The Lusitania Disaster and Insurance Regulation—Part VI
Michael Sean Quinn*

          I know.  Just when you thought you were done, another insurance case pops up. There will be a few more, one of them really unusual and fascinating, and a couple of probate cases. In the end, there will be a couple of deep sea diving cases in which insurance plays some role.

Procedural History

            The case to be described here is an accident policy with a life insurance component. Hopkins v. Connecticut General Life Insurance Company, 225 N.Y. 76, 121 N.E. 465 (N.Y. 1918). (For the “outsider,” remember that the New York Court of Appeals (“N.Y.”) is the highest state court in the state.) In this case, the Court of Appeals. The Court of Appeals reversed the Supreme Court, Appellate Division (the immediate-level appellate court) 174 A.D. 23, 160 N.Y.S. 247 (July 1916), which decided the case in favor of the insured and had reversed the trial court. 158 N.Y.S. 79 (March 1916), that had decided the case in favor of the insurer.  (Normally, these days, where there is a “West Cite” one doesn’t mother citing official state reporters. Since there are three reported cases here, I thought I best to cite the official reporters.  They may be obtained directly from various judicial clerk offices of the State of New York—again on the Net. Incidentally, New York is one of a relatively few state that has some reported opinions from trial courts.)

Cast of Lawyer Characters: Justice Hughes

            One of the things that makes this case intriguing is that Charles E[vans] Hughes argued the case before the high court on behalf of the insurance company. We all know who he is, don’t we. Well, if I’m wrong about that. Here’s what’s good to know. Charles was on the U.S. Supreme Court from 1910 to 1916, when he ran for President and lost to Wilson in a squeaker, and then back to the Supreme Court as Chief Justice from 1930 to 1941, where he was often a swing vote in the constitutional wars during the New Deal period.  

In between rendering Supreme Court services he was Secretary of State (1921-25), among other things. And there’s more. Suffice it to say for now that Hughes was a paradigm of what Anthony Kronman, called the “lawyer-statesman” in his brilliant and now classic 1993 study of legal ethics and excellence, THE LOST LAWYER.  (It looks like before Justice Hughes went to join the faculty of the Cornell Law School he practiced at a law firm with the name “Cravath” in it, so he may have been a predecessor law firm to the now Cravath, Swaine and Moore a 200 year old paradigmatic “blue stocking” New York firm. For a bit more on Justice Hughes public life, see the “Post Script” at the end.

Cast of Lawyer Characters: Van Slyke

The lawyer for the Hopkins, apparently all the way through was Warren C. Van Slyke.  He was not as famous a lawyer as Hughes or one rendering such notable public service. However, in some of the literature he is called “a prominent New York lawyer.”

More significantly from an historical point of view, he married, as her third husband, one Ruth Coles. Before marring Van Slyke, she had inherited a substantial sum property on Fox Mountain above Le Grande Lake. Her second husband was building an estate there, and it was named “Foxcroft.” The name has stuck. Warren and Ruth lived on Long Island, during which period of time he argued at least a few Lusitania cases. (During WWI, he had been assistant to the chief of naval intelligence.) After Warren’s death in 1925, Ruth lived on Foxcroft full time.  After her death, the estate has an unrelated history of decline, but eventually became an informal tourist “Mecca,” for those who like to walk in the more-or-less woods and see Manhattan buildings off in the distance. Part of the property was and still is called the “Van Slyke” castle—hence, the story told her.  (It may be that the Castle is located on property in the Ramapo Mountains. I am not sufficiently familiar with the geography of Northern New Jersey to be sure.)

 Come Facts

This case involves an “accident policy” issued by Connecticut General Life, the insurer, to Albert L. Hopkins (“ALH”) the husband of May Davies Hopkins (MDH). She was the beneficiary under the $40,000 policy and the plaintiff in the underlying case. It insured ALH for death caused by the “burning or wrecking of a vessel on which he was a passenger.” The policy was purchases on April 29, 1905, just a few days before the Lusitania sailed with ALH on board, and—you guessed—ALH was killed.

Attached to the policy, unfortunately was a “rider,” aka an endorsement that set forth war risk exclusion. It was attached to the policy and the policy could be delivered to ALH only if he agreed to the rider, and that agreement was to the effect that “the policy would not cover any loss caused directly or indirectly by an act of the belligerent nations engaged in the present European War.” ALH signed the rider.

MDH sought coverage, but the claim was denied, as one might expect.  One of the central issues in this case was the fact that the rider had not been filed with the relevant state regulatory agency, which had therefore not approved it, although the rest of the policy had been filed and approved.  MDH’s view that the rider was invalid because of the lack of a required filing, which the insurer’s view was that everything was just fine.

The trial court dismissed the case reasoning that since the rider did not contradict anything in the policy, although there had been a minor violation of established law, it need not be declared invalid or for some statutorily based reason ignored. In addition, since the rider—an endorsement—was part of the policy, if it were ignored, the  whole contract would have to be ignored and then there would be no policy at all.

Today this kind of point might be made this way. ALH signed the rider when he obtained the policy. He was therefore required to understand what the whole policy said. Consequently, if he bought it, he was stuck with it as it read. Parties to contracts are presumed to have read and understood what they have agreed to and this applies to contracts of insurance as well as any other type of contract.

The Supreme Court—Appellate Division reversed the trial court, with one judge dissenting. Remember, this case is about insurance regulation should work.  The kinds of regulations at issue in this case are widely used all over the country, and cases at least somewhat similar to this one are litigated to this day. (Often they apply to surplus line carriers, since it is not uncommon for admitted carriers, when issuing policies for members of the general population—real persons doing ordinary things—to be tightly controlled as to usable forms.  One of the meanings of “surplus lines carrier” is an insurer not licensed in a given state.)

Here is the most important thing the intermediate appellate court said: The purpose of the relevant statute was to

carry out the public policy of the state to take control of the forms of insurance contracts and prevent insurance companies from issuing any form of policy not approved by the superintendent of insurance. That part of the policy which had been approved by the superintendent of insurance clearly covers a loss such as occurred in this case. . . . The rider in question here cut down this risk so as to exclude death by accident caused by any belligerent in the present was. In a very substantial particular, it changed the form as approved by the state. The issuance of a policy in this form without the approval of the superintendent of insurance. . . if absolutely forbidden. The trial court held that notwithstanding the law had been violated in issuing the policy; it was nevertheless a valid policy as to all its provisions.
The decision of the appellate division was to reverse the trial court.  It did not remand the case, however. It decided the case on the spot in favor the plaintiff. Today that could probably not be done in most courts in response to a trial court’s order of dismissal. It could however be done in if the trial court’s judgment was a summary judgment, and I suspect that is what happened here, which a change of vocabulary.

The Court of Appeals reversed the decision of the appellate court and affirmed the judgment of the trial court, based on pretty much the same reasoning.The way it put one of its reasons is that the rider is part of the policy. It wasn’t an add-on. There was, therefore, nothing in the policy it contradicted since it was part of the policy right from the start.  In addition, there was nothing in the policy that said “We cover risks of war,” so there was nothing actually contradicted.

The way it puts another one is this:

The policy which is valid is the contract as the parties have agreed upon it, so far as it is consistent with the statute—not the contract as changed and altered by the excision of some of its provisions. What if no part of a policy defining the risks insured against had been filed? Are only the standard provisions which the law says shall be inserted in every policy to be enforced? In themselves they form no complete policy. 
. . . Further, the policy was not changed. At its inception it included the rider. All the papers together constitute the policy, and it is as agreed by the parties. This is the agreement the agent was expressly authorized to make, and he was prohibited from making any other.  The policy never had any existence except as it contained the agreement in the rider.
It seems to me that the lower appellate court had the better position.  The war risk exclusion in the rider did cut back on an existing coverage, namely “We insured death from the wrecking of a ship.” The policy with the rider was substantially different from the one without it.

The “what if” argument given by the Court of Appeals is just that: a hypothetical.  It had nothing to do with the existing Hopkins case before it, since no such issue was at stake. The Court’s “what if” argument can be undermined by an opposite argument. What if the rider said, “None of the rest of the policy upon which this clause is riding applies in any way at all, and the only provisions of the policy are those which are to be fund herein.”  Interestingly, the Court of Appeals scorns exactly this situation. 

My guess is that we are looking at a near to the last gasp discourse by the high Court. Insurance regulation was relatively new in New York and the other states at the time of the decision. In New York, first party fire regulation was already much more developed that life insurance regulation was in 1918. Today, I think most court would be inclined to accept the reasoning of the lower appellate court and avoid the sophistries of the upper court.  In any case, this opinion may have come at a watershed point in the history of insurance law and so have a significance all its own.

We would also be more conscious about for whom the agency was the agent. And we would be interested on how all this happened. Surely if ALH was racing through the city in a hurry to get to the docks (or something of the sort) that might make a difference as to how the case was decided. It is perfectly clear from the opinions in the lower courts that the agency-insurer relationships were a mess, though exactly how this is true is not so clear.

Post Script


Here is the opening of the preface of  Samuel Hendel’s biography entitled CHARLES EVANS HUGHES AND THE SUPREME COURT. Columbia U. Pr. 1951. P. vii. “The public career of Charles Evans Hughes began very early in the twentieth century and ended just before Pearl Harbor. In that career is written a vital segment of the history of our century. It was a career in which of personal eminence, diversity of experience and significance of American society few men have ever rivalled.  In its course, Charles Evans Hughes was governor of the State of New York, an Associate Justice of the Supreme Court of the United States, acknowledged leader of the American bar, Secretary of State, a Judge of the Permanent Court of International Justice, and Chief Justice of the [Supreme Court of the] United States.”



Michael Sean Quinn, Ph.D., J.D., c.p.c.u. . . .
The Law Firm of Michael Sean Quinn et
Quinn and Quinn
                                 1300 West Lynn Street, Suite 208
                                             Austin, Texas 78703
                                                 (512) 296-2594
                                            (512) 344-9466 – Fax
                                E-mail:  mquinn@msquinnlaw.com