79 F.2d 481 (4th Cir. 1935), 3874, New York Life Ins. Co. v. Truesdale

Docket Nº:3874.
Citation:79 F.2d 481
Party Name:NEW YORK LIFE INS. CO. v. TRUESDALE et al.
Case Date:October 08, 1935
Court:United States Courts of Appeals, Court of Appeals for the Fourth Circuit

Page 481

79 F.2d 481 (4th Cir. 1935)

NEW YORK LIFE INS. CO.

v.

TRUESDALE et al.

No. 3874.

United States Court of Appeals, Fourth Circuit.

October 8, 1935

Appeal from the District Court of the United States for the Eastern District of South Carolina, at Columbia.

Page 482

Pinckney L. Cain, of Columbia, S. C. (Thomas, Lumpkin & Cain, of Columbia, S. C., on the brief), for appellant.

Toy R. Gregory, of Lancaster, S. C. (Gregory & Gregory and Williams & Stewart, all of Lancaster, S. C., on the brief), for appellees.

Before PARKER and NORTHCOTT, Circuit Judges, and CHESNUT, District Judge.

PARKER, Circuit Judge.

This is an appeal from a decree dismissing a bill filed to secure the cancellation of a policy of life and disability insurance on account of false and fraudulent representations contained in the application. The court below found that the policy had been obtained by means of the false and fraudulent representations alleged, but held that, under section 7986 of the South Carolina Code, it had become incontestable as to its life insurance provisions and that, as to its disability provisions, complainant had an adequate remedy at law, in the right to assert as a defense against any action which might be instituted under such provisions the matters set up in the bill.

The policy in question was issued September 4, 1929, and suit for cancellation was instituted within two years of that date but after premiums for two years had been paid. The policy contained the following provision: '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.'

Sections 7986 and 7987 of the South Carolina Code, which were in force when the policy was issued, when premiums for the second year were received and when the decree below was entered, are as follows:

'§ 7986. All life insurance companies, fraternal benefit associations or any other company, corporation or association by whatever name known, who issues a policy or certificate of insurance on the life of a person that shall receive the premium on any policy for the space of two years shall be deemed and taken to have waived any right they may have had to dispute the truth of the application for insurance, or that the assured person had made false representations, and the said application and representations shall be deemed and taken to be true.

'§ 7987. Life insurance companies are hereby authorized to institute proceedings to vacate policies on the ground of the falsity of the representations contained in the application for said policy: Provided, The same be commenced within two years from the date of said policy.'

On May 4, 1935, more than three months after the decree below was entered, section 7986 was amended by the Legislature of South Carolina (39 St. at Large, p. 303) to read as follows: 'All Life Insurance companies, fraternal benefit associations or any other company, corporation or association by whatever name known, who issues a policy or certificate of insurance on the life of a person shall, after a period of two (2) years from the date of such policy or certificate of insurance, be deemed and taken to have waived any right they may have had to dispute the truth of the application for insurance, or that the assured person had made false representations, and the said application and representations shall be deemed and taken to be true; Provided, that where any such policy shall contain, in addition to life insurance, agreements for indemnity or benefits for disability, or any other coverage, the provisions of this section shall apply to such agreements with the same force and effect as to the life insurance coverage of such policy.'

Three questions are presented by the appeal: (1) Whether the company was precluded from disputing the validity of the policy, in so far as it related to life insurance, by the provisions of section 7986 of the South Carolina Code, in view of the fact that the company had accepted premiums on the policy for the second policy year; (2) if so, whether the passage of the statute of May 5, 1935, had the effect of restoring to the company the right to dispute the validity of the provisions of the policy relating to life insurance; and (3) whether the company had an adequate remedy at law in its right to interpose against suits on the disability features of the policy the fraud and misrepresentation in its procurement alleged in the bill.

Page 483

On the first question, we think it clear that the Supreme Court of South Carolina has construed section 7986 of the Code, as it stood prior to the recent amendment, as precluding a contest on a policy, on the ground of false representations in the application, after the company has accepted premiums covering the second policy year; and we are, of course, bound by the interpretation which that court places upon the statute. In Beard v. North State Life Ins. Co., 104 S.C. 45, 88 S.E. 285, it appeared that a policy of life insurance was reinstated in December, 1912, and that insured died in June, 1914. At the time of his death premiums for the two year period following the reinstatement had been accepted, but two years from the reinstatement had not elapsed either at that time or later when the company sought to defend on the ground of fraud in the application for the policy and in the certificate of health upon which it was reinstated. In holding that the company could not defend on this ground because it had received premiums for two years, the court said: 'It will be observed our statute said nothing about the date or age of the policy. The language refers solely to the receipt of the premium on life insurance. Companies that shall receive the premium on any policy for the space of two years shall be deemed and taken to have waived any right they may have had to dispute the truth, etc. The case states that the company had received the premium for the two years. Under the express terms of the statute, the courts are bound to hold that, as a matter of law, it had waived the right to dispute the truth of the application for insurance.'

In the very recent case of Henderson v. Life Ins. Co. of Virginia, 176 S.C. 100, 179 S.E. 680, 690, which is the latest expression of the Supreme Court of South Carolina on the subject, that court held that the lower court should have granted a motion to strike from the answer of defendant insurer a defense of fraud and misrepresentation in the application, where it appeared that premium for the second policy year had been accepted by the insurer,...

To continue reading

FREE SIGN UP