Pierce v. Massachusetts Acc. Co.

• Citation: 22 N.E.2d 78,303 Mass. 506
• Parties: PIERCE v. MASSACHUSETTS ACC. CO.
• Decision Date: 07 July 1939
• Court: United States State Supreme Judicial Court of Massachusetts

303 Mass. 506

22 N.E.2d 78

PIERCE

v.MASSACHUSETTS ACC. CO.

Supreme Judicial Court of Massachusetts, Suffolk.

July 7, 1939.

Suit by Curtis W. Pierce against the Massachusetts Accident Company to reinstate a policy of disability insurance. From a decree dismissing the bill, plaintiff appeals.

Reversed and decree for plaintiff.Appeal from Superior Court, Suffolk County; Kirk, Judge.

J. B. Sly, of Boston, for appellant.

F. X. Hurley, of Boston, for appellee.

LUMMUS, Justice.

The plaintiff, a resident of New Jersey, on August 7, 1925, at the age of forty-five years, took out a policy of disability insurance in the defendant company, under which he became entitled to $100 a week during any period of ‘disability from accidental injury or disease which necessarily, wholly and continuously disables him from the performance of any and every kind of duty pertaining to his occupation or business,’ and to further but smaller payments for any succeeding partial disability. The policy was written for one year beginning on August 7, 1925, for a premium of $289.20 payable and paid in advance. But it was provided that ‘the insured shall have the right to renew this policy from year to year upon the payment of the premium on or before the anniversary date.’ No right in the defendant to terminate the insurance was reserved. There was no provision for notice by the defendant to the plaintiff of the day upon which the premium must be paid for the annual renewal of the policy. But in practice the defendant did give the plaintiff seasonable notice of the approach of that day, in every year beginning with 1926 and ending with 1936, and the plaintiff paid the premium in each of those years on or before the appointed day, thus keeping his policy renewed and alive.

The plaintiff had become accustomed to pay on receipt of the notices, and did not charge his mind with the day. He received no such notice in 1937, and therefore failed to pay the premium on or before August 7, 1937. On August 21, 1937, as soon as he discovered his error, he wrote the defendant, asking for a notice in order that he might pay. The defendant replied that the policy had terminated and would not be reinstated. Later a tender of payment was refused. If material, the plaintiff has remained in good health.

The reason why no notice was sent the plaintiff was that the defendant wished to procure lapses or failures to renew on the part of New Jersey policy-holders in cases of policies like the one the plaintiff had. That was a form of policy especially favorable to the insured. The plaintiff cannot obtain another policy like it. The president of the defendant testified that he told the plaintiff that ‘the salvation of our company, which is fifty-four years of age, was that these policies should not be renewed if they lapsed and that we were making no exceptions;’ that that form of policy was unprofitable to the defendant; that ‘to continue with the amount of noncancellable business would prove disastrous to the company and to its numerous policy holders; that the existence of the company depended upon obtaining as many lapses as possible.’

Upon the bill, filed October 11, 1937, to reinstate the policy, a decree was entered dismissing the bill without costs. The plaintiff appealed.

It is true that ordinarily prompt payment of the premium is necessary in order to keep alive an insurance policy like this one. ‘Prompt payment and regular interest constitute the life and soul of the life insurance business,’ and the same is true of disability insurance. Thompson v. Insurance Co., 104 U.S. 252, 258, 26 L.Ed. 765;Kukuruza v. John Hancock Mutual Life Ins. Co., 276 Mass. 146, 176 N.E. 788;Sherman v. Metropolitan Life Ins. Co., Mass., 8 N.E.2d 892. The custom of insurance companies to give notice of approaching days for the payment of premiums does not bind them contractually to continue to do so, and does not alter the duty of the insured to pay, whether he gets notice or not. Thompson v. Insurance Co., 104 U.S. 252, 258, 259, 26 L.Ed. 765;Kukuruza v. John Hancock Mutual Life Ins. Co., 276 Mass. 146, 150, 176 N.E. 788.

Ordinarily a court of equity will not relieve against the forfeiture of a policy for non-payment of premium. ‘The companies must have some efficient means of enforcing punctuality. Hence their contracts usually provide for the forfeiture of the policy upon default of prompt payment of the premiums. If they are not allowed to enforce this forfeiture they are deprived of the means which they have reserved by their contract of compelling the parties insured to meet their engagements. * * * To hold the company to its promise to pay the insurance, notwithstanding the default of the assured in making punctual payment of the premiums, is to destroy the very substance of the contract.’ Klein v. Insurance Co., 104 U.S. 88, 91, 26 L.Ed. 662. If in insurance cases the equitable jurisdiction to relieve against forfeitures were commonly exercised, policy holders would be encouraged to take the chance of not paying the premium promptly, with the intention of never paying unless a loss should occur, and of relying upon that jurisdiction to help them if a loss should occur. It would involve insurance companies in much costly litigation, and in great uncertainty as to their obligations.

The present case is quite different from the ordinary case. It is not a case where an insurer is disappointed by not receiving promptly a premium that is part of its life blood, and rightly insists upon the natural consequence of the default. Instead, the insurer would have been disappointed had the default not occurred, for it had plotted to obtain the default by omitting the customary notice upon which, as it correctly judged, the plaintiff had come to rely. Its notice was the desire to escape from its valid contract to insure the plaintiff by successive renewals against...