Leonard v. Prudential Insurance Co. of America

MaRSíiall, J. The appeal must be tested by the plain obligations of the insurance contract, and a few — perhaps but one — very familiar principles of law. The failure of the assured to pay the 1904 premium, due July 8th of that year, did not work a forfeiture of the policy. It caused, what is termed in the policy, a “lapsethe commencement of a period of two years during which it still possessed such vitality that, had death occurred within the first 120 days thereof, the appellant would have been liable for the [353] full amount stipulated in tbe policy; and tbat for tbe full term tbe assured, bad be lived, was entitled, as matter of contract right — a right bought and paid for, a right as fixed and 'certain as any other obligation incurred by tbe appellant or secured by tbe assured, — to have the policy fully restored upon bis paying tbe arrears of premiums, with interest at tbe rate of five per cent, per annum, and furnishing appellant evidence of bis insurability satisfactory to it. ,So tbe relations between tbe pasties to tbe insurance contract when tbe assured made bis application to revive tbe same were not, by any means, tbe same as those between an applicant for a policy in tbe first instance, and tbe company applied to, as appellant’s counsel contend. In tbe latter, tbe application could be rejected at tbe pleasure of the company; tbe attitude of tbe applicant being tbat of one offering to take from another tbat which such other is not under any legal -obligation to deliver. In tbe case in band tbe attitude of applicant was tbat of one demanding a right which, upon tbe conditions precedent in tbe contract to its ripening into a complete obligation, it was not within tbe. power of appellant to successfully withhold. When tbe application was made in due form, tbe arrears paid, tbe examination by appellant’s medical examiner submitted to, and tbe case fully made up so far as tbe assured was concerned for action by appellant, tbe latter was bound by tbe contract, by necessary implication, to pass upon tbe matter within a reasonable time, and if tbe result was unfavorable to notify tbe assured. Since tbe result of tbe examination by appellant’s instrumentality in tbat regard was in every way favorable to tbe assured, be bad a right to assume, not bearing to tbe contrary, tbat bis evidence of insura-bility was satisfactory. There was no provision in tbe contract for tbe issuance of a revival receipt, nor was there any custom to issue such evidence so far as tbe record shows. Tbe evidence indicates tbat tbe procedure for a revival was [354] (1) to make a written application, using a printed form furnished by the appellant, (2) to submit to an examination by the latter’s medical examiner, the result to be certified thereto by him in accordance with its furnished form, (3) the making of the necessary payment of arrears and charges to the local agent, whose duty it was to certify the fact in that regard, using a printed form likewise furnished for that purpose. These three instruments, showing upon their face the facts entitling an assured to a revival of his lapsed policy according to the method of doing business which appellant adopted and required, close a case ready for the latter’s consideration. The case here was thus fully closed, as appears, and placed in appellant’s possession about December 2, 1904. It would have been so closed and placed about one month earlier but for the inexcusable negligence of appellant’s medical examiner, for whose default it is responsible. The record thus' made, on its face, as is in effect confessed, showed every essential to a continuation of the policy subject to appellant’s approval. In considering the case so made, appellant was bound to act reasonably. The agreement to restore the policy upon specified conditions, when they were satisfied according to the prescribed procedure, wanting only appellant’s judgment upon the record made, carried with it, by necessary implication, the obligation to act reasonably and with fairness to the assured. Appellant had no right of arbitrary refusal, or right to act upon information secretly 'obtained without opjDortunity for the assured to meet it. Such a course was contrary to the letter and spirit of the insurance contract. The company was entitled to be satisfied of the insurability of the applicant before restoring the policy, but it had no right, by proceedings outside of anything contemplated by the contract, to create dissatisfaction. When in all reason it ought to have been satisfied or to have notified the assured to furnish further evi355 •denee, it was bound to be satisfied or to so notify Mm. It was also bound by contract, as well as in good morals, to act with some reasonable degree of promptness. „ Life insurance bas come to be deemed so essential to security of the family, in case of the bread-winning member -thereof being 'removed, that for an insurance company, which is continually inculcating that idea, to permit one to sleep upon the faith of an existing contract of insurance with it when there is none in fact, is a grievous wrong. For appellant in this case to remain silent, as-it did for weeks, knowing ■or having good reason to know that the assured supposed his ■contract had been restored, and in the meantime to pursue a secret investigation and then act upon information thus obtained without opportunity for the assured to meet it, was ■contrary to the plainest principles of justice, and wholly outside of anything that could reasonably have been in contemplation of the parties when the policy was issued. The contract right to a renewal of the policy nipón condition, by necessary implication, carried with it the right to have the proceedings for compliance with such condition treated according to common principles of fairness. The implied obligation of appellant to act with reasonable promptness in-passing upon the application for a renewal of the policy was clearly breached by negligence of its medical examiner in failing to send in his report for some thirty ■days after the examination and negligence of the appellant in failing to pass upon the case made for some six weeks after receiving the proofs. The implied obligation of appellant to notify the assured of its adverse action within a reasonable time after it occurred, and to return, the money paid to it for the renewal, was clearly breached by failure to bring the matter to the attention of the assured during the seventy days he lived after such occurrence. Appellant’s silence for some two months after an apparently perfect case for revival was submitted, precluded it, on [356] principles of estoppel in pais, from subsequently being beard to the detriment of the beneficiary. He wbo remains silent wben in justice to another be ought to speak, will not be beard to that other’s prejudice wben be subsequently breaks such silence, is a rule of equity that applies very clearly to the facts of this case. The case is one so clearly ruled on familiar principles applicable to contracts of insurance, construed as was evidently intended in this case, that we have reached the conclusion indicated, without any such call for the citation of authorities by way of illustration as to warrant referring thereto. The array of authorities pressed upon our attention by counsel for appellant, dealing with original applications for insurance, are doubtless right as regards the facts with which they deal, but they are entirely unsuitable as guides in reaching a proper decision in this case. Here there was a contract of insurance in part, as has been said, when the application for revival was made. It had been paid for, and as to the right of restoration it was in full force when the assured’s case in that regard was submitted for consideration. It cannot be characterized otherwise than a fraud upon the latter and his beneficiary, to go outside such case and act adversely thereto upon information stealthily obtained, giving no opportunity to be heard in opposition thereto, and then to remain silent till the death of the assured, though there was ample time to. have acquainted him with the facts days and weeks prior thereto. Such conduct is so out of harmony with the theory and spirit of life insurance contracts, and so contradictory to the attitude uniformly assumed by life insurance companies-in soliciting patronage, as to be manifestly outside of anything contemplated by both parties to the policy in question., It cannot receive favorable consideration at the bar of justice. By the Court. — Judgment affirmed.