Ætna Life Insurance v. Hardison, 199 Mass. 181

Ætna Life Insurance v. Hardison

199 Mass. 181 | Mass. | 1908

Knowlton, C. J.

These are petitions brought by foreign life insurance companies under the St. 1907, c. 576, § 75, for a review of the action of the insurance commissioner, in regard to the form of the policies which they propose to issue in this Commonwealth. The cases come to this court on the reservation of a single justice upon the petitions, answers and agreed statements of facts. Under this section every life insurance company must file with the insurance commissioner a copy of any form of policy that it proposes to issue, for his approval. If within thirty days he notifies the company that in his opinion the form of the policy does not comply with the requirements of the statute, specifying his reasons for his opinion, no policy can be issued in that form. His. action in this particular is subject to review by the Supreme Judicial Court. The section further provides that no policy shall be “ issued or delivered, unless it contains in substance the following provisions.” Then follows a statement of ten provisions, of which the third is, “ That the policy and the application therefor shall constitute the entire contract between the parties and that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties and that no such statement shall be used in defense of a claim under the policy unless it is contained in a written application and a copy of such application shall be endorsed upon or attached to the policy when issued.” The provision on this subject, contained in the policy, was held by the insurance commissioner to be insufficient.

A preliminary question raised by the petitioner is whether the commissioner is authorized, by the statute, to consider matters of substance that enter into the policy, or only the form of the policy in other particulars. We have no doubt that his examination of the form of a policy to see whether it conforms to the requirements of our law was intended to involve a consideration of matters of substance called for by our statutes, and not merely of such things as the size, or shape, of the paper on which the contract appears, or the kind of type used in printing it, or the order in which different parts of the contract are set forth. It is his duty to determine whether the policy contains the substantive provisions of law called for by our statutes, in such a form as to give the contract proper effect.

*187Another question is whether the provisions which, in substance, must be inserted in the policy, must appear in a form substantially identical with that given in the statute, or whether it is enough if they contain everything, in meaning and legal effect, that the statute prescribes, and at the same time include other things relating to the same subject, no one of which impairs the force of that which is prescribed for the benefit of the insured. Inasmuch as the ten provisions referred to and the other prescribed parts of the policy were intended for the protection of the policy holder, we are of opinion that, if they are contained in substance in the policy, their form may be varied, and additional provisions beneficial to the insured may be inserted, provided the requirements of the statute are satisfied, and are left undiminished by that which is added.

Instead of the third provision already quoted from § 75, the form of policy of the Travelers’ Insurance Company says: “ This instrument contains the entire contract between the parties hereto, and all statements purporting to be made by the insured shall, in the absence of fraud, be deemed representations and not warranties, and no such statement shall be used in defense to a claim under the contract unless it be contained in the application herefor.” The insurance commissioner suggested that the words, “ and the application is attached hereto,” be added to meet the requirement of the statute. We are of opinion that this was necessary. The language of the provision did not even make it certain that the application, or the statement referred to, was in writing. The reference to an application in the early part of the policy, especially if there should be a failure to copy the application on the policy, might not protect the rights of the insured in every case. Moreover, inasmuch as the provision is insufficient, we think it better that the words, “ and the application,” be also inserted after the words, “ this instrument,” so as to conform to the statute exactly. It is conceivable that the application might contain something helpful to the insured as a part of the contract, in connection with other provisions, and with questions that might arise.

The subject most discussed in both cases is whether the form of the policy conforms to the St. 1907, c. 576, § 34, which requires that “ contracts of insurance for each of the classes speci*188tied in section thirty-two, shall be in separate and distinct policies, notwithstanding any provision of this act which permits a company to transact more than one of said classes of insurance.” Section 82 authorizes the formation of an insurance company to engage in insurance of any one of twelve different kinds or classes. The agreement of association must state the class of insurance the company proposes to transact, and on what business plan or principle. Section 38. Under § 34, neither domestic nor foreign companies, with certain specified exceptions, are permitted to transact more than one kind or class of insurance. One of these exceptions allows life insurance companies with a certain amount of paid-up capital to transact the business specified in the fifth clause, which is insurance against bodily injury, or death by accident, and upon the health of individuals.

This statute carries the regulation of the business of insurance much further than any previous legislation. It forbids the combination of two classes of insurance in the same policy, even when one company is permitted to transact insurance business of two or three classes. The petitioner contends that this quoted requirement does not apply to one of these classes of insurance, when conducted by a company in connection with life insurance. There is no reason for a distinction of this kind. The contract for insurance in each of these classes is to be in a separate and distinct policy, as well when the company is also doing the business of life insurance, as when it is furnishing insurance of any other class. There are reasons for this requirement, especially in connection with the maintenance of proper reserve funds, and with taxation. These reasons are as strong in their application to life insurance in connection with insurance in one of the classes named in § 32, as in their application to any two classes specified in the section.

It remains to inquire as to each of these companies, whether any part of the insurance referred to in the policy is within the fifth clause mentioned in § 32. That clause is, “ To insure any person against bodily injury or death by accident, . . . and to make insurance upon the health of individuals.” The policy of each of these companies, besides providing for life insurance in a common form, provides that after one full annual payment *189has been made, in case of impairment of health by bodily injury or disease, such as to prevent the insured for the rest of his life from pursuing any gainful occupation, an additional provision shall be made for him in some one of different ways. The first of the petitioners agrees, in such a case, to keep the policy in force twelve months, and then to pay the policy holder one twentieth of the sum insured, and make the same payment annually thereafter until the whole sum insured shall have been paid; or, to pay him a specified annuity for life. The second of the petitioners agrees, in such a case, to pay the premiums on the policy so long as the disability continues, without charging them against the contract, and the cash loans and the values of the contract are to increase in the same manner as if the premiums were being paid by the insured; but the insured may at any time cancel this provision of the policy and be entitled to a reduction of twenty-five cents for each one thousand dollars of insurance, upon his annual premiums.

It is agreed, and if it were not agreed it would be obvious, that this insurance against disability .from injuries or disease is a liability which costs the company something, and for which provision must be made by way of reserve. It seems plain that it is an insurance of health and against accident. The real difference between this and an ordinary accident insurance policy is that the liability is only for a disability which is total and is thought to be permanent, and that the compensation to the insured is made in connection with a contract for life insurance, instead of being made in separate payments of money directly to the insured. But these conditions do not affect the principle. Life insurance and insurance of the fifth class, under § 82, are embodied in the same policy.

It is said that this is incidental to life insurance. In the sense that, of the two classes of insurance, one is the principal and more important and the other subordinate, it may be said to be incidental ; but that is of no importance. Any two of the classes of insurance mentioned in § 32 which are kindred to each other might be combined in the same contract, and the contract might be so made that one would be the principal and the other secondary, and in their nature they might have close relations to each other. This would not enable an insurance company to *190embody them in the same policy, even though, in a sense, one might be said to be incidental to the other. In a true sense they are two different classes of insurance under the statute. It is only the attempt to incorporate them in the same contract, and connect one contract with the other, in violation of the statute, that makes one seem incidental to the other.

As to this part of the policy in each case, we are of opinion that the insurance commissioner was correct, that the form of the policy was erroneous, and that the petitioners are not entitled to relief under their petitions.

So ordered.