Russell v. Prudential Ins. Co. of America

• Decision Date: 06 October 1903
• Parties: RUSSELL v. PRUDENTIAL INS. CO. OF AMERICA.
• Court: New York Court of Appeals Court of Appeals

176 N.Y. 178

68 N.E. 252

RUSSELL

v.PRUDENTIAL INS. CO. OF AMERICA.

Court of Appeals of New York.

Oct. 6, 1903.

Appeal from Supreme Court, Appellate Division, Fourth Department.

Action by Amelia Russell against the Prudential Insurance Company of America. From a judgment of the Appellate Division (76 N. Y. Supp. 1029) affirming a judgment for plaintiff, defendant appeals. Reversed.

Haight, J., dissenting.

D. Raymond Cobb, for appellant.

Frederick A. Kuntzsch, for respondent.

BARTLETT, J.

The defendant is an insurance corporation organized in New Jersey, conducting two classes of insurance, one known as the ‘industrial’ and the other ‘ordinary’ insurance. Under the former plan small policies are issued, upon which weekly payments are paid; under the latter larger policies are issued, the premiums being payable annually, semiannually, or quarterly. The plaintiff sued to recover on a policy issued on the life of her deceased husband under the ‘ordinary’ plan. The defendant was represented in this state by one Charles H. Tennant as general agent at Syracuse. Tennant's district consisted of the counties of Onondaga, Oswego, and Cortland. It appears that at the time negotiations were opened for the policy sued on the insured held a policy for a like amount in the defendant company, which was duly paid. The complaint alleges that on the 30th day of December, 1899, the defendant issued the policy in suit; that on the 6th day of January, 1900, the defendant waived the payment of the first premium, and extended same for a period of thirty days; that on the 10th day of January-four days thereafter-the insured was killed by an explosion. The answer is a general denial, and also contained an affirmative defense to the effect that defendant had not insured the plaintiff's life, and that the policy alleged in the complaint never had an inception, the plaintiff not having paid the annual premium thereon, or complied with the preliminaries necessary to give it validity. The issues were tried at the Onondaga Trial Term, and the jury rendered a verdict in favor of the plaintiff. The Appellate Division affirmed the judgment entered upon the verdict. No prevailing opinion was handed down, but Justice Hiscock wrote a dissenting opinion, Justice Williams concurring.

The facts are as follows: On the 26th day of December, 1899, the plaintiff made a written application for the policy in suit. The material portions of that application read: ‘I hereby declare and warrant that all the statements and answers to the above questions, as well as those made or to be made to the company's medical examiner, are or shall be complete and true, and that they, together with this declaration, shall form the basis and become a part of the contract of insurance hereby applied for. And it is further agreed that the policy herein applied for shall be accepted subject to the conditions and agreements therein contained, and said policy shall not take effect until the same shall be issued and delivered by the said company and the first premium paid thereon in full,’ etc. This application was signed by the applicant, and duly witnessed. Upon receipt of the application the policy was sent to the general agent at Syracuse. On January 6, 1900, the general agent, in company with a subagent, went to the house of the deceased, and had an interview with him. Plaintiff swears, in substance, that after her husband had stated his inability to pay the first premium at that time, the general agent informed him that he might have 30 days additional time in which to pay the first premium, and that the insurance would go into immediate effect. The general agent and the subagent denied this conversation in toto, and say that deceased was distinctly informed that the policy, as stated therein, would not go into effect until the first premium was paid in full. The receipt for the first premium was thereupon signed by the general agent and delivered to the insured, and by him handed to the subagent, who was to hold it until the payment was actually made. This transaction as to the receipt is not disputed. The policy contained the following, among other, provisions: It is headed, ‘Regarding Agents.’ ‘No agent has power in behalf of the company to make or modify this or any contract of insurance, to extend time for paying the premium, to waive any forfeiture, or to bind the company by making any terms, or making or receiving any representation or information. These powers can be exercised only by the president, on of the vice-presidents or the secretary, and will not be delegated. Modifications, etc. No provision of this policy can be modified or waived in any case except by indorsement hereon signed by the president, one of the vice-presidents or the secretary.’ The general agent was appointed to his position under a written contract, which is in evidence, and contains this provision, among others: ‘4th. It is understood and agreed that said general agent has no authority on behalf of the Prudential Insurance Company of America, to make, alter or destroy any contract, to waive forfeitures, nor to receive any moneys due or to become due to said company, except on policies or renewal receipts signed by the President, Secretary or Manager of the Ordinary Branch and sent to him for collection.’

These facts constituted, substantially, the plaintiff's case, and defendant thereupon moved for a nonsuit on the ground that the plaintiff had failed to make out a cause of action. The court denied the motion. The defendant swore the general agent and subagent as witnesses, and each positively denied that the conversation testified to by plaintiff ever occurred between the general agent and the insured. At the close of the evidence the defendant again moved for a nonsuit and for a directed verdict, specifying, among others, the ground that upon the plaintiff's own evidence, and upon the uncontradicted evidence in the case, the general agent had no authority to make or modify the contract of insurance as testified by plaintiff. The learned trial judge, in denying this motion, said: ‘I deny the motion, and give you an exception. The one question I am going to submit to the jury is this: Whether, on January 6, 1900, Mr. Tennant, at the time he delivered the policy to Mr. Russell, agreed that the time for payment of the premium should be extended, as is claimed by plaintiff, and that the policy could, in the meantime, remain in force. That is the only question I am going to submit to the jury. If they find in favor of the plaintiff upon that state of facts, the verdict will be for plaintiff. If they find for defendant upon that proposition, the verdict will be for the defendant.’ To this limitation the defendant excepted. The trial judge, in one of his rulings, said: ‘I hold as matter of law that, if Mr. Tennant did what plaintiff claims he did on the 6th of January, then there can be a recovery in this case.’ To this ruling the defendant excepted. The defendant contended that, if there was any evidence that Tennant had apparent authority to put the policy in force and waive its express conditions, and any evidence of estoppel, the questions were for the jury, but the court adhered to its view that it was a question of law upon the contract of insurance.

The important question presented in this case therefore is, can an insurance company so draw the various papers constituting its contract of insurance as to prevent general and local agents from exercising powers to the detriment of the company, when the substantial provisions of that contract are brought home to the insured prior to the alleged delivery of the policy? This case may be regarded as a test one on the point, as it is apparent that the contract of insurance now before the court is as strong in favor of the company as language can make it.

In considering the law of this case, we are met at the outset by the contention of the respondent that the case of Stewart v. Union Mutual Life Ins. Co., 155 N. Y. 257, 49 N. E. 876,42 L. R. A. 147, is controlling. In that case it was held that the right of insurance companies to restrict their liabilites for acts of their agents by inserting clauses in the application and policy restricting the powers of agents must be recognized, unless by so doing their contracts would become tainted with fraud, and in such case it will be presumed that the waiver was intended, rather than fraud. In that case it was distinctly held that to have decided it in favor of the company would have worked a fraud upon the insured under the undisputed facts. The defendant in the case cited was a Maine corporation. It is true that the application and policy were quite similar to the case at bar. The application provided that ‘it will constitute no contract of insurance until a policy shall have first been issued and delivered by the company and the first premium thereon paid during the life of the party proposed for insurance in the same condition of health as described in the application.’ The policy provided that: ‘All premiums are due at the office of the company in the city of Portland, Maine, at the date named in the policy, but at the pleasure of the company suitable persons may be authorized to receive such payments at other places, but only on the production of the company's receipt thereof, signed by the president, secretary or assistant secretary. Any payments made to any person except in exchange for such receipt will not be recognized by the company, or be deemed by either party as a valid payment. No agent, nor any other person, except the president, or secretary, in writing has power to alter or change in any way the terms of this contract, or to waive forfeiture.’ One Crane was the manager of the defendant's business in the state of New York. The precise powers of the manager do not appear, and we are therefore not advised whether he was clothed with more ample authority than the...