Weekly Law Bulletin

Cincinnati (O) Superior Court

(General Term)

Rosehannah Smith v. The Manhattan Life Ins. Co.

Where a policy of life insurance was taken out by a husband in behalf of his wife, and the contract of the company was with the latter, the former continuing to act as her agent, receiving notices and paying premiums up to a certain time, when he ceased to act for or in her behalf, and so notified the company, the latter could not there-after deal with the husband as agent of the wife, nor make any agreement with him with respect to the policy, which would bind the wife. In such case notice of the approaching maturity of a premium gives to the husband would not be notice to the wife.

Where the right to participate in the profits of the company is secured to the beneficiary of a policy of life insurance, with the right to apply dividends to the reduction of premiums, the company is bound to notify the beneficiary of the amount of the annual dividend to be applied in reduction of the premium before it can forfeit the policy for non-payment of such premium.


This was an action to recover $3,000 claimed to be due on a policy of life insurance issued by defendant in the year 1863, upon the life of John W. H. Smith for the benefit of the plaintiff, who was his wife.

The application for insurance was made by Mr. Smith in the name of his wife, and is signed Rosehannah Smith, by Jno. W. H. Smith. The policy recites that for and in consideration of seventy-five dollars to them paid by Rosehannah Smith, the company assure the life of John W. H. Smith for her sole use, in the sum of three thousand dollars for the term of his natural life, and in ease the wife's death should occur before that of her husband, the sum was to be paid to her children. It was further provided, that in case Rosehannah Smith did not pay the premiums on or before the day fixed for the payment thereof, the company should not be liable for the sum insured, nor any part thereof. By the terms of the application which is made part of the contract, premium was made payable annually "with participation in the profits of the company," John W. H. Smith received the policy and placed it among his papers, where the plaintiff testified she saw it during his life-time, and that he told her about it. Before the premium came due in each year, the company sent Mr. Smith a written notice of the time when it would be due, and of the amount of the annual divided to be applied in reduction thereof. The premiums were regularly paid by the husband, part in cash, and part by taking credit for the dividends in reduction of the same - up to and including the year 1879.

In April, 1880, he received the usual notice that the premium would be due June 4, of that year, and that the amount of the dividend for the year was twenty-four dollars, which deducted from the total premium would leave due the company on that day the sum of fifty-one dollars. To that, on April 27, 1880, he replied, acknowledging receipt of notice and saying: "Is there any way in which I can have this policy transferred? My wife is otherwise provided for and I would like to transfer the policy. If this cannot be done, please advise me if I can get a paid up policy, as I do not desire to continue it in its present form."

To that the company replied on the 29th of the same month: "The only change that can be made in No. 10,476, is a paid-up policy for $810, without profits. If accepted let us have the policy and renewals prior to June 4th.

On the 3rd day of May, 1880, Mr. Smith wrote to the company as follows: "Replying to your favor of April 29, in regard to paid up policy would say I desire to have it changed and enclose the policy and renewals, as requested. I will say that my wife has separated from me and sued for alimony on the charge of not having provided for her. This is notoriously false, but of course does not particularly interest you. I greatly desire that the policy should be made payable to my estate if it can be done, as I am obliged to provide for her with alimony, or otherwise support her; and as she is no longer a wife to me I desire my children to have the benefit if any. Some of the renewals have been mislaid, but I return the last."

To that the company replied May 8, 1880:

"No change can be made in this until the 4th day of June next at which time we will give it our attention. We notice that you only return the renewal receipts for 1865, 1876, 1878. Please make a careful search for the others and forward same to us and oblige." On May 19, 1880, he wrote the company. "Replying to yours of the 6th instant, I herewith enclose you all of the certificates that I have been able to find." The company responded May 25.

"We notice that the renewal receipts for 1865 1869, 1870, 1871, 1872, 1873, 1874 and 1877 are missing and would respectfully request that you make a careful search for them, and failing to find them, that you send us an affidavit stating the circumstances of their loss and that search has been made. The beneficiary under policy No. 10476, cannot be changed."

With this letter the correspondence ended, and there is not proof that any further step was taken either by the insured or the company; nor does it appear that any paid up policy was issued. Mr. Smith died in the month of January, 1881.

To the plaintiff's petition based on the policy, defendant answered admitting that the policy was issued, but alleging that the premium due June 4, 1880, was not paid and that the contract of insurance thereby ceased and determined, and further that the insured during his life-time had agreed with the company to surrender the original policy, and accept in lieu thereof a paid up policy for $810. The allegations of the answer are denied in the reply.

On the trial of the case at special term, counsel for defendant moved the court at the conclusion of plaintiff's testimony disclosing the facts above set forth, to withdraw the case from the jury and enter a judgment for defendant, which motion was overruled. Defendant's counsel also requested that sundry instructions based upon their views of the law as to notice, and the alleged agreement for a paid-up policy, be given the jury; but they were refused, and the jury instructed to the effect that if they should find that plaintiff had no notice from the company or any other source, of the maturity of the premium and the amount of the dividend applicable to its reduction, she would be entitled to recover on the policy. Defendant's counsel then requested that the jury be instructed to return a verdict for $810, the amount of a paid up policy, but the request was refused.

A verdict was rendered for the plaintiff for the $3,000 and interest, less the amount of the unpaid premium of 1880. A motion for a new trial having been made, the hearing and determination thereof were reserved to the general term upon the pleadings and a certified bill of evidence setting forth all the evidence and proceedings at special term.


The questions before us arise mainly upon the matters alleged in the answer - the non-payment of the premium due in June, 1880, and the claim that there was an agreement for a paid up-policy between the insured and the company.

It is claimed on behalf of plaintiff, in reply to the matters urged in defense, that the company could not forfeit the policy for non-payment of the premium of 1880 because they had given the plaintiff no notice that the same was due, or of the amount of the dividend applicable to its reduction. That the correspondence between the parties, relied upon as showing an agreement for a paid-up policy, does not, when properly construed, contain any such agreement, and if it does, that it was not in the power of the insured to make an agreement, injurious to the rights of the beneficiary. In response to this, defendant urges: 1. That the law does not require such notice. 2. That a notice was given to Smith in April, 1880, and that that was sufficient if any notice were required, as the company could not be held bound to notify the beneficiary; and 3d, that there was an agreement made between Smith and the company for a paid-up policy for the benefit of his wife, which agreement is valid, and binding upon her.

As to the so-called agreement, we do not think it necessary in any view of the case to inquire whether there was or was not an agreement. Jno. W. H. Smith had power to cease paying premiums - and we find from the correspondence that he unequivocally expressed his intention not to pay any further premiums for his wife's benefit, and after that he did not pay. This action on his part worked a forfeiture of the policy, unless the circumstances were such that the rights of Mrs. Smith could not be affected by it. And if her rights could not be affected by his non-payment, they could hardly be affected by his agreement not to pay, made for a consideration of much less value to her than the policy thereby surrendered. The question then resolves itself into this: Had the husband, under the circumstances, the power to extinguish the rights of the wife in the policy, other than her right to a paid-up policy? The answer to that depends upon the relations of the parties at the time. In form, the policy was plainly a contract between plaintiff and the company. The name of J. W. H. Smith only appears as that of the person whose life is insured, or as the agent of his wife. But it is urged that he took the policy without her knowledge, never consulted with her about it, kept it in his own possession and paid all the premiums on it. In answer to that, it is in evidence that plaintiff saw the policy and was informed by her husband about it, and if knowledge and acquiescence on her part were necessary, they have been shown. The relation of plaintiff and her husband to this contract was originally that of principal and agent. This was held to be the relation of a husband and wife under a similar policy in Klein v. Insurance Co., 104 U.S., 88. The insured acted as the agent of the beneficiary at the inception of the business, and the company had the right to deal with him as such. Under those circumstances, notice to him was notice to her, and the company might perhaps regard his refusal to pay, or his agreement to accept a paid-up policy, as authorized by her.

At this point, however, the plaintiff asserts that the agency had terminated, and that the company's officers knew it some thirty days before the premium became due in June, 1880. This claim is based upon the letters of April 27 and May 3, given above. In them Mr. Smith told the company that his wife had separated from him; that she had sued him for alimony; that she was no longer a wife to him, and that he was unwilling to further provide for her in that manner. It seems to us that these letters plainly indicated to the company that he had voluntarily ceased to be her agent. Such being the case, the rights of the plaintiff could not there-after be affected by his action or his failure to act, and if the made any such agreement as that alleged, she would not be bound by it.

"But," defendant says, "if all that be true, Mrs. Smith failed to pay the premium due June, 1880, and the policy is therefore forfeited," To this she responds with the claim that she had no notice of the approaching maturity of the premium, or of the amount to be paid after deduction of divided. This brings us to the principal point of the case. Was the company bound to give plaintiff such notice before they could avoid the policy for non-payment of premium? As a general rule, no such notice is requisite. Thompson v. Insurance Co., 104 U.S., 252; but in a case where there was the right to participate in the profits of the company, and apply dividends to reduce premiums, the same court, Phoenix Ins. Co. v. Doster, 106 U.S., 30, held that a notice was requisite, for the reason that the party bound to pay could not know the amount he must pay until informed of the amount of the dividend to be deducted. The case at bar falls within the latter class, as shown by the facts stated. A notice was necessary. It could no longer be given to the agent, for the company knew he had ceased to be such, and knowing that, they could no more expect to deal with him and bind the principal than if he had never been an agent. The notices previously sent Mr. Smith had been sent him on the assumption that in notifying him they were notifying his principal; but when the agency ceased, the object could no longer be accomplished in that way. No other agent being substituted, there was nothing left for the company to do but give notice to the principal. Some other objections to this conclusion are urged, as, that the notice to Smith in April, 1880, was given before the officers of the company knew anything of the altered relations of the parties. It is a sufficient answer to this to say that the company were informed of the change in ample time before the premium became due to have notified Mrs. Smith.

It is also urged that plaintiff was bound to tender the amount of the unpaid premium before commencing this action - and we are pointed to the fact that in Phoenix Ins. Co. v. Doster, a tender was made by the beneficiaries, and that it seems to have been regarded by the court as an important element of the case. But in that case the required notice reached the beneficiaries on the day of the death of the insured, where-upon they promptly tendered the amount due. In the case at bar no notice was ever given the beneficiary - and if a notice were necessary to inform her of the amount due and put her in default for non-payment, in the absence of such notice and its consequent obligation to pay, there could hardly be any necessity for a tender. It is also claimed that it is not shown that the officers of the company knew of the plaintiff's address, and could therefore send her no notice. In the application her address is given as at Cincinnati - and the company were not notified of any change - unless they were at liberty to presume that she had left the city because of her separation from her husband. That she had left his house might be fairly presumed under such circumstances, but not that she had left the city. It does not appear that notice to her was sent to Cincinnati or elsewhere. We are of the opinion that the failure of the company to give notice to plaintiff prevents them from forfeiting the policy because of the non-payment of the last premium, and that, in the absence of such notice, neither the husband's failure to pay the premium, nor his agreement to accept a paid-up policy in place of the policy sued upon, could affect the rights of the wife under the latter.

The motion for a new trial is overruled and judgment may be entered upon the verdict.

FORCE & HARMON, J. J., concur
HERRON for plaintiff; J. O. HOYT and McGuffey & MORRILL, for defendant.