
    Ellen McDonnell, Plaintiff, v. The Mutual Life Insurance Company of New York, Defendant.
    First Department,
    April 8, 1909.
    Insurance — contractual relation between insurer and insured—policy of life insurance construed — when beneficiary not entitled to distribution of surplus.
    The relation between one taking out a life insurance policy and the insurer is purely contractual. On the death of the insured the contract as such is no longer in force, being changed into a liquidated debt of the insurance company.
    Where a policy of life insurance provided that at the expiration of fifteen years from the date of issue the holder should he entitled to a distributive share of the surplus, but that only such policies as should be “in force” at the end of the term should share in the distribution, no other distribution to be made at any previous time, the beneficiary is not entitled to share in the surplus when the insured died eleven days before the maturity of the policy, even though he had previously paid .the last quarterly premium. This, "because on the death of the insured the policy ceased to be “ in force,” and the contract should be construed to mean that the distribution of surplus should be made only if the insured having paid all the premiums was living at the end of the fifteen-year period.
    Submission of a controversy upon an agreed statement of facts, pursuant to section 1279 of the Code of Civil Procedure.
    
      Lewis F. Wilson, for the plaintiff.
    
      James McKeen, for the defendant.
   Clarke, J.:

On October 23,1893, Henry McDonnell, husband of the plaintiff, took out a policy of insurance in the defendant company by the terms of which the defendant agreed to pay to plaintiff the sum of $1,000 upon the death of the insured during the continuance of said policy upon the terms and conditions therein stated. Among other provisions of said policy was the following : “ Dividends —■ This policy is issued on the 15 year distribution plan. It wdll be credited with its distributive share of surplus apportioned at the expiration of 15 years from the date of issue. Only 15 year distribution policies in force at the end of such term, and entitled thereto by year of issue shall share in such distribution of the surplus ; and no other distribution to such policies shall be made at any previous time. All surplus so apportioned may be applied at the end of such period to purchase an annuity, or may then be drawn in cash.”

The application for the said policy, provided by the policy to constitute a part of the contract, contained the following provision signed by the insured : “ * * * And I further agree that in any distribution of surplus, the principles and methods which may be adopted by the company for such distribution, and its determination of the amount apportioned to such policy, shall be and are hereby ratified and accepted by and for every person who shall have or claim any interest under the contract now proposed.”

The policy provided for the payment of $22.34 quarterly premium on the twenty-third of January, April, July and October -in every year during the continuance of said contract. All of said premiums were duly paid to the defendant, including the quarterly premium due July 23, 1908, which was the quarterly premium in advance for the quarter ending on the 23d day of October, 1908. Henry McDonnell died on the 12th of October, 1908, eleven days before the expiration of said fifteen-year distribution period. After the death of McDonnell, and before October 23, 1908, the defendant presented a printed notice to the plaintiff as follows: “ The Mutual Life Insurance Company of Hew York. Dividend (15 year Distribution) in 1908. 61—93, Oct. 23. Policy Ho. 585,718. Dividend payable in cash, $472.70, or additional insurance (if approved by company) $567. The cash dividend will be credited on the anniversary in 1908, if the policy be then in force. To secure the additional insurance in lieu of the cash dividend, the approval of the company must be secured after full examination by the regular medical examiner if the extra insurance exceeds $1,000, otherwise on a satisfactory certificate of health. E. & O. E.” When it presented the said printed notice, the defendant had ho knowledge of the death of the insured.

After October twenty-third plaintiff presented satisfactory proofs of the death of the insured and defendant paid to plaintiff the sum of $1,000 as provided in said policy to be paid upon the death of the insured, but ref used to ci'edit to the said policy the cash dividend in the sum of $472.70 or in any -other sum on the anniversary, October 23, 1908, and refused to pay said sum or any part thereof to the plaintiff. Under the practice adopted and followed in the distribution of the surplus, no distributive share of the surplus is apportioned to any distribution policy or to the holder thereof, unless'the person on whose life the policy is issued is living at the end of the period stated in the policy. Under such practice adopted and followed by the defendant, no distributive share of the surplus has been or will be apportioned to any policy belonging to any policyholder holding. a fifteen-year distribution policy issued in the year 1893, unless the person on whose life such policy was issued was living at the end of fifteen years from the date.of the issuing of the policy on his life. Upon this agreed statement of facts plaintiff demands judgment for $472.70, with interest from the 23d of October, 1908, while defendant demands judgment that the court find that said policy is not entitled thereto.

The determination of the question involved requires the interpretation of the-contract because the relation of a policyholder to an insurance company is purely contractual. The plaintiff invokes an equitable principle for the purpose of sustaining her claim and that is, that as the insured had paid all the money which was required by the policy to be paid to entitle him to receive at the end of the fifteen-year period the deferred dividend of $472.70, therefore, she is entitled to a recovery because it had been earned by the payment of all the required premiums. But this contention loses sight of the fact that this is a contract for life insurance; that it involves the risk; that after death there is no risk; that the contract of life insurance as such then and there ceases to be in force. The obligation to pay in accordance with the terms of the contract is in force, but the policy of life insurance is no longer in force. It has been transformed into a liquidated debt bj the happening of the contin gent event theretofore provided for. The insured and the company made an agreement. If the insured lived fifteen years he was to receive that amount which represented the loading of the premiums upon the policy. If he did not live the company was to retain it. The amount of that dividend was arrived at, not only by the interest accumulated upon the premiums paid by this insured, but by the extra amount of premiums from lapsed policies of the same class in that distributive period. The plaintiff’s claim that the full payment of the required premiums was all that was necessary to secure the additional amount claimed entirely loses sight of the nature of the agreement of life insurance. In this particular instance the premiums were payable quarterly and there was only eleven days more of the term to run and under those circumstances it is a hard case. Ordinarily premiums are payable annually in advance and, therefore, if on the second day of the year the insured had died, having paid that annual premium, if the plaintiff’s contention is sound, the beneficiary would be entitled to the sum agreed to be paid at the end of the fifteen-year period. The fifteen-year period would thereby be transformed into a fourteen-year period. The rules, methods and practices under which the deferred dividends have heretofore been calculated and distributed to other policyholders would be upset, although the insured had agreed to abide by the practices, methods and procedure adopted by the company.

Furthermore, it is possible that a policyholder will commute by the payment of a lump suip. future premiums on these tontine or semi-tontine policies, and in such case the beneficiary might withhold proof of death until the expiration of the period and then claim the full amount of the deferred dividends where during all that period there had been no risk and, therefore, the contract had ceased to be a policy of life insurance.

I think it quite impossible, reading this contract in its entirety and keeping clearly in mind that it is a policy of life insurance, to hold that it is in force as such policy after the death of the insured. The words “ in force ” used in the policy can mean no other thing than this, that the required premiums shall have been fully paid and that the insured shall be still alive.

The judgment should be for the defendant, with costs.

Patteeson, P. J., Ingeaham, Houghton and Scott, J J., concurred.

Judgment ordered for defendant, with costs. Settle order on notice.  