MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. Cohen

• Decision Date: 11 March 1952
• Docket Number: No. 14215.,14215.
• Parties: MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. COHEN.
• Court: U.S. Court of Appeals — Eighth Circuit

194 F.2d 232 (1952)

MUTUAL BEN. HEALTH & ACCIDENT ASS'N v. COHEN.

No. 14215.

United States Court of Appeals Eighth Circuit.

January 10, 1952.

Rehearing Denied March 11, 1952.

COPYRIGHT MATERIAL OMITTED

Henry I. Eager and Henry G. Eager (both of Blackmar, Newkirk, Eager, Swanson & Midgley), both of Kansas City, Mo., Philip E. Horan, Omaha, Neb., of counsel, for appellant.

Myer M. Rich and Isadore Rich (both of Rich & Rich), both of Kansas City, Mo., for appellee.

Before STONE and COLLET, Circuit Judges, and DELEHANT, District Judge.

STONE, Circuit Judge.

This is an appeal by defendant from a judgment in consolidated¹ actions, on an accident and health policy, for sick benefits.

As issued in 1928, the policy provided monthly payments for the duration of disability resulting from disease. October 30, 1942, insured and the company executed jointly a rider to the policy. This rider limited monthly payments for illness and total accident liability to a maximum of one year.

Thereafter, insured became ill and appellant paid the monthly sick benefits for one year ending April 4, 1948. It refused further payment, and these actions were brought. The issues tried were (1) whether the foregoing rider was in effect; (2) whether insured had been continuously confined within doors, within the meaning of the policy; and (3) whether insured had received the required medical attendance, within the meaning of the policy. This rider and the provisions in the policy relating to each of the above issues will be set out in connection with the consideration of the particular issue. The trial court determined that no legal consideration was given by the company for this rider, therefore, it was invalid and ineffective. The issues as to confinement and as to medical attendance were found by a jury against appellant.

Appellant contends here (1) that the rider was valid; (2) that the Court should have directed a verdict for it on the issues of confinement and of medical attendance; and (3) that the charge as to confinement and as to medical attendance was erroneous.² Appellee opposes each of these contentions. As to the rider, appellee urges its invalidity for the reasons following: (1) fraud in its procurement; (2) the company did not exercise timely any right it may have had to refuse premium renewal payments; (3) conflict or ambiguity in the policy; and (4) no legal consideration to insured for the rider. In view of these various contentions of the parties, determination of this appeal is best reached by examining them in the order following: first, the validity of the rider — by consideration of the various grounds attacking its validity which appellee presents; and second, the issues as to confinement and as to medical attendance — as part thereof, the contentions that a verdict should have been directed and that the charge thereon was erroneous.

The Rider.³

(1) Fraud in Procurement. Appellee contends this rider was procured by fraud upon insured. No such issue was pleaded, tried or submitted. It cannot be raised for the first time on appeal.

(2) Exercise of Right to Refuse Renewal. The contention that appellant did not exercise any right it may have had flowing from the option to accept or reject the premium payment due November 1, 1942 is based on a quotation from Rice v. Provident Life & Accident Ins. Co., 231 Mo. App. 560, 567, 102 S.W.2d 147, 151, and the fact situation here.

The Rice case was a suit for monthly benefits for the month of February and part of March, 1935 resulting from sciatic rheumatism. On July 20, 1932, Rice had received payment and had executed a release for disability resulting from a similar illness. Immediately thereafter and upon insistence of the company agent, he had jointly executed a rider eliminating liability for rheumatism, effective July 20, 1932. The premium had theretofore been paid up to August 1, 1932. When demand was made by Rice for the 1935 illness, the company refused payment, relying upon the rider and a policy provision that it might cancel the policy at any time by written notice and repayment of unearned premiums. The evidence as to the entire transaction seems to be that the agent told Rice "I will have to put a rider on for rheumatism" and presented him the rider, which he signed.

In denying a contention of the company that the monthly renewal on August 1, 1932 constituted a new contract of which the "rider" was an integral part, the Court used the language here involved. Emphasizing the portion quoted by appellee, it is as follows.

"The rider itself recites that it is subject otherwise to all conditions, agreements, and limitations of the policy as written except as in itself is specifically provided. It is true that those that make a contract may unmake it or substitute another, either wholly or partially inconsistent; but the validity of the substituted contract must be determined, like that of any other, in the light of the situation existing at the hour of its making. If valid, then it will supersede or modify the first to the extent that the two will be unable to stand together. Lieberman v. Templar Motor Co., 236 N.Y. 139, 140 N.E. 222, 29 A.L.R. 1089.

"Applying the rule thus stated, the rider in question was at the time that it was executed void for the reason that no consideration at such time existed therefor; and, being inconsistent with and repugnant to the provisions of the original policy, it cannot stand. The original policy as continued from month to month or as renewed from month to month was unaffected by such rider."

The fact situation here, to which appellee applies the emphasized words in this quotation, is that the rider here was executed on October 30, 1942 and the next renewal date was November 1, 1942 — two days later.

The differences between the Rice case 231 Mo.App. 560, 102 S.W.2d 151 and this case are as follows: that case was tried and determined on a supposed right to cancel by a rider executed in and, by its terms, effective during a period for which the premiums had been paid and accepted; the Court held that the validity of that rider must be determined by the situation "at the hour of its making" and could not be determined as of some days later upon the next renewal date; in the present case, the rider was executed on October 30 but it expressly stated "This rider to be effective on the date of the next premium payment on said policy and any provision in the policy inconsistent with this rider is hereby modified to agree herewith."

However true the language here quoted from the Rice case may have been in the setting of that case, it has no force here because of the differences in fact and legal situations. The Rice case does not hold that parties to an insurance contract can never enter into a contract affecting that insurance merely because such later contract is prospective in its operation. If this rider is a valid contract in other respects, the fact that it was actually executed before the next renewal date is not material.

(3) Conflict or Ambiguity in Policy. While the matter of whether there was consideration given appellee for execution of this rider might properly be considered under this subheading, we prefer to deal with that issue separately under the next subheading of this opinion. We do this because of the particular importance of that issue. Our immediate concern is whether — aside from this issue of consideration — there are conflicts or ambiguities in the policy as to the right of the company to refuse renewals.

It is properly conceded that this is a term policy. The policy states: "The term of this policy * * * ends at 12 o'clock noon on date any renewal is due." Appellant bases its right to refuse to renew on any such date upon another provision of the policy. This is a portion of paragraph "(c)" which reads: "The acceptance of any premium on this policy shall be optional with the Association, and should the premium provided herein be insufficient to meet the requirements of this policy, the Association may call for the difference as required." (Emphasis added.)

Appellee contends that the portion of clause "(c)" (quoted above) in and of itself gave no unrestricted right to refuse renewal premiums and end the policy. She states two reasons for this position. The first is that the entire sentence is indivisible and leaves no unrestricted right to refuse renewals. The sentence provides for two distinct matters relating to payment of premiums. The first matter is the option to accept premiums. The second is the right to require such additional payment of premium as may "meet the requirements of this policy." The two matters are entirely consistent and neither nullifies or qualifies the other. Inclusion of both in the same sentence has no effect upon the meaning of either. This is held directly by this Court in construing this identical sentence. Mutual Benefit Health & Accident Ass'n v. Lyon, 8 Cir., 95 F.2d 528, 533, reversed on other grounds 305 U.S. 484, 59 S. Ct. 297, 83 L.Ed. 303. Also see Davis v. Mutual Benefit Health & Accident Ass'n, 168 Okl. 514, 34 P.2d 579, and Smith v. Mutual Benefit Health & Accident Ass'n, D.C.W.D.Okl., 10 F.Supp. 110, enforcing an identical clause in a policy of this appellant.

The second reason stated by appellee is that appellant has itself construed the clause as contended by appellee by changing it in policies later issued by it. We do not state that a change in an insurance policy cannot have significance in construing the meaning of the older form — that depends upon the situation in a particular instance. We do say it has no bearing here where the old form is clear in meaning.

In addition to the above contentions directed at construction of the language of clause "(c)", appellee urges that other provisions of the policy are contradictory to clause "(c)" or, at least, are so inconsistent therewith as to make the meaning of "(c)" ambiguous and, therefore, to be...