300 U.S. 435 (1937), 599, Stroehmann v. Mutual Life Ins. Co. of New York

Docket Nº:No. 599
Citation:300 U.S. 435, 57 S.Ct. 607, 81 L.Ed. 732
Party Name:Stroehmann v. Mutual Life Ins. Co. of New York
Case Date:March 29, 1937
Court:United States Supreme Court

Page 435

300 U.S. 435 (1937)

57 S.Ct. 607, 81 L.Ed. 732

Stroehmann

v.

Mutual Life Ins. Co. of New York

No. 599

United States Supreme Court

March 29, 1937

Argued March 11, 1937

CERTIORARI TO THE CIRCUIT COURT OF APPEALS

FOR THE THIRD CIRCUIT

Syllabus

Where, from the language of a policy of life insurance, it is doubtful whether provisions for disability benefits were excepted from the "incontestable" clause, the doubt will be resolved in favor of the insured. Pp. 439-440.

6 F.2d 47 reversed.

District Court affirmed.

Certiorari, post, p. 646, to review a decree reversing a decree dismissing the bill. The suit was by the insurance company to cancel the disability benefits provisions of a policy upon the ground of fraud, alleged to have been practiced by the insured in obtaining the insurance. The District Court at first refused to dismiss the bill, 6 F.Supp. 953, but later ruled the other way when the motion was renewed after the bill had been amended.

MCREYNOLDS, J., lead opinion

MR. JUSTICE McREYNOLDS delivered the opinion of the Court.

By a policy dated June 30, 1930, respondent insurance company, a New York corporation, agreed to pay the

Page 436

named beneficiary $40,000 upon death of Carl F. Stroehmann, the insured. Or to pay $80,000 if his death results from accidental bodily injury,

all upon the conditions set forth in Section 1. . . . And if the Insured is totally and presumably permanently disabled before age 60, will pay to the Insured $400.00 monthly during such disability, increasing after five and ten years continuous disability, besides waiving premium payments, all upon the conditions set forth in Section 3.

The policy is a long and complicated document. It incorporates the application and the medical examiner's report.

[57 S.Ct. 608] Section 1 (two printed pages) relates to the "Double Indemnity" obligation. It defines the injury to which the insurance applies, specifies the necessary proof, optional modes of settlement, etc.

Section 3 -- "Benefits in Event of Total and Permanent Disability before Age 60," is in the margin. * It defines

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total and permanent disability; states when benefits will become effective; what they shall be; when premiums will be waived. Also specifies what will be considered permanent disability, when proofs may be demanded, etc.

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And provides:

Disability Benefits shall not be granted if disability is the result of self-inflicted injury. The provision for Disability Benefits shall automatically terminate if the Insured shall at any time, voluntarily or involuntarily, engage in military or naval service in time of war outside of the continental limits of the United States of America and the Dominion of Canada.

Other provisions relate to termination of such benefits, reduction of premiums thereafter, etc.

Neither § 1 nor § 3 contains anything relative to fraud in obtaining the policy or the effect of false statements in the application.

Section 14 -- "Miscellaneous Provisions" (two pages) contains the following paragraph:

Incontestability. -- Except for nonpayment of premiums and except for the restrictions and provisions applying to the Double Indemnity and Disability Benefits as provided in Sections 1 and 3, respectively, this Policy shall be incontestable after one year from its date of issue unless the Insured dies in such year, in which event it shall be incontestable after two years from its date of issue.

In October, 1932, respondent filed a bill (afterwards amended) against Stroehmann, the insured, and the beneficiary in the United States District Court, Middle District, Pennsylvania. It alleged that the policy had been obtained upon false and fraudulent misrepresentations and concealments material to the risk. It asked

Page 439

that the disability benefits provisions be cancelled, also for an injunction against suit at law upon them.

Relying upon the incontestability clause, the petitioner moved that the bill be dismissed. The trial court sustained the motion, holding that, as more than a year had elapsed since the policy took effect, the limitation was applicable and controlling. The Circuit Court of Appeals thought otherwise, and reversed the challenged decree.

The matter is here by certiorari limited to the question of the application and effect of the incontestability clause.

No reason appears to doubt the power of the insurer to except from the ordinary incontestability clause all policy provisions relating to disability benefits. Ch. 28, Laws N.Y. (1923); Steinberg v. N.Y. Life Ins. Co., 263 N.Y. 45, 188 N.E. 152. But the petitioner maintains that the words used in the policy before us are inadequate definitely to disclose a purpose so to do. And we think...

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