Eaton v. N.Y. Life Ins. Co. of N.Y. , 315 Pa. 68 ( 1933 )

I am unable to agree with the conclusion of the majority in this case. I believe their conclusion imperils every life insurance policy during the first year of its existence, and opens the door to fraud of the worst character. My reasons for disagreeing, are as follows:

First: It is against public policy to hold that a policy of insurance, bearing the official receipt, may be conditionally delivered to the insured named in the policy, in the absence of fraud, accident or mistake.

Second: Assuming there was a conditional delivery, under the facts so well detailed in the majority opinion, the policy was delivered for acceptance or return for another policy. It is unquestioned that Emma Eaton, the insured, intended to purchase insurance. The record shows that this policy was accepted by the insured.

Third: The "official receipt" in the policy should be regarded as conclusive after the death of the insured, and its effect should not be permitted to be overthrown by the testimony proposed in this case.

Fourth: Assuming that payment had not in fact been made, the policy having been accepted, the first payment called for is merely a debt owing from the insured to the company.

Treating the above subjects a little more in detail: First, I agree with the intimation of the majority that the delivery, under the circumstances, should be held to be absolute, and not conditional. In this respect this policy is similar to a deed. A completed deed cannot be delivered conditionally to a grantee named therein. Delivery is absolute irrespective of any intention or concurrent parol agreements to the contrary: Simonton's Est., 4 Watts 180; Weisenberger v. Huebner, 264 Pa. 316,320; Loughran v. Kummer, 297 Pa. 179; Mowry v. Heney,86 Cal. 471, 25 P. 17; Elliott v. Merchants Bank Trust Co.,21 Cal.App. 536, 132 P. 280; Whitney v. Dewey, 10 Idaho 633,80 P. 1117; Hubbard v. Greeley, 84 Me. 340, 24 A. 799; Blair v. Security Bank of Richmond, 103 Va. 762, 50 S.E. 262; Richmond v. Morford (Wash.), 30 P. 242, 31 P. 513. All that is said in connection with the conditional delivery of a deed applies with the same force and logic to the conditional delivery of a completely executed insurance policy to the person insured. The latter has a property right in the policy upon delivery to him as certainly as does the grantee of a deed. It is contrary to the public policy expressed in the careful statutory regulations relating to insurance, to permit the insurer to deliver a completely executed policy having stated thereon its effective date and an acknowledgment of the receipt of the first premium, and to deny its legal effect after the death of the insured. If the company desired to make this policy conditional, it should have taken an inspection receipt.

Second, it is undisputed that decedent applied for the policy in Elmira, N.Y., where it was issued. The policy was in fact delivered to her for acceptance or for rejection for a smaller policy. The policy was handed to the beneficiary, who placed it in a drawer in the dining room, and had it in her possession at all times thereafter until the insured died.

The insured left her home in Lawrenceville, Pa., and was returning to Elmira, N.Y., some distance away. As these circumstances are all admitted by the insurance company, as well as by the beneficiary, there can be no doubt they evidenced an acceptance of the policy. The condition had been fulfilled and the beneficiary had the right to enforce her contract.

On both propositions as submitted, I think that the evidence of the agents is incompetent, either to show conditional delivery or any other fact occurring at the time the policy was delivered if it would have a tendency to defeat the beneficiary's right to recover. The beneficiary is suing in her independent right, which is not dependent on nor representative of the right of the assured. No interest of the assured passed to the beneficiary; she stands in her own right as a party to the contract: Hamill v. Supreme Council, 152 Pa. 537, 542. "She takes, if she takes at all, in her own right alone as the beneficiary of the fund, and she does not represent any right or interest of her deceased . . . . . . in the fund. She represents herself and her own rights only in the subject in controversy." See also Frowert v. Blank, 205 Pa. 299, and Solis v. Blank, 199 Pa. 600, which hold that the beneficiary in a beneficial association, upon the death of the member concerned, becomes a creditor. As appellee, then, was suing in her own right, conversations between the assured and appellant's agents are inadmissible since they were not had in the presence of appellee. Wigmore on Evidence, volume 2, 2d edition, section 1081, page 599, states: "In a beneficiary's action for the sum conditioned in a policy of life insurance, there is no legal identity of title between the deceased and the beneficiary, although the beneficiary's right is after all no more than the creation of the insured's contract; hence unless the beneficiary has in the beginning been made a party to the contract so as to bind himself to be identified with the insured [and some forms of contract attempt this] the insured's admissions would not be receivable against the beneficiary."

Under the third proposition that the premium had never been paid, we can only reiterate what, as the majority opinion states, is in the policy. Here is a plain, unambiguous and certain statement that money had been paid, and it is certified over the signature of the president and secretary. There is no attempt on the part of the insurance company to introduce evidence that because of fraud, accident or mistake it had not been paid. No such claim is involved in the case, yet the majority opinion permits two agents to say that they did not receive the money, notwithstanding the fact that the money may have been sent to the home office. There were other channels through which the money could have passed. Certainly the testimony of the agents would not be competent to disprove the fact of payment of money into the hands of the secretary and the president. The only thing that they could say was that decedent did not pay them, but that does not disprove the receipt that is offered in evidence here.

While a receipt for the payment of money may be challenged on the ground that the amount is inaccurate or incorrect, it is a settled rule that a recital of consideration in a deed when it is an operative part of the contractual act may not be denied: Wigmore on Evidence, volume 5, 2d edition, section 2433, page 313; Southard v. Ark. Valley W. R. Co., 24 Okla. 408,103 P. 750. See Butt v. Smith, 121 Wis. 566, 99 N.W. 328. It must be remembered that the insurance company's own witness testified that the policy itself was the company's official receipt for the first premium. Buttressed by this testimony, the policy constituted a receipt which should not be permitted to be challenged.

Assuming that the first premium had not been paid, as the insurance policy was in fact accepted, that was the entire essence of the contract. The failure to pay the first premium merely established the relation of debtor and creditor between decedent and the company. A great number of cases have determined that payment of the first premium is not essential to render a contract of insurance effective: Nat. Mut. Fire Ins. Co. v. Sprague, 40 Colo. 344, 92 P. 227; Cahill v. Royal Ins. Co., 94 Conn. 118, 108 A. 544; Marysville Mercantile Co. v. Home Fire Ins. Co., 21 Ida. 377, 121 P. 1026; Mutual Life Ins. Co. v. Allen, 212 Ill. 134, 72 N.E. 200; N.Y. Life Ins. Co. v. Greenlee, 42 Ind. App. 82, 84 N.E. 1101; Green v. Star Fire Ins. Co., 190 Mass. 586, 77 N.E. 649; DeMichele v. London Lancashire F. Ins. Co., 40 Utah 312, 120 P. 846. The delivery of a policy without actual payment of the premium raises the presumption that the company has extended credit: Washburn v. U.S. Casualty Co., 108 Me. 429, 81 A. 575; Hartwig v. Ætna Life Ins. Co., 164 Wis. 20, 158 N.W. 280. Had this policy remained in the possession of the insured for the whole year, the company would have had a valid claim against her for the first premium, and no court would deny its right to have recovered the first premium.

In the condition of this record, considering the admissions and the offers of proof, it is my opinion that the court was not in error in entering the judgment that it did.

Mr. Justice SCHAFFER concurred in this dissent.