New York Life Insurance Co. v. Statham

Supreme Court of the United States · Contracts

ContractsLife insuranceForfeitureImpossibilityWarlife insuranceentire contractannual premiums

Facts

The disputed policies were life insurance contracts requiring payment of stipulated premiums and providing for forfeiture upon nonpayment. Premium payments became due during the Civil War, and payment was prevented by the existence of the war. The insurers elected to insist on the forfeiture provisions after the premiums were not paid. The plaintiffs sought to recover the full sums assured under the policies.

Issue

Does a life insurance policy remain enforceable for the full insured amount when premiums were not paid on time because payment was prevented by public war? If not, may the insured recover anything for premiums already paid?

Rule

A life insurance policy is an entire contract of assurance for life, not a series of one-year contracts, and if the policy makes punctual premium payment material, nonpayment at the due date works an absolute forfeiture. Public war preventing payment does not suspend and later revive such a policy so as to permit recovery of the insured amount; however, where default was caused by public war without fault of the insured, the insured is entitled ex aequo et bono to recover the policy's equitable value, measured as of the first default that caused forfeiture, with interest from the close of the war.

🔒

See the holding & full analysis

Create a free KwikCourt account to unlock the rest of this brief — and practice the case.

The court's holding and reasoning
Doctrine tests, pitfalls & exam hypotheticals
10 practice questions + 4 AI-graded essays on this case

Free sample · practice this case

Test yourself

One of 10 multiple-choice questions for this case. Pick an answer to see why.

In Cleveland, Nora Benton bought a life insurance policy from Lakeview Fidelity Assurance. The policy promised payment upon her death so long as she paid a fixed annual premium each March 1, and it stated that nonpayment on the due date would forfeit the policy. After paying seven annual premiums, Nora missed one payment and her son argues each premium bought only the next year of coverage that had already elapsed.

Which characterization of the policy is most consistent with the governing rule?

Explanation. The majority treated life insurance as an entire contract of assurance for life, subject to discontinuance and forfeiture for nonpayment of stipulated premiums. It rejected the idea that each annual premium is merely the consideration for the next year of coverage. Because the premiums are level while mortality risk changes over time, each installment is part consideration for the whole life assurance.