Amoskeag Trust Co. v. Prudential Ins. Co. of Am.

CourtSupreme Court of New Hampshire
Citation185 A. 2
Decision Date07 May 1936

Exceptions from Superior Court, Hillsborough County; Scammon, Judge.

Assumpsit by the Amoskeag Trust Company, trustee, against the Prudential Insurance Company of America. Verdict for plaintiff, and case transferred by trial judge on defendant's exceptions.

Judgment for defendant.

Assumpsit upon three policies of life insurance dated June 18, 1931, issued upon the life of Dr. Jesse S. Bragg and payable to the plaintiff as trustee. Trial by jury, with verdict for the plaintiff.

The defendant's exceptions are: (1) To the denial of motions for a nonsuit and for a directed verdict on the ground that the insured had procured the issuance of the policies by fraudulent misrepresentations as to the amount of other insurance carried, as to previous illnesses and treatment in hospital, and as to his ever having albumin or blood in his urine; (2) to certain rulings of the trial justice as to the admissibility of evidence; (3) to certain instructions given to the jury and to the refusal of certain requests for instructions; and (4) to the denial of a motion for mistrial.

The plaintiff excepted to the denial of its motions at the close of the plaintiff's evidence, and also at the close of all the evidence, for judgment in its favor upon the ground that the defenses made (fraud and suicide) were barred by the incontestability clause.

The facts appear in the opinion.

Warren, Wilson, McLaughlin & Bingham and J. Walker Wiggin, all of Manchester, for plaintiff.

Thorp & Branch and Frederick W. Branch, all of Manchester, for defendant.

PAGE, Justice.

The defendant's motions for nonsuit and directed verdict were based upon the theory that it conclusively appeared both that the policies were obtained by fraud and that the insured committed suicide. The ground of suicide having been waived with respect to the exceptions to the denial of the motions, the only question raised by those motions is whether fraud conclusively appears. That leaves no question of law regarding suicide except one respecting instructions.

The discussion may center upon the denial of the motion for nonsuit. But before that is considered, it will be convenient to determine the claim of the plaintiff, raised by its exception to the denial of its motion for a directed verdict in its own favor, that the defendant is precluded by the incontestability clause of the policies from raising the defense of fraud.

I. Each policy contained the following provision: "This Policy shall be incontestable after two years from its date of issue, except for non-payment of premium." If this provision is legally "permissible and is to be construed strictly, the period within which the contest could be made expired on June 18, 1933.

Our statute provides (P.L. c. 277, §§ 8, 9) that every policy "issued or delivered within this state by any life insurance corporation doing business within the state" shall be incontestable after it shall have been in force during the lifetime of the insured for two years from its date except for certain defenses other than fraud. It seems, if the statute controls this case, that the death of Dr. Bragg on January 1, 1932, less than two years after the date of the policy, left the defendant free to contest the policies at any time it would be free to do so independently of the incontestability clause.

But that point need not be decided. Let us assume that the incontestability clause is not to be interpreted by the statute (whether because the policy was not in fact issued or delivered in this state, or because the statute is to be construed as permitting the parties to contract for a limitation of action more favorable to the insured and the beneficiary). On that assumption we are faced by the overwhelming weight of authority that the period of incontestability begins to run on the day the policy is dated, that the running is not suspended by the death of the insured, and that the parties must be in judicial contest before the period is run, otherwise the unexcepted defense is not available. Northwestern, etc., Co. v. Pickering (C.C.A.) 293 F. 496; Jefferson, etc., Co. v. McIntyre (CCA.) 294 F. 886; Chun Ngit Ngan v. Prudential Ins. Co. (C C.A.) 9 F.(2d) 340; Rose v. Mut. Life Ins. Company (CCA.) 19 F.(2d) 280 (though there was a pointed dissenting opinion); Missouri, etc., Co. v. Cranford, 161 Ark. 602, 257 S.W. 66, 31 A.L.R. 93; Prudential, etc., Co. v. Prescott, 115 Fla. 365, 156 So. 109; Powell v. Mutual Life Ins. Co., 313 Ill. 161, 144 N.E. 825, 36 A.L.R. 1239; New York, etc., Company v. Adams, 202 Ind. 493, 176 N.E. 146; Priest v. Kansas City Life Ins. Co., 119 Kan. 23, 237 P. 938, 41 A.L.R. 1100; Repala v. John Hancock Mut. Life Ins. Co., 229 Mich. 463, 201 N.W. 465; Killian v. Met. Life Ins. Co., 251 NY. 44, 166 N. E. 798, 64 A.L.R. 956; American, etc., Co. v. Life Ins. Co., 173 N.C. 558, 92 S.E. 706; Mutual, etc., Co. v. Buford, 61 Okl. 158, 160 P. 928; Humpston v. State Mut. Life Assur. Co., 148 Tenn. 439, 256 S.W. 438, 31 A.L.R. 78; American, etc., Company v. Welsh (Tex.Civ.App.) 3 S.W. (2d) 946; United, etc., Co. v. Massey, 159 Va. 832, 164 S.E. 529, 167 S.E. 248, 85 A.L.R. 306.

The full application of the majority rule operates to exclude the defense of fraud when pleaded after the running of the period, even though the suit on the policy be entered before the time has elapsed. Northwestern, etc., Co. v. Pickering, supra; Missouri, etc., Company v. Cranford, supra (two justices dissenting).

In the small minority group, perhaps, is the United States Circuit Court of Appeals for the Eighth Circuit. There it has been held that a notice of denial of liability is a contest (Mutual Life Ins. Co. of N. Y. v. Hurni Packing Company [C. C.A.] 280 F. 18), though more recently the court has suggested doubts [Peake v. Lincoln Nat. Life Ins. Co. (CCA.) 15 F.(2d) 303]. In Minnesota it is held that the death of the insured within the period of incontestability fixes the rights of the parties, so that the insurer may set up the defense of fraud whenever suit is brought upon the policy. Consequently, the insurer may not, subsequent to the death of the insured and prior to the termination of the period, bring a bill in equity for the cancellation of the policy. Mutual, etc., Co. v. Stevens, 157 Minn. 253, 195 N.W. 913. At the opposite pole, denying the jurisdiction of equity and permitting the beneficiary to delay suit until the period is run in order to deprive the insurer of a defense, is Prudential, etc., Co. v. Prescott, supra.

Holding a somewhat middle position is Feierman v. Eureka Life Ins. Co., 279 Pa. 507, 124 A. 171, 32 A.L.R. 646, where it is suggested that the defense of fraud is open if the insurer, within the time prescribed after the date of the policy, by some act to cancel the policy or by notification to the insured or the beneficiary, indicates that it will no longer be bound. For collections of the cases, reference may be had to 36 A.L.R. 1245 and 64 A.L.R. 959.

There is no occasion now to decide whether we should follow the majority view or take one more moderate. It may be said in passing, however, that the majority adopt the principle that in case of doubt the construction of the contract will prevail which is most favorable to the insured. That principle is not recognized here. Raymond v. Great American Indemnity Co., 86 N.H. 93, 97, 163 A. 713. So whenever the incontestability clause may have to be construed here, it will be necessary to give a reasonable interpretation unhampered by any special rule of construction, except, in a proper case, our own statute.

We may, however, for the present assume that the extreme technical view is correct. If it were to be adopted, it would not be improper to apply and extend it with the same technicality that marks it throughout, leaving out of view only the notion that thf insured is to be favored. If a contest exists when the insurer has pleaded fraud and that issue is before the court, the contest is made because the issue is triable, and not because of the fact that the defendant has filed a formal plea.

The plaintiff's writ was entered on September 20, 1932, and the defendant appeared the same day. Under rule 8 of the superior court, the entry of appearance by the defendant on September 20, 1932, without filing a plea, resulted ninety days later (December 21) in the action being triable upon the general issue. To all intents it was as if the defendant had so pleaded, nearly six months before the expiration of the strictest period of incontestability. If the case had been tried in January, 1932, upon the pleadings as they then stood, the defense of fraud would have been fully open to the defendant. Hoitt v. Holcomb, 23 N.H. 535.

The triable issue so remained continuously until the case was actually tried. The filing later of the brief statement of defense on the ground of fraud did not in the least alter the issue already before the court, and did not create a contest where none had existed. Even where the extreme rule is applied, it has been held that where the matter of defense is in issue, though by imperfect pleading, within the period of incontestability, there is a contest, and it is error to deny the defendant's motion to perfect its pleadings. Scharlach v. Pacific Mut. Life Ins. Co. (CCA.) 9 F.(2d) 317; Joseph v. New York Life 'Ins. Co., 308 Ill. 93, 139 N.E. 32.

The exceptions to the denial of the plaintiff's motions for directed verdicts are overruled.

II. While the failure of the insured to disclose all of the insurance in effect upon his life may have been fraudulent, it will not be necessary to consider it. Nor need the statement as to hospital treatment be discussed, except in connection with the remaining item of alleged fraud. The statements in the application blank and the declarations to the medical examiner were made a part...

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