
    Sarah Shea, Appellant, v. The United States Industrial Insurance Company, Respondent.
    
      Life insurance ■— oral representations as to the terms of a policy made to an illiterate personby an agent — they constitute an election by the company as to the beneficiary.
    An insurance company, through its agent, at the time of delivering to an illiter-' ate woman policies of insurance upon the life of her daughter, represented to her that as she was a blood relative of the insured she would be the beneficiary if she continued to hold the policies and pay the premiums up to the time of the insured’s death.
    After the death of the insured the superintendent of the insurance company procured the husband of the insured, who had paid the insured’s funeral expenses, to enter a protest against the company’s paying the amount of the. insurance to the mother of the insured, and to execute a release to the company of all liability upon the policies for one-fifth of their amount.
    
      Held, that the company could not invoke, for the purpose of taking advantage of this unconscionable conduct of its superintendent, a provision of the policy that the company might pay the loss to any blood relative or connection by marriage of the insured, or to any one appearing to the company to be “equitably entitled to the same by reason of having incurred the expense in any way on behalf of the insured, for his or her burial, or for any other purpose,” and that the receipt of the payee should fully protect the company ;
    That the representation to the mother of the insured operated as a present election by the company to exercise in her favor the option given to it by the provision of the policies above recited.
    Appeal by the plaintiff, Sarah Shea, from a judgment of the Supreme Court in favor of the defendant, entered in the office of the clerk of the county of Kings on the 19th day of March, 1897, upon the dismissal of the complaint directed by the court after a trial at the Kings County Trial Term.
    The action was brought to recover upon two policies of insurance issued by the defendant upon the life of .the plaintiff’s daughter.
    
      Thomas F. Magner, for the appellant.
    
      Edward W. S. Johnston, for the respondent.
   Hatch, J.:

Upon motion made at the close of plaintiff’s proof, the court struck out all the evidence and dismissed plaintiff’s complaint. This ruling proceeded upon the ground that the defendant had comproraised the claim arising upon the policies of insurance sued upon, with the husband of the deceased and paid him the sum agreed upon, and that it became by this act released from any further lia^ bility to any person thereon.

The evidence given upon the trial disclosed this state of facts r The insured was the daughter of the plaintiff; on the 23d day of October, 1893, the plaintiff procured the life of the said daughter to be insured with the defendant, and the latter issued and delivered to the plaintiff a policy of insurance, upon such life. The premium required to be paid was the weekly sum of twenty-five cents,, which the plaintiff paid until the daughter’s death. The sum secured to be paid under this policy at the death was $500. About the 13th day of August, 1894, the plaintiff procured the issuance of another policy upon the life of her daughter, by the defendant, in all respects like the former policy except its date. Upon this policy the plaintiff [Daid the premium until the death of the daughter. After the issuance of the last policy the daughter married one .John Iioster,. and thereafter lived with him until.her death, which occurred on the l'ltli day of November, 1895. An indorsement was made upon the first policy that “An additional policy in this company for $500' is hereby permitted.” The fact of the marriage was also indorsed thereon. Proofs of death were immediately made' out and filed, with the company, corresponding in all respects with its requirements. No objection was made thereto by the company, and the same were retained by it.

At the times when the policies were issued, the agent who then represented the company stated to the plaintiff that, as she was a. blood relative of the insured, she would be the beneficiary therein, and-entitled to the amount of the insurance if she paid the premiums as required. It also appeared that the plaintiff could neither read nor write; that the contract of insurance'was not read to*her,' except, that part of. it which provided for payment to any relative by blood or connection by marriage of the insured. It also appeared that the superintendent of the defendant company instructed agents-in soliciting insurance to represent that a blood relative, or a relative by marriage of the insured, could become a beneficiary under the-policy, and that if such person held the certificate and paid the premiums, and was in good standing when the insured died1, upon making proper proof of death, such person would become the legal beneficiary. And the agent in this case testified that he made such representation to the plaintiff when she took out the policies of insurance upon the life of her daughter. It also appeared that the company had recognized such persons as beneficiaries under like policies and had paid losses, by death, in other cases, where the beneficiary was a blood relative. This testimony was sufficient to authorize a jury in finding that the company became bound in accordance with such representations. Hence, the testimony authorized a finding that, the representation was the direct act of the company. It could be bound by acquiescence in the act. “ In determining the authority of agents the instructions are not necessarily controlling; that is to say, if you instruct your agent to do one thing or to exercise only limited authority, and you knowingly habitually suffer him to exercise greater authority, you are bound by the authority you allow him to exercise, your instruction to the contrary notwithstanding.” (Powers v. Prudential Ins. Co., 83 Hun, 254; affd. on appeal, 145 N. Y. 654.) As the plaintiff could not read or write, she was entitled to rely on the representations made to her by the agent of the company when the insurance was effected, and such representations became the contract of insurance between the parties.

If the policies which were issued did not conform to the contract which was made, the plaintiff, in order to assert her rights, might be compelled to resort to an action to reform the same. But we do not think such step a condition precedent in this case, as we think the policies as issued contain the contract as made in one of their alternative provisions, and this action permits of the enforcement of that clause as the contract of the parties. The recital in the policies is that, in consideration of the agreements and of the payment to the company of.the weekly premium, it promises to pay the amount insured unto the executors or administrators of the insured, unless payment shall he made under the provisions of article second,” upon filing satisfactory proofs of death during the continuance of the policy. Article 2d is as follows :

Second. To whom insurance may be paid.— The company may pay the sum of money assured hereby to any relative by blood or connection by marriage of the insured, or to any other person appearing to said company to he equitably entitled to the same by reason of having incurred the expense in any way on behalf of the insured, for his or her burial, or for any other purpose, and the production by this company of a receipt signed by any or either of said persons, or of other-sufficient proof of such payment to any or' either of them, shall be conclusive evidence that such sum .has been paid to the person or persons entitled thereto, and that all claims under this policy have been fully satisfied.”

This article corresponds with the representations made to the plaintiff, with this difference, that instead of being an absolute promise to pay it is permissive at the option of the company. As the company, however, made its absolute agreement with the plaintiff that she should be the beneficiary, we think such agreement had. the force of a present election upon the part -of the company to exercise the option in this regard in favor of the plaintiff.. This does not change or vary the terms of the policy ; it is ¡an agreement in addition thereto and entirely consistent therewith, which may rest in paroi and be enforced according to its terms. (White v. Hoyt, 73 N. Y. 505; Kenyon v. K. T. & M. M. A. Assn., 122 id. 247.) It was no more than an agreement upon the .part of the company to presently make its election, instead' of waiting until a loss had occurred. In this view of the case the plaintiff became ■ entitled to have the benefits of the insurance for which she had paid and which the defendant had agreed she should receive.

The scheme by which this company seeks to defeat this result is a fraud upon the rights of the plaintiff. The obliquity- which prompted the superintendent of this company to resort to the means which the evidence shows he did resort to, in. order to -escape payment of these policies, is quite astonishing and cals for severe condemnation. A bare recital of the evidence is sufficient to make this clear. Roster, the husband, of the insured, had never paid a penny of the premiums by which the policies were kept alive. He did not even know that the life of his wife was insured. The ■superintendent first informed him by letter, which had the' effect of producing him at the office, and being there the superintendent suggested that he make a protest against the company paying the money to the plaintiff. This plan was' readily acceded to' by the husband. As he expressed it, I would like to get my expenses out of it.” The superintendent discouraged the suggestion by the-husband that he should get an attorney, and drew the protest himself, which the husband signed. Then he suggested that the husband should see the plaintiff and see what she intended to do about it and get her to settle for half. But evidently repenting ■ of this liberality, he subsequently induced the husband to settle for the sum of $200, .talcing his receipt therefor, and procured him to execute a release to the company of all liability on account of the policies. The interest which the husband had or claimed to have .arose out of the payment- of the funeral expenses, amounting to $101.50.' For this the husband was personally responsible. This defendant now seeks to avail itself of this fraudulent and dishonorable act of its superintendent as a defense to this action, claiming that what it did it had the right to do by virtue of the 2d article of the policy. The law permits the defeat of this unconscionable and fraudulent scheme, for so we must characterize it, despite the sanction given it by the Supreme Court of Pennsylvania in Brennan v. Prudential Ins. Co. (32 Atl. Rep. 1042).

The judgment should be révérsed and a new trial granted, with costs to abide the event.

All concurred.

Judgment reversed and new trial granted, costs to abide the event.  