304 U.S. 202 (1938), 596, Ruhlin v. New York Life Insurance Co.

Docket Nº:No. 596
Citation:304 U.S. 202, 58 S.Ct. 860, 82 L.Ed. 1290
Party Name:Ruhlin v. New York Life Insurance Co.
Case Date:May 02, 1938
Court:United States Supreme Court

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304 U.S. 202 (1938)

58 S.Ct. 860, 82 L.Ed. 1290



New York Life Insurance Co.

No. 596

United States Supreme Court

May 2, 1938

Argued March 10, 1938




1. Where an insurance policy, by its terms, is incontestable after a time limited except for nonpayment of premium and "except as to provisions and conditions relating to disability and double indemnity benefits," the question whether the latter exception embraces, and excludes from the limitation, the right of the insurer to rescind the agreement to pay disability and double indemnity benefits because of fraud in the application is not a question of "general law" which a federal court may determine independently, but a question of state law which the federal court must determine in accordance with the decisions of the appropriate state court. Erie Railroad Co. v. Tompkins, ante p. 64. P. 204.

2. The doctrine of Erie Railroad Co. v. Tompkins is applicable to a question of construction of a contract arising in a suit in equity. P. 205.

3. Conflict among the Circuit Courts of Appeals on questions of state law is not, of itself, a reason for granting a writ of certiorari. P. 206.

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4. The petition in this case did not show, as a basis for certiorari, that the important question of local law involved was decided below "in a way probably in conflict with applicable local decision," or that the decision was "probably untenable," and therefore probably in conflict with the state law as yet undeclared by the highest court of the State. Rule 38(5)(b).

5. Where a suit dependent on the construction of an insurance policy was presented and decided below on the mistaken assumption that the construction was a question of "general" or "federal" law, this Court, on certiorari, declined to decide upon the rule of state law applicable, but vacated the judgment and remanded the cause to the District Court for further proceedings in conformity with the opinion and with directions to permit such amendments of the pleadings as might be necessary for that purpose. P. 206.

93 F.2d 416 reversed.

Certiorari, 302 U.S. 681, to review the affirmance of an interlocutory decree enjoining the institution of actions on certain insurance policies, including an action in a state court, pending the determination of a suit to cancel the policies in part for fraud.

REED, J., lead opinion

MR. JUSTICE REED delivered the opinion of the Court.

On February 14, 1935, the New York Life Insurance Company, respondent here, filed its bill of complaint in the District Court for Western Pennsylvania to rescind, because of certain misrepresentations, the disability and double indemnity provisions in five policies issued on the life of defendant John G. Ruhlin, and made in favor of the other defendants as beneficiaries.

The bill alleged that the plaintiff is a mutual life insurance company incorporated under the laws of the State of New York and lawfully engaged in business in Pittsburgh,

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Pa.; that the defendants are temporarily living in Pennsylvania, though plaintiff does not know where their legal residence is; that, on December 1, 1928, plaintiff wrote two policies of life insurance on the life of John G. Ruhlin, in the face amounts of $10,000 and $5,000; that, on July 7, 1930, it wrote three additional, similar policies in the face amount of $4,000 each; that certain questions in the applications were answered falsely and fraudulently by the insured; that, on November 1, 1934, John G. Ruhlin presented a claim for total and permanent disability benefits under each of the five policies. The company tendered into court the sum of $1,045.42, the aggregate amount of premiums paid for disability and double indemnity benefits, and prayed that the disability and double indemnity provisions be rescinded and for other relief not material here.

The defendants filed a motion to dismiss the complaint on the ground that the policies had become incontestable, since the suit was brought more than two years after the date of each policy involved. The "incontestability clause" of each of the policies reads as follows:

Incontestability. -- This Policy shall be incontestable after two years from its date of issue except for nonpayment of premium and except as to provisions and conditions relating to Disability and Double Indemnity Benefits.

The District Court overruled the motion to dismiss. The Circuit Court of Appeals, 93 F.2d 416, affirmed the order, holding that, in view of their express terms, the incontestability clauses had no application to liability for disability and double indemnity [58 S.Ct. 861] benefits. It recognized that its decision was contrary to that reached by the Circuit Court of Appeals for the Ninth Circuit (New York Life Insurance Company v. Kaufman, 78 F.2d 398), and by the Circuit Court of Appeals for the Fourth Circuit (New York Life Insurance Company v. Truesdale, 79 F.2d 481), which had held that the exception in the

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incontestability clause related only to provisions and conditions actually set forth in the policy itself, compare Strochmann v. Mutual Life Ins. Co., 300 U.S. 435, and that fraud was not mentioned in any of those provisions. Ruhlin petitioned for certiorari, asserting the conflict of circuits. The company filed a memorandum admitting the conflict, and raising no objection to the granting of the writ. Because of the conflict of circuits, the Court granted certiorari.

It was stated in Carpenter v. Providence Washington Ins. Co., 16 Pet. 495, 511, that questions concerning the proper construction of contracts of insurance are "questions of general commercial law," and that state decisions on the subject, though entitled to great respect, "cannot conclude the judgment of this...

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