Kavanaugh v. Security Trust & Life Insurance

Mr. Justice Netl, after making the foregoing statement of facts, delivered the opinion of the Court. 1. In Insurance Co. v. Hyde, 101 Tenn., 396, 404, 405, 48 S. W., 968, the court quoted as laying down the proper rule the following from Joyce on Insurance, vol. 2, sec. 182, viz.: “If a life insurance company has been in the practice of notifying the insured of the time when the premium will fall due, and of the amount, and the custom has been so uniform and so reasonably long in continuance as to induce the assured to believe that a clause for forfeiture for nonpayment will not be insisted on, hut that the notice will precede the insistence upon the forfeiture, and the insured is, in consequence, put off his guard, such notice'must he given, and, if not given, no advantage can be taken of any default in payment which it has thus encouraged, for the insured is entitled to expect the customary notification, and to mislead the insured by not giving such notice, and then insist upon a strict compliance with the conditions of forfeiture, constitutes, under such circumstances, a fraud upon the assured which the courts have refused in numerous cases to countenance” — citing Helme v. Philadelphia Life Ins. Co., 61 Pa., 107, 100 Am. Dec., 621; Mayer v. Mutual — 42 — Life Ins. Co., 38 Iowa, 304, 18 Am. Rep., 34; Union Central Ins. Co. v. Pottker, 33 Ohio St., 459, 31 Am. Rep., 555; N. Y. Life Ins. Co. v. Eggleston, 96 U. S., 572, 24 L. Ed., 841; Insurance Co. v. Pierce, 75 Ill., 426; Grant v. Alabama Gold Ins. Co., 76 Ga., 575. Other-authorities to the same effect are Gunther v. New Orleans Cotton Exchange Mut. Aid Ass’n (La.), 5 South., 65, 2 L. R. A., 118, 8 Am. St. Rep., 554; Manhattan L. Ins. Co. v. Smith, 44 Ohio St., 156, 5 N. E., 417, 58 Am. Rep., 806, 808; Johns v. Insurance Co., 2 Wkly. Notes Cas. (Pa.), 243; Globe Mut. Life Ins. Co. v. Johns, 4 Wkly. Notes Cas. (Pa.), 131; Meyer v. Knickerbocker L. Ins. Co., 51 How. Prac. (N. Y.), 263; Alexander v. Cont. L. Ins. Co., 67 Wis., 422, 30 N. W., 727, 58 Am. Rep., 869; Atty.-Gen. v. Cont. L. Ins. Co., 33 Hun (N. Y.), 138; Heinlein v. Imperial L. Ins. Co. (Mich.), 59 N. W., 615, 25 L. R. A., 627, 45 Am. St. Rep., 409; Elgutter v. Mut. Res. Fund L. Ass’n, 52 La. Ann., 1739, 28 South., 289; Mut. Res. Fund L. Ass’n v. Hamlin, 139 U. S., 297, 11 Sup. Ct., 614, 35 L. Ed., 167. In Mayer v. Insurance Co., supra, the underlying reason is thus stated: “Every law should he reasonable, and it is reasonable only when it is adapted to human conduct. Courts should not so administer the law as to require of individuals a course of conduct which, to a majority of reasonable and right-minded men, is unusual and unnatural. Indeed, it would be impossible long to maintain a law which is at variance with the judgment and sense — 43 — of justice of a majority of those upon whom it operates. “Now, it must strike every reasonable mind that a majority of ordinarily prudent persons, who had been Customarily notified of the time when premiums upon their policies became due, and who' had received no notice of an intention to abandon the customary course, would, in a particular case, expect and await a like no-, tice. And, if such is the reasonable and natural result of the previous dealings of the company, it must govern its future conduct so as to accord with the reasonable expectation thus created; that is, having furnished a policy holder reasonable ground for expecting that he will be advised when his premium becomes due, the company must continue to give such notice until it furnishes the assured notice that he need no longer expect it. Any other construction would make the law a trap to insnare the unwary.” Mayer v. Mut. Life Ins. Co., 18 Am. Rep., 34, 38. In the absence of a statute, or of an express term in a contract, making sufficient the mere mailing of a communication containing information of the approaching maturity* of the premium, it must appear that such communication was received before it can be operative as notice, and thereby effect a forfeiture of the policy upon failure to pay at the day. Brattleboro East Soc. v. Reed, 42 Vt., 76; Cont. F. Ins. Co. v. Adams, 8 Ky. Law Rep., 269; Protec. L. Ins. Co. v. Palmer, 81 Ill., 88; Castner v. Farmers’ Mut. F. Ins. Co., 50 Mich., 273, 15 N. W., 452; Burhans v. Corey, 17 Mich., 282; Mullen v. Doc — 44 — hester Ins. Co., 121 Mass., 171; Wachtel v. Noah Widows’ & Orphans’ Ben. Soc., 84 N. Y., 28, 38 Am. Rep., 478; McCorkle v. Texas Ben. Ass’n, 71 Tex., 149, 8 S. W., 516; Merriman v. Keystone Mut. Ben. Ass’n, 63 Hun, 635, 18 N. Y. Supp., 305; Id., 138 N. Y., 116, 33 N. E., 738; Crown Pt. Iron Co. v. Aetna Ins. Co., 127 N. Y., 608, 28 N. E., 653, 14 L. R. A., 147; Amer. F. Ins. Co. v. Brooks, 83 Md., 22, 35, 34 Atl., 373; Peabody v. Satterlee, 166 N. Y., 174, 59 N. E., 818, 52 L. R. A., 956; United States Mut. Acc. Ass’n v. Mueller, 151 Ill., 254, 37 N. E., 882; Cronin v. Sup. Council Royal League (Ill.), 65 N. E., 323; State v. Ins. Co., 106 Tenn., 282, 294, 295, 61 S. W., 75. We shall now refer more particularly to some of the foregoing authorities. In Brattleboro East Society v. Reed, it was held that notice of an assessment, sent by mail pursuant to a condition for a forfeiture in case of nonpayment after six months’ notice, ran, not from the time when the notice was deposited in the post office, but from the time when the party received it. In Continental Fire Ins. Co. v. Adams, it was held that the mere act of posting notice through the mail did not operate as notice to the insured. In Protect. L. Ins. Co. v. Palmer, it appeared that the policy provided the assured should within thirty days from the date of notice pay to the company the assessment, collection costs, and annual dues, and a failure to do so should render it null and void and of no effect. It — 45 — was 'held that the provision concerning thirty days’ notice meant from the day notice was received by the party to whom it was sent, and not from the day on Avhich it was dated or mailed. In Castner v. Farmers’ Mutual F. Ins. Co., it appeared that it was provided by the charter of the mutual company that its members should be “notified by the secretary, or otherwise, either by circular or a verbal notice,” of assessments made upon them, and if payment was not made in sixty days the insurance should be suspended. Notice was mailed in this case June Bd. The fire occurred October 5th. Plaintiff claimed that notice was not received until some time in September. It ivas admitted that within sixty days of its receipt a tender of the amount due upon the assessment was made and refused. It was held that the policy was not liable to suspension until the expiration of the specified time after notice was received. In Burhans v. Corey (not an insurance case, but germane upon the subject of notice by mail), it was held that the mere mailing of notice was not sufficient; that it must have been received. In the opinion of the court it is said: “A party can be in no actual default who proceeds to comply with a notice as soon as he receives it, and to hold him guilty of a constructive default, when he has always been willing to do his duty, can only be allowed where he has consented to run the risk of a safe transmission through a given channel.” Id.,Id., 17 Mich., 285. — 46 — In Mullen v. Dorchester Ins. Co., it appeared that there was a notice of assessment sent to a policy holder by mail, but not received by him. The directors of the company afterwards voted to cancel all policies the holders of which had not paid the assessment, and notice of such cancellation was sent to the policy holder by mail, but was not received. It was held there was no forfeiture. In Wachtel v. Noah Widows’ & Orphans’ Ben. Soc., 84 N. Y., 28, 38 Am. Rep., 478, it was held: “In. the absence of any agreement by the member or any provision in the charter or by-laws for a different mode of service, it should be made personally, as is required at common law, where the .object is to deprive a party of his rights or property; or, if that can be dispensed with, in such other mode as may be likely to' effect its object.” In McCorkle v. Texas Ben. Ass’n, it appeared there was a by-law that required notice of assessment to be sent to each member, and this by-law provided that: “Any person who shall fall in arrears for dues or contributions after thirty days’ notice shall cease to be in good standing and shall forfeit all rights and claims to any and all benefits of the association.” It was the custom of the officer charged with the duty to mail such notice to each member. It was held that a reasonable construction of the by-laws required that notice should be in fact given to a member before a forfeiture would result from a failure to pay dues, etc., and that mailing to a member through the post office was not such notice. — 47 — Referring to the case of Castner v. Farmers’ Mut. Ins. Co., supra, the court said: “The rule laid down by the Michigan court, we think, is fair and just to both parties, and should be followed. To deprive a person of his property rights without any notice is contrary to reason, and such a claim should not be enforced by the courts unless the terms of " the contract plainly require it.” In United States Mut. Acc. Ass’n v. Mueller, it was held that, where the by-laws of the association contained the provision that “payments are to be made . . . within thirty days of the date of the notice thereof,” this meant from the date of the service of the notice, and not from the date of the writing; and in Cronin v. Supreme Council Royal League., it was held that, when the by-laws of a beneficial association provided that payments of assessments should be made within thirty days from the date of the notice, a member was not in default until thirty days from the time notice was received. In Crown Point Ins. Co. v. Aetna Ins. Co., the question wa.s whether the notice of the cancellation of a policy of insurance would date from the mailing of the policies or from the actual reception of the notice. Speaking to this subject the court said: “It is contended by the defendants that the mailing of the policies with a letter stating the object sufficed to cancel them, because it was equivalent to the acceptance of a proposition by mail; and the following cases are cited, among others, in support of the position: Trevor — 48 — v. Wood, 36 N. Y., 307, 93 Am. Dec., 511; Vassar v. Camp, 11 N. Y., 441; Mactier v. Frith, 6 Wend. (N. Y.), 103, 21 Am. Dec., 262; Brisban v. Boyd, 4 Paige (N. Y.), 17, 3 L. Ed., 322. These were cases of contracting wholly by letter or telegram. It was long ago held that, if an offer made by mail is accepted by mail, the contract, is. complete from the moment the letter of acceptance is mailed, even if it is never received. Vassar v. Camp, supra. Those cases have no application here, because no negotiation was pending, and no contract was proposed. The plaintiff did not make an offer to the insurance companies that might or might not be accepted. It sought to do an act that would be binding on the companies, whether they were willing or not. That act was a surrender of the policies with the request that they be terminated, and the act could not be complete until the request reached the companies or their agent. The policies and notice might have been sent by a messenger, who would have been the agent of the plaintiff for that purpose. Having been sent by mail, it was none the less the agency of the plaintiff than if a messenger had been selected. It was necessary for the plaintiff, in order to terminate the policies, to have its notice actually reach the companies or their representatives, and the instrument selected for that purpose was the agent of the plaintiff, not of the defendant. If the plaintiff lost control of the letter as soon as it was mailed, that fact has no bearing except upon the nature of its relation to the agent that it empowered to deliver the package. It — 49 — seems, however, that the writer of a letter may withdraw it from the office in which it is deposited, or from the office to which it is sent. United States Postal Laws & Regulations, pp. 531, 533. If the letter never reached the companies, they would not have been bound, or, if it had reached them, after a long delay, they would have been bound only from the date of receipt. So far as1 the delivery of such a letter is concerned, the law does not recognize the agency of the mail as of any higher or more binding character than that of an express company or a private individual, although it may presume that a letter duly mailed was received by the person to whom it was properly addressed.” In State v. Insurance Co., it was held that delivery of a letter or package containing several premiums on a life policy, to a post office or carrier within this State addressed to the company at a point outside of the State, did not constitute delivery or payment of such renewal premium to the insurance company within the State, and that such delivery and payment did not become complete and effective until actual receipt of the premiums by the company at its office, and that the money remained in the meantime at the risk of the sender. It is insisted that the contrary rule is laid down in the following authorities: May on Insurance, vol. 2, sec. 356a; Bacon on Insurance, sec. 381; Lothrop v. Insurance Co., 2 Allen (Mass.), 82; Survich v. Valley Mut. L. Ins. Co. (Va.), 23 S. E., 223; McKenna v. Insurance — 50 — Co., 73 Iowa, 453, 35 N. W., 519; Epstein v. Mutual Aid & Benev. Ass’n, 28 La. Ann., 938; McConnell v. Prov. Sav. L. Ins. Co., 92 Fed., 769, 34 C. C. A., 663; Insurance Co. v. Eggleston, 96 U. S., 572, 24 L. Ed., 841; Insurance Co. v. Doster, 106 U. S., 30, 1 Sup. Ct., 18, 27 L. Ed., 65; Insurance Co. v. Hyde, 101 Tenn., 403, 48 S. W., 968; Otis v. Payne, 86 Tenn., 663, 666, 8 S. W., 848. In the section referred to in May on Insurance, it is said: “In regard to the effect of a habit or usage of sending notice of the date when each premium becomes due, opinions differ. On the one hand, it is held that, where from the course of dealing between the parties the insured has a right to believe that notice will be given to him of the amount due and the time it is to be paid, the company cannot, in the absence of such notice, set up the failure to pay. Usage makes the giving of notice a part of the contract. If, where there is a usage to give notice, none is sent, payment of the premium within a reasonable time will save forfeiture.” Further along in the same section, it is said: “A failure of notice to pay a premium to reach the insured does not prevent the avoidance of the policy, if the notice was properly mailed and directed” — citing Lothrop v. Greenfield Stock & Mut. F. Ins. Co., 2 Allen (Mass.), 82. “So, under the Iowa statute, requiring notice to be given to the makers of premiums notes when they fall due, the service is complete on mailing a registered letter, or at least when it should be received in due course of mail” — citing McKenna v. State Ins. Co., 73 Iowa, 453, 35 N. W., 519. — 51 — In Lothrop v. Greenfield, etc., Ins. Co., supra, it appeared that the policy which controlled the matter contained a provision that: “If the assured should neglect for the term of thirty days to pay his premium note, or any assessment thereon, when requested to do so, hy mail or otherwise,” etc. In McKenna v. State Ins. Co., the court had under consideration a statute which provided that: “Such notice may he served either personally or by registered letter addressed to the assured at his post office address named in or on the policy,” etc. In Survick v. Valley, etc., Ins. Co., it appeared that the by-laws of the defendant company provided that any member failing to pay his pro rata assessment within thirty days from notification in person, “or from date of mailing same to his address,” should forfeit, etc. The decision of the court was placed expressly upon the provision as to mailing. So, in Epstein v. Mut. Aid & Ben. L. Ins. Ass’n, the decision was based upon the ground that the policy provided that the insured should “he notified by written notice deposited in the post office in the city of New Orleans, addressed to such address as has been left in writing at the office of the association with the secretary.” McConnell v. Prov. Savings L. Ins. Co. was also based on a statute providing for notice by mail. The case of New York Life Ins. Co. v. Eggleston does not sustain the defendant’s contention. It is true that — 52 — the circuit judge charged the jury that, if the notice was-mailed within such time as the insured would in due course of mail have received it, then he should be held to have received it. This portion of the charge, however, was not drawn in question or considered by the supreme court; hut a previous portion inclosed in brackets which treated of the custom to give notice. In addition, the court, at the close of the opinion adverted in pointed terms to the fact that the insured had never received any notice. There was evidence that notice had been mailed, and also evidence that it had not been received. In the case of Phoenix Mut. L. Ins. Co. v. Doster, there is some language in the opinion, used in an incidental way, supporting the defendant’s contention here; but in the later case of Mut. Res. Fund Ass’n v. Hamlin, supra, the same justice suggested a doubt of the correctness of that view, in the following language: “Whether the clause in the certificate of insurance relating to.notice means anything more than that proof of mailing a notice according to the defendant’s usual course of business, directed to the insured at the post office address as appearing upon its books, made a prima facie case of compliance upon its part with the terms of the contract, leaving the insured to prove, in order to prevent a forfeiture of his membership, that the notice was not in fact received by or for him, we need not determine.” The passage cited from Bacon on Benefit Society and Life Insurance is based on cases dealing with contracts — 53 — which by their terms provided that notice might be given by mail. In the case of Insurance Co. v. Hyde, supra, it is true the charge of the circuit judge contained the expression that the assured was not bound to pay “until such notice was mailed ;” but no point was made upon that feature of the charge, and the mind of this court was not directed at all to the subject, and it was not dealt with in the opinion. That case is therefore not authority for defendant’s contention. Nor is the case of Otis v. Payne applicable. In that case the court had under examination a negotiation conducted by mail. Such a case stands on a rule different from the one we now have before us. 1 Page on Contracts, sec. 52. And see Pennsylvania Lumberman’s Mut. F. Ins. Co. v. Meyer, 126 Fed., 352, 61 C. C. A., 254. Here we have not a negotiation, but a claim that a right already acquired was forfeited by miscarriage of the mail; that the mere posting of a letter properly stamped and addressed should be treated as notice and a valuable right thereby defeated, although such letter never reached its destination, no information was conveyed by it, and it in no sense performed the purpose it was designed to perform. Before such a conclusion can be properly reached, it seems to us there should be direct statutory provisions requiring it, or the clear terms of a contract. The purpose of a letter is to give information. If it never reaches its destination, it fails of its purpose. To — 54 — say that nevertheless it must he held to have accomplished the purpose could only be justified, as we have said, by the terms of a statute or of an express contract authorizing such result. In the absence of these, it would not be reasonable to infer that a man would agree that his ignorance of a fact should fix him with all of the consequences of knowledge. It is said in the present case that the custom had been to give notice by mail, and that, when a letter was properly posted, all of the requisites of the custom were complied with. This is not a sound view. All of the previous letters had reached their destination, and had conveyed the information they were designed to convey. The custom was not merely to mail, but to give notice by mail, to actually convey the information intended to be delivered by that means. We see no hardship to the insurer in this view of the matter. It is surely not admissible to suppose that any insurance company is alert for occasions to declare forfeitures and thereby to keep moneys for which no equivalent has been rendered. The company is entitled to prompt payment of premiums. It is only by such payments that its business can be carried on. The power to declare forfeitures for nonpayment is given to effectuate this purpose. But it is a perversion of the purpose when forfeitures are in themselves made an object or end to be attained. Therefore the courts have always seized upon every reasonable circumstance presented in a case to prevent the taking effect of a forfeiture. In the case of — 55 — a miscarriage of tlie mail, tlie insured performs his duty if, upon subsequently receiving notice, be promptly complies by paying the premium due. Grant v. Alabama Gold L. Ins. Co., 76 Ga., 583. The complainants in the present case did so comply and thereby saved the forfeiture. 2. Aside from the question just considered, and passing without special remark the peculiarity of the policy, in that it places the provision for forfeiture for nonpayment of premiums' under the misleading head of “nonforfeitures,” we are of opinion that under a proper construction of the policy considered in connection with the language of the notes and the correspondence at the time, it was intended that the rights of the parties should be measured by the provision embodied in the notes, the last sentence of which contained a summation of the agreement of the parties under the new phase it had assumed. A portion of the premium had been paid in cash, and notes executed for the residue, which were enforceable by the company. This clause reads: “This note is given said company upon this express understanding or agreement that for any loss occurring by death after this note is due and remains unpaid, then said company shall not be liable.” The effect of this ivas that, if the complainants permitted this note to go to maturity and remain thereafter unpaid, they took the •risk of the death of the insured, Bowen, thereafter and pending such default. The rights of the parties were reciprocal. The defendant had the right to collect and — 56 — thus restore the insurance, and. the complainants the right to pay, with the same result. But in the meantime the advantage was with the company in one aspect, since, if Bowen had died while the note still remained unpaid, the insurance would have been lost. The foregoing seems the most reasonable construction, since under no other can full effect be given to the words, “and remains unpaid.” Even if we did not deem this construction the best, still, if a reasonable one, we should feel bound to adopt it, when considering whether a forfeiture should be allowed, since, when dealing purely with the question of forfeiture, “the rule is that if policies of insurance contain inconsistent provisions, or are so framed as to be fairly open to construction, that view should be adopted, if possible, which will sustain rather than forfeit the contract.” McMaster v. N. Y. L. Ins. Co., 183 U. S., 25, 22 Sup. Ct., 10, 46 L. Ed., 64. And see Insurance Co. v. Dobbins, 114 Tenn., 233, 234, 86 S. W., 383; Schmidt v. German Mut. Ins. Co. (Ind. App.), 30 N. E., 939; Burkhard v. Travelers’ Ins. Co., 102 Pa., 262, 48 Am. Rep., 205. .For cases construing fairly similar clauses, substantially as herein construed, see Equitable Ins. Co. v. Harvey, 98 Tenn., 636, 639, 40 S. W., 1092; Williams v. Albany City Ins. Co., 19 Mich., 451, 2 Am. Rep., 95; Hooker v. Cont. Ins. Co. (Neb.), 96 N. W., 663; Houston v. Farmers’ & Merchants’ Ins. Co., 64 Neb., 138, 89 N. W., 635; Robinson v. Insurance Co., 76 Mich., 641, 43 N. W., — 57 — 647, 6 L. R. A., 95; Hummel & Company’s Appeal, 78 Pa., 320; Matthews v. Insurance Co., 40 Ohio St., 135; McEvoy v. Mich. Mut. L. Ins. Co., 2 Ohio Cir. Dec., 329, 3 Ohio Cir. Ct. Rep., 569; East Texas F. Ins. Co. v. Perkey, 5 Tex. Civ. App., 698, 24 S. W., 1080. And see Am. Ins. Co. v. Klink, 65 Mo., 78. Ressler v. Insurance Co., 110 Tenn., 411, 75 S. W., 735, is not in conflict with what we have herein decided. No loss occurred by the death of Bowen, while the note was in default. That event did not occur until a considerable time after complainants had made a full tender of the amount due upon the notes. Hence there was no forfeiture. It results that the decree of the chancellor denying complainants relief was erroneous, and must be reversed, and judgment must be rendered here for the amount of the policy and interest. The points decided being decisive of the case, we need not consider the other points raised by the facts set forth in the statement and argued in the briefs of counsel. We do not think this is a proper case for the imposition of the statutory penalty upon insurance companies for the interposition of frivolous defenses.