Cohen v. Metropolitan Life Ins. Company

• Citation: 171 A. 106,112 Pa.Super. 314
• Decision Date: 03 March 1934
• Docket Number: 288-1933
• Parties: Cohen et al. v. Metropolitan Life Insurance Company, Appellant
• Court: Pennsylvania Superior Court

171 A. 106

112 Pa.Super. 314

Cohen et al. v. Metropolitan Life Insurance Company, Appellant

No. 288-1933

Superior Court of Pennsylvania

March 3, 1934

Argued October 12, 1933

Appeal by defendant from judgment of M. C., Philadelphia County-1933, No. 260, in the case of Louis I. Cohen and Harry Cohen, minors by their guardian, Harry Cohen v. Metropolitan Life Insurance Company.

Assumpsit on policy of insurance. Before Crane, J.

The facts are stated in the opinion of the Superior Court.

Rule for judgment for want of a sufficient affidavit of defense. The court made absolute the rule. Defendant appealed.

Error assigned, among others, was the judgment of the court.

Affirmed.

Arthur G. Dickson, and with him Leroy A. Lincoln, for appellant. -- The incontestable clause is not a bar to the defense set forth as new matter. Thomas v. Metropolitan, 135 Kans. 381; Jefferson Standard Life v. Smith, 157 Ark. 499; McKenna v. Metropolitan, 220 N.Y.S. 568; McDonnell v. Mutual Life, 131 A.D. 643; Van Saun v. Metropolitan, 239 N.Y.S. 698; Kocak v Metropolitan, 258 N.Y.S. (City Court) 937; Jordan v United States, C. C. A. 9, 36 F. 43; Crawford v. United States, C. C. A. 2, 40 F.2d 199.

Herman Bronsweig, for appellee, cited: Francis v. Prudential Ins. Co., 243 Pa. 380; Smith v. Life Ins. Co., 103 Pa. 177; Yost v. Anchor Fire Ins. Co., 38 Pa.Super. 594; Kocak v. Metropolitan Life Ins. Co., 144 Misc. 422; Hurnie Packing Co. v. Mutual Life Ins. Co., 44 Supreme Court 90; Jenson v. United States, 29 F.2d 952; Lawler v. Ins. Co., 59 Pa.Super. 409.

Before Trexler, P. J., Keller, Cunningham, Baldrige, Stadtfeld, Parker and James, JJ.

OPINION

Cunningham, J.

Metropolitan Life Insurance Company has appealed from a summary judgment entered by the court below for want of a sufficient affidavit of defense to a suit in behalf of the beneficiaries named in one of its Intermediate Twenty Year Endowment (Monthly Premium) policies, in the amount of $ 1,000. The policy was issued February 1, 1931, to Mollie Cohen, and named her minor sons, Louis I. Cohen and Harry Cohen, as the beneficiaries; the insured died within two years of the date of issue of the policy, namely, on May 21, 1932. The following incontestable clause was one of the provisions of the policy:

"This policy shall be incontestable after it has been in force for a period of two years from its date of issue, except for non-payment of premiums, and except as to provisions and conditions relating to benefits in the event of total and permanent disability, and those granting additional insurance specifically against death by accident, contained in any supplementary contract attached to, and made part of, this policy."

The affidavit of defense admitted the facts above stated and, in addition thereto, that all premiums had been paid and the beneficiaries had performed all the conditions required upon their part.

Appellant also admitted in the tenth paragraph of its affidavit that it had not cancelled or rescinded the policy within two years from the date of its issue, but, with respect to the incontestability clause, averred the policy had not been "in full force and effect during the said period of two years" because the death of the insured occurred within that period.

It then proceeded to "contest" the policy by averring that the insured had made, in the application attached to the policy, certain false and fraudulent answers to questions relative to her physical condition and prior medical treatment for diabetes; that it had not discovered the alleged fraud until after receipt of the proofs of death in the latter part of January, 1933; and that it thereupon refused payment upon the policy and tendered return of the premiums in the amount of $ 75.20.

The court below, in an opinion by Crane, J., held the incontestable clause precluded the defendant company from setting up the defense upon which it relied and entered judgment in favor of the beneficiaries in the sum of $ 1,015.

Therefore, the sole question involved upon this appeal is whether the two year limitation in the incontestable clause -- which expired prior to the refusal of the insurer to make payment under the policy, but after the death of the insured, -- operates as a bar to the defense set up in the affidavit.

We have no appellate decision in this state in a case involving an incontestable clause drawn in language exactly equivalent to the one now before us and in which the insured died prior to the expiration of the designated period, but we have a number of opinions defining the general purpose and effect of such clauses and the rights ordinarily accruing to beneficiaries thereunder.

In Feierman v. Eureka Life Ins. Co., 279 Pa. 507, 124 A. 171, the policy provided that it should be "incontestable after two years from the date of issue" and the death of the insured occurred within that period. In holding that the clause operated to bar a defense based upon alleged misrepresentations made by the insured, Mr. Justice Kephart said:

". . . . We now have the question whether death fixes all rights of the parties under the policy.

"The great weight of authority supports the position that the insurer must at least disavow liability within the contestable period to be relieved, -- not necessarily by legal action, but some definite step, specifying the ground of complaint, in such form as to effect a cancellation of the contract.

"The clause means precisely what its language states: the policy will not be challenged, opposed or litigated, and is indisputable after two years. During this period, the company may contest it for any sufficient reason. The incontestable clause is for the benefit of the insurer, in that it induces people to insure in the company, and requires no act of the insured to put it in motion or aid in the discovery of facts on which it may fasten to the insurer's benefit. Therefore insured's death within the time does not stop investigation or relieve of the duty to investigate false representations or other fraudulent circumstances on which the policy is based. The knowledge that false representations have been made must be ascertained within the two years, and, in the same time, the company, by some act, must rescind, cancel or notify the insured or the beneficiary that it will no longer be bound by the policy.

"While it is true a cause of action arises at the death of the insured, the terms of the policy are not changed; and, though payment of the insurance money is the result of death, and payment of premium ceases, the incontestable stipulation is not affected; it survives and continues in unbroken force until it expires by its own limitation, two years from the date of issue. The insurer is not placed at any disadvantage; its position is not in the slightest degree affected. It is in precisely the same position as if the insured had lived during the two years. Had the policy read, two years from the date thereof, 'provided the insured does not die within the two years,' a different question would be presented."

Reference may also be made to Central Trust Company v. Fidelity Mutual Life Insurance Company, 45 Pa.Super. 313, cited by the Supreme Court in the opinion from which we have just quoted, in which it is stated that the purpose of such clauses is not to preclude inquiry into the truthfulness or good faith of the statements made in the application but to fix a time within which such inquiry shall be made. In his opinion in the Central Trust Company case, Rice, P. J., quoted the following from Murray v. State Mutual Life Assurance Co., 22 R.I. 524; 53 L. R. A. 742, 48 A. 800, as the substance of the proposition on the part of the...