Schwartz v. Northern Life Ins. Co.

• Decision Date: 14 May 1928
• Docket Number: No. 5318.,5318.
• Citation: 25 F.2d 555
• Parties: SCHWARTZ v. NORTHERN LIFE INS. CO.
• Court: U.S. Court of Appeals — Ninth Circuit

25 F.2d 555 (1928)

SCHWARTZ v. NORTHERN LIFE INS. CO.

No. 5318.

Circuit Court of Appeals, Ninth Circuit.

April 16, 1928.

Rehearing Denied May 14, 1928.

COPYRIGHT MATERIAL OMITTED

E. S. Bell, of Oakland, Cal., and Ford, Johnson & Bourquin, George K. Ford, Elliott Johnson, and M. M. Bourquin, all of San Francisco, Cal., for plaintiff in error.

Knight, Boland & Christin, of San Francisco, Cal. (John H. Riordan, of San Francisco, Cal., of counsel), for defendant in error.

Before GILBERT, RUDKIN, and DIETRICH, Circuit Judges.

GILBERT Circuit Judge (after stating the facts as above).

The principal question presented in the case is upon what date the policy became effective. The appellant says it was August 2, 1924. The appellee says it was August 14, 1924. The date from which a policy becomes effective is not necessarily determined by the date which it bears or the date of its execution or the date of its delivery or by the date when the first premium is paid. It is the date from which the risk commenced, and it is determined by the meaning of the provisions of the insurance contract. Mutual Life Ins. Co. of New York v. Hurni Packing Co., 263 U. S. 167, 44 S. Ct. 90, 68 L. Ed. 235, 31 A. L. R. 102. Said the court in that case, page 175 (44 S. Ct. 91): "It was competent for the parties to agree that the effective date of the policy should be one prior to its actual execution or issue; and this, in our opinion, is what they did." In Anderson v. Mutual Life Ins. Co., 164 Cal. 712, 130 P. 726, Ann. Cas. 1914B, 903, it was held that the period of one year after the "issuance of this policy" does not exempt the company for a death by suicide occurring less than one year after the date when the policy was in fact signed by the officers of the company but more than one year after the date designated in the policy as its date, where it appears from other provisions of the policy, read in connection with the application, that the latter date was intended to be and was adopted by both parties as the date when the risk attached. In that case the court said: "The insurer, acting, so far as the record shows, with full knowledge of all the facts, elected to base its policy upon the first application, to date its policy May 22, 1908, the day upon which the medical examination of Anderson had taken place, to make the premiums payable on the 22d day of May of successive years. * * * In all these particulars, the company expressed its intention to fix the rights of the parties with reference to the 22d day of May in just the same way that these rights would have been fixed if a policy had been actually signed and delivered on that day. * * * The day upon which, by the agreement of the parties, the risk attached, may reasonably be taken to be the day which was meant to be designated, in the clause under consideration, as that of the `issuance' of the policy." Here the contract for insurance consisted of three instruments, the application, the binding receipt, and the policy. The application contained the provision that the insurance should not take effect unless a full premium were paid in cash and the policy were delivered during the insured's lifetime and good health, also the provision that, if the full premium were paid in advance in cash to an authorized agent of the company and the conditional binding receipt were given by such agent without alteration of the printed conditions therein, "the insurance shall be in force when an examination satisfactory to the company has been made by the medical examiner, provided that nothing has developed as existing at or prior to the time of such examination which would ordinarily cause rejection at the company's home office for the plan or the amount of insurance applied for." The conditional binding receipt contained a like provision. And the application further provided: "Unless otherwise requested, the premium due date of the policy shall be the date of my medical examination." Thus it appears that the binding receipt was denominated "conditional," for the reason that the insurer reserved to itself the right to reject the application and cancel the contract of insurance, notwithstanding that the receipt had been given and the premium paid.

A binding receipt, or binding slip, has a settled meaning in insurance law. It protects the applicant for insurance against the contingency of sickness intervening between its date and the delivery of the policy if the application for insurance is accepted. 1 Joyce on Insurance, p. 253. When it provides by its terms that, subject to approval and acceptance, the insurance shall be effective from the specified date and the company accepts the application or approves the risk, it becomes operative from the date specified. 32 C. J. 1101; Rushing v. Manhattan Life Ins. Co. of New York (C. C. A.) 224 F. 74. It is well settled that effect will be given to an agreement that the policy shall be dated as of the date of the application, and shall relate back to and take effect from that date. Jefferson Standard Life Ins. Co. v. Wilson (C. C. A.) 260 F. 593; Fox v. New York Life Ins. Co., 211 Ill. App. 406; Beswick v. National Casualty Co., 206 Mo. App. 67, 226 S. W. 1031; Talbot v. Union Cent. Life Ins. Co. (C. C. A.) 241 F. 669.

From a consideration of all the provisions of the contract here in question, we reach the conclusion that the minds of the contracting parties met in fixing upon August 2, 1924, as the date from which the policy became effective and as the date upon which the risk commenced and the date from which began the year during which the policy might be contestable for suicide. It was for a year commencing with that date that the insured paid the premium, and August 2 was made the date of the payment of each annual premium thereafter and the date upon which the appellee's reinsurance in another company took effect.

The appellee relies upon the clause of the contract which provided that the insurance should not take effect unless a full premium was paid in cash, and points to the fact that the premium was paid by a promissory note. In construing a contract of insurance, it is a fundamental rule that every part of the contract must, if possible, be given effect, and none is to be rejected unless repugnant to the intention of the parties as set forth in the component parts of the agreement. The provision that full premium shall have been made in cash is not necessarily inconsistent with a "settlement for the full premiums" made by giving a promissory note, when recourse is had to the facts and the course of dealing which the appellee had followed in authorizing its agents to receive promissory notes for the premiums and its acceptance of applications, accompanied with payments of premiums thus made. The agent who received the application here was a general agent, and he was so described in his contract with the appellee. In that contract he was made responsible for the acts of his subagents whom he had been given the power to employ. The general instructions which he received from the appellee expressly contemplated that in connection with the application for new policies he might take promissory notes, and as a matter of fact the evidence shows that the taking of notes on such applications by agents who thereupon became directly responsible to the company was in the regular course of the company's business. There can be no question but that the company could waive any provision of its policies, Knickerbocker Life Insurance Co. v. Norton, 96 U. S. 234, 24 L. Ed. 689, and could accept a promissory note as cash in the payment of premiums notwithstanding a stipulation to the contrary. In Kimbro v. Life Insurance Co., 134 Iowa, 84, 94, 96, 108 N. W. 1025, 1029 (12 L. R. A. N. S. 421), the court said: "No general rule adopted by an insurance company as to the prepayment of premiums can take away its power to waive or ignore such requirement and to bind itself by a contract without such payment. * * * It was a common practice known to and approved by the company for agents to take such notes payable to...