Case Name: NEW YORK LIFE INS. CO. v. SLOCUM
Court: United States Court of Appeals for the Third Circuit
Jurisdiction: United States
Decision Date: 1910-02-15
Citations: 177 F. 842
Docket Number: No. 1,263
Parties: NEW YORK LIFE INS. CO. v. SLOCUM.
Judges: Before GRAY, BUFFINGTON, and FANNING, Circuit Judges.
Reporter: Federal Reporter
Volume: 177
Pages: 842–853

Head Matter:
NEW YORK LIFE INS. CO. v. SLOCUM.
(Circuit Court of Appeals, Third Circuit.
February 15, 1910.)
No. 1,263.
1. Insurance (§ 349 ) — Life Insurance — Nonforfeitable Policy — Premiums — Failure to Pay — Termination.
A nonforfeitable policy provided that, if insured was indebted to the company, and any premium on the policy or interest on a loan was not -duly paid, and a request for paid-up insurance was made, the policy would be indorsed for such amount as any excess of the reserve held by the company over such indebtedness would purchase according to the company’s published table of single premiums, and that, if there was no request for paid-up insurance, then the net amount that would have been payable as a .death claim on the date to which the premiums were duly paid would automatically continue as term insurance from such date for such time as the excess of the reserve would purchase according to the company’s present published table of single premiums for term insurance and no longer. Sold, that where the excess of reserve over a loan granted on a policy was practically nothing, amounting at most to only $5.80, which would have purchased term insurance for not more than eight days after the annual premium date, a failure to pay a current premium until after the expiration of such time precluded a recovery on the policy in case of insured’s death.
[Ed. Note. — For other cases, see Insurance, Cent. Dig. § 891; Dee. Dig. § 349.*]
2. Insurance (§ 349*) — Premiums—Nonpayment—Loans.
A premium note, executed to continue a policy, provided that no part of the premium had been paid,-but that the insurance should continue in force until midnight of the due date of'the note, and, if the note was paid on or before the date when due, the payment, together with the cash received, would he accepted in payment of the premium. The agent accepting the note informed insured’s wife that the amount of cash received at the time the note was executed would extend the policy until May 27, 1908, which was after insured died, if the note signed by insured was delivered prior to the expiration of the days of grace. Insured, however, was too ill to sign the note, and it was not signed or delivered until after the expiration of such grace. Sold, that the policy was terminated.
[Ed. Note. — For other cases, see Insurance, Cent. Dig. § 897; Dec. Dig. § 349.*]
3. Estoppel (§ 55*) — Estoppel in Pais — Reliance.
An estoppel in pais is not created except by conduct which the person pleading the estoppel has a right to rely on and does rely on in fact.
[Ed. Note. — For other cases, see Estoppel, Cent. Dig. §§ 136-141; Dec. Dig. § 55.*]
Buffington, Circuit Judge, dissenting.
In Error to the Circuit Court of the United States for the Western District of Pennsylvania.
Action by Lillian F. Slocum, as executrix of Alexander W. Slocum, deceased, against the New York Fife Insurance Company. Judgment for plaintiff, and defendant brings error.
Reversed and remanded, with instructions.
George B. Gordon and James H. McIntosh, for plaintiff in error.
George F. Shaw, for defendant in error.
Before GRAY, BUFFINGTON, and FANNING, Circuit Judges.
For other cases see same topic & § number in Dec. & Am. Digs. 1907 to date, & Rep’r Indexes

Opinion:
LANNING, Circuit Judge.
This is an action on a life insurance policy for $20,000. The jury rendered a verdict for the plaintiff below, the defendant in error here, for the sum of $38,224.02, which they ascertained by the following calculation:
Amount ol' policy............................................... $20,000 00
Loan deducted........................................ $2.300 00
Note deducted........................................ 434 00
- 2,704 00
$17,200 00
Interest added from Jan. 17, 1908............................... 1,018 02
$18,224 02
We think the errors assigned may all be disposed of by considering the single question whether, under the terms of the policy and the evidence, it was legally possible for the jury to find that the policy was, at the date of the death of the insured, a valid subsisting contract of insurance for any sum whatever.
The policy was dated January 16,1900. It provided for the payment by the insured of a premium of $579.60 on the 27th day of November in each year during its continuance. It also contained the following provisions:
"This policy is automatically nonforfeitable from date of issue as follows: Second. If any premium or interest is not duly paid, and if there is an indebtedness to the company, this policy will be indorsed for such amount of paid-up insurance as any excess of the reserve held by the company over such indebtedness will purchase according to the company's present published table of single premiums, on written request therefor within six months from the date to which premiums were duly paid. If no such request, for paid-up insurance is made, the net amount that would have been payable as a death claim on flie date to which premiums were duly paid will automatically continue as term insurance from such dale for such time as said excess of the reserve will purchase according to the company's present published table of single premiums for term insurance, and no longer."
"Grace in Payment of Premiums. — A grace of one month, during which the policy remains in force, will be allowed in payment of all premiums except the first, subject to an interest charge at the rate of five per cent, per annum."
"General Provisions.- — (1) Only the president, a vice president, the actuary or the secretary has power in behalf of the company to make or modify this or any contract of insurance, or to extend the time for paying any premium, and the company shall not be bound by any promise or representation heretofore or hereafter given by any person other than the above. (2) Premiums are due and payable at the home office, unless otherwise agreed in writing, but may be paid 1o an agent producing receipts signed by one of the above-named officers and countersigned by the agent. If any premium is not paid on or before the day when due, or within the month of grace, the liability shall be only as hereinbefore provided for such case."
At the date of the issuance of the policy, the insured, Alexander W. Slocum, was a resident of Pittsburgh, and the policy was delivered to him by the insurance company's Pittsburgh agent. The premiums from 1900 to 3906, inclusive, were paid at the company's 'Pittsburgh office to the company's Pittsburgh agent. In May, 1906, Mr. Slocum took up his residence temporarily, for business purposes, in Houston, Tex. His wife remained, except during a part of the winter of .1906-07, in Pittsburgh. On December 1, 1906, she, acting for her husband, went to the company's Pittsburgh office and there obtained from the company for her husband a loan of $2,360, out of which the premiurn due the preceding November 27th was paid. She thereupon delivered to the company a "policy loan agreement," signed by her husband, by which he admitted that he had that day, December 1st, received such, loan in cash, and thkt he had pledged his policy with the company as collateral security therefor. It was stipulated by the agreement that interest on the loan at the rate of 5 per centum per annum should be annually paid in advance, and that the loan should become due and payable (inter alia) if any premium on the policy or interest, on the loan should not be paid when due, in which event the pledge should be foreclosed by satisfying the loan in the manner provided in the policy.
The insured died December 31, 1907. His wife claims that on December 27, 1907 — that is, on the last day of the month of grace succeeding November 27, 1907 — she, acting for her husband, paid tp the company's Pittsburgh agent the sum of $264.20 on an agreement 'hereafter referred to. It is conceded that nothing more was paid to the company during the lifetime of the insured. Passing, for the moment, the consideration of the alleged agreement .under which the insured's wife claims to have paid the $264.20, it is clear that if nothing had been paid, and the case should be determined strictly in accordance with the terms of the policy and of the "policy loan agreement," there would be nothing whatever due on the policy. It is provided in the policy, as shown in the above quotations from it, that if the insured be indebted to the company, and any premium oh the policy or interest on a loan is not duly paid, and a request for paid-up insurance is made, the policy will be indorsed for such amount of paid-up insurance as' any excess of reserve held by the company over such indebtedness will purchase according to the company's published table of single premiums, and that, if there be no request for paid-up insurance, then "the net amount that would have been payable as a death claim on the date to which premiums were duly paid will automatically continue as term insurance from such date for such time as said excess of the reserve will purchase according to the company's present published table of single premiums for term insurance, and no longer.".
In the case at bar, the excess of reserve over the loan of .$2,360 was practically nothing. The reserve, on the American 3 per cent, basis, would have been $118.29 per $1,000, or $2,365.80 on the policy of $20,000. The company estimated the reserve at $118 per $1,000, or $2,360 on the policy of $20,000. It had loaned to the insured the whole of this estimated reserve. Giving- to the insured, however, the benefit of a reserve of $118.29 per $1,000, the excess of reserve over the amount of the loan, $5.80, would have purchased term insurance for an extended period of not more than eight days after November 27, 19.07. Such is the undisputed testimony in the case. If there had been no payment of any part of the premium which became due on Noverqb.er 27, 1907, and no loan against the policy by the company to the insured on that date, the reserve would have carried the policy for the sum of $4,000, according to one of its provisions not quoted, for a period of seven years and seven months beyond November 27, 1907. As there was a loan of $2,360 against it, and that loan exhausted the reserve, except as to the sum of $5.80, the policy, unless saved by the agreement presently to be considered, expired by force of its own provisions on December 27, 1907, since that was the last grace day and the excess of reserve ($5.80) would not have carried the policy beyond that day.
It is contended, however; by the counsel for Mrs. Slocum, that she paid the $264.20 to the Pittsburgh agent under an agreement that, by the payment of that sum, the policy should he continued in force until May 27, 1908. There is a dispute as to whether the $264.20 was paid by Mrs. Slocum to the company's agent at Pittsburgh or mailed by her to the company's agent at St. Douis, and also as to the conversation between her and the Pittsburgh agent at the Pittsburgh office in the latter part of November and the latter part of December, 1907. We .shall assume, as in view of the trial court's charge to the jury we think we must do, that the jury found the facts to be as stated by. Mrs. Slocum. Her statement, in substance, is that on November 26, 1907, her husband then being returned to Pittsburgh from Houston, Tex., and being ill, she called at the office of the company's Pittsburgh agent, and was there given by the same person to whom she had in previous years paid the premiums for her husband a memorandum showing that upon the payment by the insured of $264.20 in cash, and the giving of a note for $434.90 payable May 27, 1908, the cash payment would carry the policy until May 27, 1908, and the note would carry it for the balance of the year; and that she took the memorandum to her home, and on December 27, 1907, returned to the office, gave the agent a check for $261.20, and received from him a blank note to be signed by her husband. This part of the transaction she states in the following language:
"I gave Iiim (lie check tor $204.20, and he handed me the blue note and another paper in an envelope, and he said that the note must be signed and T must return it. I told him Mr. Slocum was ill, and it might; lie several days before I could send it hack, and he said that would be all right. 'Mail it as soon as you can.' "
The note was one of the form of notes prescribed by the company, called 'blue notes," and was drawn for $4-35, payable on or before May 27, 1908, without grace and without demand or notice, with interest at the rate of 5 per centum per annum. It contained a recital that it was accepted at the request of the maker, together with $145.60 in cash, which, with the $485 for which the note was drawn, amounted, it will he observed, to $1 more than the premium due. The note contained, also, this provision:
"That although no pari of the premium due on the 27th day of November, 1907, under policy No. 3,011.138, issued by said company on the life of a. IV. Slocum has been paid, the insurance thereunder shall bo continued in force until midnight of the due date of said note; that if this.note is paid on or before the date when it becomes clue, such payment, together with said cash, will then lie accepted by said company as payment of said premium, and all rights under said policy shall thereupon be the same as if said premium had been paid when due; that if this noto is not paid on or before the day it becomes due it shall thereupon automatically cease to be a claim against the maker, and said company shall retain said cash as part compensation for the rights and privileges hereby granted, and all rights under said policy, shall be the same as if said cash had not been paid nor tills agreement made."
It will be observed, further, that, after deducting from the check of $264.20 the cash item of $145.60 mentioned in the note, there remained $118.60, being 60 cents in excess of the interest bn the loan of $2,360 for one year at 5 per centum.
Having made the payment of $264.20 and received the blank note, Mrs. Slocum went to her home, but found her husband too ill to sign the note. He died, as already stated, on December 31, 1907, without having signed it.
Similar notes for part of the premiums due had been given in previous years and delivered to the Pittsburgh agent; but, so far as the case shows, they had always been signed by Mr. Slocum and delivered to the company's agent before the expiration of the grace periods of one month after the due dates of the premiums. While the company would doubtless have been estopped from denying the right of the Pittsburgh agent to extend the policy until May 27, 1908, if the note, duly signed by Mr. Slocum, as well as the check, had been delivered to the Pittsburgh agent on December 27, 1907, notwithstanding the provision of the policy that only the president, a vice president, the actuary, or the secretary of the company had the power to extend the time for paying any premium, since such extensions had been made in previous years without objection on the part of the company, no estoppel in pais can be created except by conduct which the person setting up the estoppel has the right to rely upon and doés in fact rely and act upon. Bloomfield v. Charter Oak Bank, 121 U. S- 135, 7 Sup. Ct. 865, 30 D. Ed. 923.
In the present case, the contract between the company and the insured provided that only the company's president, or one of its vice presidents, or its actuary, or its secretary, should have power to extend the time for paying a premium. In former years, that provision had been 'disregarded to the extent of allowing an agent of the company to grant additional time for paying a premium provided the additional time was actually granted within the grace period of one month. An attempt was made to show that the Pitsburgh agent had extended the time for the payment of a premium on a policy of Mr. Slocum's brother more than two months after the premium became due. It was shown, however, that the agent acted in that case after notification from the home office of the company in New York that the policy had been reinstated. Furthermore, it must be borne in mind that Mrs. Slocum, according to her own testimony, was told by the Pittsburgh agent on December 27, 1907, when he handed the blank note to her, that it.must be signed by Mr. Slocum and returned to the agent. The contract between her and the company's agent, even on her own showing, was never completed. It remained executory. It was not a divisible, but an indivisible, contract. If she should get the note signed by her husband, and mail it to the agent as soon as she could, then, assuming the power of the agent to enter into such an arrangement, the $264.20 would carry the policy until May 27, 1908, and the note would carry it for the rest of the year.
It will be observed, further, that according to the terms of the blank note given to Mrs. Slocum the $145.60 paid on December 27, 1907, was not received as part of the premium due on November 27th pre ceding, for the note declares that no part of the premium had been paid. The note itself was the thing that embodied the only contract that, so far as the record shows, the agent had the power to make. It declares that, if the note should be paid at its maturity, the amount of it, with the $115.60 paid in cash on December 27, 1907, would then be accepted as payment of the premium, and that, if the note should not he paid at maturity, the cash payment of $1-15.60 should be retained by the company as part compensation for the rights and privileges thereby granted. If the note had been signed and delivered on December 27, 1907, it, with the cash payment of $115.60, would have continued the policy until May 27, 1908, notwithstanding the provision of the policy that no one hut the president, a vice president, the actuary, or the secretary, could extend the time for paying the premium, for the reason that extensions made on such terms in previous years had been ratified and authorized by the company. The note would then have been a good contract supported by a good consideration. But the acceptance by the Pittsburgh agent, on December 27, 1907, of $26-1.20 ($118.60 of which wras for interest and the remaining $145.60 for the purpose above stated), without any note whatever, was an unprecedented transaction. The company does not claim the money, and it tendered it back to Mrs. Slocum before her action was commenced. Mrs. Slocum could not rightfully infer from any previous transactions with the Pittsburgh agent or with the company that any agent other than the president, a vice president, the actuary, or the secretary had power to make any contract with her for the continuance of the policy from November 27, 1907, to May 27, 3908, on the mere payment of a part of the premium due on the former date.
In Hudson v. Knickerbocker Life Ins. Co., 28 N. J. Eq. 367, it appears that the plaintiff sought to collect the amount alleged to be due on a policy of insurance issued by the defendant to the plaintiff on the life of her husband. A little more than one-half of the premium due on May 28, 1871, was paid in cash. "It is insisted," says Vice Chancellor Van Fleet, "that the acceptance of this sum operated to keep the policy alive for such proportion of the ensuing year as the sum paid bore to the premium for the whole year; in other words, a payment of just half the annual premium would continue the life of the policy for six months. The policy requires the payment, on a day certain, of a specific sum; its payment on the day designated is a condition precedent to the continuance of the policy, and it is expressly provided that a failure to make it destroys the policy. The parties have agreed upon this condition, and the court has no power to modify it, or dispense with it. It is not stipulated a partial payment shall keep the policy alive for such fractional part of a year as the payment bears to the whole premium, and in the absence of such an agreement a partial payment is no better than no payment."
In New York Life Ins. Co. v. Statham, 93 U. S. 21, 23 L. Ed. 789, in the two suits on life insurance policies then before the Supreme Court, Mr. Justice Bradley said:
'All the calculations of the insurance company are based on the hypothesis of prompt payments. They not only calculate on the receipt of the premiums when due, but on compounding interest upon them. It is on this basis that they 'are enabled to offer assurance at the favorable rates they do. Forfeiture for nonpayment is a necessary means of protecting themselves from embarrassment. Unless it were enforceable, the business would be thrown into utter confusion. It is like the forfeiture of shares in mining enterprises, and all other hazardous undertakings. There must be power to cut off unprofitable members, or the success of the whole scheme is endangered. The-insured parties are associate's in a great scheme. This associated relation exists whether the company be a mutual one or not. Each is interested in the engagements of all; for out of the coexistence of many risks arises the law of average, which underlies the whole business. An essential feature of this scheme is the mathematical calculations referred to, on which the premiums and amounts assured are based. And these calculations, again, are based on the assumption of average mortality, and of prompt payments and compound interest thereon. Delinquency cannot be tolerated nor redeemed, except at the option of the company. This has always been the understanding and the practice in this department of business. Some companies, it is true, accord a grace of 30 days, or other fixed period, within which the premium in arrear may be paid, on certain conditions of continued good health, etc. But this is a matter of stipulation, or of discretion, on the part of the particular company. When no stipulation exists, it is the general understanding that time is material, and that the forfeiture is absolute if the premium be not paid. The extraordinary and even desperate efforts sometimes made, when an insured person is in ex-tremis, to meet a premium coming due, demonstrates the common view of this matter." 0
While forfeiture is not' favored in the law, and while we do not adopt the view pressed upon us by the learned counsel for the plaintiff in error that the policy now in suit was in all respects "automatically nonforfeitable," yet we. cannot hold the insurance company to have waived a provision of its contract, by reason of an act of one of its agents, when that contract1 expressly declares that the agent had. no authority to do the thing he has done, and there is absolutely no evidence that the company by any of its authorized officers has ever ratified, approved, or acquiesced in the act.
We cannot find in this case any evidence from which the jury could have properly found that the company waived the provisions of the policy except to -the extent of allowing its agent at Pittsburgh to grant additional time for paying a premium on receiving from the insured, within the gracej period of one month, some cash, and a note for the the full amount of the premium less the cash paid, and, consequently, we find no evidence in support of the alleged estoppel..
. The views above expressed are in accord, we think, with what has been said on the binding character of the provisions of an insurance policy, and on forfeiture, waiver, and estoppel, in Assurance Co. v. Building Association, 183 U. S. 308, 22 Sup. Ct. 133, 46 L. Ed. 213; Ætna Life Ins. Co. v. Frierson, 114 Fed. 56, 51 C. C. A. 424; Modern Woodmen of America v. Tevis, 117 Fed. 369, 54 C. C. A. 293; Supreme Council of Royal Arcanum v. Taylor, 121 Fed. 66, 57 C. C. A. 406; Murray, v. State Life Ins. Co. (C. C.) 151 Fed. 540, s. c. affirmed, 159 Fed. 408, 86 C. C. A. 344. While in the last of these cases this court held that forfeitures of policies of insurance are not favored in the law, and that "any agreement, declaration, or course of action, on the part of the insurance company, which leads a party honestly to believe that by conforming thereto a forfeiture of his policy will,not be incurred, followed by due conformity on his part, will and ought to estop-the company from insisting upon, a forfeiture, though it might be claimed under the express letter of the contract," there was, in the case at bar. no agreement, declaration, or course of action, on the part of the insurance company, which justified the insured in assuming that the time for the settlement of his premium due on November 27, 1907, was extended beyond December 27, 1907.
We conclude that there was error in not entering judgment for the defendant non obstante veredicto.
The judgment entered by the Circuit Court is therefore reversed. The record will be remanded, with instructions to enter judgment for the defendant notwithstanding the verdict.