New York Life Ins. Co. v. Dodge, 246 U.S. 357 (1918)

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New York Life Insurance Company v. Dodge

No. 378

Argued January 21, 1918
Decided April 1, 1918
246 U.S. 357

ERROR TO THE SPRINGFIELD COURT OF APPEALS

OF THE STATE OF MISSOURI

Syllabus

A law of a state, governing a life insurance contract made locally between a resident citizen and a locally licensed foreign corporation and prescribing how the net value of the policy shall be applied to avoid forfeiture if the premium be not paid, cannot be extended so as to prevent the policyholder, while present in such state, and the company from making and carrying out a subsequent, independent agreement in the company’s home state, pursuant to its laws, whereby the policy is pledged as security for a loan and afterwards cancelled in satisfaction of the indebtedness.

Such attempt to engraft the law of the policy upon, the subsequent contract, so that the insurance shall remain enforceable in the courts of the state where the policy was issued without regard to its termination in satisfaction of the loan, is an invasion of the citizen’s liberty of contract under the Fourteenth Amendment, and cannot be sustained through the license to the foreign corporation.

A life insurance policy, issued in Missouri to a resident and citizen of Missouri by a New York corporation with Missouri license provided that the insured might obtain cash loans on the security of the policy on application at the company’s home office, subject to the terms of its loan agreement, and that any indebtedness to the company should be deducted in any settlement of the policy or of any benefit thereunder. Held that this imposed no obligation on the company to make a loan subject to a Missouri nonforfeiture law governing the policy and devoting three-fourths of its net value to satisfaction of premium indebtedness exclusively and extension of the insurance in case of default.

Upon application, based on such a policy, addressed to the company at New York, accompanied by a loan agreement, both signed by the insured and beneficiary in Missouri, where both were resident citizens, and forwarded, with pledge of the policy as security, through the company’s Missouri agent, and all received and accepted at its home office in New York, a loan was made, the amount being remitted by mail to the insured in Missouri in the form of the company’s check on a New York bank payable to his order. The agreement declared in substance that it was made and to be performed entirely in New York under New York laws. Under it, in accordance with those laws, the pledge was foreclosed and the reserve of the policy extinguished in satisfying the loan. Held that the agreement was a valid New York contract, independent of the policy, and that the foreclosure was a defense to an action on the policy in the courts of Missouri, notwithstanding a Missouri nonforfeiture statute (Rev.Stats. 1899, 7897), devoting three-fourths of the net value to payment of premium indebtedness exclusively and in extension of the insurance, was there construed as continuing the insurance in force.

189 S.W. 609 reversed.

The case is stated in the opinion.