Messer v. New York Life Ins. Co., 272 A.D. 377 (1947)

An insured’s request to surrender a life insurance policy for its cash value, coupled with a request for terms not provided in the policy’s options, constitutes a counteroffer that requires acceptance by the insurer to be effective; absent such acceptance, the original policy remains in force.

Summary

John Messer sought to surrender his life insurance policies and deposit the cash value with the company under terms different from the policy options, specifically requesting the right to withdraw principal at any interest date. The company sent a form with different withdrawal terms. Before the “supplementary contract” was finalized, Messer attempted to rescind his surrender request and pay the premium. The company refused, claiming the policies were surrendered. The court held that Messer’s initial request was a counteroffer not accepted by the company, thus the policies remained in force and the beneficiaries were entitled to death and disability benefits.

Facts

John Messer held two life insurance policies with New York Life. On February 15, 1946, Messer wrote to the company expressing his desire to surrender the policies on their anniversary date, March 5, 1946, for their cash value, to be deposited with the company at interest, with the added provision that he could withdraw the principal at any interest date. The policies allowed for surrender for cash value and various settlement options, but not for the withdrawal of principal at will. On March 28, 1946, Messer telegraphed the company to ignore his surrender request and tendered the premium payment. The company rejected the premium and tendered a “supplementary contract” which Messer refused.

Procedural History

The executors of Messer’s estate sued to recover the death and disability benefits under the policies. The trial court granted summary judgment for the insurance company, dismissing the complaint. The Appellate Division affirmed, and the executors appealed to the Court of Appeals.

Issue(s)

Whether Messer’s letter of February 15, 1946, constituted an effective surrender of the life insurance policies, thereby terminating the policies prior to his death?

Holding

No, because Messer’s request constituted a counteroffer to the insurance company, which the company did not accept, and because Messer rescinded his offer before the company could accept it by sending the telegram and the check for the premium.

Court’s Reasoning

The court reasoned that Messer’s letter was not an acceptance of an option within the existing policy terms because it requested a provision (withdrawal of principal) not offered in the policy. “The insured could not accept what was not offered.” Therefore, the letter was a counteroffer. The company’s response, offering withdrawals with a $250 minimum, was a second counteroffer. Citing Jones v. Union Central Life Ins. Co., the court emphasized that the company’s consent was necessary for the change, drawing an analogy to cases where the option had terminated. The court stated that the “supplementary contract” was a new offer, and the insured’s retention of it was a condition precedent to acceptance, which Messer refused. The court emphasized the distinction between a supplemental contract, which arises from exercising an existing option, and a new contract, which requires mutual assent to new terms. The original policies required surrender to be “accompanied by the Policy for endorsement”. Since Messer never surrendered the policies and, in fact, attempted to continue them by tendering the premium, the original insurance contracts remained in full force. Furthermore, any ambiguities in the company’s offer should be construed against the company. The Court explicitly said, “The so-called ‘supplementary contract ’, as the term is applied by the insurance company to the paper dated March 19, 1946, is a new offer to contract which had to be accepted in the manner provided in the company’s ‘ Income Settlement Request ’ and with that manner there was concededly no compliance.”