IOWA LIFE INS. CO. V. LEWIS, 187 U. S. 335 (1902)

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U.S. Supreme Court

Iowa Life Ins. Co. v. Lewis, 187 U.S. 335 (1902)

Iowa Life Insurance Company

No. 53

Argued October 21-22, 1902

Decided December 8, 1902

187 U.S. 335


1. As the delivery of a policy of insurance and the payment of the premium are reciprocal or concurrent considerations and, together with the method of payment, are all essential things, it makes no difference, when the first premium is paid by a note, whether the words "if note be given for the payment of the premium hereon or any part thereof, and same is not paid at maturity, the said policy shall cease and determine" be printed upon the face or the back of the receipt given for the note or in the policy. As such receipt expressed the conditions upon which the note was received, the memorandum on the back must be considered as embodied in the policy and the endorsements thereon, as well as in the note and the receipt given therefor.

2. When the first premium on a policy of insurance is paid by note and a receipt with such an endorsement thereon is given and accepted therefor, whilst the primary condition of forfeiture for nonpayment of the annual premium is waived by the acceptance of the note, a secondary condition thereupon comes into operation by which the policy will be void if the

Page 187 U. S. 336

note be not paid at maturity, and no affirmative action cancelling the policy is necessary on the part of the insurance company if the note be not paid when due and presented, and if the policy contains a provision that no person other than the president or secretary can waive any of the conditions, a local agent has no power to extend the time of payment of the note after the same has become part due.

3. A life insurance company may, by its conduct, waive proof of death and estop itself from setting up the provisions of the policy requiring said proof.

4. This Court will adopt the construction of the state courts of a state statute as to the necessity of a demand's being made before commencement of an action.

This is an action upon a life insurance policy, and was originally brought in the District Court of Tarrant County, Texas, and removed by the defendant, plaintiff in error here, to the Circuit Court of the United States for the Northern District of Texas on the ground of diversity of citizenship.

The action was to recover $3,000, alleged to have become due upon a life insurance policy issued by plaintiff in error to Thomas M. Lewis, the husband of the defendant in error. The defendant in error also, under the laws of Texas, Revised Statutes of Texas of 1895, art. 3071, prayed judgment for interest on the said $3,000 from the date of the death of the said Thomas M. Lewis, together with a penalty of twelve percent on the amount due, and for an attorney's fee of $750.

The case was tried to a jury and resulted in a verdict for the defendant in error for $3,000, the principal of the policy, with interest from January 1, 1900, $300 damages, and an attorney's fee of $500. Judgment was entered in accordance with the verdict.

The statute of the State of Texas allowing interest and attorney fees was attacked by plaintiff in error as being in contravention of the Constitution of the United States. The statute was sustained, and the case was brought here under section 5 of the Judiciary Act of 1891

By the policy, the plaintiff in error promised to pay defendant in error the sum of $3,000 upon the death of Thomas M. Lewis if death should occur on or before the fourth day of March, 1900, and to pay the sum within sixty days after the

Page 187 U. S. 337

receipt by plaintiff in error of satisfactory proofs of death and its cause. Lewis died on the seventh of October, 1899.

The issues in the case, besides the constitutionality of the Texas statute, are (1) whether the insurance company waived proof of death; (2) whether the policy had ceased and determined before the death of the insured by nonpayment of the premium. The evidence bearing upon the issues is as follows:

"The first sentence of the policy sued upon, appearing upon the face thereof, reads as follows:"

" The Iowa Life Insurance Company, in consideration of the stipulations and agreements in the application herefor (a copy of which is hereto attached), and of the provisions and requirements upon the next page of this policy, all of which are a part of this contract, and in consideration also of the payment of seventy-four dollars and sixty-one cents, being the premium hereon for the first year, hereby promises to pay the sum of three thousand dollars to Lula T. Lewis (wife of the insured) if living; if not living, to the insured's executors, administrators, or assigns (less any indebtedness of the insured or beneficiary to this company, together with the balance of any year's premium remaining unpaid), within sixty days after receipt and acceptance at the company's office in Chicago, Illinois, of satisfactory proofs of the fact and cause of death, within the terms of this policy, of the said Thomas M. Lewis, of Fort Worth, County of Tarrant, State of Texas (the insured under this policy), provided such death shall occur on or before 12 o'clock noon of the fourth day of March, A.D. 1900."

"Upon the second page of the policy is a provision reading as follows, it being one of the provisions referred to in the sentence above quoted from the face of the policy:"

" This policy is a contract made and to be performed in accordance with the laws of the State of Iowa, and shall be construed only in accordance with the charter of said company and the laws of said state, and shall not go into effect until the premium hereunder, or a semi-annual or quarterly installment thereof, shall have been actually paid during the lifetime and continuance in good health of the insured. Upon payment of the premium, there shall be delivered a receipt signed by the

Page 187 U. S. 338

president or secretary and countersigned by an authorized agent."

"Another provision appearing upon the second page of the policy reads as follows: 'All agreements made by this company are signed by the president or secretary. This power will not be delegated. No other person can alter or waive any of the conditions of this policy, or issue permits of any kind, or make an agreement binding upon said company.'"

"The policy sued upon is of the kind designated by the defendant as a 'ten-year convertible term stock' policy. It is dated March 13, 1899. The annual premium thereon is $74.61."

"The policy sued upon was issued in pursuance of a written and printed application therefor made by the insured under date of March 4, 1899. Said application requests the issuance of a 'ten-year convertible term stock' policy, and states that the premium of $74.61 is to be paid annually. It concludes with a recital as follows:"

"A note for premium of $74.61 has been paid under this application, to make the insurance binding from the date hereof, on condition that, if the risk is not assumed by the company, this sum is to be returned in accordance with the receipt given as voucher for said payment."

"On March 4, 1899, the insured executed and delivered to S.E. Starn, as agent of the defendant, in partial settlement of his premium, his note, reading as follows:"

" $37.30 March 4th, 1899"

" Six months after date, I promise to pay to the order of myself thirty-seven 30-100 dollars at Ft. Worth, Texas, value received, with interest at 6 percent per annum."

"T. M. Lewis, M.D."

"Which he endorsed in blank as follows: 'T. M. Lewis, M.D.'"

"On March 5, 1899, S.E. Starn transmitted to the defendant the insured's said application and note with a letter, which, insofar as it is material to this bill of exceptions, reads as follows: 'I herewith hand you application of Thomas M. Lewis for $3,000.00, 10-year term con. stock. Also his note to cover settlement.' These papers were received by the defendant March 8, 1899 at its office in Chicago. "

Page 187 U. S. 339

"The application was accepted by the defendant March 13, 1899. The defendant did not signify to Thomas M. Lewis its acceptance of his application in any way other than by making out and forwarding to its agent, S.E. Starn, for delivery, the policy sued upon, and the premium receipt hereinafter mentioned, which it did on March 16, 1899."

"On March 18, 1899, S.E. Starn countersigned the premium receipt, and delivered it and the policy sued upon to the insured. The policy and receipt were delivered at the same time and were received by the insured"

"Said premium receipt reads as follows."



owa Life Insurance Company"

"Chicago office"

" Received $74.61, being the first annual premium due March 4, 1899, under policy No. 30,140, on the life of Thomas M. Lewis, subject to the terms of the contract and the conditions on the back hereof."

" Read the notice to policy holders on the back of this receipt."

" This receipt is not binding unless it is countersigned by"

" (Signed) C. E. Mabie, President"

" S.E. Starn, Ag't, Ft. Worth, Tex."

" Countersigned this 18th day of March, 1899."

" S.E. Starn."

"(On back of receipt)"

" For terms of mutual agreement, see application and policy."

"Notice to Policyholders"

" This receipt, to be valid, must be signed by the president or secretary of the company, and in exchange therefor, cash or its equivalent, be given by the holder of the policy, on or before date payment is due, and when payment hereon is made to an authorized agent or collector, such agent or collector must countersign at the date of payment to him."

" If note be given for the payment of the premium hereon or any part thereof, and same is not paid at maturity, the said policy shall cease and determine."

" For the first annual premium, the insured gave the above-described note for $37.30, and agreed to perform professional

Page 187 U. S. 340

services for S.E. Starn to the value of the remaining $37.31. Starn was to furnish professional work to be done by Dr. Lewis in the examination of applicants for insurance and otherwise, and Dr. Lewis was to do it and let Starn have the fees. No work ever was done, and no money ever was paid to S.E. Starn or the defendant in pursuance of this verbal arrangement. Except that the note was given and the verbal agreement made, as just above stated, the defendant never received, and the insured never paid, anything upon account of the premium for the policy sued upon. S.E. Starn testified that, before the issuance of the policy, he reported to the defendant his agreement with Dr. Lewis concerning the payment of the premium."

"The policy sued upon is in the form always used by the defendant in making contracts of insurance of the kind designated by its 'ten-year convertible term stock' contracts. At the time of issuing said policy, it was the defendant's universal practice to issue with its policies premium receipts in form like the one delivered to the insured in this case."

"The defendant never sold or transferred the note received by it from the insured, but continued to be the owner thereof until the time of the trial. Some time before its maturity, the defendant sent said note to S.E. Starn for collection. S.E. Starn deposited it for collection with the Farmers' & Mechanics' National Bank of Fort Worth, Texas, on August 24, 1899. The bank held the note until September 25, 1899, when it returned it unpaid to S.E. Starn. The manager of its collection department testified that it would have accepted payment of the note at any time before its return to S.E. Starn, and that it had received no instructions from S.E. Starn with reference to the acceptance of payment after maturity."

"S.E. Starn made no effort to collect the note before its maturity, except that he deposited it in the bank for that purpose, nor had he, up to that time, furnished any professional work for the insured to do in pursuance of the verbal agreement, or made any effort to get the insured to do any work, or pay any money on account of such agreement."

"About September 29, 1899, S.E. Starn called at the residence of the insured in Fort Worth (he being at the time confined

Page 187 U. S. 341

to his bed from illness, the nature of which was typhoid fever, and from the effects of which he died October 7), and there had an interview with the plaintiff and the insured. Concerning this interview, the evidence is conflicting. The evidence introduced by the plaintiff tended to prove that Starn stated that he had called for the purpose of collecting the note, that the plaintiff promised that it should be fixed up at once, and that Starn stated that it could be paid at any time before the date on which he was required to make his monthly report, to-wit, October 1 following. The evidence was sufficient to have supported a verdict that this was a fact. Mr. Starn denied that he called for the purpose of collecting the note, and denied that he had made the statement that the note could be paid at any time before October 1, or the date on which he would make his report to the defendant."

"Dr. Green, one of the physicians attending the insured, met Mr. Starn as the latter was coming out of the plaintiff's house. Starn inquired of the doctor if he intended returning to the city after seeing his patient. Being answered in the affirmative, Starn stated that he would wait in the doctor's buggy and go up town with him. While the doctor was in the house, the plaintiff requested him to call on J. R. Reeves at the latter's pharmacy and ask him to pay off the insured's note for them, held by Starn, the doctor agreeing to do so. Dr. Green and S.E. Starn rode in the former's buggy from the plaintiff's residence to the business portion of the City of Fort Worth. Mr. Starn left the buggy as soon as the business portion of the city was reached, and Dr. Green drove immediately to Reeves' pharmacy and indicated to him the plaintiff's request. Mr. Reeves agreed to pay off the note as requested, and the doctor agreed to notify Starn."

"Concerning the conversation which ensued between Dr. Green and Mr. Starn on the way to town, the evidence is conflicting. Dr. Green testified that Mr. Starn stated that he had called at the plaintiff's house to collect the note. Mr. Starn denied having made such statement."

"Sometime during the afternoon of this day, Dr. Green notified S.E. Starn that J. R. Reeves, the druggist, would pay

Page 187 U. S. 342

off the note. Concerning the conversation which occurred between Dr. Green and Starn immediately following this notification, the evidence is conflicting. Dr. Green testified that Starn said he would go down to the pharmacy for that purpose; that some statement was made about his going to Reeves' pharmacy to get the money that evening, and that Starn said it would not be necessary, that he would go down by nine or ten o'clock the next morning. S.E. Starn testified that he stated to Dr. Green that he would call and see Mr. Reeves the next morning."

"The night following this interview, Mr. Starn sent to the defendant a night rate telegram, reading as follows:"

" Forth Worth, Texas, September 29, '99"

" Iowa Life Ins. Co., Chicago:"

" Dr. T. M. Lewis offers to pay premium today. Very sick. Shall I receive it?"

" S.E. Starn"

"The next morning, September 30, 1899, the defendant, through its secretary, telegraphed to S.E. Starn as follows:"

"To S.E. Starn, 615 Grove St., Fort Worth, Texas:"

" Do not accept payment on note due September 4. Answer."

" R. E. Sackett, Sec."

"On the same day, defendant wrote to S.E. Starn a letter reading as follows:"

"Mr. S.E. Starn, 615 Grove St., Fort Worth, Texas"

" Dear Sir: We are in receipt of your telegram as follows: 'Dr. T. M. Lewis offers to pay premium today. Very sick. Shall I receive it?' to which we replied as follows: 'Do not accept payment of note due September 4. Answer.' We presume this telegram refers to policy No. 30,140, Thomas M. Lewis, $3,000, convertible term, premium $37.60, upon which note was received at this office in the sum of $37.30, due September 4, 1899, and which was sent to you for collection."

" Very truly yours,"

" R. E. Sackett, Sec."

"Sometime in the morning of September 30, 1899, S.E. Starn called at the pharmacy of J. R. Reeves, and Mr. Reeves

Page 187 U. S. 343

informed him that he had the money to pay off the Lewis note and had been waiting for him. Mr. Starn thereupon informed Mr. Reeves that he could not accept the payment of the notes because he had received a telegram from the company instructing him not to do so. Later in the day, Mr. Reeves and Dr. Green called on Mr. Starn, and Reeves made a tender of the amount of the note, which Starn refused to accept. Reeves kept the money he tendered to Starn, and did not pay or deliver same to the plaintiff of the insured or to anyone for them, and had no interview with the plaintiff or the insured."

"On the same day, Starn telegraphed the defendant as follows:"

" Fort Worth, Texas, September 30th, '99"

"Iowa Life Ins. Co., Chicago:"

" I have refused payment on Lewis policy this 10:30 A.M."

" S.E. Starn"

"The only testimony with regard to any consideration for the promise claimed by the plaintiff to have been made to her by S.E. Starn that he would accept payment of the note is the following passage from the cross-examination of the plaintiff:"

" Q. Did you pay Mr. Starn anything?"

" A. No, sir."

" Q. He simply told you he had come to see the doctor about his note, and that it ought to be fixed up, and you said you would attend to it?"

" A. Yes, sir."

" Q. That is all that occurred between you?"

" A. Yes, sir."

"The attention of the plaintiff was not directed to the fact that she was being questioned concerning a consideration for the extension of the time for payment of note other than is indicated by the questions put to her."

"At the request of the defendant, S.E. Starn returned to it the note of the insured, which thereafter continued in the defendant's possession. The defendant never offered to return the note to the insured, and never before the death of the insured did anything in the way of an affirmative forfeiture or cancellation of the policy, and no communication passed between the defendant and S.E. Starn regarding said note between the transmission of the note to Starn for collection and Starn's above-quoted telegram of September 29, 1899. "

Page 187 U. S. 344

"Except for the evidence upon the question of the extent of S.E. Starn's authority, the foregoing is a full statement of all material facts upon the issue of the forfeiture of the policy sued upon for nonpayment of the premium note, and the waiver of such forfeiture."

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