The Phenix Insurance Company, of Brooklyn v. Tomlinson

• Decision Date: 18 September 1890
• Docket Number: 14,412
• Parties: The Phenix Insurance Company, of Brooklyn, v. Tomlinson et al
• Court: Indiana Supreme Court

25 N.E. 126

125 Ind. 84

The Phenix Insurance Company, of Brooklyn, v. Tomlinson et al

No. 14,412

Supreme Court of Indiana

September 18, 1890

From the Marion Superior Court.

Judgment affirmed.

A Gilchrist, C. A. De Bruler, A. C. Ayres, E. A. Brown and L M. Harvey, for appellant.

J. S Duncan, C. W. Smith and J. R. Wilson, for appellees.

OPINION

Elliott, J.

The complaint of the appellee alleges that the appellant issued to him a policy of insurance covering a period of five years; that in payment of the premium the appellee gave the appellant $ 9.73 in money, and executed a promissory note for $ 16.39; that the property insured was destroyed by fire on the first day of August, 1887; that immediately thereafter he gave the appellant due notice of the loss, and that the appellee performed all of the conditions of the contract on his part. The averment of performance is, however, qualified by specific allegations, which read thus: "And the plaintiff admits it to be true that when said premium note became due he did not pay the same. But he would further show that after the maturity of the note, and prior to the loss, to wit: on the 25th day of June, 1887, said Phenix Insurance Company recovered judgment against the plaintiff on said premium note, for the full amount thereof, before one Ezra Martin, a justice of the peace in and for Wayne township, Marion county, Indiana; that the plaintiff procured execution to be stayed, by one ----- offering himself as replevin bail, who was accepted as such by said justice of the peace; that said replevin bail had thus been tendered and accepted before the happening of said loss; that thereafter, on the expiration of the stay of execution, to wit; on October 10th, 1887, the said judgment was, by this plaintiff, fully paid and satisfied to said justice of the peace."

The policy contains the following provision:

"In case the assured fails to pay the premium note, or order, at the time specified, then this policy shall cease to be in force, and remain null and void during the time said note, or order, remains unpaid after its maturity, and no legal action on the part of this company to enforce payment shall be construed as reviving the policy. The payment of the premium, however, revives the policy and makes it good for the balance of its term."

The contention of the appellant is that the complaint is bad, for the reason that it is not shown that there was a performance of the conditions precedent on the part of the plaintiff. The theory of the appellant's counsel is that the appellant did not, by resorting to legal proceedings, nor by accepting the amount of the judgment rendered on the note, waive its right to insist that the appellee lost his claim to the benefit of the policy during the time the premium remained unpaid. The counsel for the appellee thus outline their theory. "Our contention is not at all that the taking of the judgment on the premium note, and the entering of replevin bail, were equivalent to the payment of the note; hence, we do not discuss any citations to that point. Our theory of the case is this: We say that when the note went past due, the insurance company had a right to declare such policy forfeited for such non-payment, and it likewise had the power to waive such forfeiture, and consider the policy in force; that this waiver may be by conduct as well as by words; that there are certain lines of action, or conduct, which in law clearly work a waiver of any such forfeiture."

It is established law that the right to declare a forfeiture of a policy for the non-payment of premiums may be waived, and that the waiver may be manifested by conduct as well as by words. Sweetser v. Odd Fellows', etc., Ass'n, 117 Ind. 97, 19 N.E. 722; Willcuts v. Northwestern, etc., Ins. Co., 81 Ind. 300; Behler v. German, etc., Ins. Co., 68 Ind. 347; United Life, etc., Ins. Co. v. President, etc., Ins. Co., 42 Ind. 588; Insurance Co. v. Eggleston, 96 U.S. 572, 24 L.Ed. 841; Appleton v. Phenix M. L. Ins. Co., 59 N.H. 541; Stylow v. Wisconsin Odd Fellows, etc., Ins. Co., 69 Wis. 224, 34 N.W. 151; Helme v. Philadelphia, etc., Ins. Co., 61 Pa. 107. This general rule is too firmly settled to be shaken, so that the only question which is here open to controversy is, whether the company did waive the right to forfeit the policy by an acceptance of the premium after the loss had occurred.

It is proper to say at the outset that this case is to be discriminated from such cases as American Ins. Co. v. Henley, 60 Ind. 515, and American Ins. Co. v. Leonard, 80 Ind. 272, for the reason that in those cases the premium notes were shown to be unpaid at the time of the loss, and it did not appear that the insurance company had subsequently accepted payment, while here there was an acceptance of the premium after the loss occurred.

We can not perceive any solid ground upon which it can be held that an insurance company may accept payment of the entire premium after a loss has occurred, and yet escape payment of the loss. By accepting payment it affirmed the validity of the policy, and tacitly asserted that the policy was in force from the time it was executed. In such a case there is no interregnum in which there was a lifeless policy, for the policy is continuous in its nature and effect, and the premium covers the risk as an entirety. It would do violence to the intention of the parties and the language of their contract to declare, as the appellant seeks to have us do, that the payment simply revived the policy. It can not be justly affirmed that the parties meant to revive a policy in a case where, as here, the act which revived it was performed after the loss occurred. The reasonable effect to be attributed to such an act is that the parties meant that the affirmance of the contract should relate back to the execution of the policy.

In our judgment, acceptance of the premium after the loss has occurred, is a waiver of the right to declare a forfeiture of the policy, and not a mere act of revivor. It is not reasonable to assume that the parties meant to do no more than revive the policy and give it force from the time of the acceptance of payment, since, as the loss had already occurred, the insured could acquire no benefit from the revived policy. The only rule which would yield him benefit and give him a consideration for his money is that which we adopt.

It is a principle of wide sweep that forfeitures are not favored, and within the spirit of this principle such cases as this clearly fall. To treat the acceptance of the premium as merely reviving the contract is, in effect, to adjudge a forfeiture, for, in the event that we should adopt the views of the appellant, the result would be the same as to adjudge the policy forfeited. This is clear when it is brought to mind that if the policy is held to be lifeless from the time of default in payment until after the loss, it must also be held that the insured can not recover anything upon his contract. A construction of the conduct of the parties which will practically produce the same result as a declaration of forfeiture is one which it is the duty of the courts to avoid if it can reasonably be done. It is clear that this construction may be reasonably avoided; it is, indeed, quite clear that such a construction as that for which the appellant contends would be against reason and justice.

It is a familiar general rule that a party who accepts and retains benefit from a contract confirms the contract as it was executed. Under the operation of this general rule there is not a revival of a contract, but a confirmation, and we can see no reason why such a case as this should be excepted from the rule. The doctrine we approve produces equitable results. It certainly does so in this case, for it is but just that the company, having accepted the entire premium after the occurrence of the loss, should yield the consideration for which the premium was paid. It is not just that the company should retain the premium and give no value in return.

The fact that all of the property insured was not destroyed does not affect the question for the policy is indivisible and continuous. If, to put an illustrative case, the premium should be five hundred dollars and the amount of the loss only fifty dollars, and the insurance company should enforce payment of the entire premium after the loss occurs, it seems quite clear that it could not escape payment of the loss, and the principle in the real case must be the same as that in the supposed, for the amount can not change a fundamental principle of law. It was not in the power of the assured to pay part only of the premium; he was bound to pay it all or lose the benefit of his contract. The rights of the parties are reciprocal. The company was not bound to accept part of the premium, nor had it a right to treat the premium as paid upon part only of the property insured. It was the right of the company to refuse to accept part of the premium, but it had no right to accept the whole premium and treat it as payment for an insurance upon part only of the property...