Case Name: Johnson v. New York Life Insurance Company et al.
Court: Colorado Supreme Court
Jurisdiction: Colorado
Decision Date: 1914-01
Citations: 56 Colo. 178
Docket Number: No. 6862
Parties: Johnson v. New York Life Insurance Company et al.
Judges: 
Reporter: Colorado Reports
Volume: 56
Pages: 178–199

Head Matter:
[No. 6862]
Johnson v. New York Life Insurance Company et al.
1. Life Insueance — Change of Beneficiary — The general rule is that there can be no change in the beneficiary without a provision to that effect in the policy. Where the policy allows such change the beneficiary named therein has an interest which is liable to be defeated, but only in the manner prescribed by the policy, the charter or by-laws of the insurer, or by statute.
In Colorado there is no difference in this respect between policies in ordinary life companies, and those held in fraternal or mutual companies.
2. -Notice to Insurer — Where notice to the insurer is required, a change attempted by the insured without giving such notice is ineffectual as against the beneficiary named in the policy.
3. -Notice Excused — If the assured has fully complied with what is required of him, to protect the change of beneficiary, and by reason of circumstances beyond his control the change is not entirely consummated at the time of his death, equity will sometimes treat the substitution as complete. But an allegation that the assured resided fifty miles from the local office of the insurer, that he made one journey to such office but found it closed, and was unable to find the agmt, that he was ignorant of what was required, was a laboring man, a poor person, and unable to either read or write in English with facility, and by reason of these circumstances and the expense incident to a second journey, he failed to cause the change to be perfected, in the manner required, was held entirely insufficient.
4. -Pm-ol Assignment of Policy — The policy named as the beneficiary, the mother of the assured, but provided for its assignment. His widow, suing thereon, alleged that the insured in his life time delivered the policy to her, as a gift, in order to provide for her maintenance, and that of their infant child; that thereafter the policy remained in her possession until the death of her husband; and that after such delivery she assisted in paying the premium accruing thereon. These facts were held insufficient to defeat the right of the mother. Gabbert J. and Scott J. dissenting.
Error to Denver District Court. — Hon. Greeley W. Whiteord, Judge.
Messrs. Stark & Martin, for plaintiff in error.
Mr. H. R. Sahlgaard, Mr. M. B. Carpenter and Mr. A. Newton Patton, for interpleader.
Messrs. Hindry & Friedman, Mr. Guy K. Brewster, Mr. George Allan Smith and Mr. B. E. Woodward, Amici Curiae.

Opinion:
Mr. Justice Hill
delivered the opinion of the court.
This action involves the disposition of $2,000 paid into court by the defendant in error, the New York Life Insurance Company. In her complaint the plaintiff in error alleges, that in March, 1901, in consideration of certain payments made and to be made to the insurance company by Swan G. Peterson, it made its policy of insurance in writing, wherein and whereby it agreed to pay to Lisa Swanson, mother of the insured, or to such bener ficiary as may have been duly designated, the sum of $2,000 upon proof of the death of Swan G. Peterson. A copy of the policy is incorporated in the complaint. The clause bearing upon the subject of beneficiaries reads:
"The insured, having reserved the right, may change the beneficiary, or beneficiaries, at any time during the continuance of this policy, by written notice to the company at the home office, provided this policy is not then assigned. The insured may at any time, by written notice to the company at the home office, declare any beneficiary then named to be an absolute beneficiary under this policy. No designation, or change of beneficiary, or declaration of an absolute beneficiary, shall take effect until endorsed on this policy by the company at the home office, During the lifetime of an absolute beneficiary the right to re.voke or change the interest of that beneficiary will not exist in the insured. If any beneficiary, or absolute beneficiary, dies before the insured, the interest of such beneficiary will become payable to the executors, administrators or assigns of the insured."
The policy provides for its participation in the profits of the company at the end of twenty years, if the insured is then living; also for paid.up insurance, as well as for automatic term insurance, also for a cash surrender value, and possibly for loans. Another clause states, "An assignment of this policy may be made in duplicate and both sent to'the home office, one to be retained by the company and the other to be returned. The company has no responsibility for the validity of any assignment." The complaint further alleges, that in July, 1905, the plaintiff and the said Swan G. Peterson intermarried and that such relation continued until his death, which occurred in November, 1907; that in September, 1906, as the issue of said marriage there was born one child, Katherine, who is now dependent upon the plaintiff for support. It is then alleged, that while the policy was in full force and not assigned, and in pursuance of the reservation permitting him to change the beneficiary, the said Swan G. Peterson did designate and appoint the plaintiff as the beneficiary of and under the policy; that in pursuance of such designation the insured delivered her the policy, and that the same remained and continued in her possession until his death; that after the transfer and delivery of the policy to her she paid and assisted in paying the premiums due thereon so as to keep it in full force and effect.
It appears from the complaint that notice of this assignment and change of the beneficiary was not given the company, nor was an endorsement on the policy of a change made by the company. To excuse the failure of the insured to comply with the requirements of the policy in these respects it is alleged, that he resided about fifty miles from Denver and made a trip for the purpose of making application at the office of the company in Denver to have plaintiff designated as the beneficiary; that he was ignorant of the manner and procedure required to be taken for the purpose of effecting such change; that he endeavored to find the agent through whom the policy was effected; that he was unable to do so-; that he then attempted to transact the matter himself but found the offices of the company closed; that he was a laboring man, a miner, a poor person and a foreigner, and unable to either read or write the English language, except meagerly; that by reason of the long distance from his place of residence to an office of the company, the expense incident in going to one, and his unfamiliarity with the English language he neglected to have the policy changed in the proper manner.
It is alleged that Lisa Swanson, the mother of deceased, claims the money payable under the policy, but denies that she has any interest, and prays in order that there may be a final adjudication in the premises that she be made a party to the action, and be required to present her claim if any she has.
In its answer the insurance company admits the issuance of the policy, the death of the insured, the designation of Lisa Swanson, the mother, as beneficiary and alleges that she claims the money; that it cannot determine without hazard to itself to which the money is rightfully due. It prays for an order requiring plaintiff and Lisa Swanson to appear and interplead concerning their respective claims under the policy; that an order issue authorizing it to pay the money into court and be discharged. The order of interpleader, etc., was made. Lisa Swanson intervened; in her petition she alleged that she was made the beneficiary as the mother of the insured, denied that the insured at any time designated or appointed the plaintiff as the beneficiary under the policy, and alleged that she is the beneficiary named in the policy and claims the money due thereunder.'
The plaintiff filed a replication to this answer. The interpleader then moved, for judgment in her favor on the pleadings, which was sustained. The plaintiff brings the case here for review.
If the facts, alleged when admitted to be true are such that no other judgment could have been rendered thereunder, the motion was properly sustained. Where the policy contains no provisions for a change of the beneficiary, the general rule is that the policy, and the money to become due under it vests immediately in the person named as the beneficiary, and that this interest being vested cannot be transferred by the insured to any other person without the consent of the named beneficiary.—Hill v. Groesbeck, 29 Colo. 161, 67 Pac. 167; Pittinger v. Pittinger, 28 Colo. 308, 64 Pac. 195, 89 Am. St. Rep. 193; Love v. Clune, 24 Colo. 237, 50 Pac. 34; Mutual Life Insurance Co. v. Hagerman, 19 Colo. App. 33, 72 Pac. 889; Central Bank v. Hume, 128 U. S. 195, 9 Sup. Ct. 41, 32 L. Ed. 370; Hopkins v. Hopkins' Adm'r, 92 Ky. 324, 17 S. W. 864; Mutual Life Ins. Co. v. Twyman, 122 Ky. 513, 92 S. W. 335, 97 S. W. 391, 121 Am. St. Rep. 471; Pilcher v. New York Life Ins. Co., 33 La. Ann. 322.
This does not hold true, however, where the contract of insurance provides (as this one does) that the insured may change the beneficiary. In policies like this the general rule is that the beneficiary has an interest in the policy, which, while subject to be defeated by a change of ben eficiary, can be defeated only in tbe manner prescribed in tbe policy, tbe charter or by-laws of the company or by statute.— Finnell v. Franklin, 55 Colo. 156, 134 Pac. 122; Rollins v. McHatton, 16 Colo. 203, 27 Pac. 254, 25 Am. St. Rep. 260; Indiana Nat. Life Ins. Co. v. McGinnis (Ind.), 101 N. E. 289, 45 L. R. A. (N. S.) 192; Union Central Life Ins. Co. v. Woods, 11 Ind. App. 335; Farra v. Braman, 171 Ind. 529, 86 N. E. 843; Holland, Guardian, v. Taylor, 111 Ind. 121, 12 N. E. 116; Smith v. Nat. Benefit Soc., 123 N. Y. 85, 25 N. E. 197, 9 L. R. A. 616; Arnold v. Empire Life Ins. Co., 3 Ga. App. 685, 60 S. E. 470; 2 May on Insurance, § 399e; Bliss on Life Insurance (2d Ed.), § 318, 337; Isgrigg, Ex'r, v. Schooley, 125 Ind. 94, 25 N. E. 151; Holder v. Prudential Ins. Co., 77 S. C. 299, 57 S. E. 853; Washington Life Ins. Co. v. Berwald, 97 Tex. 111, 76 Pac. 442, 1 Ann. Cas. 682; Freund v. Freund, 218 Ill. 189, 75 N. E. 925, 109 Am. St. Rep. 283; Thomas v. Thomas, 131 N. Y. 205, 30 N. E. 61, 27 Am. St. Rep. 582; De Silva v. Supreme Council, 109 Cal. 373, 42 Pac. 32; Charch v. Charch, 57 Ohio St. 561, 49 N. E. 408; Kentucky Masonic Mutual Life Ins. Co. v. Miller's Adm'r, 76 Ky. (13 Bush) 489; Eastman v. Association, 62 N. H. 555; National Mut. Aid Soc. v. Lupold, 101 Pa. 111; McLaughlin v. McLaughlin, 104 Cal. 171, 37 Pac. 865, 43 Am. St. Rep. 83; Wendt, Adm'r, v. Iowa Legion of Honor, 72 Iowa, 682, 34 N. W. 470; Supreme Conclave v. Capella (C. C.), 41 Fed. 1; Mut. Ass'n v. Montgomery, 70 Mich. 587, 38 N. W. 588, 14 Am. St. Rep. 519; Wirgman v. Miller, 98 Ky. 620, 33 S. W. 937.
In this jurisdiction there is no difference in this respect between policies held in fraternal or mutual companies and ordinary life insurance companies.— Finnell v. Franklin, supra; Hill v. Groesbeck, 29 Colo. 161, 67 Pac. 167; Pittinger v. Pittinger, 28 Colo. 308, 64 Pac. 195, 89 Am. St. Rep. 193; Love v. Clune, 24 Colo. 237, 50 Pac. 34.
It has repeatedly been-held where a change of beneficiaries is to be made in a certain manner which includes notice to the insurer, that a disposition of the proceeds by will, not brought to the attention of the insurer during the insured's lifetime, is ineffectual as against the beneficiary named in the policy.—De Silva v. Supreme Council, 109 Cal. 373, 42 Pac. 32; Hellenberg v. District No. 1, 94 N. Y. 580; Stephenson v. Stephenson, 64 Iowa, 534, 21 N. W. 19; Daniels v. Pratt, 143 Mass. 216, 10 N. E. 166; Holland v. Taylor, 111 Ind. 121, 12 N. E. 116; Olmstead v. Benefit Society, 37 Kan. 93, 14 Pac. 449.
It is not claimed that the conditions prescribed in the policy for a change of beneficiary were complied with. The complaint fails to allege a sufficient attempt on the part of the insured to make a change of the beneficiary in the manner provided, or that he was prevented from doing so by the happening of that over which he had no control. What it alleges on this subject in the way of an excuse was pure neglect upon his part and nothing more. These alleged excuses disclose that he was aware of the conditions prescribed in the policy by which a change of beneficiary could be made. Eegardless of this he made no reasonable effort to have the beneficiary changed in the maimer prescribed in the policy.
In Rollins v. McHatton, supra, it was said:
"If the assured has done his part towards perfecting the substitution in accordance with the method prescribed, but owing to circumstances over which he has no control the change is not entirely consummated at the time of his death, equity will sometimes treat the substitution as complete."
But as above stated, he made no such effort and was not prevented from completing such a change by circumstances over which he had no control.
The complaint alleges that the insured delivered the policy to the plaintiff, that the purpose of such delivery was to provide in the event of his death that the proceeds of the policy should be paid to her for her maintenance and that of their infant child; that the policy thereafter remained in her possession until the death of the husband; that after such delivery she assisted, out of the proceeds of her labor, in paying premiums on the policy. It is claimed, that these allegations are sufficient to sustain a parol assignment of the policy to her by way of gift; that the plaintiff's relation to the policy became that of assignee or donee, which deprived the beneficiary named in the policy of all right and interest therein.
In Block v. Valley Mutual Insurance Association, 52 Ark. 201, 12 S. W. 477, 20 Am. St. 166, the policy did not provide for a change of beneficiaries but contained a clause pertaining to assignment as follows: "This certificate may be assigned, transferred, or set over by and with the consent of the association, granted by its president or secretary. ' ' This was held to mean that the beneficiary might assign his interest. The court said:
"This does not mean that another beneficiary may be substituted by the insured, for substitution and assignment are quite different things; it simply intends that the beneficiary may assign his interest. The insured had no interest to assign. That was vested in the parties, named. 'Bliss Life Ins., sec. 318; Bacon Ben. Soc., sec, 392. He had no power of substitution, because none is reserved in the contract, or in the charter or by-laws of the association, incorporated into the policy."
In Highland v. Highland, 13 Bradwell (Ill.), 510, the certificate was payable to the member's sister, he subsequently married and shortly before his death wrote to his wife, "I want you to have all my effects — everything. Tell my sister, if you ever hear from her." The certifi cate was never delivered to the sister, hut was found among the effects of the deceased member; at suit between the wife and sister, held that the sister was entitled to the insurance. The corporation had prescribed in what manner a member should direct to whom his benefit was to be paid. The court said: "Having elected to direct on the face of the certificate to Avhom the money should be paid, it must be paid as directed, unless such direction has been changed in the mode prescribed by the laws and constitution of the order."
In Coleman v. Knights of Honor, 18 Mo. App., 189, it was held that the adoption of a particular method of changing a benefit certificate under the powers and within the limits of the charter of a benevolent benefit society is the exclusion of all other methods.
As stated in Indiana Nat. Life Ins. Co. v. McGinnis, supra:
"It seems, as we view it, that in such a policy or contract the beneficiary has some interest, and that the insured has reserved to himself a power with a right of exercise to the extent of defeating or cutting off the interest of the beneficiary by a strict compliance with the terms of such power as in the contract or policy written; that the interest therein taken and owned by the beneficiary upon the issuance, delivery, and acceptance of the policy was a defeasible, vested interest. "
In Holland v. Taylor, supra, on this subject, it is said:
"It would be saying too much to say that she had no rights. # So long as the contract remained as executed, she had the right of a beneficiary, subject to be defeated by a change of beneficiary by the assured. the assured had reserved to himself the power to change the beneficiary, and that was the extent of his right in, or p'ower over, the certificate, or the amount agreed to be paid at his death. ' '
In Freund v. Freund, 218 Ill., at page 201, it is said:
"In the present case, where the policy was issued by a New York company and must be governed by the laws of that state, the right of the assured to change the beneficiary is a qualified right; that is, subject to the consent of the company and to the endorsement upon the policy by the company at its home office. The tendency of the decisions in the state of New York, when carefully examined, is to sustain the rule, that a change of beneficiary cannot be accomplished, except by compliance with the provisions in the statute and in the contract for such change, and only by and with the consent of the company. ' '
In Arnold v. Empire Mutual Life Ins. Co., supra, the court says :
' ' The beneficiary of an insurance policy has a vested right in the contract of insurance, which cannot be diminished or affected by subsequent agreements between the insurer and the insured, which are not stipulated or pro^ vided for in the original contract. The vested right of the beneficiary is subject to be divested only in accordance with express provisions of the contract permitting a change of beneficiary.'
In McGlynn v. Curry, 82 Ap. Div. 431, 81 N. Y. Supp., 855, the insured had the policy made payable to another, which policy she at once delivered to the other. Four days before her death she assigned the policy to another and notified the company that she desired to change the beneficiary; this latter notice was required by the company. It was held that the delivery of the policy to the first beneficiary constituted a complete gift of the same to her which prevented the assured from thereafter changing the beneficiary without the consent of the party to whom she had orally assigned the policy. This case which involved a New York life policy explains to some extent the reason for the clause in the one under consideration, viz., that the beneficiary can be changed in a certain manner, provided the policy has not been assigned. That the insured may assign all the right, title and interest which he has reserved to himself in a policy with a named beneficiary therein, may be conceded. The beneficiary may likewise assign the policy to the extent of his or her interest.— Collins v. Dawley, 4 Colo. 138, 34 Am. Rep. 72; May on Insurance, Vol. 2 (3d Ed.), Sec. 399s; Connecticut Mut. Life Ins. Co. v. Baldwin, 15 R. I. 106, 23 Atl. 105.
We deem it unnecessary to determine whether the clause in this policy permitting an assignment was for the benefit of the insured, or the beneficiary, or both; or if for the insured whether the facts alleged are sufficient to constitute such an assignmnt for the reason, if they were all determined in favor of the plaintiff, it is elementary that the insured could not, by assignment or otherwise, transfer to the plaintiff any greater right or interest in the policy than that of which he was possessed. If such an assignment was permissible, and is valid, then her rights were limited to what his were prior to the assignment. Without determining what his rights were, the language might be construed to mean that the insured reserved the right to allow the policy to lapse automatically by the nonpayment of premiums, to secure a paid up policy for a certain amount, to surrender it and secure its cash value, to change the beneficiary in the manner provided by the policy, or to assign his interest, thereby giving to the assignee these same privileges pertaining to its disposition. If the alleged assignment is valid it is conceded that no attempt was made by the assignee to make any disposition of the policy during the lifetime of the deceased.
The rights of a designated beneficiary under a life insurance policy are fixed by the facts existing at the time of the death of the insured.—Freund v. Freund, 218 Ill. 189, 75 N. E. 925, 109 Am. St. Rep. 283; Benton v. Brotherhood of Railroad Brakemen, 146 Ill. 570, 34 N. E. 939; Niblack Benefit Societies and Accident Insurance (2d Ed.), § 218, 222; Fink v. Fink, 171 N. Y. 615, 64 N. E. 506; Thomas v. Thomas, 131 N. Y. 210, 30 N. E. 61, 27 Am. St. Rep. 582; Wendt v. Legion of Honor, 72 Iowa 685, 34 N. W. 470; Ballou v. Gile, Adm'r, 50 Wis. 614, 7 N. W. 561; Ireland v. Ireland, 42 Hun (N. Y.) 212.
In Townsend's Assignee v. Townsend, 127 Ky. 230, 105 S. W. 937, 16 L. R. A. (N. S.) 316, where the policy did not provide for the change of beneficiaries the court said: •
"The only reservation to the insured was the right to surrender the policy at the end of the first ten years, or at the end of any subsequent 5 years, and to receive in cash its then cash surrender value. Unless, then, this right was exercised at the time, and in the manner expressed in the policy, the interest of the named beneficiaries continued unaffected by it. Their interest was vested, subject to be defeated only (1) if they died before the insured, or (2) if he, at the time and in the manner expressed in the policy, exercised his option to surrender it in exchange for its then cash surrender value. It was not within the power of the insured, or within his and the insurer's power, to alter the terms of the contract so as to affect the interests of the beneficiaries. The insured had not the right to assign the policy to another, for value or not, nor had he the right to pledge it as collateral to secure his own indebtedness."
The pertinent question is, who was the beneficiary at the time of the death of the insured? The policy was then in force and there was in existence a designated beneficiary named in the policy; there had been no change in this respect; no action had been taken by any one concerning its surrender or cancellation. Under such circumstances the beneficiary designated in the policy is entitled to receive the money in harmony with the terms of the contract; to hold otherwise would be inconsistent with the great weight of authority, as well as violative of well settled principles pertaining to contracts of insurance. '
The case of Embry's Admrs. v. Harris, 107 Ky. 61, 52 T. W. 958, is not applicable. The distinction being, as stated in the opinion, "The policy, being payable to the estate of Embry, was assignable by him in any legal manner. There was no beneficiary named to take a vested estate. ' '
In Leaf v. Leaf, 92 Ky. 166, 17 S. W. 354, this same court reasoned out that a certificate of insurance issued by a benefit association, whose object of organization was to create a widows ' and orphans ' benefit fund, could not have the beneficiary changed from a divorced wife and her little children to the adult children by a former wife of the deceased by complying with the conditions required in the policy, except the surrender of the policy which was sought to be substituted by an affidavit that the divorced wife held and refused to surrender the policy, when it was shown that the policy was taken into consideration in a property settlement in connection with divorce proceedings and that the wife had paid some subsequent premiums.
In Chapman v. McIlwrath, 77 Mo. 38, 46 Am. Rep. 1, it was held that a husband might orally assign a policy of insurance on his life to his wife. The court makes the same distinction as the Kentucky cases by stating that the policy was made payable to McGuire if living at its expiration, otherwise to his executors, administrators or assigns. To the same effect is appeal of Louis C. Madeira (Penn.), 4 Atlantic 908, also Hewins v. Baker, 161 Mass. 320, 37 N. E. 441, as are practically all the other cases cited to sustain the plaintiff's contention, with the exception of those where the policy, while allowing a change of beneficiary, has failed to prescribe the manner in which it shall be done. These cases are not applicable to the facts under consideration.
If the case of Splawn v. Chew, 60 Tex. 532, is in conflict with the views herein expressed, it is in conflict with the former decisions of this court, and is contrary to the great weight of authority. As stated in Finnell v. Franklin, supra, in quoting from Niblack's Benefit Societies and Accident Insurance, "It is said that Splawn v. Chew, supra, is the sole exception to the holding that a change of beneficiary 'to be effectual must be made in compliance with the terms of the certificate or by-laws of the society.' "
For the reasons stated the judgment is affirmed. The former opinion is withdrawn.
Affirmed.
Decision en banc.
Mr. Justice Gabbeet arid Mr. Justice Scott dissent.