Wolfe v. Washington Life Insurance

Greenbaum, J. Defendant demurs to the complaint upon the ground that it fails to set forth any cause of action. Two causes of action are stated in the complaint, each of substantially the same tenor. They arise out of two separate policies of insurance heretofore issued by defendant upon the life of the plaintiff, the one for $2,000, and the other for $10,000, based upon premium payments for twenty years. The pleader, affirming due performance on the part of the plaintiff, alleges the making of an agreement by plaintiff with the Pittsburg Life and Trust Company as follows: “ That on or about the the 30th day of December, 1908, the defendant entered into an agreement with the Pittsburg Life and Trust Company wherein and whereby the defendant, fraudulently and in derogation and violation of its contract with and obligations to the plaintiff, assumed to rein-sure in said Pittsburg Life and Trust Company the plaintiff’s said policy and all other outstanding policies in the defendant, and wherein and whereby it fraudulently and in further [573] violation of plaintiff’s rights, transferred, assigned and set over unto said Pittsburg Life and Trust Company the assets representing the legal reserve upon the plaintiff’s said policy and representing the legal reserve upon all other outstanding policies in the defendant and all its other assets, including, among other things, all its books and papers relating to policies and policy-holders, and all its right, title and interest in and to all premiums or other moneys thereafter payable to the defendant upon all its then outstanding policies or other contracts.” The allegations of fraud and of violation” of the contractual rights of the plaintiff may be disregarded or treated as mere conclusions of law, but we nevertheless have allegations of the making of the agreement and of a transfer thereunder of the assets of the defendant. The defendant argues that the complaint fails to allege that the agreement therein referred to was, in fact, consummated by the actual receipt of the assets of defendant by the Pittsburg Life and Trust Company and by the latter’s performance of the provisions of reinsurance. But, taking into consideration the allegation that the defendant has ceased transacting its business of insurance, and inferring, as we should, every intendment of fact fairly deducible from the pleading in favor of plaintiff, it may be assumed that the defendant in fact did reinsure in the Pittsburg Life and Trust Company all outstanding policies and did transfer to said company the legal reserve upon all outstanding policies (including the policy of the plaintiff), together with all its other assets. The plaintiff alleges his prompt protest to defendant against its aforesaid acts, his refusal to assent thereto, his election to treat defendant’s said acts as a breach of its contract with him and the definite amount of the legal reserve and actual value of his policy on December 30, 1908. It is further alleged that the amount of insurance under said policy was payable to Plora H. Wolfe, the wife of plaintiff, or, in the event of her prior death, to plaintiff’s executors, administrators and assigns, and that the said Plora H. Wolfe duly assigned all her right and interest in and to plaintiff. The action is for damages for defendant’s alleged breach of contract. It seems to be well settled that a con [574] tract of life insurance carries with it the implication that the insurance company will continue its business and keep on hand the funds required by law during the term of the policy, and that its failure so to do necessarily results in a breach of the contract. People v. Empire Mutual Life Ins. Co., 92 N. Y. 105; Mason v. Cronk, 125 id. 496; People v. Security Life Ins. & Annuity Co., 78 id. 125. The demurrant contends that Kelly v. Security Mutual Life Ins. Co., 186 N. Y. 16, has practically decided that no action for damages under a life insurance policy will lie upon the facts in this case for an anticipatory breach thereof. I do not so read the opinion in the Kelly case. That was a case where the breach alleged was that the defendant wrongfully declared the contract void and forfeited, denied that the plaintiff had any legal rights thereunder “ and refused to continue said policy in force.” There was no allegation “ of a refusal to receive premiums or that the defendant had never recognized its contract or that it had not retracted its repudiation or that it was in such a position that it could not retract.” The court held, upon such a state of facts, that there was no breach of the contract, “because the time for performance by the defendant had not arrived.” It was held that the complaint alleged a breach only by anticipation. Citing Langan v. Supreme Council, American Legion of Honor, 174 N. Y. 266. Recognizing, as we should, the rule in the Kelly case, it has not the slightest application to the facts alleged in the complaint. Here the plaintiff, whose duty it was under his policy regularly to pay his' premiums, was absolved from further payment, not by a threatened repudiation of its obligation on the part of defendant, but by its overt act of reinsurance of all its policies in another company, coupled with a transfer to said company of all its assets and its cessation of life insurance business. The distinction sought to be drawn by the learned counsel for defendant between the facts in the case at bar and those appearing in the various cases which have recognized the rule reaffirmed in the Empire Mutual Life Ins. Co. case, supra, in that, insolvency was an essential factor in those cases and that insolvency was not here alleged, is more subtle than substantial. A study of [575] the cases hearing upon this phase of the discussion clearly shows that, although a condition of insolvency appeared in many of them, the underlying principle upon which a breach of the contract ivas recognized did not depend upon the fact of insolvency. In reason it should be sufficient to establish a breach upon the facts assumed in this case. The views that I have just expressed necessarily show my conviction that the absence of an allegation that defendant failed to exact ample security from the Pittsburg Company for the due performance of its alleged contract with defendant is not fatal to the plaintiff’s complaint. I am of opinion that a breach of the contract would be established, irrespective of the fact that complete security was exacted from the reinsuring company. The plaintiff was not bound to accept the new company. Its contract was with the defendant. The demurrer is overruled, with costs to plaintiff, but with leave to defendant to answer in twenty days upon payment of costs. Demurrer overruled.