« PreviousContinue »
EFFECT OF WAR UPON CONTRACTS INVOLVING SUCCESSIVE PAYMENTS, AND PARTICULARLY UPON CONTRACTS OF LIFE INSURANCE.
The prospect of war between Great Britain and the United States, while greatly to be deplored, is not so remote as to render it irrelevant to consider at this time the effect which such a war would have upon contracts involving continuing payments, such as contracts of life insurance. Upon this question there is a very instructive mass of American judicial authority, growing out of our great Civil War. The well-known legal doctrine is that the effect of war is to suspend commercial operations and other intercourse between parties situated within the lines of the opposing belligerents, without reference to the actual citizenship of such parties.? The effect of such a war upon the enormous mass of American railway and other corporate securities held in Great Britain and Canada would not be disastrous to the holders of such securities; for, although payments of accruing interest thereon could not be transmitted from this country either to England or Canada, yet it may be assumed that it would be easily practicable for the British and Canadian security-holders to transfer their securities, for collection, to bankers residing in neutral states, and thereby accomplish the purpose. If, for example, a mass of American railway securities held in London were transferred to a banking house in France for a collection of the interest due thereon pending the war, and if the American debtors should attempt to make the pendency of the war a plea or a pretext for not transmitting the payments, it may be assumed that the French government would take the matter up, and that it might lead to complications between ourselves and a power which has generally been friendly with us, and which has even been our ally in a war with England. The effect of such a war on contracts of life
1 Matthews v. McStea, 91 U. S. 7; New York Life Ins. Co. v. Statham, 93
U. S. 24; Fretz v. Stover, 22 Wall. (U. S.) 198.
insurance would be more serious. Several American life insurance companies are doing business in Great Britain; still more, it may be assumed, are doing business in Canada. Their contracts of insurance provide for a forfeiture of the policies on the failure of the insured to transmit to the insurer a stated premium at stated intervals. But, where the insured resides within one of the opposing lines of belligerent occupancy, and the insurer resides within the other, the transmission of these premiums is unlawful. What then are the rights of the parties, either (1) in case the insured dies while there is a default in the payment of premiums for this reason, or (2), in case, after the close of the war, he tenders the past due premiums to the insurer for the purpose of keeping the policy in force? In the struggle over the settlement of this question, the position of the insurance company has been that the premiums are the very life of the policy, their prompt payment being absolutely necessary to keep in existence the fund out of which the assured is to be paid in the event of death. The position of the insurer, on the other hand, is, that he has been prevented by a vis major, for which he is in nowise responsible, from making the payments at the times stipulated in the contract. The reply of the insurance company to this contention is that the insured is in a legal sense responsible for the existence of the war; in other words, that the consequences of war are visited upon all the inhabitants of each of the belligerents, in theory of law, in solido, and wholly without reference to the question whether they are opposed to the war or are in favor of it. The law identifies them with their government, and on a question of right, growing out of a state of war, visits upon them any misfortune created by the act of their government in entering into the war. Differing essentially from this last conception, the mass of American holdings, already alluded to, has already settled the contention in favor of the assured, in a manner which we shall now attempt briefly to state.
The operation of the rule respecting non-intercourse in time of war, upon contracts of life insurance, has been held to suspend the payments of the annual premiums without destroying the contracts, since the insured is disabled, by the fact of war, from transmitting the premiums across the lines of opposing
belligerent occupancy to the insurer, and since the transmission of such premiums would be unlawful. If the insured resides within one of the opposing lines of belligerent occupancy, and pays the annual premiums so long as intercourse is not rendered unlawful by the intervention of war, and dies while the war continues, the beneficiary in the policy, on tendering the unpaid premiums, may maintain an action for the sum insured in the policy.?
1 Martine v. International Life Ins. Society, 53 N. Y. 339; s. C. 13 Am. Rep. 529.
2 Robinson 0. International Life Ins. Society, 42 N. Y. 54; 8. c. 1 Am. Rep. 490; Manhattan Life Ins. Co.o. Warwick, 20 Gratt. (Va.) 614; 8. c. 3 Am. Rep. 218 (two of the five judges dissenting); New York Life Ins. Co. v. Clopton, 7 Bush (Ky.), 179; 8. c. 3 Am. Rep. 290; Statham 0. New York Life Ins. Co., 45 Miss. 581; s. c. 7 Am. Rep. 737; Hamilton v. New York Mutual Life Ins. Co.,9 Blatchf. (U. S.) 234; $mith v. Charter Oak Life Ins. Co. (Circuit Ct. St. Louis, general term), 1 Cent. L. J. 76; 8. C. aff’d. 64 Mo. 330; Seyms v. New York Life Ins. Co. MS., U. S. Circuit Court, South Dist. Miss. 1873, Hill, J.; Cohen v. New York Mutual Life Ins. Co., 50 N. Y. 610; 8. c. 10 Am. Rep. 522; Sands V. New York Life Ins. Co., 50 N. Y. 626; Mutual Benefit Life Ins. Co. 0. Atwood, 24 Gratt. (Va.) 497; $. c. 18 Am. Rep. 652. Contra, Dillard v. Manhattan Life Ins. Co., 44 Ga. 119; s. c. 9 Am. Rep. 167; Tait v. New York Life Ins. Co., MS., U. S. Circuit Ct. West Dist. Tenn., Emmons, J. An insurance company whose home office was in Canada had a so-called “ Branch " at Baltimore, in Maryland, which branch
merely an agency, and the manager of this branch had appointed an agent in the city of Washington, District of Columbia. The policies of the company which were delivered by this latter
agent, read “not valid unless countersigned by the duly authorized agent of this company at Washington, D. C." It was held that a policy effected through the local agent at Washington and countersigned and delivered by him, took effect at Washington and that the situs of the contract was accordingly the District of Columbia; and consequently that an action could not be sustained on the policy by foreign attachment in the State of Maryland. Cromwell v. Royal Canadian Ins. Co., 49 Md. 366; 8. C. 33 Am. Rep. 258. Where a foreign life insurance company had complied with the provisions of the statute authorizing it to carry on business in the State, and had opened an office in New York, where it conducted its business by general agents and a local board of directors, issuing policies there as a distinct organization, and where a policy had been thus issued prior to the war of rebellion to a citizen of one of the late Confederate States,
- it was held that payment of the premium thereon was excused and the liability suspended during the war, and that where the insured died before the close of the war, no tender of the unpaid premium was necessary at its close, but that the same could be adjusted by making proper deductions from the policy, and holding the company liable for the residue, Martine v. International Ins. Society, 53 N. Y. 339; 8. c. 13Am. Rep. 529.
If the assured is alive at the cessation of hostilities and the insurer declines to recognize the policy as in force, the assured may maintain a bill in equity to compel the defendant to recognize the subsistence of the contract of insurance and receive the annual premiums.? Where the assured, after the cessation of hostilities, tendered the premiums which were due, and the company refused to receive them, and in this state of things the assured died, it was held that his executor might maintain a bill for a decree declaring the policy to be subsisting and directing the payment of the amount insured by it, less the unpaid premiums and interest thereon. The courts which have taken the foregoing view have not succeeded in understanding that a life insurance company cannot carry on its business unless the annual premiums on its policies are paid. They have not succeeded in explaining why one policy-holder should be exonerated by a public calamity from paying his premiums, and why at the same time his insurance should be kept alive for his benefit by means of premiums paid by the other policy-holders, These decisions are in a great measure shaken by the authority of the Supreme Court of the United States, which, on a question of public law of this nature, though not necessarily binding upon the State judicatories, must be regarded as possessing exceptional weight. The question first came before the court after the death of Chief Justice Chase and before the
appointment of his successor, upon a writ of error to the Circuit Court of the United States for the District of West Tennessee, in a case where the late Circuit Judge Emmons had written and published an elaborate opinion ; 3 and the judgment of the court below, holding that the failure to pay premiums at the stipulated date avoided the policy, notwithstanding that the intervention of war made the payment of premiums unlawful, was affirmed by an equally divided court. The question came before the court
Statham v. New York Life Ins. Co., 4 The decision in the Supreme Court 45 Miss. 581; 8. c. 7 Am. Rep. 737. of U. S. does not seem to have been
* Hamilton v. Mutual Life Ins. Co., reported. The writer remembers the 9 Blatchf. (U. S.) 234.
opinion of Mr. Circuit Judge Emmons, 3 New York Life Ins. Co. v. Tait, as having been printed in book form, MS.
and containing something like eighty
while in the same condition, on a writ of error to the Circuit Court of the United States for the Southern District of New York,1 by which court the question had been decided the other way; and the decision was again affirmed by a divided court, thus affirming two opposing conclusions, under a wellknown principle of appellate procedure. These conflicting judg. ments were rendered, according to the author's recollection, in the year 1873. The question again came before the Supreme Court of the United States in 1876 in three cases, and a majority of the court resolved the following principles, according to the syllabus, evidently written by Mr. Justice Bradley, who delivered the opinion of the court: 1. “A policy of life assurance which stipulates for the payment of an annual prémium by the assured, with a condition, to be void on non-payment, is not an insurance from year to year like a common fire policy; but the premiums constitute an annuity, the whole of which is the consideration for the entire assurance for life; and the condition is a condition subsequent, making, by its non-performance, the policy void. 2. The time of payment in such a policy is material, and of the essence of the contract; and a failure to pay involves an absolute forfeiture, which cannot be relieved against in equity. 3. If a failure to pay the annual premium be caused by the intervention of war between the territories in which the insurance company and the assured respectively reside, which makes it unlawful for them to hold intercourse, the policy is nevertheless forfeited if the company insist on the conditions; but in such case the assured is entitled to the equitable value of the policy arising from the premiums actually paid. 4. This equitable value is the difference between the cost of a new policy and the present value of the premiums yet to be paid on the forfeited policy when the forfeiture occurred, and may be recovered in an action at law or a suit in equity. The doctrine of revival of contracts, suspended during the war,
pages of printed matter, delving into the question with the interminable prolixity characteristic of that very learned judge.
i New York Life Ins, Co, v. Ham
ilton, not officially reported. The case is reported in the court below in 9 Blatchf. (U. S.) 249. The writer believes that this was the case.