New York Life Ins Co v. Viglas

• Decision Date: 30 March 1936
• Docket Number: No. 602,602
• Citation: 56 S.Ct. 615,297 U.S. 672,80 L.Ed. 971
• Parties: NEW YORK LIFE INS. CO. v. VIGLAS
• Court: U.S. Supreme Court

297 U.S. 672

56 S.Ct. 615

80 L.Ed. 971

NEW YORK LIFE INS. CO.

v VIGLAS.

No. 602.

Argued March 6, 1936.

Decided March 30, 1936.

Messrs. F. H. Nash, of Boston, Mass., and Louis H. Cooke, of New York City, for petitioner.

Mr. Harris J. Booras, of Boston, Mass., for respondent.

Mr. Justice CARDOZO delivered the opinion of the Court.

The case, which is here upon demurrer to a declaration, depends for its solution upon the nature of the breach of contract imputed to the defendant, the petitioner in this court, and upon the measure of the damages recoverable therefor.

From the declaration we learn the following: Respondent received from petitioner on February 7, 1927, a policy of insurance for $2,000 payable at his death. The consideration was a semiannual premium of $38 payable during his life, but for not more than twenty years. If, however, the insured became totally and permanently disabled before the age of sixty, the company, petitioner, was to pay him a monthly income at an agreed rate and was to waive the payment of any premium that would otherwise be due. Disability was to be considered total when the insured was so affected by bodily injury or disease as to be wholly prevented from performing any work, from following any occupation, or from engaging in any business for remuneration or profit. In particular, 'the total and irrecoverable loss of the sight of both eyes or of the use of both hands or of both feet or of one hand and one foot' was to constitute 'total disability for life.' Before making any income payment or waiving any premium, the company might demand due proof of the continuance of total disability, not oftener, however, than once a year after such disability had continued for two full years. Upon failure to furnish such proof, or if the insured performed any work, or followed any occupation, or engaged in any business for remuneration or profit, 'no further income payments' were to be made, 'nor premiums waived.' If, at the time of a default in the payment of a premium, the insured was disabled within the definition of the policy, the insurance was to be reinstated, provided, however, that within six months after the default proofs of such disability were received by the insurer. In any event, reinstatement would be permitted at any time within five years upon evidence of insurability satisfactory to the insurer and upon payment of overdue premiums with interest at 5 per cent. Finally, the insured, though in default, was to have the benefit of surrender values in the form either of cash or of tem- porary insurance or of participating paid-up insurance according to his choice.

On September 11, 1931, the insured, according to the declaration, lost 'the total and irrecoverable use' of one hand and one foot, and became totally and permanently disabled. Upon proof of his condition the company paid him the monthly benefits called for by the policy from October 11, 1931, to July 11, 1933, and during the same period waived the payment of semiannual premiums. It refused to make a monthly payment in August, 1933, and refused the same month to waive a semiannual premium, 'asserting to the plaintiff as its ground for such refusal that since it appeared to the defendant that for some time past the plaintiff had not been continuously totally disabled within the meaning of the disability benefit provision of the policy, the defendant would make no further monthly disability payments, and that the premiums due on and after August 7, 1933, would be payable in conformity with the terms of the contract.' Later, upon the expiration of a term of grace, 'the defendant, on or about September 19, 1933, declared the policy as lapsed upon its records.' Plaintiff has elected to treat the defendant's acts 'as a repudiation and denunciation of the entire contract,' relieving him on his part from any further obligation.

There are two counts to his declaration. In the first, after stating the foregoing facts, he claims the cash surrender value that the policy will have in February, 1969, if he lives until that time, the date being chosen with reference to his expectancy of life under the American Table of Mortality. This value, $1,408, is less than the amount necessary to give jurisdiction in accordance with the Judicial Code. Judicial Code, § 24, 28 U.S.C. § 41, 28 U.S.C.A. § 41. In the second count, after stating the same facts, he claims for damages the total benefits that will be payable to him during the same period of expectancy, if he lives that long and his disability continues. The damages so computed are $15,900. No deduction is made on account of future premiums, for by hypothesis the disability will continue during life. The defendant demurred to both counts, stating in the demurrer that the declaration sets forth a cause of action for the benefits and premiums accruing prior to the date of the writ, and for nothing in excess thereof. In that view the recovery will be only $98, which is less than the jurisdictional amount. The District Court sustained the demurrer, and gave judgment for the defendant. The Circuit Court of Appeals for the First Circuit reversed. 78 F.(2d) 829. A writ of certiorari issued to resolve a claim of conflict with a decision of this court. 296 U.S. 571, 56 S.Ct. 370, 80 L.Ed. 403.

Upon the showing made in the complaint there was neither a repudiation of the policy nor such a breach of its provisions as to make conditional and future benefits the measure of recovery.

Repudiation there was none as the term is known to the law. Petitioner did not disclaim the intention or the duty to shape its conduct in accordance with the provisions of the contract. Far from repudiating those provisions, it appealed to their authority and endeavored to apply them. If the insured was still disabled, monthly benefits were payable, and there should have been a waiver of the premium. If he had recovered the use of hand or foot and was not otherwise disabled, his right to benefits had ceased, and the payment of the premium was again a contractual condition. There is nothing to show that the insurer was not acting in good faith in giving notice of its contention that the disability was over. Mobley v. New York Life Insurance Co., 295 U.S. 632, 638, 55 S.Ct. 876, 79 L.Ed. 1621, 99 A.L.R. 1166. If it made a mistake, there was a breach of a provision of the policy with liability for any damages appropriate thereto. We do not pause at the moment to fix the proper measure. Enough in this connection that at that stage of the transaction there had been no renunciation or abandonment of the contract as a whole. Mobley v. New York Life Insurance Co., supra; Dingley v. Oler, 117 U.S. 490, 503, 6 S.Ct. 850, 29 L.Ed. 984; Roehm v. Horst, 178 U.S. 1, 14, 15, 20 S.Ct. 780, 44 L.Ed. 953; Pierce v. Tennessee Coal, Iron & R. Co., 173 U.S. 1, 3, 11, 19 S.Ct. 335, 43 L.Ed. 591.

Renunciation or abandonment, if not effected at that stage, became consummate in the plaintiff's view at the end of the period of grace when the company declared the policy 'lapsed upon its records.' Throughout the plaintiff's argument the declaration of a lapse is treated as equivalent to a declaration that the contract is a nullity. But the two are widely different under such a policy as this.¹ The policy survived for many purposes as an enforceable obligation, though default in the payment of premiums had brought about a change of rights and liabil ties. The insurer was still subject to a duty to give the insured the benefit of the stipulated surrender privileges, cash or new insurance. It was still subject to a duty upon proof within six months that the disability continued to reinstate the policy as if no default had occurred. None of these duties was renounced. None of them was questioned. Indeed, there is lacking an allegation that notice of the entry on the records was given to the plaintiff, or that what was recorded amounted to more than a private memorandum. In that respect the case is weaker for the plaintiff than Mobley v. New York Life Insurance Co., supra, decided at the last term. There also the controversy turned upon the rejection of a claim of disability under a like contract of insurance. The insurer took the ground that the disability had ended and that premiums would not be waived. Upon default it gave notice to the insured that the policy had lapsed. We held that the breach fell short of an unconditional abandonment. On the other hand, following the notice and before the service of a summons, there were acts and declarations pointing to an understanding between insurer and insured that the lapse was not definitive but was open to recall. These differences are such as to take from that decision the quality of a controlling precedent, though the analogy it offers is cogent and persuasive. Viewing the case before us independently, we hold that upon the facts declared in the complaint the insurer did not repudiate the obligation of the contract, but did commit a breach for which it is answerable in damages.

What the damages would be if there had been complete repudiation we do not now decide. Cf. Kelly v. Security Mutual Life Insurance Co., 186 N.Y. 16, 78 N.E. 584, 9 Ann.Cas. 661; O'Neill v. Supreme Council, A.L. of H., 70 N.J.Law, 410, 415, 57 A. 463, 1 Ann.Cas. 422. For breach short of repudiation or an intentional abandonment equivalent thereto, the damages under such a policy as this do not exceed the benefits in default at the commencement of the suit. Full justice will thus be done alike to insured and to insurer. The insured, if he proves that the benefits are due, will have a judgment effective to reinstate his policy. The insurer will be saved from a heavy, perhaps a crushing, liability as the consequence of a claim of right not charged to have been made as a disingenuous pretense. Cf. Armstrong v. Ross, 61 W.Va. 38, 48, 55 S.E. 895. So the courts have held with an impressive concord of opinion. ² Federal...