
    James A. Farley and another, Resp’t, v. Union Mutual Life Ins. Co., App’lt.
    
      (Supreme Court, General Term, First Department,
    
    
      Filed June 28, 1886.)
    
    Insurance (life)—Policy of—Present value of, how determined— Northampton tables.
    When a policy of life insurance is surrendered under a provision therein permitting it to be done, the holder is entitled to the equivalent of the present value of the policy surrendered. And in ascertaining and determining the amount of the paid up policy to be issued, it is necessary to consider the time the policy has run, the age of the insured, the amount of the annual premiums which have been paid and required to be paid during its continuance, and the probable period of its continuance according to the tables consulted and acted upon for such purposes. The Northampton tables may be used.
    Appeal from a judgment recorded on trial before the court, and for an order making an additional allowance of costs.
    
      Merritt E. Sawyer and William D. Whiting, for app’lt; Raphael J. Moses, Jr., for resp’t.
   Daniels, J.

The defendant issued a policy of life insurance upon the life of Thomas Rigney, on the 23d day of April, 1873, for the sum of $10,000, payable at the time of his decease, for which an annual premium of $162 was reserved. This premium was paid by him to, and including the year 1884, making in all twelve payments, amounting, with a note of $2,291, to the sum of $9,144. By the policy it was agreed that after three annual premiums had been paid, the company would, at any time, pay the holder of the policy its fair cash value upon its surrender while in force, or in lieu of such cash value, a paid up policy for an equitable amount would be granted. The policy was assigned to the plaintiffs in the action, and on the 16th of April, 1885, they proposed to surrender it to the company, and take in lieu of it a paid up policy in the amount they were entitled to receive under this agreement. The court, at the trial, held and determined that the plaintiffs were entitled to a paid up policy for $9,144, subject to an indebtedness of $2,210 upon the note, which had been reduced to that amount by an annual dividend. This decision necessarily gave the plaintiffs the full benefit of all the premiums which had been paid, and deprived the company of that portion which it had earned by the risk taken upon the fife of the assured during the time the policy issued.'to him had been running. For that risk, by this decision, no compensation whatever was made to the company, and the decision was accordingly erroneous.

What the plaintiffs were entitled to was a paid up policy for an equitable amount upon the basis of the premium which had already been paid. In other words, they were entitled to what was the equivalent of the present value of the $10,000 policy issued to Rigney, and that was to be determined by the period for which it had been .running, his own time of fife, and the probability of its continuance, according to the tables consulted and acted upon for such purposes. The case in this respect was within the principle of Speer v. Phœnix Ins. Co. (36 Hun, 322). There the company had refused, as it did in this instance, to issue a paid up policy for the amount claimed by the plaintiff and a recovery by way of damages for the refusal, corresponding with the amount of premiums which had been paid by him with interest thereon, was held to be improper, and it was then declared that “he Was entitled to recover a sum that equaled the value to him of the policy, or, in other words, that would make good to him the loss he sustained by its breach.” Id., 325.

Incidentally also this subject has been considered in determining the value of policies of life insurance against the receivers of insolvent insurance companies, and they have been considered to be of that value only wdiich would enable the assured to obtain another insurance for the same amount in a solvent life insurance company. People v. Security Life Ins. Co., 78 N. Y., 114; Attorney-General v. Guardian Mutual Life Ins. Co., 82 id., 336. Upon the trial of the action witnesses were examined to estimate the value or amount of a paid up policy which should be issued upon the surrender of the original policy, considering the premiums which had been paid upon it. Their estimates to some extent were based upon chapter 347 of the Laws of 1879, which, however, has no application to this controversy, and also upon the effect of the Northampton tables wdiich they were at liberty to consider for the purpose of reaching an intelligent conclusion as to what should be the value or amount of the paid up policy. Schell v. Plumb, 55 N. Y., 592; Sauter v. N. Y. Central, etc., 66 N Y., 50, 54.

The estimates or conclusions, which these witnesses maintained by their evidence, all fell short of the amount allowed by the judgment of the court. The utmost resérve value of the policy to be issued was stated by the witness Homans, under the principle embodied in the statute, at the sum of $3,377, while the witness Standen making his estimate upon the actuary standard of mortality, placed the amount at $3,528.40, and upon the basis of the Northampton tables of mortality at the sum of $3,343, and on the principle of the act of 1879 at the sum of $3,377. And one or the other of these amounts, instead of that included in the judgment seemed to have' been the proper amount to have been adopted by the court.

What it was to consider, was the fair value at the time, of the policy to be surrendered, for that would indicate the equitable amount for which the paid up policy should be issued. And in ascertaining and determining that it was necessary to consider the time the policy had run, the age of the insured, the amount of the annual premiums which had been paid, and required to be paid during it continuance, and the probable period of its continuance. These circumstances would indicate with reasonable plainness what would be the equitable amount of a paid up policy. And as before observed it would' probably under the evidence have been one or the other of the estimates of these two witnesses, who were the only persons sworn and examined as to this matter upon the trial. Taylor v. Bradley, 39 N. Y., 129, 145.

What it was equitable the plaintiffs should receive, was the fair value of the policy to be surrendered, or its fair equivalent, in a paid up policy, and to ascertain what that was, by the tenth of the stipulations upon the back of the policy, the amount unpaid on the note was required to be set off or deducted. The case of Lovell v. St. Louis Mutual Ins. Co. (111 U. S., 264), is not applicable to the controversy between these parties, for there the stipulation was different from that contained on this subject in this policy.

As the judgment had proceeded upon an erroneous theory of the defendant’s habihty, another trial of the action will necessarily take place, and for that reason no special attention will be required for the appeal taken from the order making an additional allowance of costs.

The judgment should be reversed with costs to abide the event, and the appeal from the order dismissed without costs.

Brady, J., concurs.  