Case Name: Caroline Steinbach, Respondent, v. The Prudential Insurance Company of America, Appellant
Court: New York Supreme Court, Appellate Division
Jurisdiction: New York
Decision Date: 1901
Citations: 62 A.D. 133
Docket Number: 
Parties: Caroline Steinbach, Respondent, v. The Prudential Insurance Company of America, Appellant.
Judges: 
Reporter: Appellate Division Reports
Volume: 62
Pages: 133–143

Head Matter:
Caroline Steinbach, Respondent, v. The Prudential Insurance Company of America, Appellant.
Insurance policy—refoi’med and enforced in the same action — uihat evidence warrants its refoi’mation — competency, as evidence, of conversation with the insurance agent — company, when chargeable with the agent’s acts—waiver of a defect of . pa/ii,ies.
The reformation of an insurance policy as to the name of the beneficiary and a recovery thereon may be had in the same action.
Tn an action to reform a policy of insurance by striking therefrom the provision ■ that it was made payable to the executors, administrators or assigns of one Fehrman and by substituting in place thereof the provision that it was payable to the plaintiff, her executors, administrators or assigns, it appeared that Fehrman was indebted to the plaintiff, and that in order to secure said indebtedness the plaintiff applied to an insurance agent for a policy of insurance upon Fehrman’s life for her benefit; that the agent filled out a blank application which Fehrman signed, whereupon the plaintiff asked the agent if she would have to sign her name, to which the agent replied that it was not necessary; that the person “who keeps the policy and pays the premium gets the money if anything happens,” and that he made the same statement when he delivered the policy and the premium book.
The defendant did not call the agent as a witness.
Held, that a finding that the plaintiff was not designated as beneficiary in the policy through the mistake or iraud of the defendant or its officers or agents, and that the policy was accepted by the plaintiff by mistake and upon the supposition and in the belief that it was payable to her, was warranted by the evidence, and that the plaintiff was entitled to have the policy reformed;
That conversations with the insurance agent at the time of, and prior to, the making of the. application were competent in evidence;
That declarations made by the agent at the time of delivering the policy, and which were merely a reiteration of the assurances he had previously given to the plaintiff, were competent, at least, as tending to relieve the plaintiff from the charge of negligence in accepting the policy;
That the company, having collected and retained the premiums, was constructively chargeable with the fraud or mistake of its agent, regardless of whether it had knowledge thereof;
That Fehrman’s executor or administrator should have been made a party to the action, but that the defect was waived by the defendant’s failure to answer or demur upon that ground.
Patterson and McLaughlin, JJ., dissented.
Appeal by the defendant, The Prudential Insurance Company of America, from a judgment of the Supreme Court in favor of the plaintiff, entered in the office of the clerk of the county of New York on the 9th day of July, 1900, upon the decision of the court rendered after a trial at the New York Special Term, 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 Caroline Lampp (the plaintiff), her executors, administrators or assigns,” and allowing plaintiff to recover thereon the sum of $164.90, principal and interest, 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 fifty cents per week, to which she replied that she Was not able to pay that •amount but could pay twenty-five 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 rasked 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 jiolicies 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 is all made out the same,’ and he said, who keeps the policy and pays the premium gets the money if anything happens.” Subsequently the doctor came, examined Fehrman, and he and Fehrman signed Ta 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 twenty-five 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 ten dollars and fifty cents, 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, 6 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.
William Ogden Ocuiwpbell, for the appellant.
Walter Large, for the respondent.

Opinion:
Laughlin, J.:
The trial court upon 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. Star Fire Ins. Co., 77 N. Y. 240.)
Fehrman's executor or administrator should have been joined (Conkling v. Davies, 53 How. Pr. 400), 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 áre warranted by precedent. (McCoubray v. St. Paul Fire & Marine Insurance Company, 50 App. Div. 416.)
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 jiolicy 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. St. Paul Fire & Marine Ins. Co., supra; Maher v. Hibernia Ins. Co., 67 N. Y. 283; Pitcher v. Hennessey, 48 id. 415; Kirchner v. N. H. S. M. Co., 135 id. 182; Kilmer v. Smith, 77 id. 226; Welles v.. Yates, 44 id. 525.)
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 wrould 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 théy did not understand the meaning of the words used, or their legal effect, failed to embody their intention 4n 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 of fact."
The conversations with defendant's agent before and at the time the application was made and at the time of the delivery of the 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 com versatións with an insurance agent at the time of and prior to 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. Hartford Fire Ins. Co., 7 App. Div. 575 ; McCoubray v. St. Paul Fire & Marine Ins. Co., supra; Maher v. Hibernia Ins. Co., supra; Stewart v. Union Mut. Life Ins. Co., 155 N. Y. 257; Mayer v. Dean, 115 id. 561; Bridger v. Goldsmith, 143 id. 424; Bennett v. Judson, 21 id. 238 ; Universal Fashion Co. v. Skinner, 64 Hun, 293.)
The judgment should be affirmed, with' costs.
O'Brien and Ingraham, JJ., concurred; Patterson and McLaughlin, JJ., dissented.