Court Opinion

ID: 7915903
Source: CourtListenerOpinion
Date Created: 2022-09-08 22:10:54.313564+00
Date Added: 2024-06-11T16:32:48.452373
License: Public Domain

Harvey, J.
(dissenting): The question in this case is, what was the contract between the insured, plaintiff here, and the insurer? Concededly, the contract is evidenced by the application and by the policy. The real question is, what does the policy mean with reference to its classification for the payment of dividends? It does not provide how policies are classified for computing dividends to be paid to the holders of various kinds of policies issued by the insurer. The insurer prepared and furnished its soliciting agent with a booklet explanatory of how its policies were classified with respect to the payment of dividends. It is true it represented the experience of *721the insurer up to a certain date, and it was not a guarantee or warranty that the dividends in the future would be the same in amount. It did, however, explain how the insurer classified its policies with respect to dividends. This classification shows that ordinary life policies carrying special benefits for which an extra premium was charged were classified with respect to the payment of dividends as similar policies without such special benefits. It carried the statement: “Any increase or decrease in future dividend scales will correspondingly increase or decrease the figures given.” That was the only change suggested for the future. The figures given were- based on the 1927 annual dividend scale. One reading this could not help but understand the dividend scale after 1927 might be increased or decreased so far as the amount paid in dividends was concerned, but there was no intimation anywhere in the booklet that the types of policies would be reclassified with respect to dividends. In fact, the representations contained in the booklet were to the contrary — that they would be uniform. This was not a change in the policy; it was simply explanatory of what the policies provided. The court found that this booklet was exhibited by the agent of the insurer to plaintiff and that plaintiff read it, understood it and relied upon it. In other words, the contract represented by the policy issued to plaintiff and his application were understood by plaintiff to provide that the dividends upon his policy carrying special benefits would be the same as those upon a similar policy which did not carry those benefits. I think it clear that the insurer intended that he should so understand it. It is also clear that the insured so understood it. In fact, that point upon which the minds of the contracting parties apparently met at the time of the issuance of the policy was carried out for ten years by the insurer, and used by the insured to pur-’t chase additional insurance, as authorized by the policy. His righVr' to do so was recognized by the insurer.
This question was not presented nor decided by the court in Ellis v. Mutual Life Ins. Co. of New York, 237 Ala. 492, 187 So. 434. Neither was the question raised nor decided in any of the fifteen opinions: Uhlman v. New York Life Ins. Co., 109 N. Y. 421, 17 N. E. 363; Greeff v. Equitable Life Assur. Society, 160 N. Y. 19, 54 N. E. 712; Equitable Life Assurance Soc. v. Brown, 213 U. S. 25; Miller v. New York Life Insurance Co., 179 Ky. 246, 200 S. W. 482; Maddox v. Mutual Life Ins. Co., 193 Ky. 38, 234 S. W. 949; Pittsfield Bank, etc., Co. v. Equitable Life (Mass. [Dist. Ct.] 1934); *722Rhine v. New York Life Ins. Co., 248 App. Div. 120, 289 N. Y. S. 117; Rhine v. New York Life Ins. Co., 273 N. Y. 1, 6 N. E. 2d 74; Rubin v. Metropolitan Life Ins. Co., 278 N. Y. 625, 16 N. E. 2d 293 ; Sullivan v. Penn. Mut. Life Ins. Co., 100 F. 2d 560; Barnett v. Metropolitan Life Insurance Co., 258 App. Div. 241, 16 N. Y. S. 2d 198; Barnett v. Metropolitan Life Ins. Co., 285 N. Y. 627, 33 N. E. 2d 554; Blackburn v. Home Life Ins. Co., 19 Cal. 2d 226, 120 P. 2d 31; Maynard v. Mutual Life Ins. Co. (Tenn. 1942), 165 S. W. 2d 385, cited and relied upon heavily by appellee in support of the trial court’s judgment, which opinions appellee has printed in full for the convenience of the court.
Counsel for appellant cite Forman v. Mutual Life Insurance Co., 173 Ky. 547, 191 S. W. 2d 279; Noel v. Continental Casualty Co., 138 Kan. 136, 23 P. 2d 610; Fuller v. Metropolitan Life Ins. Co., 37 Fed. 163, and Southern Mutual Life Insurance Company v. Montague, 84 Ky. 653, 2 S. W. 443, in support of their contention that the illustration from the booklet issued by the insurer and shown plaintiff at the time he made application for the policy in question, and which shows that the dividends were computed at the same rate as dividends on similar policies without special benefits, was explanatory of the policy and should be read with it. The cases cited tend to sustain that view. Counsel for appellee contend that the Forman case has been “distinguished and practically repudiated” by later decisions of the Kentucky court of appeals. I agree the later decisions distinguish the case, but not that they repudiate it. In fact, they seem to make it clear that is not being done. The Forman case was cited and followed in Thomas v. Life Assurance Society, 198 Mo. App. 533, 205 S. W. 533, and more recently cited J vith approval in Automobile Underwriters, Inc., v. Camp, 217 Ind. 328, 27 N. E. 2d 370-373.
The principle contended for by appellant is sustained in Rasmussen v. New York Life Ins. Co., 267 N. Y. 129, 195 N. E. 821. The policy there involved contained a provision for double indemnity in case of death by accident, but further provided:
“Double indemnity shall not be payable if the insured’s death resulted from . . . the taking of poison or inhaling of gas, whether voluntary or otherwise.”
The court said: “Unless ineffective for reasons in the record, this exception defeats plaintiff’s recovery,” citing Osburn v. Commercial Traveler’s Mut. Acc. Assn., 265 N. Y. 671, 193 N. E. 438. At the *723trial plaintiff offered in evidence a pamphlet which had been enclosed and delivered with the policy. An objection to that was sustained and the case dismissed. The policy was dated in 1928. The pamphlet was entitled “1927 in a Nutshell. . . . Printed by the New York Life Insur. Co., N. Y. city.” It reads in part:
“ ‘Double indemnity for accidental deaths. Experience of the New York Life in 1927, the tenth year of this feature. Double indemnity added 11,983,-060.01 to the amounts otherwise payable. Who can say that this feature is not valuable? Causes of death: . . . Carbon Monoxide, 16 . .
Plaintiff testified that in the course of solicitations for the insurance defendant’s agent suggested double indemnity, and left a similar pamphlet with her husband. The court said:
“The document offered by plaintiff is thus probative of the fact that the general words of this policy were used by both insurer and insured to connote accidental death by carbon monoxide as among the contingencies in which double indemnity would be paid. . . . Had the excluded evidence been admitted, the jury could have found that the insured was induced to accept the policy by a clear assertion that death by carbon monoxide was not to be understood as death by poison or gas within the exception to the provision for double indemnity in the event of fatal accident.”
The court quoted the American Law Institute, Restatement of Contracts, § 242, and cited 5 Wigmore on Evidence, 2d ed., §§ 2463, 2465, and earlier New York cases, and reversed the trial court. One paragraph of the syllabus reads:
“The circumstances under which parties contract may be looked at to indicate the proper choice of possible meanings of a writing even though it be not, on its face, ambiguous.” (Syl. ¶ 2.)
In the circular in that case, as in the booklet here, there was no effort to change the terms of the policy. All that was being done was explaining the policy, and the contract was made in harmony with the explanation. Other cases in which it was claimed a booklet, letter or circular influenced the applicant could be cited. In some of them the insurer was held bound and in others not, depending upon who prepared the literature and what it contained and how it was used.
The insurer here does not contend that it did not prepare the booklet in question and send the same to its agent;' neither does it contend that the agent improperly used it in soliciting plaintiff’s insurance. Neither is it contended that the booklet does not disclose that the dividend upon the policy issued to plaintiff would be computed on the same basis as dividends upon similar policies which did *724not contain special benefits, nor that the booklet did not advise plaintiff that any increase or decrease in future dividend scales would correspondingly increase or decrease the figures set out in the booklet. Neither is it contended that the plaintiff did not understand and rely upon the representations contained in the booklet. Indeed, it would appear from the record as a whole that if the president of the insurer or any of its officers had been present, similar representations would have been made to plaintiff, for the insurer so understood it and acted upon that basis for ten years.
The insurance law of New York (ch. 30, sec. 83), as applicable here, shortly stated, provides that on December 31 of each year the insurer shall ascertain the surplus earned by it during the year, and after setting aside sums for certain items “shall apportion the remaining surplus equitably” to the policies entitled to share therein.
The insurer here contends that since losses upon policies of the kind held by plaintiff have been somewhat greater than was anticipated, it would be inequitable to pay dividends upon plaintiff’s policy on the same basis as on policies otherwise similar but without special benefits. To illustrate this counsel present the analogy of plaintiff’s “mythical twin brother” who, on the same day plaintiff took out the policy here in question, took out a policy similar to it but without special benefits, and argue it is “inequitable” for the insurer to pay plaintiff the same dividend they would pay the twin brother. The analogy should go a little further. Let it also be assumed that the same agent took the application for both policies; that he explained the basis of the insurer for computing dividends upon each of them; that one of the policies cost more money in premiums than the other but had some special benefits, and with this knowledge the plaintiff chose one policy at greater cost to him, and his twin brother chose a similar policy but without special benefits at a less cost, and both of them knew and understood that their dividends would be computed upon the same basis. In such a situation the lack of “equitable” distribution of dividends as between them becomes “mythical.” I have rather a deep-seated notion that when competent parties, fully informed and with no intention of being unfair to each other — and in this case there is no contention that either the plaintiff or the insurer through its agent attempted to be unfair to the other — make a contract in terms which both of them understand, that it is equitable for each of the parties to carry out its part of the contract.
The circumstances which brought this controversy about are quite *725freely stated. When, about 1913, defendant prepared to issue an ordinary life policy with certain special benefits, it ascertained as best it could the amount of extra premium it would have to charge for that kind of a policy and pay the same dividends upon it as it did with its policies of the same character without special benefits. Whether such extra premium would prove adequate for this purpose was, of course, not definitely known. For some twenty-three years it continued to issue such policies and pay the same dividends upon them that it did upon like policies without the special benefits. In the meantime it discovered that the losses upon such policies with 'special benefits were greater than had been anticipated. Of course, as to policies to be issued in the future it could handle the matter by not issuing them, or by charging greater premiums. As to policies previously issued, apparently thinking it could not legally cancel the policy, or raise the premium rate, or decrease the benefits, or decrease the special benefits, it conceived the notion of accomplishing the same result by decreasing the amount of dividends. In my judgment it had no more right to do the one than the other. Certainly, what the insurer has done in this case has decreased the value of this policy to the holder. It has taken from him dividends which he did in fact use to purchase additional insurance and which he might have collected in cash or used in some other way. It is my judgment that the insurer violated its insurance contract with plaintiff when it did so.
In 1930 the insurance commissioner of the state of New York advised all authorized life insurance companies of his ruling pertaining to “Minimum valuation requirements for disability benefits included in life policies issued after June 30, 1930.” Since this policy was issued prior to that date, most of the ruling does not pertain to.it, but the ruling contained the following:
“On business issued prior to July 1, 1930, companies should accumulate over a period of a few years such additional reserves over and above the Hunter’s table as appear sufficient in the light of the best information available to take care of the liberal disability benefits granted in the past.”
This is the only ruling respecting the matter shown by the abstract to have been made by the commissioner of insurance of New York. I see nothing wrong with it. It fixed a date as of July 1, 1930, for the actuarial security of policies issued after that date, and required insurers to accumulate such a reserve as would take care of their obligations upon policies issued prior thereto. Apparently the appellee did so until 1937, when it appears from the abstract to have *726issued a circular to the effect that dividends on policies containing special benefits were computed to be less than on otherwise similar policies without such benefits, stating that this was done “with the knowledge and approval of the New York State Insurance Department, and is likewise in accordance with a recent decision of the Court of Appeals (the highest court in New York state) in a suit involving just such a distinction in dividends.” Nothing from the insurance department of the state of New York is shown in the record to indicate that it had knowledge of or approved the insurer’s action. We may assume that the “recent decision of the Court of Appeals” referred to is Rhine v. New York Life Ins. Co., 273 N. Y. 1, 6 N. E. 2d 74. However, as previously pointed out, that case did not involve a specific contract with an insured predicated upon the information contained in a booklet issued by the insurer and the representations of the insurer’s agent made at the time the application for the policy was taken. Had the New York Court of Appeals had that kind of a showing before it, as it had a similar showing in Rasmussen v. New York Life Ins. Co., supra, its decision, no doubt, would have been the other way as regards that specific policy.
I have only this to say with reference to the powers of the board of directors in issuing its circular in 1937, above referred to, that it had no authority to violate the contract which the insurer’s agent made with plaintiff with the full knowledge and approval of the insurer. I think the duty of the board of directors was to conform to the ruling of the insurance commissioner of the state of New York respecting business issued prior to July 1, 1930, by building up such a reserve as would take care of the liabilities of the company on its policies previously issued.
It is no financial hardship on the insurer to pay dividends on the basis of its agreement with appellant, as explained in the booklet and as actually carried out until 1937. The record in this case discloses that the insurer is a prosperous going concern. On December 31 of each year it ascertains the surplus earned by it during the year, sets aside certain items, and disburses the remainder among its policyholders. It has only the one fund to disburse, and it disburses that fund. It costs the insurer no more to disburse the fund as it had done up to 1937 than it does to disburse the fund by paying a smaller amount of it to plaintiff and a larger amount of it to plaintiff’s “mythical twin brother.” This theory of “equity” is too mythical for me to understand.
*727The testimony offered by plaintiff and rejected by the court should have been received, but the ruling is not very material in view of the trial court’s finding that the booklet was shown to plaintiff by insurer’s agent and that plaintiff understood and relied upon the method of the insurer in classifying policies for the payment of dividends as shown by the booklet. The insurer now takes the position that plaintiff had no right to rely upon the booklet or its agent’s explanation of the various policies which it issued. To me, that is an unwarranted position for the insurer to take, and, if sustained, a dangerous one for insurers.
The judgment of the court below should be reversed with directions to enter judgment for plaintiff.