New York Life Insurance Company v. Statham

THE first of these cases is here on appeal from, and the second and third on writs of error to, the Circuit Court of the United States for the Southern District of Mississippi.

The first case is a bill in equity, filed to recover the amount of a policy of life assurance, granted by the defendant (now appellant) in 1851, on the life of Dr. A. D. Statham, of Mississippi, from the proceeds of certain funds belonging to the defendant attached in the hands of its agent at Jackson, in that State. It appears from the statements of the bill that the annual premiums accruing on the policy were all regularly paid, until the breaking out of the late civil war, but that, in consequence of that event, the premium due on the 8th of December, 1861, was not paid; the parties assured being residents of Mississippi, and the defendant a corporation of New York. Dr. Statham died in July, 1862.

The second case is an action at law against the same defendant to recover the amount of a policy issued in 1859 on the life of Henry S. Seyms, the husband of the plaintiff. In this case, also, the premiums had been paid until the breaking out of the war, when, by reason thereof, they ceased to be paid, the plaintiff and her husband being residents of Mississippi. He died in May, 1862.

The third case is a similar action against the Manhattan Life Insurance Company of New York, to recover the amount of a policy issued by it in 1858, on the life of C. L. Buck, of Vicksburg, Miss.; the circumstances being substantially the same as in the other cases.

Each policy is in the usual form of such an instrument, declaring that the company, in consideration of a certain specified sum to it in hand paid by the assured, and of an annual premium of the same amount to be paid on the same day and month in every year during the continuance of the policy, did assure the life of the party named, in a specified amount, for the term of his natural life. Each contained various conditions, upon the breach of which it was to be null and void; and amongst others the following: 'That in case the said [assured] shall not pay the said premium on or before the several days hereinbefore mentioned for the payment thereof, then and in every such case the said company shall not be liable to the payment of the sum insured, or in any part thereof, and this policy shall cease and determine.' The Manhattan policy contained the additional provision, that, in every case where the policy should cease or become null and void, all previous payments made thereon should be forfeited to the company.

The non-payment of the premiums in arrear was set up in bar of the actions; and the plaintiffs respectively relied on the existence of the war as an excuse, offering to deduct the premiums in arrear from the amounts of the policies.

The decree and judgments below were against the defedants.

''Mr. Matt. H. Carpenter and Mr. James A. Garfield'' for the appellant in the first case, and for the plaintiff in error in the second. The third case was submitted by Mr. Alfred Pitman for the plaintiff in error.

The rights involved depend upon the contract. The court will not interpolate new conditions, but hold the parties to their agreement. Dermott v. Jones, 2 Wall. 1; Jeffreys v. ''Life Ins. Co.'', 22 id. 47. It consists of two parts, and is divisible. The payment of the first premium accomplished two things: First, it effected an insurance upon the life of the applicant for one year, which is, so far as he is concerned, an executed contract. Should he die within that specific period, the company absolutely covenants to pay the amount of the policy. Second, it purchased the option of his making the stipulated payments, and thus continuing the insurance from year to year, and is in this respect an executory contract. Worthington v. ''Charter Oak Life Ins. Co.'', 41 Conn. 372. The provisions requiring payment of the agreed premium for each subsequent year are an essential part of the substance of the contract, by which the duration of the risk is limited and defined, and are not a condition in the nature of a penalty. Dean v. Nelson, 10 Wall. 158. They declare that the policy, if the requisite premium is not paid, expires by its own limitation; but if the court considers that they create a condition, then we insist that it is a condition precedent to the renewal and extension of the risk. Until its performance, no liability is incurred by the underwriter, and no right vests in the policy-holder. Want et al. v. Blunt et al., 12 East, 183; ''Phoenix Life Ins. Co. v. Sheridan'', 8 Ho. of Lds. Cas. 745; Law R. 9 Ch. 502; id. 9 Eq. 705; id. 17 Ed. 316-320. An impossibility to perform it does not prevent the loss which results therefrom; nor will a court of equity relieve against the consequences of a breach, although such impossibility be occasioned by law. Salk. 231, 233; 3 Vern. 338, 339, 344; 1 id. 223; 1 Bro. Ch. 168; Earl of Shrewsbury v. Scott, 6 C. B. N. S. 1; Barker v. Hodgson, 3 M. & S. 267.

From the beginning of the war until the President's proclamation of Aug. 6, 1861, the assured, who lived within the rebel States, had full opportunity and permission to withdraw to loyal territory. His duty in such a case is clearly indicated in Mrs. Alexander's Cotton, 2 Wall. 421, and The William Bay ley, 5 id. 377. He elected to remain within the jurisdiction of the enemy. The result of his choice cannot be pleaded as an excuse for non-performance; nor can relief be claimed on the ground insisted upon by the other side, that, when the annual premium became due, its payment was rendered unlawful by the existence of war.

The contract, under the circumstances, and by his own voluntary act, was, if for no other reason, made void by the war; because its continued existence depended upon the performance of certain conditions by a person who remained within the Confederate lines, when all intercourse was prohibited by law. Hanger v. Abbott, 6 Wall. 536; Duer on Insurance, 473, note 2; Thompson v. United States, 15 Wall. 400. As insurance of the property or lives of enemies violates the laws of war, all such continuing policies are annulled when hostilities commence between the countries where the insurance company and the assured respectively reside. The war, ipso facto, dissolved the contracts sued on. Furtado v. Rogers, 3 Bos. & Pull. 191. There can be no well-founded distinction between a promise to indemnify a hostile country and one to indemnify its citizen or subject, though a non-combatant, against loss of life. Upon his death, should the contract be valid, and the non-performance of the condition which he has assumed be waived, an absolute right to a sum of money accrues, even though payment might not be enforced until the close of the war. We also insist, that during the war, and when the insured died, the contract, by its own limitation, or by reason of the non-performance of the condition, ceased and determined. The ground taken on the other side is, that only the particular clause requiring the stipulated annual payment was suspended, and that no loss arises from a non-compliance with its terms. This extraordinary result then follows. The contract, so far as the company is concerned, remains in force, and absolutely binds it, whilst the enemy is excused from performance. Should the insured survive the war, there would be no obligation to pay the back premiums, the contract being unilateral; if he dies, the assured can claim, as is done in these cases, the amount of the policy.

But if the court should reject these views, and hold that the defences are not a valid bar to a recovery in these suits, it will not affirm the judgments and decree for the entire amount of the several policies. If any equitable adjustment of the matters in controversy be made, the policy-holder, whose policy was alive when the war began, should not be entitled to any thing beyond its surrender value at that date. Such an adjustment would not impose on the assured the forfeiture of the premiums paid, or on the company the hardship of paying all lapses, whether voluntary or involuntary.

Mr. Clinton L. Rice for the appellees in the first case, and Mr. Joseph Casey for the defendant in error in the second. The third case was submitted by Mr. W. P. Harris for the defendant in error.

A contract of insurance, when made upon and for the life of the insured, is a contract for life, and not from year to year. ''Manhattan Life Ins. Co. v. Warwick'', 20 Gratt. 620; Reese v. ''Mut. Benefit Life Ins. Co.'', 26 Barb. 556; Hodson's Adm'rs v. ''Guard. Life Ins. Co.'', 97 Mass. 144; Hillyard v. ''Mut. Benefit Ins. Co.'', 37 N. J. 444. The payment of the premiums is a condition subsequent, the performance of which is excused when rendered illegal by the interdiction of commerce and intercourse in time of war between the countries where the contracting parties respectively reside.

It is not an executory contract of such a nature as to be ipso facto terminated or abrogated by a state of war. The war did not, therefore, proprio vigore, annul it, or impair any vested right under it. It had no other effect than to suspend the remedy upon, or the performance of, it. Statham v. ''New York Life Ins. Co.'', 45 Miss. 592; Cohen v. ''New York Mut. Life Ins. Co., 50 N. Y. 610; Sands v. New York Life Ins. Co.'', id. 626; ''Manhattan Life Ins. Co. v. Warwick, supra; New York Life Ins. Co. v. Clopton, 7 Bush, 179; Hamilton v. New York Mut. Life Ins. Co.'', 9 Blatch. 234; Semmes v. ''Hartford Ins. Co.'', 13 Wall. 158; Griswold v. Waddington, 16 Johns. 438; Bliss on Life Ins. (2d ed.) pp. 657-702. Conditions are void, if, at the time of their creation, their performance is impossible, or afterwards becomes so, by the act of God or the law. Walker v. Osgood, 53 Me. 432; Wood v. Edwards, 19 Johns. 205; Glover v. Taylor, 41 Ala. 124; People v. Bartlett, 3 Hill, 570; Story's Eq. sects. 1304, 1307; Brewster v. Kitchen, 1 Ld. Raym. 317; Coke's Com. 206 a; 2 Pars. on Contr. 672-674. The nonperformance of a condition subsequent, where its performance is a forbidden and unlawful act, does not work a forfeiture of the policy. There is no forfeiture, in the just sense of that term, where the law prohibits performance (Semmes v. Hartford Ins. Co., supra; Dean v. Nelson, 10 Wall. 169; Brewster v. Kitchen, supra; Tenlevey v. Hubbard, 3 B. & P. 291); and every intendment consistent with the contract will be made to prevent a forfeiture. McAllister v. ''N. E. Mut. Life Ins. Co.'', 101 Mass. 558; ''N. E. Mut. Life Ins. Co. v. Hasbrook'', 32 Ind. 447; Helme v. ''Phila. Life Ins. Co.'', 61 Penn. 107; Bliss on Life Ins., sects. 186, 190; Thompson v. ''St. Louis Mut. Life Ins. Co.'', 52 Mo. 469. On the cessation of hostilities, the former state of things revived, and rights under a valid contract were restored to their original vigor. United States v. Grossmeyer, 9 Wall. 72; Montgomery v. United States, 15 id. 395; United States v. Lapene, 17 id. 601.

MR. JUSTICE BRADLEY, after stating the case, delivered the opinion of the court.