Equitable Life Assur. Soc. of the United States v. Kushman
| Decision Date | 23 November 1937 |
| Citation | 276 N.Y. 178,11 N.E.2d 719 |
| Court | New York Court of Appeals Court of Appeals |
| Parties | EQUITABLE LIFE ASSUR. SOC. OF THE UNITED STATES v. KUSHMAN et al. |
OPINION TEXT STARTS HERE
Action by the Equitable Life Assurance Society of the United States against Alexander Kushman and another. From a judgment of the Appellate Division, First Department (251 App.Div. 294, 296 N.Y.S. 143), reversing an order of the Special Term which denied a motion made by the defendants under rule 106, Rules of Civil Practice, to dismiss the complaint upon the ground that it failed to state facts sufficient to constitute a cause of action in equity, and dismissed the complaint, the plaintiff appeals.
Judgment of the Appellate Division reversed, and order of the Special Term affirmed. Appeal from Supreme Court, Appellate Division, First department.
James D. Ewing, for appellant.
Morris, A. Marks, for respondents.
The appellant issued two life insurance policies upon the life of the respondent Alexander Kushman. The respondent Esther Kushman is the beneficiary named in each policy. Each policy contained a disability and double indemnity provision.
The insured filed a claim with the appellant claiming to have become totally and permanently disabled. The claim was allowed and the company waived the payment of premiums and paid to the insured monthly the amount called for in the policies until it had paid $6,750. The complaint in this action alleges that appellant then discovered that the policies were procured by fraud; that the insured made material false and fraudulent statements in his application for the policies; and that the company relied upon such statements in issuing the policies.
The complaint also alleges that the company tendered to the insured the amount of the premiums which he had paid and notified the insured that the disability and double indemnity provisions of the policies were null, void, and of no effect, and that it rescinded the double indemnity and total and permanent disability provision contained in the policies. The complaint demands judgment for $6,750, the amount paid to the insured, and that the double indemnity and permanent disability provisions of the policies be decreed to be null and void. Each policy contained a one-year incontestability clause which applied to the life insurance feature of the policies. As more than one year had expired before the commencement of this action, no question is raised as to the binding effect of the life insurance provision of some policies. The incontestability clause does not apply to the disability and double indemnity clause of the policies. Manhattan Life Ins. Co. v. Schwartz, 274 N.Y. 374, 9 N.E.2d 16;Guardian Life Ins. Co. of America v. Katz, 243 App.Div. 11, 275 N.Y.S. 743, affirmed 269 N.Y. 625, 200 N.E. 29;Steinberg v. New York Life Ins. Co., 263 N.Y. 45, 188 N.E. 152, 90 A.L.R. 642. The policy here in question was not made a part of the record, and no question was raised as to its incontestability.
The complaint was dismissed by the Appellate Division upon the ground that it did not state a cause of action in equity as the plaintiff has a full and complete remedy in an action at law.
In at least two cases in this court a judgment canceling a disability and double indemnity clause of a policy in an action in equity on the ground that the policy was procured by fraud has been affirmed. It does not appear, however, that the point was made in either case that the plaintiff had a full and complete remedy at law. Manhattan Life Ins. Co. v. Schwartz, supra; Guardian Life Ins. Co. of America v. Katz, supra.
An action may be maintained in equity to cancel a life insurance policy which does not contain a disability and double indemnity provision, when the action is commenced before the incontestability clause has become effective. New York Life Ins. Co. v. Watkin, 229 App.Div. 211, 241 N.Y.S. 441, affirmed 256 N.Y. 618, 177 N.E. 164;Travelers' Ins. Co. v. Pomerantz, 246 N.Y. 63, 158 N.E. 21;American Life Ins. Co. v. Stewart, 300 U.S. 203, 57 S.Ct. 377, 81 L.Ed. 605, 111 A.L.R. 1268.
The decision in each of those cases was based upon the ground that the incontestability clause created an exceptional circumstance which necessitated the intervention of a court of equity as the plaintiff's rights might be jeopardized by the expiration of the period of contestability.
Black on Rescission and Cancellation (vol. 3, p. 1569, § 652) states the general rule as follows:
‘Before a loss occurs under a policy of insurance (life) the company which issued it has no adequate remedy at law for fraud,...
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