Prudential Ins. Co. of America v. Prescott

• Decision Date: 06 November 1937
• Citation: 176 So. 875,130 Fla. 11
• Court: Florida Supreme Court
• Parties: PRUDENTIAL INS. CO. OF AMERICA v. PRESCOTT.

176 So. 875

130 Fla. 11

PRUDENTIAL INS. CO. OF AMERICA v. PRESCOTT.

Florida Supreme Court, Division B.

November 6, 1937

Error to Circuit Court, Palm Beach County; C. E. Chillingworth Judge.

Action by Mae Irene Prescott, a widow, against the Prudential Insurance Company of America. To review a judgment for plaintiff, defendant brings error.

Reversed and remanded.

COUNSEL

Shutts & Bowen, Crade D. Bowen, and L. S. Bonsteel all of Miami, for plaintiff in error.

Blackwell & Donnell and John L. Moore, all of West Palm Beach, for defendant in error.

OPINION

BROWN Justice.

This is an action at law brought by the beneficiary to enforce the provisions of a life insurance policy issued to Jerry Prescott on October 5, 1931, by the Prudential Insurance Company. The insured died May 29, 1932, and thereafter on the 4th of October, 1932, the insurer filed a bill in chancery seeking to cancel the policy on the ground that the insured had knowingly misrepresented material facts relating to the condition of his health in the answers, contained in his application, to questions propounded by the insurance company, and on the further ground that the insured was not in sound health on the date of the issuance of the policy. The policy contained the following provisions that are material to this case.

'Preliminary Provision.--This policy shall not take effect if on the date hereof the Insured be not in sound health, but in such event the premium or premiums paid hereon, if any shall be returned.'

'Incontestability.--This policy shall be incontestable after one year from its date of issue, except for non-payment of premiums, but if the age of the insured be misstated the amount or amounts payable under this policy shall be such as the premium would have purchased at the correct age.'

'Entire contract contained in this policy.--This policy contains and constitutes the entire Contract between the parties hereto, and all statements made by the insured shall in the absence of fraud be deemed representations and not warranties, and no statement shall avoid the policy or be used as a defense to a claim thereunder unless it be contained in the application for the policy and unless a copy of such application be endorsed upon or attached to the policy when issued.'

The bill of complaint was dismissed on motion and an appeal was had to this court. See Prudential Ins. Co. v. Prescott, 115 Fla. 365, 156 So. 109, 113. In an opinion written by Mr. Justice Buford and concurred in by the entire court, it was held that the bill in equity had been brought within the contestable period, but the judgment of the chancellor was affirmed on the doctrine laid down in the case of Ocean Accident & Guarantee Corporation, Ltd., v. Tucker, 112 Fla. 401, 150 So. 606, in which this court held:

'As a general rule, equity will not entertain a bill by an insurance company, after loss, to cancel the policy and enjoin the bringing of an action thereon, where the bill is founded upon charges of fraud in obtaining the policy which might be availed of by way of defense in an action at law. The Sailors v. Woelfle, 118 Tenn. 755, 102 S.W. 1109, 12 L.R.A. (N.S.) 881; Mechanics' Ins. Co. of Philadelphia v. C. A. Hoover Distilling Co. (8th Circuit) 173 F. 888, 97 C.C.A. 400, 32 L.R.A. (N.S.) 940; Bankers' Reserve Life Co. v. Omberson, 123 Minn. 285, 143 N.W. 735, 48 L.R.A. (N.S.) 265. The reason for the rule is that the insurers, by issuing the policy of insurance, have entered into a contract with the assured, which entitles the latter, after a loss under the policy has occurred, to seek redress in a court of common law, and there submit for judicial determination all issues of fact between the parties, pursuant to the constitutional right to have a jury trial on all such issues. Drobney v. Lukens Iron & Steel Co. (C.C.A.2d Circuit) 204 F. 11.'

In affirming the lower court, this court held:

'In the instant case the suit was brought invoking the aid of a court of equity after the death of the insured, and, if the policy was procured by fraud, such fact could be established as a defense to liability under the terms of the policy.'

On rehearing it was pointed out to this court that a feature existed in this case that did not exist in the Tucker Case, supra, as in the Tucker Case, suit at law had been filed on the policy to enforce it, while in this case no suit had been filed. The court then, in a per curiam opinion in which Justices Buford and the writer dissented, reaffirmed the judgment of the chancellor.

The court held that:

'It appears by the weight of authority, as well as what we conceive to be the better reason, a clause contained in an insurance policy declaring the same to be incontestable after a stated period of time has reference to contest in court by some sort of litigation and not a mere protest against payment, or an offer to rescind or a notice of repudiation of the policy given by the insurer to a party at interest that the insurer will insist upon some defense to the policy. 37 C.J. 540; 36 A.L.R. 1245, note.'

'The incontestability clause simply means that the insurer contracts that if it should have any defense which might be interposed to the validity of the contract that it will interpose such objections to its validity either by affirmative or defensive action taken in court within the period named in the contract [citing authorities].'

'It appears in this case however that the insurer was guilty of inexcusable laches in that it waited until the last day of the contestable period to deny liability, and then undertook to resort to a court of equity for relief based on its election to rescind the contract.'

'Whether this was done purposely as a means of depriving the insured of her constitutional right to a jury trial on certain issues of fact arising because of its denial of liability on the policy, or whether it was due merely to the insurer's neglect, the result is the same,--namely, the insured will be deprived of her constitutional right to a jury trial because of the act of the insured in withholding its notice of election to deny liability until the last day of the contestable period, whereas it plainly appears that it was in a position to have given notice of election to rescind at a much earlier date.'

'The holding of Ocean Accident & Guarantee Corp., Ltd., v. Tucker, 112 Fla. 401, 150 So. 606, confirms the constitutional right of an insured after loss to have issues of fact arising under insurance policies tried by jury. And only when an insurance company has seasonably denied liability on its policy within the contestable period and the insured has with notice thereof delayed so long thereafter in bringing a suit at law on the policy that the insurance company is about to lose its right to contest the policy during the contestable period unless it affirmatively proceeds in equity, is an equity suit to avoid the policy after loss maintainable.'

The present action at law was instituted on April 19, 1933, more than eighteen months after the policy's date of issue, and long after the incontestable period had begun to run. The insurer filed amended pleas, one of which averred that the insured was not in sound health on the day of delivery, and denied liability for that reason, and also averred that the policy had been contested within the contestable period by the aforesaid equity suit, etc. The next plea denied liability because certain material representations concerning the insured's health and medical history were fraudulently made in the application.

The beneficiary interposed a demurrer to these pleas on a number of grounds, among which were: (1) That the policy is incontestable; (2) that the fraudulent misrepresentations in the application could not be pleaded, because the application was not attached to nor indorsed upon the policy when it was issued.

The circuit judge sustained the demurrer and no provisions for amending pleadings were made. The cause came on for trial without pleas and verdict was found in favor of the beneficiary and final judgment entered thereupon.

In the present case the insured died before the incontestable period had begun to run. We find by a review of the cases reported from other jurisdictions that where a life insurance policy provides that after a certain definite time it shall be incontestable, except for certain defenses, a majority of the courts hold that the death of the insured within this time does not put an end to the incontestable clause, or prevent its subsequently becoming operative for the benefit of the beneficiary. Great Southern L. Ins. Co. v. Russ (C.C.A.) 14 F. (2d) 27; Mutual Life Ins. Co. v. Conley (D.C.) 55 F. (2d) 421; Mutual Life Ins. Co. v. Hurni Packing Company, 263 U.S. 167, 44 S.Ct. 90, 68 L.Ed. 235, 31 A.L.R. 102; Jefferson Standard Life Ins. Co. v. McIntyre (C.C.A.) 294 F. 886; Missouri State Life Ins. Co. v. Cranford (1923) 161 Ark. 602, 257 S.W. 66, 31 A.L.R. 93; Monahan v Metropolitan Life Ins. Co., 283 Ill. 136, 119 N.E. 68, L.R.A. 1918D, 1196; Ramsey v. Old Colony Life Ins. Co., 297 Ill. 592, 131 N.E. 108; Ebner v. Ohio State Life Ins. Co., 69 Ind.App. 32, 121 N.E. 315; Priest v. Kansas City Life Ins. Co., 119 Kan. 23, 237 P. 938, 41 A.L.R. 1100; Becker v. Illinois Life Ins. Co., 227 Mich. 388, 198 N.W. 884; Repala v. John Hancock Mut. Life Ins. Co., 229 Mich. 463, 201 N.W. 465; Lavelle v. Metropolitan Life Ins. Co., 209 Mo.App. 330, 238 S.W. 504; Yates v. New England Mut. Life Ins. Co., 117 Neb. 265, 220 N.W. 285; New York Life Ins. Co. v. Steinman, 103 N.J.Eq. 403, 143 A. 529; Hardy v. Phoenix Mut. Life Ins. Co., 180 N.C. 180, 104 S.E. 166; Killian v. Metropolitan Life Ins. Co., 251 N.Y. 44, 166 N.E. 798, 64 A.L.R. 956; Jensen v....