Bane v. Travelers' Insurance

JUDGE HOLT delivered the opinion of the court. Tbe portions of tbe accident policy issued on tbe tenth day of January, 1883, by tbe appellee, tbe Travelers’ Insurance Company, upon tbe life of Patrick Bane, which are material to tbe consideration of this .case, read thus; “Tbe Travelers’ Insurance Company of Hartford, (Conn., in consideration of tbe warranties made in tbe application for this policy, and of an order on tbe Texas Pacific Railway Company for tbe sum of twenty dollars, payable by installments in accordance with said order, does hereby insure Patrick Bane in tbe principal sum of two thousand dollars for tbe term of twelve months, commencing at twelve o’clock noon on tbe day and date of this policy, tbe said sum to be paid to Mark Bane, if surviving. * * * * — 680 — £ £ Provided always, that in the event of any claim for injury to the insured before the actual payment of the-first installment under the aforesaid order, then from any amount found to be justly due by reason of said injury may be deducted the sum of all the installments-called for by said order, whereupon the order shall be-canceled, and the premiums for the full term of this policy receipted for as fully paid ; but if the sum found to be due under said claim shall be less than the unpaid installments covered by said order, then the sum adjudged to be due' to the insured shall be credited on account of the installments due or to become due under-said order. It being expressly understood and agreed that the first, second, third and fourth installments, specified in the aforesaid order shall apply only to the payment of premium for the first, second, third and fourth insurance periods of two, two, three and five months .each, and in the order named. It is also agreed that there shall be no liability under this policy for any claim by reason of personal injuries, as aforesaid, occurring in either of the said insurance periods for which the respective installments of premiums shall not have-been actually paid, except as herein provided for delay in payment of the first installment as the premium for' the first insurance period. * * If the company shall so elect, this policy may be canceled at any time, by refunding to the insured the premium paid by him, less, a pro rata part thereof for the time said policy has; been in force.” This is the order referred to in the policy : “Paymaster’s Order eor $20. “ To the Texas Pacific Railway Company: “ Please pay to the Travelers’ Insurance Company,, — 681 — of Hartford, Conn., or its authorized agent, the sum of twenty dollars, by installments, as follows: “First installment. Five dollars to be paid and deducted from my wages for the month of January, 1883. “Second installment. Five dollars to be paid and deducted from my wages for the month of February, 1883. ‘ ‘ Third installment. Five dollars to. be paid and deducted from my wages for the month of March, 1883. “Fourth installment. Five dollars to be paid and deducted from my wages for the month of April, 1883. “The first installment being the premium for two months, the first insurance period, under a policy of insurance issued to me by said company, and bearing even date and number herewith; the second installment being the premium for two months, the second insurance period under said policy; the third installment being the premium for three months, the third insurance period under said policy; and the fourth installment being the premium for five months, the fourth insurance period under said policy, all in accordance with the provisions and conditions of said policy and my application for the same. [Signed] “Patrick Bane.” The policy was delivered to the insured, and the: order to the insurance company. The insured worked for the railway company during January and February, 1883, but not during March and April following. He-resumed work for it on May first, and was killed on May 28, 1883. The order was never accepted by the682 railway company, but was left with it by tlie insurance company. The installments from the January and February wages were paid to the appellee by the railway company; but those for March and April were not paid, as the insured earned nothing during those months. On the tenth day of May, however, there was more than ten dollars due him from the railway company, and at his death the sum of forty-seven dollars and seventy cents, all earned during the month of May, 1883. The insurance company never demanded payment of the balance of the order of the railway company, and never notified the insured of its non-payment, or that the contract of insurance was at an end, and never returned the order to him or offered .to do so. The insurance company contends that, by the terms of the contract, the several payments were to pay for insurance in several periods; thus, the first payment for two months, or from January 10th to March 10th; the second payment for two months, or from the last-named date to May 10th; but that, if the third payment was not in fact made, then the insurance ceased at the end of the second period. In short, that the insurance was on the installment plan, and that the failure to pay the installment, ipso facto, worked an end of the contract. The beneficiary under the policy says, however, that by a fair construction of the contract, the period of insurance was twelve months; that in consideration of it, the insured gave the order for twenty dollars; that the provision in it as to how it was to be paid was merely directory, and but an indication to the drawee as to how he was to reimburse himself, and that it was — 683 — .an executed contract of insurance for a year. Moreover, if the order was not a bill of exchange by reason of being payable out of a particular fund, that yet it was binding on the drawer as a common law order, because prima facie it imported an indebtedness by him to the insurance company;' and as it neither returned the order to him or notified him of its non-payment, or that it elected in consequence thereof to consider the contract at an end, there was a waiver of any forfeiture or right of forfeiture upon the part of the company, -even if, under the contract, it had this right. In considering this question, the character of accident insurance must be borne in mind, and that the policy is a peculiar one. Undoubtedly, the rights of the parties should be reciprocal. The insurance company should not be allowed to occupy such a legal attitude that it can say, in case the insured lives : “You owe this order; ” but in case of his death, that “the insurance had expired by reason of its non-payment.” The manifest injustice of such an advantage has led to the adoption ■of the rule in this State, that where an insurance company has taken the personal obligation of the insured to pay a premium at a particular time on pain of forfeiture, the right to rely upon a forfeiture is waived by retaining the obligation after maturity without notice to* the insured of an intention to- consider the policy void. Here, however, the policy and the order constitute one contract, and there is no conflict between them. The order was to be paid in installments by the employer out of the wages of the employe for specified months. They were not earned when the order was — 684 — given, and the assignment could not operate until the-insured was entitled to the money. It was not an assignment of twenty dollars to be paid out of any money that might become due to the insured, but only five dollars out of his wages for each of four specified months, during two of which he earned nothing. Undoubtedly the drawee in the order had no right to-pay the balance due upon the order out of the May wages. The assignment did not embrace them, and such payment, if made, would have been at his peril. If made, and it had subsequently appeared that the-insured had assigned his May wages to another party, such party could have compelled payment from the employer, because the transfer to the insurance company was of specific wages. It therefore makes no difference-that when the second period of insurance expired, the insured had a sufficient amount of wages owing to him by the railway company, for the month of May, to have-paid the balance of the premium, or that this continued to be the case until his death. The only real question, it seems to us, is, whether the insurance company was required to return to the insured the order and notify him that the contract of insurance was at an end, upon peril, if it did not do so, that it should operate as a continuation of-the contract. By the express terms of the contract the insurance was to cease at the end of the second period if the premium for the ihird period was not paid. It is evident that the parties to the contract looked alone to the wages that were expected to become due from the railway company for the payment of the premium. It is unreasonable to suppose that the credit would. — 685 — otherwise have been, given by the insurance company. Railroad employes, as a general thing, are transitory persons, and it would be destructive of the accident insurance business as to them, if, by the mere giving of an order to the insurer, to be paid out of a fund to be earned by them in the future, they could ■compel the insurer to carry the insurance, although they should fail to work because they might not be hunted up and the order returned. In this instance the insured knew he had not earned the wages which he had assigned in order to continue the policy. If he had lived, and the insurance company had attempted to collect the balance of the order out of his May wages, ■could he not have claimed successfully that he did not "transfer them, and that he had chosen to let the policy lapse ? He knew that the expected fund had not been ■earned; that by the express condition of the policy its continuation depended upon payment in that way. The right of election was with him, and not with the company, under such circumstances. It wras his duty, if he desired to continue the policy, to have paid the installments, and his failure to do so terminated the liability of the company. It is really a misnomer to say that the policy in this instance was forfeited by the non-payment of the premium. The insurance, by the express terms of the policy, ceased because of such non-payment. The payment of the premium was a condition precedent to the continuation of the risk, and even a court of equity will hot interfere to release one from the consequences of such a failure. The order in this case, in view of the circumstances, — 686 — did not bind the drawer personally, and with, the cessation of the policy the entire contract was at an end. The case of Lyon v. Travelers’ Insurance Company, 55 Mich. Rep., 141, differs from this one in the controlling circumstance that there the insured had earned the wages out of which the premium was to be paid, thus providing for its payment; and they were, in fact, owing by the employer, and subject to the control of the insured. Judgment affirmed.