Clappenback v. New York Life Insurance

Dodge, J. Tbe first and most important question is tbat of tbe true construction of tbe so-called automatic nonfor-feiture clause quoted in tbe statement of facts. This policy provided for payment of premiums considerably in excess of tbe cost of carrying tbe insurance, whether as fixed by tbe laws of New York or as ascertained by defendant’s actuaries. It therefore contemplated tbat at all times after tbe first payment tbe insured would have in tbe defendant’s bands a certain surplus or reserve fund belonging to him, which, but for agreement to tbe contrary, be should equitably have a right to withdraw upon discontinuance of tbe insurance. This policy provided against such withdrawal and, in effect, that defendant should keep this fund, and in consideration thereof tbat it would continue the insurance of $1,000 for six years and four months. Tbe policy, however, gave tbe assured an election to commute such $1,000 insurance for a limited time into paid-up life insurance of $164-, on written request made within six months after default in premiums. Tbe amount was to be tbe same whether be gave tbat notice at tbe beginning or tbe end of tbe six-months period. Tbat is, the assured at least could, if be chose, perpetuate the $1,000 liabil [630] ity up to tbe end of tbe six-months period; and it is therefore certain that tbe company’s actuaries computed and deducted tbe cost of $1,000 for tbe whole of that period1 in order to ascertain tbe amount of tbe surplus which it would apply to paid-up insurance. Of course tbe cost of $1,000 insurance for six months is more than for one month, and for any given term it is greater than the cost of $164 insurance for tbe same term. It is therefore obvious that on January 2d less of Clappenback’s surplus bad been exhausted than would have been on April 20th, and upon a fair commutation the balance would have purchased a larger amount of paid-up insurance. The statutes of New York, when this policy was written, forbade all discrimination between policy-holders of the same class, and required that paid-up insurance be accorded to the full amount that the existing reserve would purchase at the established rates. Ch. 85, Laws of 1898. Whether such foreign statute was properly before the court or not, the general policy thereby expressed is part of the law of this state. Sec. 1955o, Stats. (1898). This contract, as construed by defendant and by the trial court, would be in defiance of the policy of these statutes. It would give to one who declared his election before the six months had expired less insurance than to another, similarly situated, who withheld such declaration till the end of that period. It would give to the former less insurance than his reserves would purchase at established rates, if $164 was the correct amount purchasable by the reserves at the end of six months. Even an apparently unambiguous contract may be rendered ambiguous and open to construction if its words, taken literally, lead to absurdity or illegality when applied to the facts, Rice v. Ashland Co. 108 Wis. 189, 193, 84 N. W. 189; Rossmiller v. State, 114 Wis. 169, 118, 89 N. W. 839; Loper v. Sheldon's Estate, 120 Wis. 26, 97 N. W. 524; Pape v. Carlton, 130 Wis. 123, 109 N. W. 968; State ex rel. Williams v. Samuelson, 131 Wis. 499, 505, 111 N. W. 712. [631] But we do not think tbis contract clear and unambiguous. It nowhere expressly declares wben tbe substitution of paid-up for term insurance shall take place; merely that tbe term insurance shall persist unless tbe written request for full-paid insurance be made within six months. It also, by clearest implication, provides that tbe company shall take out of the reserve and retain full payment for six months $1,000 insurance immediately on happening of the default. We think the implication is plain that the insurance liability shall continue during that whole six-months period, regardless of when assured shall malee up his mind that for the future he prefers the full-paid insurance for the smaller sum. The policy contemplates the act of election as one likely to take place at any time within the six months; but to hold that the parties intended that by the act of election the' absolute liability for $1,000 insurance which assured had paid for should be reduced to a liability no more absolute and no different in character during the rest of the six months of only $164 involves the absurdity that both parties assumed the likelihood that the' assured woixld for no consideration whatever surrender $836 of the absolute $1,000 of liability. Such an act with reference to a promissory note would be absolutely void for want of consideration. It is unbelievable in case of a contract like this., We think no purpose could have honestly or legally been intended expression by the words used, save that both parties were bound without option to continuance of the full insurance for six months, and that the option of assured was to choose between the two equiva-< lénts: continuance of $1,000 insurance after that time for a specified period or $164 for his life; that, in other words, the option could not apply to the period during which his rights were fixed independent of any choice or election by him. This view is entirely consistent with, and, we think, confirmed by, the indorsement in fact made on the policy as [632] quoted in tbe statement of facts. Had tbe intention been to declare $164 of paid-np insurance from tbat date in present substitution for tbe pre-existing contract, it was easy to say just tbat in few words. Instead of tbat it is declared that it is “indorsed for” paid-up insurance of $164, “subject to tbe conditions of this policy” and “pursuant to tbe insurance law of New York.” It also recites tbe date of default in premium, which is of no relevancy to a new agreement for present change to a paid-up policy. Tbat date, however, is relevant and significant if “indorsed for paid-up insurance” means shall become effective for paid-up insurance, subject to tbe conditions of this policy and pursuant to tbe insurance laws of New York, to wit, at the end of tbe six-months period from such date of default, for which period tbe company has taken payment for maintaining $1,000 insurance and at which time the $164 will be tbe amount of full-paid insurance purchasable at established rates by the sum of the amount of reserves or surplus of premiums paid by assured. That is what the indorsement ought to mean, and, since it is fairly susceptible of such construction, we think that is what it does mean. We conclude that at the time of the death of Henry 0. Clappenback, January 3, 1906, the policy was in full force as insurance for $1,000, and it is therefore unnecessary to consider whether he had effectively withdrawn his election to substitute paid-up insurance before the defendant had acted upon it. By the Gouri. — Judgment reversed, and cause remanded with directions to enter judgment in plaintiff’s favor for $1,000, with interest and costs.