Case Name: EDMONDS, Respondent, v. MUTUAL LIRE INSURANCE COMPANY OF NEW YORK, Appelant
Court: South Dakota Supreme Court
Jurisdiction: South Dakota
Decision Date: 1913-12-30
Citations: 33 S.D. 55
Docket Number: 
Parties: EDMONDS, Respondent, v. MUTUAL LIRE INSURANCE COMPANY OF NEW YORK, Appelant.
Judges: 
Reporter: South Dakota Reports
Volume: 33
Pages: 55–63

Head Matter:
EDMONDS, Respondent, v. MUTUAL LIRE INSURANCE COMPANY OF NEW YORK, Appelant.
(144 N. W. 718.)
Insurance — life Insurance — Extra Hazard — Prohibited Period— Death Thereafter.
Where the application for a life policy provided that during one year following date of issue of policy the insured should not engage in certain extra-hazardous occupations, and the policy provided that it was free from any restriction after one year from its date, held, that the fact that insured, before expiration of one year, engaged in a prohibited occupation does not wholly avoid the policy, but merely suspends -it during the balance of the 'prohibitive period; and upon death after expiration of that time recovery may be had thereunder, where the death was in n-o- manner due to or connected with the engagement in such ooc-upation during such .period.
(Opinion filed December 30, 1913.)
Appeal from Circuit Court, Minnehaha County. Hjon. Joseph W. Jones, Judge.
Action- by Charles H. Edmunds against the- Mutual'Ei-fe Insurance Company of New York, to recover upon a life insurance policy. Prom -a judgment overruling a demurrer toi the complaint, defendant appeals.
Affirmed.
Bailey & Voorhees, and Frederick L. Allen, f-o-r Appellant.
The position, which we take in this case is -that -the engaging by the insured, Clarence P. Edmunds, in the business' of the handling -of electric wires- and dynamos prior to the expiration of one year from the date -of the -issuance of th-e policy -constituted a breach of th-e policy and -that thereafter -the -policy became void and no recovery could be bad there'on. W-e -contend that the engaging in -the prohibited occupation, el-even- months -after the policy was .issued, constituted just as much a breach of its conditions as if -the -insured had engaged in the occupation- of handling electric wires and dynamos 'the day after he obtained the policy. The fact -that ¡the death of the insured did not occur until three months after the expiration of the limit of one year, is immaterial. The policy was broken .during1 tire year, when the insured engaged in the prohibited employment .and was mot revived by the fact -that the year elapsed before he met his death. The wording of the policy is mat that the policy shall be void in case the 'insured engage in the prohibited occupation 'and “death ensues within ome year from) the date of the issuance of the policy,” but the insured1 in his application agreed, as -an inducement for the issuance of 'the policy of insurance, that during one year after its issue he would mot engage in the occupation of ■handling electric wires and dynamos.
While we have -been able to finid mo reported case upon a life insurance policy involving the precise questions involved in this case there are many fire insurance cases which have been decided upon analogous state of facts. Imperial Fire Insurance Company v. Coos Comity, 151 U. S. 452; More v. Phoenix Company, 62 N. H. 240; Diehl v. Adams County Mutual Insurance Company, 58 Pa. St., 443; Coicoechea v. Louisiana State Insurance Company., 6 Hart (N. S.) 51 (La.)
The cooitracf entered into between Clarence P. Edmunds and the Appellant was a lawful one and was one which modern industrial methods renders necessary in the life insurance business, for that business cannot be conducted unless the insurance company can be assured- of receiving truthful1 and reliable information as to- the business or industrial occupation 'followed by the insured.
If this court should hol'd that the defendant cannot contest liability upon this policy upon the ground of the breach of contract upon the pant of the insured, -then the - agreement in the application not to engage in the business oif “handling electric wires or dynamos” within- -one year is am umenfoircible agreement, and -any person de'slring to obtain a policy of insurance is at -perfesit liberty to make any misrepresentation or agreement he may see fit in regard- to his habits, health or business occupation, and su-di misrepresentation will not avail the insurance company as, a defense in the action upon the policy. - ■...
IN REPLY.
Counsel for Respondent have overlooked ¡the provisions of the South Dakota Statutes, under which the decisions cited in their briefs have no bearing- upon .the question at issue "in this case.
Section 1856, Civil Code: “A statement ini a policy, which ■ imports that it is intended to do or not' to do a thing which materially affects the risk, is a warranty -that -such act or omission shall take place.”
This section is the same as section 1419 of the Civil Code, in the final’report of the Commissioners of the Code, presented to the legislature -of the state of New York in 1865. The commissioners -based the section upon the oases of Murdock v. Chenango County Mutual Insurance Company, 2 N. Y. 210, 'and Bil-brough v. Metropolis Insurance Company, 5 Duer 587.
Section 1856, was adopted- by-¡the Legislative Assembly of the Territory of Dakota as a part of -fibre Civil Code by Act, -approved January 12, 1866. It was enacted within a very few months after the report -of the Commissioners of the Code was made in 1865 to the Legislature of the state of New York, and, -ini adopting it, -the Legislative -assembly of the Territory of Dakota undoubtedly intended to enact it with the construction placed upon it by the Commissi oners of ifih'e Code. So far -as we have been able to ascertain there has never been a decision of. ¡this count -construing Section 1856, Civil’-Code. We submit, that in view of these facts, it is not .top much, to presume that this -count will not, at this time, disturb what has been the settled -1-aw of the 'territory and th-e state for more than forty-seven years and give -to section 1856 Civil Code, a forced construction different from- that accorded to it by 'the Commissioners of the -code and acquiesced in by the courts -of the territory and state since a time prior to the birth of nto-re than -ene o-f .-the judges who -are sitting u-p-on this court.
Section 1859 Civil Code provides that “A -policy may declare -that a violation of- specified provisions thereof shall avoid it; otherwise the breach o-f an immaterial provision does not avoid the policy.” This section is also -copied from the report of the commissioners of -the code, and the commissioners say regarding it, “this and the preceding- sections are -intended to relax the strictness which now requires performance of immaterial conditions.”
Under the provisions of 'sections 1856 and 1859 Givil Code, the questions involved in this case narrow down to the issue as to whether the warranty uipon thie part otf the assured, that he would not engage in the business of “'handling electric wire's or dynamos” constitutes a “material” warranty. Commissioners of the Code seem to have used the word “warranty” in a sense different from what, in the absence of a statute like section 1859, it is used in life insurance. It was evidently the intention of the Commissioners ¡to provide that policies off insurance should he avoided in case of a breach of a material representation, warranty or other provision, of the policy, even if the policy contained no express condition for a forfeiture, but to. sustain liability under the policy in dase the warranty, representation, or other provisions did not materially affect the risk.
The violation 'by the insured of his engagement not to eoter into the business of “handling electric wires and dynamos” during 'the period of one year following the daibe of issue of the policy of insurance does materially affect the risk. Waterburjr’ v. Dakota Fire and Marine Insurance Company, 6 Dakota 468.
Without the aid of. section 1836, Giv. Code, the law is by' no means well 'settled, as counsel for Respondent would assume, that such provisions as the one under consideration' are only effective in case the' policy contains an express forfeiture clause. We cite to the contrary: Jackson, v. Mutual Life Insurance Company, 186 Fed. Rep..' 447. Tigg v. Register Life Insurance Company, T52 la. 720. Brig-nac v. Pacific Mutual Life Insurance Company, 112 L. 547. (p. 590); S. C. 36 So. Rep. 595 (p. 600.) Mutual Life Insurance Company v. Kelly 114 Fed. Rep'. 268, (p. 279.)
Charles P. Bates, and B. H. Wilson, for Respondent.
In each of the dases cited by counsel in support of their contention, -the policy of insurance contained a clause expressly providing that, upon a breach of certain conditions by the assured, the policy should be void’ and .of no effect.
In the case a,t bar, ¡the policy contains no provisions of forfeiture, except in case of .suicide within one year, or the non-payment of premiums.
In order to forfeit a policy for the 'breach of a stipulation or condition contained1 therein, the contract must in term's provide that the liability of tire company shall cease, or that the policy shall become void, on occurrence of the breach of the condition. Knecht v. Insurance Company, 35 Am. Rep. 641 (Pa.) Hobbs v. Benefit Association, 47 N. W. 983 (la.). State Ins. Oo>. v. Maackens, 38 N. J. Law, 564. Purdy v. Life Association, 74 S. W. 486 (MO.) Zepp v. Grand Lodge, 69 Mo. App-. 487. Cooley, Briefs on the Law of Insurance, volume III., page 2246.
Courts wiil'l construe a contract of insurance liberally, so as to give it effect rather than to- make it void. Conditions which create forfeitures will be construed most strongly against the insurer and will never be extended! beyond the strict word's of the policy. Only a stern legal necessity will induce suich a Construction as will nullify .the policy. Wood on Insurance, Sec. 58. Bliss on Life Insurance,- Sec. 385. N. W. Mut. Life Ins. Go-, v. Hazelett, 105 Ind. 212. Franklin Life Inte. Go. v. Wallace, 93 Ind. 7. Carson v. Jersey City Fire Ins. Co. 43 N. J. Law 300. Stone’s Admr’s v. U.' S. Casualty -Co., 34 N. J. Law 371. Hartford Ins. Co. v. Walsh, 54 111. 164. Stein'ert v. United Brotherhood, 97 N. W. 668. McMaster v. Ins. Cio. of North Amerida, 55 N. Y. 222. Herrman v. Merchants^ Ins. Co., 81 N. Y. 184. Palmer v. Warren Ins Co., 1 Story 360.
Forfeitures should- -always rest upon substantial grounds. They are not favored' either by our code or 'at common law. Enos v. Insurance Co., 4 S'. D. 656. Appleton Iron- Co-, v. Assurance Go-.' 1 N. W. 9 (Wis.) Olmlstead v. Insurance Co., 15 N. W. 82 (Mich.) Knickerbocker Ins. Co. v. Norton, 96 U. S. 242. Miay on Insurance, 367. Civil Code, Sec. 1128.
It is a general rule that where a policy of life insurance provides far a forfeiture in case of the breach of certain' conditions, there mu&t be -some relation1 between- the ground' of forfeiture anid- the cause of death, in 'order to render the policy void. Woodmen v. Gilliland, 67 Pac. 485 (Okl.) Accident Co. v. Sibley, 57 111. App-. 315. Standard Life Ins. Co. v. Koen, 36 S. W. 133 (Tex.) Insurance Co. v. Hughes, 60 S. W. 850 (Ky.) Summers v. Insurance Go-., 13 L'a. Ann. 504. Horton v. Assurance Co., 3 Alb. Law J. 233.
Where a fire 'insurance policy contains provisions -avoiding it for change of location, use for certain purposes, vacancy of premises, incumbrance, etc., the avoidance intended -by the stipulation is during, and only during the -existence of ibh-e forbidden hazard; the failure to comply 'with its terms merely suspends the policy during -s'uch non-compliance, and on ¡the ¡termination of the breach the policy reattaches with all its original force and effect. Ohio Farmers Ins. Co. v. Burget, 6i N.; E. 712 (Ohio.) New Eng. E. & M. Ins. Go. v. Wetmore, 32 111. 221. Traders1 Ins Co. v. C-atlin, 163 111. 256. Johaoseto, v. Home Ins. Co., 74 N. W. 866 (Neb.) State Ins-. Co., v. Sobrack, 43 N. W. 340 (Neb.) Born v. Home Inis. Co., 81 N. W. 676 (la.) Hinckley v. Ge-mnanii'a Eire In's. Co. 140 Mass. 38. Mutual Eire Ins. Co. v. Coatsville Sbo:e Eaotory, 80 Pa,. 407. Dapene v. Sun 'Mutual Ins. O01, 58 Am. Dec. 668 (Da.) Power v. Ooefani Ins. Co., 36 Am. Dec. 665 (Da.) Cooley’s Briefs on ¡the Daw.of Insurance, volume II.,' pages 1883-1885.
The fact that Clarence P. Edmunds, the insured, failed' to keep his .promise relative .to- engaging in the occupation of handling -electric wires and dynamos within one year from the issuance of the .policy, but did engage in such- occupation six days- -before the expiration -of the year, had no relation -to his death, and in no way ¡contributed thereto. The Insurance 'Company sustained no damage, and incurred no loss by reason of his mon-compliance with -the pro-mise 'contained in bis application.
At the ¡time -of bis -death, the insured was engaged in a lawful occupation, and one permitted by the terms -of bis policy. Defendant Cannot defeat a recovery upon ¡the policy by reason of a temporary breach -of a stipulation in the application, which breach dad not -exist at ¡the time of death and had no- rel-aton to the cause of ¡death.
IN REPDY.
Section 1856, Civ. Code, has not been in effect, as¡ regards policies of life 'insurance like the one in question, s-in-ce Eeb-ruary 19, 1909. It was repealed by Oh. 58, Daws 1909.
Section 2 thereof provides1: “The following are established as standard forms -in which policies of life insurance may be issued and delivered in this state,” ¡and then sets -out standard forms for six different kinds- of life insurance policies, each of which contains the following .provision: 1 ‘All statements made by -the in sured shall, in the absence of fraud, be deemed representations and not warranties.”
‘The policy issued1 in this' c'asei bears date November 21, 1910, and conforms to the standard form prescribed for ordinary life insurance policies, and contains the provision above quoted.
The provision in Section 1856 that — “A statement in a policy which Imports thait it is intended to do or not to' do a thing which 'materially .affects the risk, fe a warranty that such act or omission shall -take place,” is in conflict with the provision of the act of 1909 that- — -“AH statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties.” Both of .these provisions 'Cannot apply to the policy in question. It would make no difference in this calse whether such statement be construed as a warranty or a representation.

Opinion:
McCOY, J.
From the plaintiff's complaint it appears- that on the 21 st day of November, 1910, there was issued and 'delivered to Clarence P. Edmonds, as the insured, a life insurance policy, the plaintiff and respondent being therein named' as beneficiary; that the application preceding said ' policy contained a clause which, among other ¡things, contained the following: "During the period of one year following the date of the issue of the policy of insurance for which application is hereby made, I will not engage in any of the following extra hazardous occupations or employments; retailing intoxicating liquors, handling electric wirec or dynamos," etc. — naming a number of other occupations- as being extra hazardous. The -policy also contained the following as a portion of one of it© provisions: "This policy is free from any restriction after one year from, its date of issue, as set forth in the provisions of tire application attached hereto." On the 24th day of October, 1911, -said insured entered toe employ of the General Electric Company, and on November'15th became engaged in the occupation of handling .electric wires and dynamos, and so continuously continued to be engaged until the 22nd day of Eebruaiw, T912, when he was killed by an • electric shock while being so 'engaged. Ffom -an order overruling a demurrer to said complaint, defendant appeals.
It is toe contention ¡of appellant that as ¡soon as the insured violated the terms of the policy and toe ¡application by engaging in toe forbidden occupation within one year of toe date of in surauce, such policy, by reason thereof, became forever after-wards void and of no effect Whatsoever; while on the other hand, the contention of respondent is that during the time within the year, after the issuance of the policy, that insured engaged in the forbidden extra hazardous occupation .the right to recover on sudh policy was suspended, but when the death of, the insured occurred' at a time when there was no restriction, by the terms of the policy, ais to such occupation which caused his death, then recovery wa's proper.
We are inclined to the view that tire contention of respondent is the right one, and that the demurrer was properly overruled. If the de'ath of insured had occurred prior to November 21, 1911, by reason of and while he was engaged- -in the prohibited occupation then there i© but little question, but what :a recovery on this policy Would have been improper; but after the 21st -day of November. 1911, he was not prohibited1 or restricted' by the terns of the contract from engaging in the occupation of handling electric wires or dynamos. From the 22nd -day of November, 1911, until the time of his dejath, a period of .three month®, the insured was ,sO employed and engaged, not in violation of the contract, but by implied permission thereof. There 'is absolutely nothing in the circumstances of this case that would, to the least degree, indicate that the death of -the insured' was in any manner whatsoever due to or connected with the one month's employment in violation of the contract:
We have been unable to find any reported case involving a like provision- in policy or application. The usual application and policy restrict and1 prohibit the extra hazardous occupation throughout the entire existence of the policy. A somewhat analogous 'situation arises under fire insurance policies, where the policy is conditional that the insured -property shall not be suffered to become vacant, or that extra inflammable material® shall not be stored therein, or that the -insured property -shall not become mortgaged or insumbered, and like provisions, -during the existence of the policy. All tiiese conditions 'including the one -involved in the case ait bar, -relate to the question of extra hazardous increased risk or peril. It seem® to be held by many courts that, when the extra hazardous condition occurs temporarily during the existence of the policy, 'but ha® -ceased to exist at -the time of 'loss, and where there is nio' connection] between, the cause of a loss and- the prior existing- forbidden extra 'hazard, the policy is voidable and suspended during the continuation of the forbidden extra, hazard, but that, when, the temporary extra hazard ceases-, the policy revives, and is again in full force and effect, and that a recovery may be had- thereon for loss occurring after -the removal of -tire forbidden extra hazard. In the case at bar inhibition against extra hazardous employment, by the .term's of the -contract, was for a temporary period only. Sumpter Tob. Warehouse Co. v. Phoenix Ins. Co., 76 S. C. 76, 56 S. E. 654, 10 L. R. A. (N. S.) 736, 121 Am. St. Rep. 941, 11 Ann. Cas. 780, and note; Cooley's Briefs on Ins. §1883-1885. In the case of Union Life Ins. Co. v. Hughes' Adm'r, 110 Ky. 26, 60 S. W. 850, where a .policy was conditional against the excesisive, use and engaging in the business o-f selling intoxicating liquors, and where- the insured had- both used intoxicants and engaged in such business- in violation of the policy, but had ceased to' do so at the time of death, .and death hot being due to. such violation of .the term's of the contract, .it was held that the right to- recover -on the policy was not forfeited.
- Finding no error in the record, .the order appealed from is affirmed