Russell v. . Prudential Ins. Co. , 176 N.Y. 178 ( 1903 )

This action was brought to recover the amount of an insurance policy issued upon the life of Robert J. Russell, and payable to the plaintiff, his widow.

Charles H. Tennant was the general agent of the defendant, in charge of its office in Syracuse, and James F. O'Donnell was the sub-agent and a solicitor of insurance under him. Russell had made application for insurance through O'Donnell, and the policy had been issued by the company and sent to its general agent, Tennant. On the 6th day of January, 1900, Tennant and O'Donnell called upon Russell at his residence with the policy of insurance, and asked Russell if he wanted to pay the premium. He was not ready to pay at that time, and Tennant then said to him that he could have thirty days in which to make the payment. He thereupon handed Russell the policy and gave him a receipt for the first payment, saying to him that the policy was in force from that time on. He then suggested that Russell better let O'Donnell hold the receipt until he paid the premium. Thereupon Russell handed the receipt to O'Donnell and then they went away. On the 10th day of January thereafter Russell was killed by the explosion of an engine in the Rapid Transit power house. Both O'Donnell and Tennant deny the statement of the plaintiff, to the effect that Tennant stated to Russell at the time he delivered the policy to him that it should be in force from that date on, thus raising a question of fact between the parties which was submitted to the jury, who found a verdict in favor of the plaintiff, thus settling that question of fact in accordance with the testimony of the plaintiff.

It is now contended that there can be no recovery upon this policy, for the reason that the application of insurance contained a clause to the effect that the policy shall not take effect until the same shall be issued and delivered by the company, and the first premium paid thereon in full. Upon the back of the policy there was printed the following: "No agent has power on behalf of the company to make or modify this or any contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the company by making any promise, or making or receiving any representation or information. These powers can be exercised only by the president, one of the vice-presidents or the secretary, and will not be delegated."

I had supposed that a general agent of an insurance company could waive a condition of the policy requiring prepayment of premium, in order to make the policy binding, and that this proposition was settled so firmly by judicial authority as to be beyond question. In Sheldon v. Atlantic Fire and MarineInsurance Company (26 N.Y. 460) it was held that a general agent of the insurer may waive a condition in the policy that no insurance should be considered as binding until actual payment of the premium. EMOTT, J., in delivering the opinion of the court, says with reference thereto: "There can be no dispute that Lewis could waive the actual prepayment of the premium. He was a general agent of this company, and whatever may have been his secret instructions the insurer had a right to rely upon his act. His principals were bound as well by a waiver on his part of the condition of prepayment of the premium as by his contracts of insurance." In Wood v. Poughkeepsie MutualInsurance Company (32 N.Y. 619) PORTER, J., says: "Boggs was a general agent of the company. If he had waived the condition of prepayment the insurers would have been bound by his act, though it was in violation of their private instructions. The law would have implied such waiver if the policy had been delivered by the agent without requiring payment of the premium, and had been accepted by the plaintiff as a complete and executed contract. The company would have been held to its engagement, and the assured would have been liable for the premium, notwithstanding the acknowledgment of payment on the face of the paper." InBoehen v. Williamsburgh City Insurance Company (35 N.Y. 131) it was held that "Although, by the printed terms of the policy, it is stated that no policy will be considered binding until the premium is paid, yet the agent may waive such condition and give short credit. The delivery of a policy without requiring payment raises a presumption that a short credit is intended." (See, also, McNeilly v. Continental Life Insurance Co., 66 N.Y. 23;Marcus v. St. Louis Mutual Life Ins. Co., 68 N.Y. 625;Palmer v. Phænix Mutual Life Ins. Co., 84 N.Y. 63-70;Ruggles v. American Central Ins. Co., 114 N.Y. 415; May on Ins. [4th ed.] vol. 2, sec. 360b; 19 Am. Eng. Ency. of Law [2d ed.] p. 55.)

But it is now claimed that a way has been discovered by which the settled law upon this subject can be evaded and annulled, and that is by printing upon the back of the policy issued a clause which seemingly deprives their agents of any power to give any information, make any representation, or to extend the time for the payment of the premium for a single day. It is not pretended that this condition printed upon the back of the policy was ever called to the attention of Russell, or that he knew of its existence in his lifetime. It did not appear upon his application, and nothing was said with reference to it at the time of the interview in which the policy was delivered to him by the general agent of the company. He had no opportunity to read over and post himself with reference to the printed conditions upon the back of the policy until the agents had taken their departure. He does not, however, appear to have read it then, for immediately after the agents had left he handed it over to his wife, the plaintiff in this action, who since that time appears to have had the custody thereof.

It has been intimated that there was some merit in the defense to this action; that the jurors should have believed the agents instead of the plaintiff. But this question has, as I have already stated, been settled by the jury, and, I have no doubt, upon ample evidence to sustain the verdict. Indeed, the testimony of the agents is inconsistent with their conceded acts. They admit that the general agent, at the time and place stated by the plaintiff, delivered the policy to Russell and left it with him, and that he gave him time within which to make the payment. If the policy was not to be in force in the meantime, why was it delivered? Had it been held by the general agent until the money was paid, no one could have been deceived with reference to its force and effect. The very fact of its delivery, under the authorities to which we have referred, carries the presumption that it was in effect, and that any provision in the policy to the contrary was deemed waived. There is but one answer to the action of the agents, and that is that which the law implies. By the delivery of the policy to Russell and the inducing of him to accept it, he thereby became bound to pay the premium from that day, together with the interest accruing thereon, and the same could be enforced in a court of law. Whereas, by holding the policy for one month without delivering it to the insured, would prevent its earning any premium during that month which lawfully could be collected, and the company would thus be deprived of one-third of its first quarterly premium.

What, then, is the position of this defendant as disclosed by the record? It maintains an office in the city of Syracuse, presided over by a general agent of the company, who has the supervision of numerous sub-agents, but these agents cannot give any information, make any representation or promise on behalf of the company. The only power, apparently, given to the general agent is to deliver policies and collect premiums due thereon, but he has no power to extend the time for the payment or to make delivery of policies until the premiums are actually paid incash. And yet this agent, having the power to deliver policies, delivered this policy without the payment of the premium, in violation of his instructions, arranging with the insured to give him thirty days within which to pay the premium, and to induce him to accept the policy representing to him that it was then in force. At the same time this agent knew that the policy contained the provisions alluded to, and that it would not be in force or binding upon the company, although Russell by his acceptance had become bound to pay the premium.

To sustain the company's position in this transaction is, to my mind, the permitting of it to practice a fraud, through its general agent, upon the insured. The general agent was acting within the scope of his employment in delivering the policy. Russell, in the absence of knowledge as to the instructions given the agent in the manual, and of the condition to which we have referred, had the right to rely and act upon the statements of the agents, made at the time of the delivery of the policy; and he having accepted the same, the company became bound by the contract. To hold otherwise would permit the company to deceive its customers by the false and fraudulent representations of its general agent, and at the same time avoid responsibility therefor. Parties to contracts, including insurance companies, cannot be permitted to avail themselves of their own fraud, in order to escape liability for failure to perform their contracts. (Broom's Legal Maxims, 320.)

The case of Stewart v. Union Mutual Life Insurance Company (155 N.Y. 257), while distinguishable from the case under consideration as to the facts, is not, in my judgment, distinguishable as to the questions of law involved.

Under the view taken by me of this case, the exceptions appearing upon the record present no error calling for a reversal.

The judgment should be affirmed, with costs.

PARKER, Ch. J., GRAY, O'BRIEN and MARTIN, JJ., concur with BARTLETT, J.; HAIGHT, J., reads dissenting opinion; VANN, J., not voting.

Order and judgment reversed, etc.