Aetna Life Ins. Co. v. Fallow

• Decision Date: 29 May 1903
• Citation: 77 S.W. 937,110 Tenn. 720
• Parties: ÆTNA LIFE INS. CO. v. FALLOW.
• Court: Tennessee Supreme Court

77 S.W. 937

110 Tenn. 720

ÆTNA LIFE INS. CO. v. FALLOW.

Supreme Court of Tennessee.

May 29, 1903

Appeal from Circuit Court, Shelby County; J. S. Galloway, Judge.

Action by C.J. Fallow against the Ætna Life Insurance Company. From a judgment in favor of plaintiff, defendant appeals. Affirmed.

Malone & Malone and W. B. Glisson, for appellant.

Thos M. Scruggs and M. G. Evans, for appellee.

NEIL J.

This suit was brought below to recover upon an accident policy. It resulted there in favor of the plaintiff, and the defendant has appealed and assigned errors.

The facts necessary to be stated to raise the legal questions to be considered herein are as follows:

During the year 1895 the defendant in error obtained from the plaintiff in error an accident policy, which was continued in force by the payment of quarterly premiums, without question down to December 18, 1901. At first, and during several quarters, the defendant in error went to the office of the plaintiff in error's general agent in the city of Memphis, Tenn., Harris, and paid the premiums promptly when due; but on several occasions, not finding the agent or any of his clerks in the office, he complained of this matter to Mr. Harris, calling attention to the inconvenience occasioned thereby. In response the agent instructed Mr. Fallow to retain the premiums until he himself or some of his clerks should call for them. Thereafter the custom of business prevailing between the parties was that the assured waited for the agent to collect the premium from him, and the agent by himself or his clerks, did so for a series of years, continuing up to the time the present litigation began. Very often the agent of his clerk failed to collect the premium until it had been overdue eight or ten days. The assured relied implicitly upon this habit of business, and always reserved the premiums until called upon by the agent or some of his clerks. The last premium before the injury occurred fell due upon the 18th of December, 1901, but was not then paid, the agent of the company not having called for it or sent for it. The injury occurred on December 23, 1901. On the 26th of the same month the company's agent sent Dr. Hall to inspect the injury and to examine the assured upon the subject. The assured stated the facts fully to the doctor. On the next day the agent directed the assured to send in his formal notice of loss, and to send in his "claim blank" when he should be fully recovered.

On the 2d day of January, 1902, some one of the agent's employés or clerks in the office whose business it was to collect premiums collected the premium from the assured and credited it to the company upon the agent's books, and deposited it in bank to the agent's credit, as agent, and it was forwarded by the agent to the company, along with other moneys belonging to it in his hands, and is still retained by it, and no offer has ever been made to return it to the assured.

This premium was not credited upon the books of the agent until January 6, 1902, and the agent had no personal knowledge of the fact that it had been collected until about the last of January or the first of February, 1902. He could, however, by examining his books, have ascertained at any time, subsequent to December 18th, that the premium had not been paid on that day, and by a like examination he could have learned that it had been credited on the 6th of January. It was not his custom, however, to attend to the details of the business. This was committed by him to the clerks in his office, whom he appointed, and from whom he took bonds for the company.

He was at the head of the office, and was the general agent of the company for its accident department, covering two states--Tennessee and another. Among other things, it was his duty to receive applications for insurance, personally or through his clerks, to countersign policies in blank, and place them in the hands of his policy clerks for filling up and issuance, and to continue policies in force from quarter to quarter by accepting premiums therefor, personally or through his clerks.

Under the custom of business prevailing in the office of Mr. Harris, when premiums were paid after they were due policies were treated as renewed for three months from the date of the maturity of the premium. However, if the patrons of the company desired, after a premium day had passed, to take out a new policy rather than to renew the old one, they were allowed to do so, and in this case the new policy took effect from the date of its issuance.

The following conditions appear upon the back of the policy sued on, and are referred to in its face and made parts of it, viz.:

"(1) There shall be no insurance under this policy unless the premium is actually paid prior to any accident by reason of which claim is made."

"(9) No agent has authority to waive any condition of this policy, and no waiver will be recognized, unless in writing, signed by either the president, vice president, secretary, or assistant secretary of the company."

In respect of the foregoing facts his honor charged the jury as follows:

"If you find from the evidence in this case that the plaintiff was insured in the Ætna Life Insurance Company, and had an accident policy in the company that had been in operation for several years, and you further find that in his dealings with the defendant company it was the custom and usage, as between them, that the agent of the defendant's company would call at his place of business and collect the premiums, and that manner of payment and carrying on business had renewed the policy quarterly for several years; and you further find that the premium was not paid on the 18th day of December, a few days before the accident; and you further find that the plaintiff was injured on the 23d day of December, 1901, and suffered injuries whereby

he would be entitled to the accident benefit according to his policy; and you further find that a day or so after the party was injured Dr. Hall, as the agent and representative of the Ætna Life Insurance Company, was sent to examine the condition of the plaintiff, and did so examine the condition of the plaintiff, and the plaintiff disclosed all the facts and circumstances to Dr. Hall; and you further find that Dr. Hall reported these facts to the home office here (Memphis); and you further find that the plaintiff paid--say on the 2d day of January or the 6th day of January after the accident--the home office here or the agent of the company the premiums that would have been due on the 18th day of December, 1901, and that the agent accepted that money and passed it to the treasurer of the company, and issued a regular receipt for the money so paid,--then the court charges you that that would be a waiver of the demand of the premium in advance, and would be an acceptance of the money, and would continue the policy of insurance from the 18th day of December, 1901."

The defendant below asked the court to give in charge to the jury the following instruction, which was refused, viz.:

"The plaintiff cannot recover in this case unless he shows that he actually paid the premium due on the 18th day of December, 1901, prior to the accident in which he was injured, and no agent of the company by the terms of the policy has any authority to waive this condition of the policy requiring actual payment prior to the injury." In other requests his honor was asked, in substance, to charge that the company would not be bound by any collection made by the clerks in the office of the general agent, which request he likewise refused.

Error is assigned upon the action of his honor in charging the jury as he did charge them, and in refusing to give the instructions asked by the plaintiff in error.

The contention of the plaintiff in error, stated in the briefest way, is that it was not liable, for the reason that the premium had not been paid when the accident occurred, and that this fact was in no way qualified by any of the special facts which we have recited as bearing upon the question.

It is, of course, true that a provision for the release of an insurance company from liability for nonpayment of premiums is a material element of the contract, and that on violation of such a provision, unless there has been a waiver thereof, neither a court of law nor of equity will enforce the contract. Dale v. Continental Ins. Co., 95 Tenn. 38, 31 S.W. 266; Insurance Co. v. Statham, 93 U.S. 24, 23 L.Ed. 789; Klein v. Insurance Co., 104 U.S. 88, 26 L.Ed. 662.

But the law is equally well settled that insurers are estopped to insist upon forfeiture for nonpayment of premiums when due, when, by any course of action, representation, or dealings, the assured has been led to believe that the forfeiture will not be insisted upon; or, as said in New York Life Ins. Co. v. Eggleston: "Any agreement, declaration, or course of action on the part of an insurance company, which leads a party honestly to believe that by conformity thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part, will and ought to estop the company from insisting upon the forfeiture, though it might be claimed under the express letter of the contract. The company is thereby estopped from enforcing the forfeiture." Insurance Co. v. Eggleston, 96 U.S. 572, 24 L.Ed. 841. See, also, Ph nix Insurance Co. v. Doster, 106 U.S. 30, 1 S.Ct. 18, 27 L.Ed. 65; Hartford L. & A. Ins. Co. v. Unsell, 144 U.S. 439, 12 S.Ct. 671, 36 L.Ed. 496; Ins. Co. v. Hyde, 101 Tenn. 396, 403, 48 S.W. 968.

It is held, however, in the following cases that, where the policy on its face denies the right of the company's agent to waive forfeitures, there can be no waiver by any act of the agent,...