it was also subject to forfeiture for breaches of other conditions. Clauses of forfeiture were contemplated. The new contract was to be made subject to the payment by the assured of annual interest on the outstanding notes, and the right of the company to insert a clause of forfeiture as a means of enforcing this obligation and of protecting the company against the accumulation of unpaid interest, was, we think, implied. The successful prosecution of the business of fife insurance requires prompt payment by policy-holders of their obligations. It is on this basis that they are enabled to offer assurance at the favorable rates they do. Forfeiture for non-payment is a necessary means of protecting companies from embarrassment. Bradley, J., N Y. Life Ins. Co. v. Statham, 93 U. S., 30. The policy of following breaches of conditions by forfeiture was indicated in the original policy, and the fair construction of the agreement to give a new policy subject to the annual payment of interest on outstanding notes, authorized the insertion in the new" policy of the usual provision of forfeiture on non-payment. We are of opinion that the new policy conformed to the agreement in the original policy, and it is, therefore, unnecessary to determine whether the claimant could be permitted, after having accepted the policy, and held it for years without objection, to now insist that the forfeiture clause was inserted without authority, and excuse himself on the ground that he did not know of its existence until after the insolvency of the company.
The cases of Cowles v. Continental Life Ins. Co. (decided by the supreme court of Hew Hampshire), 2 East. Rep., 741, and Bruce v. Same, 2 Atl. Rep., 710 (decided by the supreme court of Vermont), involved the construction of clauses in original policies dissimilar to those in question— the clauses considered in those cases, so far as the reports show, did not provide that the new policy should be subject to the payment by the assured of annual interest on the outstanding notes. The order should be affirmed.
All concur.