Rathbun v. New York Life Ins. Company

• Decision Date: 30 June 1916
• Citation: 30 Idaho 34,165 P. 997
• Parties: JULIA M. RATHBUN and ERASTUS A. RATHBUN, Her Husband, Appellants, v. NEW YORK LIFE INSURANCE COMPANY, Respondent
• Court: Idaho Supreme Court

165 P. 997

30 Idaho 34

JULIA M. RATHBUN and ERASTUS A. RATHBUN, Her Husband, Appellants, v. NEW YORK LIFE INSURANCE COMPANY, Respondent

Supreme Court of Idaho

June 30, 1916

LIFE INSURANCE-CONSTRUCTION OF CONTRACT BETWEEN PARTIES.

1. Where R., desiring life insurance, applied in writing to the insurance company for such insurance, and agreed that the policy of insurance applied for should not take effect unless the first premium was paid and the policy was delivered to and received by him during his lifetime and while he was in good health, and after applying for the policy and before the delivery thereof R. was stricken with appendicitis, from which he died five days after he received the policy, said policy having been sent to him by mail from the insurance company's branch office in Spokane, Washington, in total ignorance of the changed condition of R.'s health, and R.'s friends thereafter paid the first premium, which the company promptly returned when it discovered the fact of R.'s fatal illness, held, that the policy did not take effect by reason of the fact that R. was not in good health at the time it was received by him.

[As to what is good health within the meaning of the law of life insurance, see note in 10 Am.St. 242]

APPEAL from the District Court of the Second Judicial District, for Latah County. Hon. Edgar C. Steele, Judge.

Action to recover on a life insurance policy. Judgment for defendant. Affirmed.

Judgment affirmed, with costs in favor of respondent.

A. L Morgan, for Appellants.

"Any agreement, declaration, or cause of action on the part of an insurance company which leads a party insured honestly to believe that by conforming thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part will estop the company from insisting upon the forfeiture though it might be claimed under the expressed letter of the contract." (New York Life Ins. Co. v. Eggleston, 96 U.S. 572, 24 L.Ed. 841.)

There is nothing in the contract, either in the application or in the policy itself, which required anyone to notify the New York Life Insurance Company of Rathbun's physical condition at the time such policy was ready for delivery. It was the company's right to refuse to deliver. It therefore became its duty to ascertain Rathbun's condition before exercising its option. (Grier v. Mutual Life Ins. Co. of New York, 132 N.C. 542, 44 S.E. 28.)

It is a thoroughly settled rule in the construction of a policy of insurance, which is reasonably susceptible of two interpretations, that that meaning will be given to it which is more favorable to the insured. (Moore v. Aetna Life Ins. Co., 75 Ore. 47, Ann. Cas. 1917B, 1005, 146 P. 151, L. R. A. 1915D, 264; Hoffman v. Aetna Ins. Co., 32 N.Y. 405, 413, 88 Am. Dec. 337; Darrow v. Family Fund Society, 116 N.Y. 537, 15 Am. St. 430, 22 N.E. 1093, 6 L. R. A. 495; American Surety Co. v. Pauly, 170 U.S. 133, 18 S.Ct. 552; 42 L.Ed. 977; Sneck v. Travelers' Ins. Co., 88 Hun, 94, 34 N.Y.S. 545; Union Accident Co. v. Willis, 44 Okla. 578, 145 P. 812, L. R. A. 1915D, 358.)

An insurance company cannot take an applicant's money by way of premium without giving in return insurance for all of the period covered by that premium. (Anderson v. Mutual Life Ins. Co., 164 Cal. 712, Ann. Cas. 1914B, 903, 130 P. 726; Gordon v. United States Casualty Co. (Tenn. Ch.), 54 S.W. 98; Unterharnscheidt v. Missouri State Life Ins. Co., 160 Iowa 223, 138 N.W. 459, 45 L. R. A., N. S., 743.)

Clency St. Clair, J. H. Forney and Frank L. Moore, for Respondent.

The negotiations between parties making a life insurance contract are the same in the eye of the law as are the negotiations between parties making a contract for any other purpose. (Stephens v. Capital Ins. Co., 87 Iowa 283, 54 N.W. 139; Weidenaar v. New York Life Ins. Co., 36 Mont. 592, 122 Am. St. 330, 94 P. 1; Quinlan v. Providence- Wash. Ins. Co., 133 N.Y. 356, 28 Am. St. 645, 31 N.E. 31; Conway v. Phoenix Mut. Life Ins. Co., 140 N.Y. 79, 35 N.E. 420; Dwight v. Germania Life Ins. Co., 103 N.Y. 341, 57 Am. Rep. 729, 8 N.E. 654; Liverpool & L. & G. Ins. Co. v. Kearney, 180 U.S. 134, 21 S.Ct. 326, 45 L.Ed. 460; Wells Fargo & Co. v. Pacific Ins. Co., 44 Cal. 397.)

The merits of the case, therefore, must be determined according to the established rules of the law of contracts. (Iowa Life Ins. Co. v. Lewis, 187 U.S. 335, 23 S.Ct. 126, 47 L.Ed. 204; Behling v. Northwestern Nat. Life Ins. Co., 117 Wis. 24, 93 N.W. 800.)

No insurance took effect because the first premium was not paid nor the policy delivered to and received by the applicant during his lifetime and good health. (Nyman v. Manufacturers' & M. Life Assn., 262 Ill. 300, 104 N.E. 653; Gallop v. Royal Neighbors of America, 167 Mo.App. 85, 150 S.W. 1118; Reese v. Fidelity Mut. Life Assn., 111 Ga. 482, 36 S.E. 637; Metropolitan Life Ins. Co. v. Willis, 37 Ind.App. 48, 76 N.E. 560.)

SULLIVAN, C. J., FLYNN, District Judge. Budge, C. J., and Rice, J., concur. Morgan, J., did not sit at the hearing and did not take any part in the decision of this case.

OPINION

SULLIVAN, C. J.

This is an action brought by the mother and father to recover on a life insurance policy issued to their son, Ernest C. Rathbun. A demurrer to the complaint was overruled and answer filed by the Insurance Company denying its liability. Thereupon the issues were tried to the court without a jury and judgment was entered against the plaintiffs, from which this appeal was taken.

The action of the court in overruling plaintiffs' demurrer to the defendant's answer and in overruling plaintiffs' objection to the introduction of any testimony under the allegations of the answer, and in making findings of fact and conclusions of law and entering judgment in favor of the defendant, is assigned as error.

The following facts appear from the record:

On the 9th day of April, 1913, Ernest C. Rathbun, son of the plaintiffs, made application to the defendant, New York Life Insurance Company, for a $ 2,000 insurance policy upon his life, in which policy the plaintiff Julia M. Rathbun was made the beneficiary. Thereafter on April 17, 1913, the Insurance Company issued the policy and the policy recites that the insurance is granted in consideration of the payment of the first premium amounting to $ 41.68, and the policy contains an acknowledgment of the receipt of such payment. The policy also contains the following, among other, recitations: "After its delivery to and receipt by the insured, the policy takes effect as of the 9th day of April, 1913, that being the date upon which the application for such policy was made."

It is alleged in the complaint that subsequent to the execution of said contract and prior to the 10th day of May, 1913, the policy was delivered to said insured and that during the month of June, 1913, the beneficiary made due proof of the death of Ernest C. Rathbun in accordance with the terms of said policy, and demanded from said insurance company the payment of the sum of $ 2,000 as provided in such policy which payment said company refused, one of the grounds for such refusal being, as appears from the answer, that said policy was issued by the company upon application and that the applicant paid at the date of application $ 5 in cash and executed and delivered to the agent who took said application his promissory note for the balance of the amount due for the first premium, and that the policy was forwarded by registered mail addressed to the insured from the company's branch office in Spokane, Washington, and the same was receipted for by one C. L. Williamson, and on the 5th day of May was by said Williamson delivered to Ernest C. Rathbun. On the 28th day of April, 1913, the applicant became ill with appendicitis and died on the 10th day of May, 1913. It is further alleged that the application for said policy contains, among other things, the following...