Case Name: Mamie E. Perry, Appellant, v. The Prudential Insurance Company of America, Respondent
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1911-05-26
Citations: 144 A.D. 780
Docket Number: 
Parties: Mamie E. Perry, Appellant, v. The Prudential Insurance Company of America, Respondent.
Judges: 
Reporter: Appellate Division Reports
Volume: 144
Pages: 780–783

Head Matter:
Mamie E. Perry, Appellant, v. The Prudential Insurance Company of America, Respondent.
Second Department,
May 26, 1911.
Insurance — pleading—defects in complaint cured By answer — provision that period of extended insurance shall Be reduced when loans are made By company — lapse of reduced extended insurance Before death of insured — Insurance Law, section 58, not retroactive.
An objection that an action was brought upon an original policy of life insurance which, had become forfeited, rather than upon a non-participating paid-up term policy issued in lieu thereof, is waived where the answer of the insurer alleges that the paid-up term policy was issued.
Where a policy of life insurance provided that the insured might borrow from the insurer in accordance with the terms of the company’s loan certificate, and further provided that any indebtedness placed' upon the policy would operate to reduce the benefits of the insured, and “-to reduce the term of extended insurance guaranteed by the terms of said [original] Policy,” it .is a complete defense to an action on the policy to ■ allege that the insured borrowed money of the defendant whereby, pursuant to the rules of the company and the conditions of the policy, the period of extended insurance guaranteed by the original policy wais reduced one year and some days, and that said period of reduced extended insurance had expired before the death of insured.
Under such a policy the insured, having taken the loan, was not entitled to the period of extended insurance guaranteed by the original policy and the beneficiary cannot recover, although he died within the period the insurance would have been extended if the loan had not been made.
Section 58 of the Insurance Law, providing that nothing shall be incorporated in a policy by reference to the constitution, by-laws, rules, applications, <5r other writings, unless the same be indorsed upon or attached to the policy when issued, applies only to policies issued on or after January 1, 1907.
Appeal by the plaintiff, Mamie E. Perry, from an order of the Supreme Court-, made at the Kings County Special Term and entered in the office of the clerk of the county of Kings on the 16th day of February, 1911.
Samuel Silbiger \R. W. Kathan with him on the brief], for the appellant.
Alfred M. Bailey [Solon Weit with him on the brief], for the respondent.

Opinion:
Burr, J.:
Plaintiff's motion for judgment on the pleadings was properly denied.
The complaint alleges the issuing by defendant on the 9th day-of February, 1900, of a policy insuring the life of Percy Elmore Perry, in the sum of $1,000, payable to the plaintiff.
The policy contained á provision that , the insured might borrow from the company the amount specified in a table which was indorsed. thereon, by making written application for the loan, and assigning the policy to the company as security/ in accordance with the terms of the company's loan certificdte.
The table referred to provided that a person at tha/age of twenty-five, after paying eight premiums, might borrow fifty* four dollars.
The policy also contained a provision that, if after being in force for three full years it' should lapse or become forfeited for the non-payment of any premium, it might be/sm^endered for a non-participating paid-up life policy, eir, if Motgurrendered for a paid-up life policy, the company would^/rite in lieu of such policy and without any action on tifie paift of the insured, a non-participating paid-up' term policy for the full amount insured thereby, and to continue in force for the term indicated by another table described as a table of extended insurance
This table of extended insurance provided that, where premiums had been paid for eight years, the insurance should be extended for seven, years and twenty-six days.
The premiums, were paid for eight years.
The insured died May 24, 1910, and within the time named as the extended period.
Plaintiff claims that the' deceased was -entitled to a nonparticipating paid-up term policy; that the period of extended ' insurance therein provided for had not expired, and, therefore, . that she was entitled to recover.
Technical objection might' have been made that this action is not brought upon the non-participating paid-up term policy but upon the original policy which had become forfeited. Inasmuch, however, as the answer alleges. that such nonparticipating paid-up term policy was issued, we think that this question may be waived.
Defendant's answer sets up that on the 20'th day of February, 1908, the insured borrowed from defendant the sum of fifty-four dollars and that he and the plaintiff executed in connection therewith a loan certificate and that the provision for extended insurance referred to in the foregoing table is modified by the loan agreement, the rules of the company and the terms in connection therewith, so that by reason of - this loan -the period of extended insurance was reduced to one year and .ei!ghty-one days from the date of the lapse of the policy, May 9,1908, which period had expired before the death of the insured.
•\e think that this contention is correct. The agreement in thckpolicy as to the loan was that it should be in accordance With tlie terms of .the company's loan certificate. Defendant did not contract to make a loan upon any other terms.
The policy also provided that the tables, both as to amount to big loaned and the period of extended insurance, applied to the' or^rinW sum insured .only. It provided that, if the sum insured iXmcteasedXby dividends or otherwise, the benefits will be mcreasód^SWb amy indebtedness placed on the policy will operate to redu\ce the benefits. The "benefits reférred to were, first, as to the amount of the loan, and then as to the extended period of insurance. The parties, therefore, agreed that in case of a loan on the policy these benefits would be reduced.
The loan certificate provided for an assignment of the policy, and among other things .provided that, if the policy should lapse or become forfeited in any manner, the amount nof the said loan should, operate "to reduce the term of extended insurance guaranteed by the terms of said Policy, in accordance with the rules of the Company."
The answer also set put 'the rules in force providing for the calculation of such reduction, showing the period of extension, as hereinbefore set forth.
This was clearly within the contemplation of the parties and made a part of the contract, and, of course, there is a justice in this arrangement, for the reason that when the company makes its loan upon the policy the value of the policy has been thereby reduced, and it could ill-afford to carry the, policy for as long an extended period as if it had advanced no money thereupon.
Appellant contends that this construction is in violation of section 58 of the Insurance Law, to the effect that nothing shall be incorporated in a policy by reference to the constitution, by-laws, rules, application or other writings, unless the same are indorsed upon or attached to the policy when issued, and that, therefore, the terms of the loan certificate and the rules of the company adopted .in connection therewith cannot be made a part of this contract. (See Gen. Laws, chap. 38 [Laws of 1892, chap. 690], § 58, added by Laws of 1906, chap. 326; how Consol. Laws, chap. 28 [Laws of 1909, chap. 33], § 58.)
It is enough upon that point tp.say that this policy was issued in February, 1900, and that section only applies to policies issued on and after the 1st day of January, 1907.
Upon the pleadings the defendant has a complete defense to the action.
The order appealed from should be affirmed, with ten dollars . costs and disbursements.
Jenks, P. J., Thomas, Carr and Woodward, JJ., concurred.
Order affirmed, with ten dollars costs "and disbursements.