Drews v. Metro. Life Ins. Co.

• Decision Date: 13 January 1910
• Parties: DREWS et al. v. METROPOLITAN LIFE INS. CO.
• Court: New Jersey Supreme Court

75 A. 167

79 N.J.L. 398

DREWS et al.

v. METROPOLITAN LIFE INS. CO.

Supreme Court of New Jersey.

Jan. 13, 1910.

Appeal from District Court of City of Newark.

Action by Charles Drews and others against the Metropolitan Life Insurance Company. Judgment for defendant, and plaintiffs appeal. Reversed.

Argued November term, 1909, before REED, BERGEN, and MINTURN, JJ.

Samuel Press and Harry Kalisch, for appellants.

McCarter & English, for appellee.

BERGEN, J. The defendant, on May18, 1907, issued to John Drews a life insurance policy, under which $500 became payable, after his death, to beneficiaries named therein. The policy contained the following covenant: "This policy shall be incontestable, except for nonpayment of premiums, two years from its date." It is admitted that the insured was not in default in payment of premium, and that he died more than two years after the date of the policy. This action was instituted to recover on the policy, and the trial court, having, against objection, admitted evidence tending to show that the insured had, in his application for insurance, misrepresented his condition of health, and falsely answered other material questions contained therein, thereupon directed a verdict for the defendant, from which result plaintiff appeals.

The contention of the appellant is that the incontestability clause in the policy is a contract limiting the time within which the policy may be contested for any reason, except nonpayment of dues, and that the limitation period agreed upon having expired, the defense admitted by the trial court, and upon which the direction of verdict rested, was an error which requires a reversal of this judgment. The contention of the appellee is that as the contract of insurance was obtained through fraud, it is void ab initio, and therefore there never was any legal contract to which the limitation agreed to can be applied, and also that such fraud may be shown in avoidance of the contract notwithstanding the clause of noncontest.

In Wright v. M. B. L. Association, 118 N. Y. 237-243, 23 N. E. 186, 187 (6 L. R. A. 731, 16 Am. St Rep. 749) where a similar eon-tract was under consideration, it was held: "It is not a stipulation absolute to waive all defenses, and to condone fraud. On the contrary, it recognizes fraud and all other defenses, but it provides ample time and opportunity within which they may be, but beyond which they may not be, established. It is in the nature of, and serves a similar purpose as, statutes of limitations and repose, the wisdom of which is apparent to all reasonable minds. It is exemplified in the statute giving a certain period after the discovery of a fraud in which to apply for redress on account of it. * * * The parties to a contract may provide for a shorter limitation thereon than that fixed by law, and such an agreement is in accord with the policy of statutes of that character." This rule was approved in Reagan v. Union Mut Life Ins. Co., 189 Mass. 555, 76 N. E. 217, 2 L. R. A. (N. S.) 821, 109 Am. St....