Court Opinion

ID: 7136538
Source: CourtListenerOpinion
Date Created: 2022-07-24 15:24:33.585747+00
Date Added: 2024-06-11T16:14:38.834603
License: Public Domain

Response to the Petition by Appellant fob Rehearing June 26, 1907, by Chief Justice 0 ’Rear.
This case was orally argued before this court on May 2, 1907, on appellant’s petition for rehearing. The original opinion was delivered October 19, 1906. Since the opinion appellant has made a complete change of its position in this case, utterly and expressly abandoning its former contention, and now urging that “dividend additions” is a technical term employed in life insurance which is old and well known, and means altogether a different thing from what the court has found, as well as from what appellant originally argued.
Appellant’s change of base should detract nothing from the correctness of its present attitude, if it is correct; but it-may furnish a very tangible illustration of the error of its present contention on its merits, for it may illustrate that the use of the term is not so well known, even in insurance circles, and therefore not presumably used entirely with reference to its technical sense. The question is: How did the New Tork Legislature employ the term ‘ ‘ dividend additions'?” The question is one of more than incidental importance. We have the same expression in the nonforfeiture insurance statute of this State. The construction given the one would dotíbtless be held to apply also to the other. We are referred by *436counsel for appellant to certain histories of life insurance in which it appears that “dividend additions” was a term sometimes employed in life insurance to represent additional insurance set apart by the insurer to a policy whose dividends had accumulated to a period of distribution, and which had not beén otherwise applied. For example, it is said; “The method of dealing with the surplus on policies entitled to participate therein, which was intended by the founders of the Equitable of London, was, as we have seen, to divide the same to the insured at frequent intervals in cash. The method actually adopted by the Equitable of London, as we have also seen, was to grant reversionary bonuses, payable at the death of the insured, and to make apportionments every seven years. The application of surplus earnings to purchase reversionary bonuses, known in this country, as ‘paid-up additions,’ ‘reversionary additions,’ or merely ‘dividend additions,’ was also employed in this country at an early date.’’ Dawson’s Elements of Life Insurance, p. 105. It is quite likely that some companies did, and may yet, issue policies which permitted that privilege; but we are unacquainted with any statute which-required it, or with any general practice of the insurance companies which permitted it. There is nothing in this case to show that appellant does now, or ever did, indulge the practice. Still that might shed but little light on the true construction of the statute under considera-' tion. Appellant’s contention now is that this expression “dividend additions” is a term of art, and has now, and always had, but the one meaning, which' is those additions to the principal sum insured which the divisible surplus would buy as paid-up insurance for the insured, payable at his death, as *437the principal insurance was. That form of insurance is believed to have been rare, as compared with the bulk of all insurance. That it is indulged by some companies, and possibly would be written by all, need not be doubted. But the fact remains, as is most evident by a cursory glance at the statements of any of the old line insurance companies, that the “surplus” was not generally so employed. If it had been, the ernormous surpluses, advertised as evidence of good management, and really evidences of oppressive management, could not have existed.
But we are entitled to look beyond the technical meaning of terms used in a statute to ascertain the intent of the Legislature, if the. meaning of the language of the act be obscure. One of the first, and one of the surest, sources of information, is to look to the evil that was intended to be remedied. In this instance what was the evil? It assuredly was not that insurance companies were unjustly forfeiting that part of the insurance which had been paid up in full. That is precisely what a “dividend addition” is, as described by Dawson, and now contended for by appellant. Those companies that applied the “surplus” to buying additional paid-up insurance for the beneficiary were those whose sense of equity, without coercion from the Legislatures, had led them to adopt the measure. They were not, and none others in considerable instances were, so far as we know, forfeiting such additions at all. Indeed, there was no ground whatever for doing so. As they, in any event, were fully paid up, nothing in the way of failure to pay premiums to keep up other insurance by the assured could possibly affect them. But there was in 1879 and 1880, and had been for a.decade or more previous, a crying evil in life insurance, which had *438aroused widespread bitter feeling, and had brought the management of insurance companies under severe criticism; and that was the unjust, unconscientious, inequitable practice of forfeiting the reserve, as well '■ as accumulations of “tontines” in event of a failure of the insured' to pay each recurring premium. The bubble that had grown to the most noticeable proportions was that of the “tontine” feature, a pure hazard. But many companies issued “semitontine,” “free tontine,” and other policies partaking more or less of the character of the pure tontine, which, as has already been pointed out, was not insurance at all, strictly speaking. Among those mentioned was “deferred dividend” policies. They were, if you died before the period arrived for declaring the “dividend” out of the “surplus,” you got no part of the “surplus” — that went to those who survived the “period of distribution” (which, by the way, is the class to which the policy in the case at bar belongs). If you did not die, but failed, to pay a premium, you forfeited your part of the ‘ ‘ surplus ’ ’ and everything else under your contract If you survived the period of distribution, you would be entitled to have distributed to you by the company what it might then be pleased to apportion to your policy. There was not much chance for the company to lose anything by following the plan. There was about as small a chance for the policy holder to get anything out of it. Millions of insurance of this character was being written. The first “tontines” originated by the Equitable of New York and adopted by the New York Life and others, had begun to mature, and were proving great disappointments. Although many thousands had forfeited their whole investment by nonpayment of premiums, still the survivors got back *439much less than upon any right calculation they had reason to expect. It was this situation that was in a state of popular ferment that led up to the legislation in New York and other states about that time, shown in the statute now under examination. The statute aimed to protect the policy holders in their own, and no more; but equally certainly no less. It would be inexplicable that the Legislature could have intended to protect policy holders from the forfeiture of their reserves, and additions to their insurance bought by a part of the “surplus,” and yet allow that their “surplus” which had not been so applied could be forfeited for the same cause which was deemed inequitable and unjustifiable, and which experience has demonstrated was in truth so.
Given that all premiums paid in had been apportioned to (1) paying their share of death claims, (2) their share of expenses,. (3) to maintaining the “reserve” to finally redeem the policy, (4) to a surplus which belonged as truly in equity to the policy holders as did the reserve, which surplus may have been partly applied under a limited number of policies to buying additional paid-up insurance, and the remainder of it unapplied, while in the great bulk of insurance there was no provision or practice of issuing “dividend additions” insurance paid for out of the surplus. Now, why should the Legislature have provided against the forfeiture of all of these interests of the insured except the last? No reason is assigned in argument by appellant; and we feel safe in concluding, after a careful study of the question, that there is none. The history of insurance shows that terms which might be deemed technical were frequently changed. Sometimes one term was used to express the idea, and sometimes another. *440They were purposely changed, we have no doubt, to mislead in some instances. Yet the matter of life insurance is of such a nature that its fundamental principles must necessarily remain the same, whatever name they may be. called by. As attempted to be pointed out in the original opinion, the insured in reality insure themselves and each other. The excess of premiums collected from them belongs, in a mutual company, to them alone. An evil had grown up of forfeiting .the policy holders’ “reserve” and “surplus.” Legislation was enacted to prevent it. In construing terms employed in the statute, they will be given the meaning which will remedy the evil, rather than a. meaning which would leave it partly ■ unremedied.
We conclude that, while “dividend additions” may have meant what appellant contends, the term also meant that fund from which “dividends” were declarable, to-wit: the surplus, whether it had been applied to buying additional insurance or not.
Petition overruled.