Aetna Life Ins. Co. v. American Sur. Co.

• Decision Date: 21 March 1888
• Citation: 34 F. 291
• Parties: AETNA LIFE INS. CO. v. AMERICAN SURETY CO.
• Court: U.S. District Court — District of Connecticut

34 F. 291

AETNA LIFE INS. CO. v. AMERICAN SURETY CO.

United States Circuit Court, D. Connecticut.

March 21, 1888

Charles J. Cole and Charles E. Perkins, for plaintiff.

Theodore M. Maltbie and Wm. Hamersley, for defendant.

SHIPMAN J.

This is an action at law, in which, by written stipulation signed by the parties, a trial by jury was waived, and the cause was tried by the court. Upon such trial, the following facts were found to have been proved and to be true: James N. Patrick was, on April 2, 1883, appointed by plaintiff, a duly incorporated life insurance company, located in and having its principal office in Hartford, Conn., its general agent to procure applications for insurance for it in the state of Missouri, excepting one county; to receive premiums upon all policies issued upon such applications; to collect premiums upon renewals of the same, and to collect renewal premiums on existing policies issued by same, and to collect renewal premiums on existing policies issued by said company in said territory. He agreed to account to said company on or before the 10th day of each month, or at any other time when required, for all premiums received by him or his agents, and remit the amount of the same, less the charges to which he was entitled by the agreement, and to give a bond to the company for $3,000, with good and satisfactory surety, for the faithful performance of his duties, and to renew and increase the same as might be desired. It was further agreed that the contract could be terminated after one year from its date, by either party, upon not less than 60 days' notice to the other of such proposed termination. By the rules of the plaintiff which existed at the date of Patrick's appointment, and which continue to exist, all moneys which are received by an agent during each month are to be remitted, less charges, to the plaintiff with his account, on or before the 10th of the succeeding month. By the practice of the plaintiff, the requirement that the account should be sent as early as the 10th of each month is not insisted upon; but the requirement that all moneys received during the preceding month should be remitted or accounted for in the next month, is imperative. The plaintiff always sends during each month to each general agent renewal receipts for the premiums becoming due during the succeeding month upon policies of insurance to persons within his territory, and such renewal receipts are charged to the respective agents to whom they are sent. This charge is a matter of book-keeping, and does not imply that the agent is indebted to the company for the amount of the receipts which are sent him. By the rules of the plaintiff, if a renewal premium was not paid when due, the policy lapsed, but, if satisfactory evidence was furnished that the person whose life was insured was in good health, and was acceptable, the agent might receive the premium, and deliver the receipt within 60 days from the time when the premium became due, and the insurance would be therefore revived, but the evidence must include a health certificate to be signed by the beneficiary, which should be sent to the plaintiff with the account in which the premiums were reported. Agents were therefore authorized to retain renewal receipts in their hands for 60 days after the premiums mentioned therein were due, and then, if unpaid, were directed to return them to the plaintiff. In practice, agents do sometimes retain such receipts for a longer period without prompt objection or criticism by the company. In each account the amount of each collected premium, the number and date of the policy upon which it was paid, and the name of the person whose life is insured thereby, are given, together with the charges against such premium, so that each account contains an appropriation of the receipts by the agent, and, when accepted, a corresponding acknowledgement of the payments by the plaintiff.

On February 26, 1883, said Patrick gave to the plaintiff a bond with three persons as sureties in the sum of $3,000, for the payment to the company of all moneys which he should receive belonging to it for one year from April 1, 1883; and on April 1, 1884, gave another bond in said sum of $3,000, with three persons as sureties, for the faithful performance of his duties, so long as he should continue to be its general agent. Prior to June 15, 1884, said Patrick, at his own suggestion, made application to the defendant, an incorporation, duly incorporated for the purpose of executing contracts of indemnity for the conduct of employes, and located and having its principal office in the city of New York, for a bond to the plaintiff in the sum of $3,500. This application was made by Patrick, without the solicitation of the plaintiff, probably because he feared that his bondsmen would become liable, and he preferred that the loss should fall upon a corporation rather than upon his personal friends. The defendant sent the application to the plaintiff with a printed form of employe's certificate to be filled by an officer of the company, and to be returned to the defendant. The secretary of the plaintiff thereupon filled the blanks in the certificate, signed the same, and returned the application and the certificate to the defendant. The certificate, when completed, was as follows:

'I have read the foregoing declarations and answers made by J. N. Patrick, and believe them to be true. He has been in the employ of this company during one year, and, to the best of my knowledge, has always performed his duties in a faithful and satisfactory manner. His accounts rendered to this company were last examined on the 13th day of June, 1884, and found to be correct in every respect. He is not, to my knowledge, at present in arrears or default. I know of nothing in his habits or antecedents affecting his title to general confidence, nor why the bond he applies for should not be granted to him.

'Amount required $3,500. Bond to date from June 15, or June 16, 1884.

'Dated at Hartford, the 16th of June, 1884.

'J. L. ENGLISH, Secretary, on behalf of Aetna Life Insurance Company.'

The bond in suit was thereupon issued, the important portions of which are as follows:

'This bond was made the 15th day of June, 1884, between the American Surety Company, hereinafter called 'the company' of the first part, and J. N. Patrick of St. Louis, Missouri, hereinafter called the 'employe' of the second part, and Aetna Life Insurance Company, hereinafter called the 'employer' of the third part. Whereas, the employe has been appointed in the service of the employer, and has applied to the American Surety Company for the grant by them of this bond: Now, therefore, in consideration of the sum of thirty-five dollars, lawful money of the United States of America, in hand paid to the said company as a premium for the term of twelve months ending on the 15th day of June, 1885, at twelve o'clock noon, it is hereby declared and agreed that, subject to the provisions herein contained, the company shall within three months next after notice accompanied by satisfactory proof of a loss, as hereinafter mentioned, has been given to the company, make good and reimburse to the employer all and any pecuniary loss sustained by the employer of money, securities, or other personal property in the possession of the employe, or for the possession of which he is responsible, by any act of fraud or dishonesty on the part of said employe, in connection with the duties hereinbefore referred to, or the duties to which, in the employer's service, he may be subsequently appointed, and occurring during the continuance of this bond, and discovered during said continuance or within six months thereafter, or within six months from the death, or dismissal, or retirement of the employe from the service of said employer. * * * That if the employer shall at any time hold, concurrently with this bond, any other bond or guaranty of security from or on behalf of the employe, the employer shall be entitled, in the event of loss by default of the employe, to claim hereunder only such proportion of the loss as the amount covered by this bond bears to such other security; that the company shall be notified in writing, addressed to the president of the company, at its office in the city of New York, of any act of omission or of commission on the part of the employe which may involve a loss for which the company is responsible hereunder, as soon as practicable after the occurrence of such act shall have come to the knowledge of the employer.'

The premium was paid by Patrick, June 11, 1884. The bond was sent to him immediately after its date, and was delivered by him, when in Hartford, to the plaintiff, July 29, 1884, which accepted the same; and thereafter the second bond of said Patrick was not regarded as concurrent for defalcations which might occur after June 15, 1884. In the month of December, 1884, the plaintiff, upon an examination of the books of said Patrick in St. Louis, ascertained that he was indebted to it in the sum of $3,041.94 for premiums of insurance due to it before that time, collected by him and not paid over; that said default was occasioned by acts of fraud and dishonesty on the part of said Patrick, and that the pecuniary loss to the plaintiff resulting from said defalcations amounted to said sum of $3,041.94. Of these facts thus ascertained, and which I find were true, the defendant was promptly notified. No part of said loss has ever been paid to the plaintiff. This amount of $3,041.94 had all been collected since June 15, 1884, except J. F. Schwegman's premium collected in January, 1884, the net amount due the plaintiff being $80.10, and the following collected in May, 1884.

Two premiums

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