Germania Life Insurance v. Bouldin

McLean, J., delivered tbe opinion of tbe court. In 1892 one J. D. Thompson, a resident of Memphis, Tenn., was tbe agent of tbe Germania Life Insurance Company of New York. His jurisdiction embraced the states of Mississippi, Arkansas, and West Tennessee. Tbe contract between Thompson and tbe insurance company was in writing. This contract consists of some fifteen provisions, but it is only necessary for the purpose of this- case to refer to tbe first three provisions. — 669 — thereof. The first provision authorizes Thompson to receive applications for insurance, to accept the first premium on each and every policy of insurance which shall be issued by the insurance company upon applications ■obtained through said agent, and also to receive such ■other premiums payable to the principal within the district aforesaid. The second clause provides that the agent shall protect the insurance company for the faithful performance of his duties as agent by a bond of five thousand dollars, to be approved by the insurance ■company. The said agent had power, and it was his ■duty, to appoint local agents, with the consent of his principal, in all places within the district covered by the contract. Further, he (the agent) should superintend the local agents within- the said district, visiting them from time to time for that purpose, and is to be held responsible for premiums collected by them, as well as for other of their acts as such local agents. It is further provided that it shall be the duty of the said agent to properly attend to such matters pertaining to the business of the insurance company within the district aforesaid, as may be referred to him by the company. The sixth provision provides that in the conduct of his business he (the agent), is to exactly observe the general rules which have been or may be hereafter adopted by the party of the first part for his agencies, and such instructions as may be given by the party of the first part. The deposition of the vice president of the company was taken, and he says that the company at that time had no other agent to solicit business for it in Mississippi, and that Thompson had no other authority than that ■contained in the contracts above mentioned. Some time prior to May 18, 1892, the appellee was solicited by Thompson, the agent, to take out a life insurance policy with the Germania Life Insurance Company, and the appellee made written application for a three thousand dollar policy upon the twenty-payment plan, — 670 — This application was delivered by the appellee to Thompson, • the agent of the company, and Thompson forwarded this application to the company at its home office in New York. On the 18th day of May, 1892, Thompson addressed and mailed to the company in New York the following letter: "Office of the Germania Life Insurance Company, New York. J. D. Thompson, General Manager Southwestern Department, Mississippi, Arkansas and West Tennessee. Memphis, May 18, 1892. Gentlemen: Some time ago I wrote making inquiry as to the disposition of the application of Mr. M. J. Bouldin for a three thousand dollar policy. Kindly advise what action was taken, and oblige. Yours respectfully, J. D. Thompson, Manager.” This letter was promptly received by the company in New York, as it appears that a few days thereafter, to wit, May 23, 1892, the company answered this letter and addressed Thompson as follows: "J. D. Thompson, Esq., Manager, Memphis, Tenn.” — in which the company says that it is awaiting1 some additional information as to this risk, but "will inform you” (Thompson) of the action of the company as soon as such information shall have been received by it. This deposition of the vice president of the company shows that during the year 1892, beginning as early as the 1st of March of that year and ending with the 1st of September, 1892, the company received letters addressed to it by Thompson upon the stationery of the company, upon which was printed or engraved the following language: "Germania Life Insurance Company of New York. J. D. Thompson, General Manager Southwestern Department, Mississippi, Arkansas and Tennessee, Memphis” — and said company, through its vice president, further testifies that 'the majority of these letters had as their letter head the following printed or engraved language: "Office of the Germania Life Insurance Company of New York. J. D. Thompson, Manager Southwestern Department, Memphis.” — 671 — The company, after having further considered the application, declined to issue the twenty-pay policy, but it did issue in lieu thereof the fifteen-year policy, this policy being dated the 28th of July, 1892, and forwarded this policy to its agent, Thompson, at Memphis, for the purpose of being delivered by Thompson to the applicant. This policy was received by Thompson, the agent, at Memphis, Tenn., some time prior to August 15, 1892, and on that day, August 15, 1892, Thompson, the agent, addressed a letter to the assured, Bouldin, at Friars Point, Miss., wherein he forwards to Bouldin the insurance policy, together with this letter, and in which, among other things, he writes as follows: “Herewith I hand you policy 88801 on your life for three thousand dollars, with annual premium of one hundred and nine dollars and eighty cents. This policy, as you will see, is on the fifteen-year tontine plan, and only differs from the policy for which you made application in being for fifteen years in place of twenty, and I think is much better for you. The only thing is the policy costs you a little more, but it is paid up five years sooner.” This letter was written upon the stationery of the insurance company, upon which was printed or engraved the following: “The Germania Life Insurance Company of New York. J. D. Thompson, General Manager Southwestern Department, Mississippi, Arkansas, and West Tennessee.” In due course of mail Mr. Bouldin received this letter inclosing the policy. He says that he never read the policy, but put it away, and he did not know what was in the policy until a short time before the expiration of the fifteen years. There is a great deal of testimony in the record as to what Thompson; the agent, said to Bouldin as to the benefits to be derived from the policy, and as to Bouldin’s reliance upon said statements, both verbal and written. We omit entirely all of this, because it has no bearing upon the question at issue, for the reason — 672 — that the policy, and the policy alone, speaks the contract between the parties, and any representations or statements made outside of the policy, either verbally or written, are inadmissible, and can have no bearing upon the question presented. Bouldin promptly paid all of his premiums for the fifteen years. Subsequently to the issuance .of the policy, the date as to the payment of the premiums was changed by the consent of both the assured and the company itself, and the premiums were made payable quarterly, instead of annually. We leave out of consideration altogether the testimony of the assured to the effect that he never read this policy until a short time before the expiration of the tontine period, to wit, the fifteen years, for the reason that as heretofore stated, the assured was charged with notice of everything in the policy, whether he read it or not. A short time previous to the maturity of the policy the assured addressed a letter to the company at New York, this letter being dated June 22, 1907, in which he writes that this policy would mature on the 28th of next month (July), and asks the company for full information as to the exact amount and options of settlement, and requesting specially the amount of settlement upon surrender of policy for cash, paid-up policy, and paid-up policy for face of policy, three thousand dollars, and cash. This letter was received by the company promptly, and on June 26, 1907, the company replied, stating options as follows: “There would be payable on July 28th next the guaranteed reserve of one thousand two hundred and eighty-four dollars, and its accumulated dividend, amounting to one hundred ninety-two dollars and eighty-two cents ”• — and referring Mr. Bouldin to a Mr. Shumaker, in Jackson, Miss., who at that time was the agent of the company, and who would be pleased to communicate with him (Bouldin) further on the subject. After that the assured demanded of the agent of the company the settlement hereinafter referred to, and which is in — 673 — accordance with what we regard the terms of the policy. The demands of the assiired were denied, and thereupon the complainant brought this his bill in the chancery court, wherein he set forth the facts relating to the transaction, and prays, first, that the defendant be required specially to perform said contract according to its tenor and effect as the said bill specifically charged; or if mistaken in the force and effect of the contract, and if same shall be held not to embody the true intent, meaning, and purpose of the parties, that the said contract be reformed so as to make it speak the true intent of the parties; or, third, if mistaken, that the court adjudge that no contract of insurance was entered into between the parties, that the defendant wrongfully and fraudulently secured of the complainant the aforementioned sums of money, and a decree be rendered against the defendant for all of said sums of money paid it by the complainant, with interest, etc. — and then prays for general relief. The defendant answers, and admits ■ that the policy was issued upon the application of the complainant, denies that any representations made by the company or its agents are pertinent or relevant, and insists that the contract of insurance was fully set forth in the policy as issued by the defendant and accepted by the complainant, and further insists that it was immaterial whether the defendant, prior to-the delivery of the contract, made any representations as to its terms, etc., admits that the complainant paid all the premiums on the policy as required by its terms, and further alleges that the defendant offered to pay to complainant the sum of one thousand four hundred and seventy-eight dollars and eighty-two cents upon the surrender and cancellation of said policy, etc. The policy as issued bears date July 28, 1892, and provides that, in consideration of the annual premium of one hundred and nine dollars and eighty cents, there is to be paid the wife of said in — 674 — sured the sum of three thousand dollars upon the death of said insured and proof of death, provided said death occurs before noon of the 28th day of July, 1907. The policy, among other things, provides that “this policy is issued and the same is accepted by the assured upon the express conditions and agreements printed on the back hereof, which are referred to and made a part hereof.” On the back of the policy, and under the heading, “Conditions and Agreements of This Policy,” are printed certain stipulations: First, providing for the payment of premiums; second, service in war; third, travel and residence; fourth, occupation; fifth, suicide; sixth, untrue statements; and then, under the head of agreements, are these provisions: “This policy, together with all other dividend tontine policies, the dividend tontine period of which terminates in the same calendar year, shall form a special dividend class, and-that the said assured, if the person upon whose life insurance is taken, shall be living at noon of the 28th day of July, 1907, and if this policy shall have been kept in force until then, for its full amount, shall then, with all ihe other assured of the same class whose policies are then in force for their full amounts, share in the apportionment'of the dividend fund accrued to the said class.” It is further agreed that, “upon due surrender of this policy on the day last above mentioned, if this policy shall have been kept in force until then, the company will pay to the legal holder the sum of one thousand, two hundred and eighty-four dollars.” From the evidence in the case, such were the terms and stipulations of the policy when it was forwarded by the company from its home office in New York to Thompson, the manager of the company at Memphis, Tenn. ; the company forwarding this policy to its agent, Thompson, for the purpose of delivery by Thompson to the assured. When Thompson received this policy, he pasted on the back of it a slip, or rider, as follows: . — 675 — “TO LIVE AND WIN. “An Investment Insurance. “Age 30. Amount of policy, $3,000.00 “Annual premium, $109.80, payable for 15 years. “Dividend period, 15 years. If death occurs during dividend period, your heirs will receive ................................................$3,000.00 At the end of the dividend period you can select one of the following options: I.Surrender policy for cash .................................................. ] Reserve, $1,284 "I J Surplus, 777 j $2,061.00 Reserve guaranteed and amount stated in policy. Surplus guaranteed, but amount estimated based on past experience. Total premium^ paid in 15 years ....................$1,647.00 Fifteen years’ life insurance free and profit............ 414.00 II.Paid-up policy for $4,770, having cost only ............ 1,647.00 III.Paid-up policy for $3,000 and cash .................... 777.00 “You will receive dividends during life on paid-up policy under second and third options. “Policies non-forfeitable and incontestible after three years, and can be surrendered either for paid-up policy or their cash value. “Cash loans made on policies, after they have run three years or longer, 85 per cent, of reserve at 6 per cent, interest.” Thompson, the agent, after having pasted this slip, or rider, on the back of the policy, and just immediately over the printed conditions and agreements, forwarded the policy, with the slip thereon, by mail to the assured at his post office in Friars Point, Miss., and, as herein-before stated, wrote him the letter dated August 15, 1892. "We emphasize three things: First, that the insurance company forwarded the policy to its agent, Thompson, in Memphis, to be delivered by Thompson to the assured ; second, that Thompson, the agent, attached to the insurance policy the rider, or slip, hereinbefore men — 676 — tionecl, and forwarded the policy, with the rider thereon, to the assured; and, third, that the assured had no notice or knowledge whatever that Thompson, the agent, attached the rider or slip to the policy, but, upon the other hand, the assured believed that the policy, when received by him, was in the same condition as when it left the home office of the company, with the rider or slip attached thereto. The lower court held that the policy does not state and embody any contract of insurance according to the true intent and meaning of the parties, that the minds of the parties never met with respect to the terms of any policy of insurance," and the court, finding that the complainant paid to the defendant -the annual premiums for fifteen years, entered a decree in favor of the complainant for the total sum of all the premiums paid, together with six per cent, interest thereon, the premiums, with the interest, amounting to two thousand, eight hundred and seventy-five dollars and eighty-two cents, and entered a decree against the defendant for the payment of this sum of money. We do not know of any principle upon which this decree can be sustained. “It is a faithful saying, worthy of all acceptation,” that when a party comes into a court of equity he is required to do equity, and it is clear, under the facts of this case, that if the complainant had died at any time during the life of this policy — that is, within the fifteen years — the company would have been required to have paid the beneficiary the full amount the policy called for, to wit, three thousand dollars. In other words, the company would not have been in position to have claimed that the policy was not in full force and effect. It was surely bound thereon, and the complainant, having received the protection for the fifteen years, is ex aequo et bono compelled to pay for this protection. It certainly would be inequitable and unjust to require the insurance company to refund the total — 677 — amount of the premiums received by it, together with the legal interest thereon; but, upon the other hand, it is right and proper that the amount should be charged out of this sum with whatever amount was sufficient to carry the insurance for the period prescribed by the policy. However that may be, .we take a very different view of this ease from what the learned chancellor in the court below did. The complainant, who from the evidence is a gentleman of intelligence and splendid business capacity, received the policy, and, instead of informing himself of its terms and conditions, placed the policy among his valuable papers, and it' was only a short time before the expiration of the fifteen years when he read the policy and made any effort whatever to inform himself of its contents. In New York Life Insurance Co. v. O’Dom, recently decided by this court (page 19 supra), 56 South. 379, we held that a party who accepts an insurance policy is bound to know, and is chargeable with, the provisions of the policy. It is bound to be the law that although the party may not have read the provisions of his policy, and relied in ignorance of them upon the express representations of the agent, this .fact cannot help him when the policy has actually been placed in his hands. It is his business to know what the contents of the written contract of insurance are, and there can be no difference in this respect between an insurance policy and any other contract. In the absence of any fraud in the making of an insurance policy, the insured must be held to a knowledge of the conditions of his policy, as he would be in the case of any other contract or agreement. Itcertainly would be inequitable and inconsistent with every safe, sound rule of conduct to permit one party to a contract to accept without examination a written contract, and to lay it aside for a long period of time, and then, when the period of termination is about to expire, to for the first time inform himself of its terms. — 678 — It shocks the conscience and is at variance with every known rule of business. If the complainant had been an ignorant and illiterate person, and one who was unable to either read or write, it may be that in such an instance he would have the right to rely upon the representations of the company or the agent, as the case may be. This question, however, is not presented by this record for adjudication. We therefore must assume that the complainant, when he received this policy, knew of its terms and conditions and provisions. The law charges him with this notice, and in the eye of the law, knowing the contract and having accepted the policy, he is bound by the terms thereof. The powers possessed by agents of insurance companies, like those of any other corporation or of an individual principal, are to be interpreted in accordance with the general law of agencies. No other or different rule is to be applied to a contract of insurance than is applied to other contracts. The agent of an insurance company possesses such powers only as have been conferred verbally or by the instrument of authorization, or such as third persons had a right to assume that he possesses under the circumstances of each particular case.- Cases frequently arise where the principal is estopped from denying the authority of his agent, and this is especially true where the agent, with the knowledge and consent of the principal, holds himself out to the world as having certain powers. The essence of estoppel is that the party asserting the agency was deceived by the conduct of the party against whom it is asserted, and, 'though fraud may be an ingredient of the case, it is not essential. The principal need not authorize the agent, to practice a fraud on third parties, yet if he authorize his agent to transact the business with a third party, and in so doing the agent practices the fraud on the party, the principal is liable. The estoppel may be allowed on the score of negligent fault of the principal. Where one or — 679 — two innocent persons must suffer loss, the loss will he visited on him whose conduct brought about the situation. We have seen from the evidence in this case that the company forwarded this policy to Thompson with instructions to deliver it to the assured, and that the assured accepted the policy without any notice or knowledge whatever that the slip, or rider, thereon was not placed there by the company itself at its home office in New York. The conclusion must inevitably follow that under such circumstances the company is bound by any alteration or modification made by its agent, Thompson, in the transaction of this business. The printed conditions, referred to in the body of the policy as being upon the back of the policy, originally contained a blank space to be filled in by writing therein the amount, and this blank was filled in by the company writing therein the amount, to wit, “twelve hundred and eighty-four dollars.” Now, suppose that, when the agent, Thompson, received this policy, he had erased these written words, “twelve hundred and eighty-four,” and had inserted therein a different sum; would it be doubted that the company would not be responsible for the acts of its agent, Thompson, in inserting in this blank space the amount? ' It is a well-settled rule of law that insurance policies are always construed most strongly against the insurance company, and most favorably for the assured. When the assured received the policy in suit, he read, or is presumed to have read, as advised in the policy, the conditions and agreements printed on the back thereof, and was therefore authorized to construe those conditions and provisions most favorably for himself. We find on the back of this policy a printed agreement to the effect that, upon the surrender of this policy at the expiration of the tontine period, the company would pay to the legal holder the sum of one thousand, two hundred — 680 — and eighty-four dollars, and in addition the insured would share in the apportionment of the dividend funds accruing to the class to which this policy was then in force. Upon examining the slip or rider that was attached to the policy, we find under the first condition the amount of the reserve is one thousand, two hundred and eighty-four dollars as this corresponds with the amount stated in another condition printed on the back of the policy. The surplus is seven hundred and seven-seven dollars, and, while this surplus is not guaranteed, yet the amount “is estimated, based on past experience.” We hold that the slip or rider, as pasted on the back of the policy by the agent, Thompson, is a part and parcel of the contract of insurance, and that the complainant is .entitled to demand and claim either one of the three options offered to him, to wit: First, the guaranteed reserve of one thousand, two hundred and eighty-four dollars, plus whatever sum may be apportioned by the company of the dividend fund accrued to all the policies in this same class, which amount is not shown in the evidence ; or, second, he has the right to demand a paid-up policy for four thousand, seven hundred and seventy dollars, payable at his death; or, third, to demand a paid-up policy for three thousand dollars and seven hundred and seventy-seven dollars in cash, and that, if he accepts either the second or third option, he will receive dividends during the life of the paid-up policy. There is nothing on the slip showing or stating that the amount of paid-up insurance is merely an estimate, but the same is an unqualified guaranty or representation as to the amount of paid-up insurance. Reversed, with instructions that a decree be entered in accordance with this opinion. Reversed.