Rosenbloom v. New York Life Ins. Co.

• Decision Date: 18 September 1947
• Docket Number: No. 13394.,13394.
• Parties: ROSENBLOOM et al. v. NEW YORK LIFE INS. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

163 F.2d 1 (1947)

ROSENBLOOM et al. v. NEW YORK LIFE INS. CO.

No. 13394.

Circuit Court of Appeals, Eighth Circuit.

August 21, 1947.

Rehearing Denied September 18, 1947.

Solbert M. Wasserstrom, of Kansas City, Mo. (Phillip L. Levi, of Kansas City, Mo., on the brief), for appellants.

Richard S. Righter, of Kansas City, Mo. (Howard A. Crawford, of Kansas City, Mo., Ferdinand H. Pease, of New York City, and Lathrop, Crane, Sawyer, Woodson & Righter, of Kansas City, Mo., on the brief), for appellee.

Before STONE, THOMAS, and JOHNSEN, Circuit Judges.

STONE, Circuit Judge.

This is an action in two counts. In the first count, specific performance of an annuity contract issued by appellee to Jay R. Rosenbloom is sought to compel issuance of a policy of insurance on the ordinary life plan on the life of Rosenbloom, in accordance with an option in the annuity contract. The second count is to collect death benefits under the life policy, with damages for vexatious delay and for attorney fees.

Both parties filed motions for summary judgment (Rule 56, Federal Rules Civil Procedure, 28 U.S.C.A. following section 723c) with supporting affidavits. Two depositions were added later. The trial court found that no essential fact was in dispute. Judgment was entered denying the motion of plaintiffs, sustaining the motion of defendant, and dismissing the action at the costs of plaintiffs. From that judgment, plaintiffs appeal.

The issues here have to do with the refusal of appellee to issue the ordinary life policy, on request, unless such policy included appellee's then current "War and aviation clause." Broadly, this clause restricted recovery for death from war or aviation causes to the return of the premiums with compound interest and certain dividends, less any indebtedness to the appellee. Such restricted amount would be much less than recovery under an ordinary life policy. More particularly, the issues are concerned with four matters: (1) was appellee within its rights in refusing conversion to an ordinary life policy unless the restrictive "war and aviation" provision was included therein; (2) if appellee had no such rights, were the conditions precedent to such coversion complied with by appellants or waived by appellee; (3) was appellants' offer to perform made to appellee's soliciting agent binding on appellee; and (4) did appellants abandon their rights to such conversion?

1. Rights of appellee as to conversion.

The rights of the parties as to conversion of the annuity into an ordinary life policy are to be determined by the contract for the annuity which is the sole source of such rights. This issue is purely one of construction of that contract.

The pertinent portions of the annuity contract are as follows:

"Privilege of Change to Other Plans. — At any time before default in payment of premium, provided the Annuitant is then at least 10 years of age but less than 55 years of age and prior to the commencement of Annuity payments hereunder, the Annuitant may exchange this Policy for a Policy on the Ordinary Life, Limited Payment Life or Endowment plan of Insurance, issued by the Company at the time this Policy takes effect, at a total premium as high as that charged under this Policy, but not more than twenty percent in excess thereof, upon presentation at the Home Office of evidence of insurability satisfactory to the Company. The exchange shall be effective upon surrender of this Policy and the payment to the Company of the difference in premiums with compound interest at the rate of six per cent per annum from the due date of each premium to the date of exchange; allowance will be made for any larger dividends on the new plan. The new Policy will take effect as of the effective date of this Policy and the premium will be at the rate which would have been charged if this Policy had been issued originally on the new plan."

"Residence, Travel and Occupation. — This Policy is free of conditions as to residence, travel, occupation, and military or naval service."

The petition alleges and the answer admits that policies issued by appellee on the ordinary life plan, at the time this annuity took effect (December 20, 1938), contained the provision following:

"Residence, Travel and Occupation. — This policy is free of conditions as to residence, travel, occupation, and military or naval service."

Since the annuity policy gave the annuitant the privilege of changing to "a Policy on the Ordinary Life * * * plan of insurance, issued by the Company at the time this annuity policy takes effect;" and since the Ordinary Life policy issued by the Company, at the time this annuity policy took effect, expressly stated that it was "free of conditions as to * * * military or naval service," it is clear that the right of this annuitant was to demand and the obligation of the Company was to deliver an Ordinary Life Policy free of such conditions. This is emphasized by the annuity policy provisions that the new policy is to take effect as of the effective date of the annuity policy and that premiums on the new policy shall be calculated from the effective date of the annuity policy.

As to this issue, the contention of the Company is that the provision in the annuity policy that a conversion might be had "upon presentation at the Home Office of evidence of insurability satisfactory to the Company" gave it the right to insist upon inclusion in the new policy of a provision excluding coverage for military or naval hazards. The argument is that this is true because the test of "insurability" is at the time of conversion, that "insurability" comprehends not only health but vocational and other matters which enter into assumption of or limitation of the risk.

We think the test of "insurability" here is to be determined as of the time of conversion. For the purposes of this opinion, we assume that "insurability" may include elements other than health — such as vocation. See Kirby v. Prudential Ins. Co., Mo.App., 191 S.W.2d 379, 162 A.L.R. 660; Hanna v. Aetna Life Ins. Co., 217 Mo. App. 261, 263 S.W. 526, 529; Long v. St. Joseph Life Ins. Co., Mo.App., 225 S.W. 106, 107; Malone v. State Life Ins. Co., 202 Mo.App. 499, 213 S.W. 877. Also, we recognize that this is a Missouri contract and that, where a privilege of conversion is exercised, the new policy is a new contract. National City Bank v. Missouri State Life Ins. Co., 332 Mo. 182, 57 S.W.2d 1066, and compare, as to reinstated policies, State ex rel. Metropolitan Ins. Co. v. Shain, 334 Mo. 385, 66 S.W.2d 871, 874; Jenkins v. Covenant Mut. Life Ins. Co., 171 Mo. 375, 71 S.W. 688, 690.

It remains to fit these principles to the pertinent situation as created by the annuity contract. While a contract might have been drawn which would have given the Company a broad, open choice of determining (within reasonable bounds of the word "insurability") what it would require, yet the parties could limit that power as they might agree. We think there was such an agreed limitation here.

The annuity policy provided, very clearly, that the annuitant had the privilege of converting to an Ordinary Life Policy of the kind "issued by the Company at the time this Policy takes effect." Such Ordinary Life Policy expressly denied any inclusion of military or naval conditions. Thus, it denied the Company the right to require such inclusion. This denial cannot be escaped on the theory that "insurability," as used in the annuity policy, left the company the right to include such. Such theory is entirely inconsistent with the provisions of the contracts. One effect of such provisions was to eliminate "conditions as to * * * military or naval service" as a test or requirement for insurability.

2. Policy conditions precedent to conversion.

The Annuity Policy set forth certain conditions precedent to the exercise of the "privilege of change to other plans." The conditions precedent here involved were (1) "presentation at the Home Office of evidence of insurability satisfactory to the Company"; (2) "surrender of this Annuity Policy," and payment to the Company of "the difference in premiums." While not expressly required by the Annuity Policy, the nature of the transaction necessitated some sort of application by annuitant for the change desired. When this change was requested, a memorandum from the Actuarial Department of the Company set forth the Company requirements for this change as being (1) "return of the policy," (2) "Form 2274 an application signed by annuitant," (3) "Inspection Report," and (4) "Full medical Re-Examination."

The Company contends that none of the conditions precedent were performed. The trial court found it unnecessary to resolve this issue as it cast its determination upon the matter of "insurability," examined hereinbefore.

There is no material dispute in the evidence as to what was done by the parties in connection with this desired change of Policy. The evidence is clear that none of the conditions precedent was actually performed by or for annuitant. Such performance was necessary unless legally excused. Whether there was such legal excuse is the matter to be now determined.

There can be no serious dispute as to the applicable rule of law. That rule is that a party is not required to do a useless, futile act. More narrowly and pertinently stated, it is that where failure of a party to perform a condition is induced by a manifestation to him by the other party that he will not substantially perform his own promise, performance of such condition is waived and, therefore, excused. Frank A. Gilbert Realty Co. v. Timmerman, Mo.Sup., 183 S.W.2d 131, 133; Tevis v. Tevis, 259 Mo. 19, 167 S.W. 1003, 1005; Deichmann v. Deichmann, 49 Mo. 107, 109; Swift v. Kansas City Life Ins. Co., Mo.App., 184 S.W.2d 184, 187; Marty v. Security Benefit Ass'n, Mo.App., 99 S.W. 2d 132, 136; Hawkins v. Washington Fidelity National Life Ins. Co., 230 Mo.App. 882, 78 S.W.2d 543, 546; Klinkhardt...