Hartford Life Insurance Company v. Barber/Opinion of the Court

These are suits upon two certificates of qualified life insurance issued to Frank Barber and payable at his death to his wife, the plaintiff-defendant in error here. The defense in both suits was the same; that Barber failed to pay a mortuary assessment levied on January 29, 1910, known as quarterly call No. 126, and that the failure avoided the policies by their terms. It set up further that, in a suit brought by one Dresser on behalf of himself and all certificate holders, including the plaintiff, in the Connecticut Court having jurisdiction over the defendant and the mortuary fund from which alone, by the contract, death losses were payable, it was adjudicated on March 23, 1910, that if a certificate holder failed to pay a mortuary assessment the company could not pay the insurance in case of his death.

At the trial the Connecticut judgment was offered and excluded and the jury were instructed that the defendant must prove that an assessment was made by the directors of the company and that it was not for a larger amount than was necessary to pay death losses up to that time after giving Barber credit for his pro rata share in the mortuary fund; that if there was money on hand in that fund, and unless the defendant had 'so proved,' it could not declare the insurance forfeited on that account. This instruction was in the teeth of the Connecticut adjudication which held that it was proper and reasonable for the company to hold a fund collected in advance in order to enable it to pay losses promptly. The plaintiff recovered judgments and these were sustained by the Supreme Court of Missouri. 269 Mo. 21, 187 S. W. 867. The defendant says that it was denied its constitutional rights by a failure to give due faith and credit to the judgment of the Connecticut Court.

The transactions were of the class before this Court in Hartford Life Ins. Co. v. Ibs, 237 U.S. 662, 35 Sup. Ct. 692, 59 L. Ed. 1165, L. R. A. 1916A, 765, which arose on a similar contract and a failure to pay the call next after the one in question here. In that case the character of the business arrangements was explained and it was decided that the Dresser judgment binds all certificate holders of the class to which Barber belonged. The Missouri Court, indicating some dissatisfaction with the company and the judgments in Connecticut and here, sought to justify a different result by distinctions that seem to us unreal. The first is that at the end of the quarter for which the assessment was levied, that is on December 31, 1909, after deducting all losses in respect of which the assessment was laid, there was still left, of the fund out of which the losses were paid, over $50,000, which the assessment would increase to over $375,000; that $300,000 was all that was allowed by the contract 'as modified by the [Connecticut] judgment'; and that the assessment therefore was excessive and void. The other distinction attempted is that the charter requires all of the affairs of the company to be managed and controlled by a board of not less than seven directors, and that the assessment was not levied by the board.

It is obvious on the evidence that this assessment was levied in the usual way adopted by the company and tacitly sanctioned by the Connecticut judgment. Quarterly mortality calls were provided for and were regularly made in this way for the appointed dates. A jury would have been justified, at least, in finding that the call was made by the directors within the meaning of the instructions although it did not appear that the directors went over the figures of the officers who made it up, and voted it specifically. It clearly was made under the directors' management and control. The verdicts for the plaintiff hardly could have been rendered except upon the other ground opened by the instructions, that the assessment was for a larger amount than was necessary to pay death losses up to that time. Upon that ground the verdicts were a matter of course, and we regard the reference to the directors' part in the assessment as a makeweight which adds nothing to the substantial basis for the decision below. See Terre Haute & Indianapolis R. R. Co. v. Indiana, 194 U.S. 579, 589, 24 Sup. Ct. 767, 48 L. Ed. 1124. The powers given by the Connecticut charter are entitled to the same credit elsewhere as the judgment of the Connecticut Court. Supreme Council of the Royal Arcanum v. Green, 237 U.S. 531, 542, 35 Sup. Ct. 724, 59 L. Ed. 1089, L. R. A. 1916A, 771.

As we have said the instruction was in the teeth of the Connecticut judgment by which under the Ibs Case the plaintiff was bound. The verdicts were based upon fundamental error, and the only real question in the case is whether it appears as matter of law that under correct instructions the same result must have been reached. The Connecticut judgment was that any excess in the mortuary fund above the average of the four preceding quarterly assessments in the Men's Division of the Safety Fund Department (taken for the purposes of these cases to be $300,000), shall be distributed to certificate holders in diminution of assessments by crediting the excess on account of the next succeeding assessment. This contemplates a possible excess and does not limit the assessment to a sum equal to the difference between $300,000 and the fund on hand after deducting the deaths that had occurred at the time when the assessment was levied, as was assumed by the Missouri Court. Deaths were occurring between the time of the levy and the time when so much of it as might be paid would be paid in. The assessment was for the purpose of keeping up a fund of $300,000 to meet deaths promptly, as they occurred. Without giving the figures in detail it is enough to say that it clearly appears that the amount of the assessment, $322,378.48 was not in excess of what the subsequently rendered Connecticut judgment allowed. It necessarily was levied as an estimate. There was no probability that it would lead to even a temporary excess over $300,000, to be applied to the next assessment laid. We are of opinion that full faith and credit was not given to the Connecticut record and that for that reason the present judgments must be reversed.

Judgments reversed.