Universal Life Insurance v. Whitehead

Insttbance. Paid-up policy. Condition precedent. Where a policy of life insurance provides that, upon default in the payment of any premium after three annual payments have been made, the policy-holder may exchange it for a paid-up term-policy, upon condition of delivering the original policy, duly receipted, to the insurance company within sixty days after the default in payment, such condition is a condition precedent to the right of the assured to demand the paid-up term-policy. And the fact that the insurance company is enjoined, during the sixty days after such default in payment, from issuing any policies is no excuse for the failure of the assured to deliver up the original policy, receipted, within that time.

Appeal from the Chancery Court of Hinds County. Hon. E. Gr. Peyton, Chancellor. On the 2d of September, 1873, P. F. Whitehead took out a policy of insurance on his life in the Universal Life Insurance Company for the sum of $3,000, the premiums to be paid quarter-annually, on the 2d of September, December, March,* and June of each year. The premiums were all paid up to and including that of June 2, 1877, making four full annual premiums. Soon thereafter, the attorney-general of the State of New York filed an information in the Supreme Court of that State representing that the superintendent of insurance of the State of New York had commuuicated to him that the Universal Life Insurance Company was insolvent, and praying for an order requiring said company to show cause why its business should not be closed, the company dissolved, a receiver appointed, and a distribution had. On the twenty-third day of August, 1877, said Supreme Court made an order restraining and enjoining said company from exercising any of its privileges and franchises, except receiving and paying moneys as therein authorized ; and from paying out or in an}' way transferring or delivering to any person any of the effects, moneys, or property of the company, except for salaries of employees and officers then due; and from collecting or receiving any debts or demands, except intei’est, agents’ balanees, and premiums, until the court should otherwise order. This restraining order was not modified uutil the 29th of October, 1878, when the injunction was released; and within the period between the 23d of August, 1877, and the 29th of October, 1878, no policies were issued by the company. On the 2d of September, Í877, P. F. Whitehead went to the agent of the Universal Life Insurance Company, and proposed to pay the premium which became due on that day; but he was advised by the agent to await the result of the litigation in New York, and see whether the company would resume business. Whitehead acted upon this advice, and did not pay the premium then due. One of the stipulations in the policy was as follows : “ That in case of default in any payment, after three full years’ payments have been made thereon, this policy may be exchanged for a paid-up term-policy of the same amount on the life of the person upon whom this policy is issued, for a term as. stated in the table given below, subject to the provisions and conditions following, to wit: that this policy, duly receipted, shall have been transmitted to and received by the said company within sixty days after such default; and that no condition of this policy shall have been violated. By the terms of the new policy, the full amount named therein, without any deduction whatever, shall become payable on the death of the person upon whose life this policy is issued, provided said death occur within the time named in the new policy.” In September, 1878, P. F. Whitehead died. Proof of his death was duly made according to the terms of the policy, and demand was made for the amouut of the insurance; which demand was refused. And on the 6th of December thereafter, Irene Whitehead, as administratrix of the estate of P. F. Whitehead, demanded of the insurance company a paid-up term-policy, as provided in the stipulation above recited; and this demand was also refused. Thereupon she filed the bill in this cause against the Universal Life Insurance Compan}', praying for a decree declaring her entitled to a paid-up term-policy,, directing an account to be taken, and requiring the defendant to pay her the amount found due on such policy. The defendant demuiTed to the bill. The demurrer was overruled, and the defendant appealed. The demurrer to the bill should, in my opinion, have been sustained. The bill is filed upon the theory that the policy upon the life of Peter F. Whitehead was forfeited for non-payment of the premium falling due September 2, 1877, and that the fact that the compare ivas at that time under an injunction, restraining it from the exercise of any of its corporate rights, relieved Whitehead from the necessity of surrendering the original policy, duly receipted, within sixty days after his default, according to the condition of the contract. We are willing to concede that the policy was forfeited September 2, 1877, but we deny that the injunction under which the company then was, rendered it unnecessary for Whitehead to receipt and surrender the original policy within sixty days after such default in order to get the benefit of the condition in said policy with reference to its surrender. Our construction of this condition of the policy is, that it simply gave to Whitehead-the privilege of making anew contract Avith the company, by which, upon the doing of certain things by him, the company would-insure his life for a certain term. Upon his failure to pay the premium which matured September 2, 1877, the only right remaining to him under and by virtue of his contract with the company was the privilege of complying with the condition' prescribed as necessary to entitle him to this paid-up term-policy. This he failed to do ; and Ave submit that when the sixty days after the forfeiture expired, every right under said policy was lost. He could at any time Avithin the sixty days have saved his right under the condition referred to, by doing what he Avas required to do ; and if at the time of the surrender, within the sixty days, the company was disabled from issuing the term-policy, his right to it would have been unimpaired, and when the disability was removed the company would have been bound to issue it. . Whitehead never intimated to the company that he wanted this paid-up term-policy, and but for his death the probability is that no demand for it would have ever been made. In the next place, we submit that, after a forfeiture, this paid-up policy could only be demanded and the original policy surrendered during the life of the insured. The very terms of the condition plainly import that the person upon whose life the term-policy is to be issued must be alive. The fact is, that it would simply be absurd to talk about issuing a life-policy for any period upon a dead man. See May on Ins., sects. 353, 355'. It must be borne in mind that the proceedings against the insurance company in New York were instituted by third parties, and not by tb,e insurance company itself, and that there has never been a time since Whitehead insured when the company did not have a perfect legal right to receive and receipt for all premiums as they matured. The case of In re Albert Insurance Company, L. R. 9 Eq. {33 Victoria) 705, relied upon by counsel for appellee, was a case in which the company was wound up upon its own petition, and at the time the premium matured the affairs of the company were in other hands; so that it was rendered impossible, by the act of the company, for the policy-holder to comply with his contract, and hence the court held that his rights were unaffected by his failure to do that which the company itself had made impossible. The decision of the chancellor is connect, and should be. affirmed. The case-under consideration bears a very strong.analogy to a certain class of cases arising under what may be. called conditional contracts, — that is, contracts which impose on the obligee the performance of certain things, or of a certain thing, before he can call upon the obligor to perform his part of the contract, — and in these cases it is always held that it is a sufficient excuse for the obligee not having-done what is required of him, to say that he has ascertained that the other party will not be able to do that which he has undertaken to-do. “It is a good defence to an action on a contract that the obligation to perform the act required was dependent upon some other thing, which the other party was to do and has failed to do. And if, before the one party has done anything, it is ascertained that the other party will not be able to do that which he has undertaken to do, this will be a sufficient-reason why the first party should do nothing.” 2 Pars, on Con. 675, and cases cited in note n. Now, apply this reasoning to the case of Whitehead, and we see that he has done everything that his policy required him to do : that he paid his premiums punctually up to the day that the company had, by its own act, disabled itself from performing the contract. He then, by the' advice of the agent of the company, ceased to pay premiums, and awaited the action of the courts, to see whether or not the company should be allowed to proceed with its business. He did not forward his policy, duly receipted, because the company could not give him the paid-up policy as stipulated in the original policy. It was restrained from exercising any of its corporate rights and franchises, and hence could not' issue a new policy. It could not even receive the policy, duly receipted, in the sense in which the policy stipulated, and the only thing left for the insured to do was exactly what he has done. To hold now that the appellee is not entitled to the relief prayed for would be to hold that the company could take advantage of its wrong, and enforce a forfeiture of the lights of the assured as a consequence of that wrong. In the case of In re Albert Insurance Company, L. It. 9 Eq. 703, it was held that where the insured had neglected or failed to pay his premium maturing after proceedings had been inaugurated by the company to wind up its business, the insured did not forfeit his rights under the policy ; because the company had, by its own act, rendered it absolutely impossible for the assured to perform the condition precedent imposed upon him. “ The non-payment of a premium falling due after an order issued, upon the petition of the insurers, to wind up the affairs of the insurance company, does not work a forfeiture of the rights of the insured against the company. This is, practically, a determination of the contract by them, and not by the polic}r-holder. He, therefore, need take no further steps to keep his policy alive.” May on Ins., sect. 358.