Court Opinion

ID: 6584237
Source: CourtListenerOpinion
Date Created: 2022-07-20 19:41:01.723771+00
Date Added: 2024-06-11T15:57:24.507075
License: Public Domain

Baldwin, J.
(concurring in the judgment, but dissenting in part from the opinion). I cannot agree with the majority of the court in approving the construction given, by the judgment appealed from, to the contract contained in the policies in question.
The plaintiffs introduced in evidence a pamphlet entitled as follows:—
“ New Plans of Insurance presented by the Metropolitan Life Insurance Company, 819 Broadway, New York, entitled Reserve Endowment and Reserve Dividend Plans, claiming advantages not hitherto offered. Originated and published by William P. Stewart, Actuary of the Metropolitan, and copyrighted by him in 1869.
“Entered according to Act of Congress in the year 1872 by the Metropolitan Life Insurance Company in the office of the Librarian of Congress at Washington.”
It is found that William P. Stewart, prior to 1872 was the actuary of the Widows and Orphans Benefit Life Insurance Co., compiling and publishing while such, a pamphlet entitled a “ Key to the Reserve Dividend Plan,” etc., which was copyrighted in his name in 1871; and that in 1872 he became the actuary of the defendant under a contract by which he gave it the exclusive right until 1878 to use and practice the plan so copyrighted.
No other proof was offered that the defendant or any of its agents prepared the matter in the pamphlet of 1872, or had it copyrighted, except the fact of such copyright and the document itself. The plaintiffs asked the trial court to find as a fact that it was copyrighted by the company, and the refusal to comply with the request is assigned for error. It seems to me plain that it was error. Hoyt v. Danbury, 69 Conn. 341. The pamphlet served to throw light on a material point, and if its statements were indorsed and put forward by the defendant, they became thus entitled to great weight in determining the nature of the policy contracts in controversy. That it was copyrighted in the name of the defendant was prima fade evidence that it was so cop3rrighted by its authority, and there was nothing to abate from the force of that presumption.
*679I am therefore of opinion that the pamphlet should have been taken as a cotemporaneous explanation by the defendant of the meaning of certain terms of art, used in its policies, namely, “ Reserve Dividend Plan,” and “ Reserve Dividend Fund.”
Three of the policies in suit bear an indorsement which also states what is to be credited to this fund. As these policies, in other respects, are identical with all the rest, I think that each of the whole number should be construed as if it bore a similar indorsement.
From these sources of information, and others to which allusion is made in the preceding opinion, it seems to me that the contract of the defendant was not that found by the Superior Court.
The defendant was a stock company. Its capital in 1872 was $200,000; in 1888, $500,000. Its means for meeting its obligations were therefore not limited to its premium receipts and the accumulations from them. It offered insurance upon the “ participating ” plan, under which dividends are annually declared from the surplus of the year’s operations, if any there be, payable to all policy-holders, in proportion to the premiums received from them. It also offered insurance upon the “ Reserve Dividend Plan.” This was to ton-tine a number of participating policies for a fixed term of years, and instead of paying over the dividends which might be declared upon them, reserve payment until the end of the term, crediting interest meanwhile on the sums so reserved. But this was not all. In the words of the copyrighted pamphlet of 1872:—
“ On the reserve dividend and reserve endowment plans a fund will accumulate from five sources, as follows: First. From the ordinary dividends, as allowed by the company, accumulated upon existing policies. Second. From the accumulated dividends bequeathed to the class by dying members. Third. From the accumulated dividends forfeited to the class by retiring members. Fourth. From the reserve of all policies lapsing before the close of the class. Fifth. From the addition of compound interest. It follows, *680then, that the existing members at the close of the class will get, besides receiving all the ordinary dividends earned by their policies, more or less from all the last four sources. It is plain, therefore, that the dividend to the existing members at the close of the class must be considerably larger than the dividends accumulated in the ordinary way.”
One of the five sources of credit to the “ Reserve Dividend Fund ” was therefore “ the reserve of all policies lapsing before the close of the class.”
On a previous page of the same work we find another description of the “ Reserve Dividend Plan,” as follows :—
■ “ The Reserve Dividend Plan contemplates the reserving for ten years of the usual dividends paid policy-holders annually, and then of dividing this sum equitably among the survivors. In the event of death during this period the full face of the policy is paid; in which case it has proved a productive investment to the extent of from 500 to 5,000 per cent of its cost. In the event of a policy-holder relinquishing his insurance, his reserve reverts to the surviving members.”
In the indorsement on three of the policies, to which reference has been made, the credits to the reserve dividend fund are described as “ gains from the following sources,” and one of these sources is given as “ The total reserve on all policies lapsing before the completion of said period.”
I think that the tontine fund, under the plan thus stated by the defendant, was entitled to be credited either with the total amount of the legal reserve on all policies lapsing within the tontine period, or with such part of that amount as, in the fair judgment of the company, might properly be treated as surplus funds, not needed to strengthen its capital or otherwise to secure the performance of its obligations.
The “ ordinary dividends allowed by the company,” and paid or credited annually upon participating policies, came from such surplus as mig'ht remain, when, from the premiums accrued during the year upon all such policies, receipts of income from investments other than those representing the capital stock, and gains on sales of such investments, *681there was deducted the amount of its current expenditures, together with the requisite additions to the reserve to be carried for each policy, less subtractions for reserves no longer necessary because the policies, against which they were held, had ceased to he in force. There would be included in its current expenditures whatever it might pay on matured policies, or for the surrender value of policies purchased. The total amount of the reserves on lapsed policies was thus a source of credit to the general surplus, out of which the usual annual dividends to policy-holders were payable. But these dividends in the aggregate were not necessarily or probably to equal the amount of that surplus. It might at the reasonable discretion of the company be drawn upon for dividends to stockholders, or for a permanent addition to the company’s investments to strengthen its financial credit. It might also be drawn upon to satisfy special contracts with special classes of policy-holders who had been induced to insure themselves in a particular way by the promise of such a benefit.
Such was the case of the tontine policy-holders under the reserve dividend plan. They had agreed, in lieu of receiving the usual dividends every year, to have the sum to which these would amount remain in the hands of the company for ten years, during -which it would serve, in favor of its creditors, including themselves, as a “ guaranty capital ” in addition to the regular re-insurance reserve fund required by law, as was stated in Stewart’s original Key to the Reserve Dividend Plan. In consideration of this the company promised them whatever gain might accrue from lapses of any of the policies in their tontine. One gain accrued by chalking off from the list of the company’s liabilities the reserve previously held for each lapsed policy; for this left its amount a free asset, to be treated as such in computing the surplus available for dividends. But this cannot be what was intended by the separate specification of the total reserve on lapsed policies as an additional source of gain to those already described. The tontine policies were to have some benefit by these lapses besides that which was exhausted in *682increasing the usual dividends, in which all participating policy-holders shared alike. The only other gain they could have would be by a credit either of the total amount of these reserves to the tontine fund, or of such portion of it as the company thought it equitable to allow. There is nothiug singular or unfair in such an arrangement.
The “Reserve Endowment Plan,” which was combined with the “ Reserve Dividend Plan ” in all the policies in controversy, ensured to each surviving policy-holder who kept his policy in force during the whole term of Ms insurance (which might be longer than the tontine term), the full amount of the reserve which ought to have been held against his policy, whether in fact the company had maintained it inviolate, or not. The sum insured upon his life, being no longer payable in any contingency, he might fairly stipulate to have the reserve returned, which had been or ought to have been kept to meet the contingency of his previous death.
So all the members of the tontine might fairly stipulate with the company and each other, that if any of them let his policy lapse, the reserve which had been or ought to have been held against it, being freed by the lapse, should forthwith go into the tontine fund. While in the fund, it would be an asset of the company quoad its creditors. At the end of the tontine, it would be payable to the tontine survivors, subject only to such rights of creditors, and to any statute requirements as to the maintenance of an adequate re-insurance reserve.
The Superior Court has found that the policy contract was that dividends to members of the tontine should be made only out of the receipts for premiums upon the tontine policies, improved at interest; and that there must first be deducted, among other things, all sums paid for insurance upon the lives of those of the class who had died, and any amounts paid to buy in any of the class policies. I find no such provisions in any of the documents in proof. On the contrary, in the Key to the Reserve Dividend Plan, Stewart expressly says that “ the expenses and death claims are paid out of the general fund of the company, and not charged to the class *683fund.” Any other arrangement would violate the general principles of life insurance, which is only safe for either party when a large number of lives are at risk, so as to allow the doctrine of averages full play.
The Superior Court also denied the tontine fund any benefit from lapses, except that shared by all participating policyholders in the ascertainment of the surplus applicable to ordinary dividends. I think the policy, which, if obscure, should be construed against the defendant whose production it is, promised some addition to the fund, outside of its share in the usual dividends, from the reserves which were or ought to have been held against the lapsed policies; and that this proviso was valid and enforceable. In the preceding opinion of the court, it is said that if the undertaking were to account for the entire reserve, it would be a mere wager, and so void. To this I cannot agree. It seems to me a legitimate mode of reducing the cost of insurance to the survivors of the ton-tine, in the benefit of which all share alike at the inception of the contract, since the chances of life are then uncertain.
In my opinion, the total amount of the reserves belongs to the tontine fund, subject only to the rights of creditors or the provisions of statute law as to the necessary insurance reserve.
In Stewart’s Key to the Reserve Dividend Plan, after explaining its right to the usual dividends, he saj^s: “ It is further stipulated that in case any member fails to keep his policy in force for the ten years he shall forfeit his reserve for the benefit of his class, which sum shall be kept at interest by the company, and divided in like manner.” In his “ Key to the Reserve Endowment Plan,” he recurs to the subject of the “ reserve dividend,” and describes it thus: “ The dividend is not a return at compound interest of the policyholder’s own money, but the payment to him of his equitable share in the funds of the company. This share will include the contributions from lapsed dividends, reserves, and the dividends bequeathed by dying members.” All this seems to me fundamentally inconsistent with the conclusions of the Superior Court, which were that the business of each *684tontine was to be marshaled by itself, bnt that lapses in ton-tine policies benefited the tontine only as it benefited every participating policy-holder.
Considerable weight is attached by the majority of the court to the provision in every policy that “ an equitable surrender value will be allowed in purchase of this policy only at such times as a dividend may be due and payable upon it by its terms.” As dividends while they might become “ due ” annually were not to be “ payable ” until the end of the ton-tine term, this forbade the company to buy in any of the tontined policies prior to that event. Its object, as it strikes me, was not to express a promise to pay a surrender value, but to provide against wronging the tontine survivors by denying them the full benefit of any lapse. Each policy provides distinctly that “in every case when this policy shall cease and determine or become or be null and void, all payments thereon shall be forfeited to the company,” and that if there be any default in the payment of premiums, it “ shall cease and determine.” A purchase, therefore, of one who contemplated dropping his insurance, was an act of mere grace. If he belonged to a tontine, it was better for the other members that his relations to them should be terminated by a lapse rather than a purchase. A purchase would prevent a lapse, and by giving the company some rights as his assignee, or as respects the purchase money paid, would complicate or disarrange the final settlement of the tontine account. On the other hand, if a purchase were made at the end of the term, the company simply would become the assignee of the vendor’s right in the accumulated fund, whatever it was.
I concur in the opinion that in the admission of expert testimony to determine tbe construction of written documents there was error, for which a new trial should be granted.