Knapp v. Homeopathic Mutual Life Insurance Company/Opinion of the Court

The canceling of the policy, in consequence of the husband's fraudulent representation that the wife was dead, had no effect upon her rights. It is not relied on by the defendant, and there is nothing in the case to show that it in any way influenced the conduct of the plaintiff by preventing her from paying the premiums or making the election required by the policy. The contract of insurance, made and to be performed in New York, between a corporation and a citizen of that state, is to be governed by the law of New York. By that law, in respect to the payment of or the neglect to pay premiums, a married woman stands like any other person insured, (Baker v. Union Ins. Co., 43 N. Y. 283;) and there is no statute which affects this case. The decision, therefore, depends upon the true construction of the non-forfeiture clause in the policy.

The single purpose of this clause is that, after two annual premiums shall have been paid, a failure to pay any subsequent premium shall not have the effect of avoiding the whole insurance, but the assured shall have the right to an insurance for such a sum and such a time as the premiums already paid would equitably cover. The policy does not declare that it shall continue of itself without any act of the assured. On the contrary, it stipulates that 'the party insured shall be entitled to have it continued in force for a period to be determined' by ascertaining, according to certain rules, the net value of the policy at the time of failure to pay a premium, and making the amount of that value, considered as a single premium, the basis for determining the time for which there shall be a temporary insurance for the full amount of the original policy. It then prescribes an alternative by which the party insured, 'at his option, may receive a paid-up policy for the full amount of premium paid.' In short, the forfeiture of the policy, by a failure to pay any premium after the first two, is not absolute, but qualified; and the party insured is entitled to be insured according to the sum already paid in premiums, either for the full amount of the original policy, so long as that sum would pay for it, or else for the full term of the original policy for such amount as that sum would pay for. Then follows the proviso 'that unless this policy shall be surrendered and such paid-up policy shall be applied for within ninety days after such non-payment, as aforesaid, then this policy shall be void and of no effect.'

It is contended on behalf of the plaintiff that the words 'such paid-up policy' show that this provision refers only to a new insurance determined by the second method,-that is, for the full term of the original policy, and for an amount depending upon the sum already paid in premiums; and that if the assured does not seasonably apply for such an insurance, she still remains insured for the full amount for a time computed according to the sum paid. But the proviso does not say that upon a failure to surrender the original policy, and to apply for a paid-up policy, the original policy shall stand good for a temporary insurance; but that it 'shall be void and of no effect.' The result of either of the two methods already prescribed for determining the extent of the insurance is a paid-up policy. According to either method there is to be no further payment of premium, nor is the original policy continued in force; but the assured is to have the benefit of the sum already paid in premiums, by being insured, either for the amount of the original policy for a time to be determined, or for the time of the original policy for an amount to be determined. Taking the whole clause together, it is clear that the assured is to have the benefit of that sum in one of two ways, at her election, and that election must be made within a certain time. As that time expired without any election, or any excuse for not making one, the forfeiture became complete under the express provisions of the policy, and the circuit court rightly held that the action could not be maintained. Judgment affirmed.