Austin v. Mutual Reserve Fund Life Ass'n, No. 1,393

No. 1,393 | U.S. Circuit Court for the District of Massachusetts | Aug 22, 1904

PUTNAM, Circuit Judge.

The facts in this case are sufficiently shown by the plaintiff’s declaration and the findings of law and fact filed this day.

Only one issue is made by the defendant corporation. No claim i© made by virtue of any alleged fraud, warranty, or representation.. Its case is rested entirely on the provisions in the applications and the policies that the policies were not to be in force, and that the contract© should not' take effect, until the policies were delivered to Jonathan Wk Austin, who was the applicant therefor, and whose life was insured.. while he was in good health, nor until the first premiums were paid while also he was in good health.

The findings accompanying this opinion state that the premiums received by the defendant corporation have never been returned, and no offer has ever been made to return them. This, however, is not of consequence, because, under the settled rules of the law of insurance, if the policy was never in force, it, of course, never attached, and no action could be brought upon it whether the premiums were returned or not. The remedy for a return of the premiums, according to the same settled rules, would be by an action therefor.

With reference to the meaning of the words “in good health,” the expression explains itself better than any explanation which we could make in reference to it. All we need to say in this connection is that in holding that the applicant was not at the essential times “in good health” within the intent of the applications and of the policies we regard ourselves as well within the dividing lines which have been so often practically fixed by the courts and text-writers, some of which are referred to and explained by the Circuit Court of Appeals for this circuit in Hubbard v. Mutual Reserve Association, 100 F. 719" court="1st Cir." date_filed="1900-03-29" href="https://app.midpage.ai/document/hubbard-v-mutual-reserve-fund-life-assn-8740410?utm_source=webapp" opinion_id="8740410">100 Fed. 719, 40 C. C. A. 665, and Provident Society v. Hadley, 102 F. 856" court="1st Cir." date_filed="1900-04-24" href="https://app.midpage.ai/document/provident-savings-life-assur-soc-of-new-york-v-hadley-8741400?utm_source=webapp" opinion_id="8741400">102 Fed. 856, 43 C. C. A. 25. The latter case appears in this court as Hadley v. Provident Society (C. C.) 90 F. 390" court="None" date_filed="1898-11-30" href="https://app.midpage.ai/document/hadley-v-provident-savings-life-assur-soc-of-new-york-9336471?utm_source=webapp" opinion_id="9336471">90 Fed. 390.

It is plain that the expressions in the applications and the policies “in force” and “shall not take effect” must necessarily be taken in some sense in a qualified manner. According to the underlying rules of insurance, Jonathan W. Austin’s life, at the time when the policies issued, was not an insurable risk; and therefore, except for the complications which arise in' matters of life insurance on account of the numerous stipulations in contracts for this class of insurance, it might be said that the policies never attached, and, in that sense, were never in force, and, of course, never took effect. But in the present case it is clear that these expressions have npt that broad range, and merely intend to distinguish between policies which have not been delivered, and those which have been delivered. In the view of the underlying rules of insurance when not qualified or limited by stipulations, which stipulations have, of course, an implied as well as an express effect, these policies would not have been in force or in effect, but, in view of the usual provisions of such policies, on which those now under discussion are built up, it is impossible to look at this case from that standpoint. What the provisions in this case have reference to is not to the ordinary rules which are. related to the broad principles of insurance to the effect that the policies never attached, but they are to the effect that the policies were to be regarded as though they had never been delivered. Their effect is that, unless the terms of those provisions of the policies are complied with, there is no contract in any sense of the word. But when the defendant corporation received the second premium it was not entitled to receive it unless there was then an existing contract of some nature, even though one which might be avoided either by proof of fraud, or a breach of warranty, or by showing that the applicant was not in good health when the first premium was paid. The defendant corporation was not entitled to receive the second premium if the contract were only in embryo, and its reception of it ratified the policy as having come into life and existence, although its life and existence might afterwards be terminated. Consequently, from the time the second premium was received, the provision in each policy rendering it incontestable came into effect, even with reference to all questions arising in connection with the delivery of the policy and the payment of the first premium. This, of course, would not have barred the defendant corporation from repudiating the contracts indicated by the several policies on discovery that within the period of three years named in the provision as to incontestability the applicant was not in good health when the first premium was paid. But, subject to that fact, the propositions which we enunciate declare a sound rule of law, applicable to all contracts which have at a prior stage remained in embryo, or otherwise in mere incipiency, whether by an escrow, or other qualified delivery of the instrument, or by provisions like those we are discussing. Moreover, in the present case it is especially applicable, because it gives full effect to what was undoubtedly the expectation of the parties to these policies, although they failed to use lam guage which directly embodied it.

Notwithstanding the apparent anxiety of the defendant corporation that the court did not or would not appreciate its propositions, we wish it understood that they are perfectly clear and perfectly well understood, and that we leave the case to turn in no way on those which usually arise in cases of this class. It is on that account that we add that none of the decisions cited by the plaintiff, not even Wright v. Mutual Benefit Life Association, 118 N. Y. 237, 23 N. E. 186, 6 L. R. A. 731, 16 Am. St. Rep. 749, or any other decision of any court of the .state of New York, reaches the question before us.

It is ordered that the findings of law and fact in this case under date of August 22, 1904, be entered of record, that either party may file a draft bill of exceptions on or before the 19th day of September next, that either party may file corrections of the other party’s bill of exceptions on or before the 3d day of October next, and that upon the settlement of the bills of exceptions judgment will be entered for the plaintiff for the amount of all the policies, with interest from the time the same were payable according to the terms thereof.