Equitable Life Assur. Soc. for United States v. Gillam

• Decision Date: 14 April 1943
• Docket Number: 14476.
• Parties: EQUITABLE LIFE ASSUR. SOC. FOR THE UNITED STATES v. GILLAM.
• Court: Georgia Supreme Court

25 S.E.2d 686

195 Ga. 797

EQUITABLE LIFE ASSUR. SOC. FOR THE UNITED STATES v. GILLAM.

No. 14476.

Supreme Court of Georgia

April 14, 1943

Rehearing Denied May 8, 1943.

Syllabus by the Court.

Evidence supported finding that insured was totally disabled so as to be entitled to recover disability benefits under two life policies.

Harry J. Gillam filed suit against the Equitable Life Assurance Society of the United States, on two contracts of insurance one dated May 1, 1928, which was originally a life-insurance policy, and rewritten on March 22, 1930, so as to provide for disability, and the other dated January 7, 1932. The plaintiff sought (a) to recover stated unearned premiums on the policies; (b) attorney's fees and damages; (c) to enjoin the defendant from allowing the policies to lapse; (d) a decree directing defendant to waive all the premiums during the total and permanent disability of the plaintiff in conformity with the provisions of the policies; (e) specific performance of the provisions of the policies; (f) general equitable relief; (g) rule nisi requiring defendant to show cause why plaintiff should not be allowed to pay further premiums into the registry of the court; (h) rule nisi requiring defendant to show cause why it should not be ordered to carry out the other terms of the policies and comply

with the prayers of the petition; (i) to enjoin defendant from further collection of premiums under the policies.

The suit was in two counts. The plaintiff alleged in each count, that he became totally and permanently disabled under the terms of the policies on June 10, 1941, and sought to recover $40 a month on one policy and $50 a month on the other from June 10th, 1941, to date of trial; that due proof of his disability had been given to the defendant; that in conformity with the provisions of the policies the defendant should have waived the payment of premiums from the date of the total and permanent disability.

The defendant filed an answer in which it denied that the plaintiff was totally and permanently disabled, and denied that he was entitled to recover for total and permanent disability benefits under the terms and provisions of the policies sued on. It was further alleged in the answer that the policies were procured by false and material representations made by the plaintiff as to his previous health and medical history, to induce the defendant to issue the policies; and the defendant denied that it was liable for disability benefits under the policies, because of such material false and fraudulent statements made by the insured in his application for the policies in question. The court sustained a demurrer interposed by the plaintiff, struck from the defendant's answer all defenses based upon alleged fraud in the procurement of the policies, and held that the defendant was precluded from raising any defense of fraud or material misrepresentations, because of the incontestable clauses contained in the policies. To this ruling the defendant excepted pendente lite, and assigned error thereon in its bill of exceptions. The jury returned a verdict for the plaintiff, upon which the following decree was entered: "That the plaintiff, *** recover of and from the defendant, *** $1,913.68 as principal, and $92.94 as interest and $500.00 as attorney's fees with future interest on the principal at the rate of 7% per annum. It is further *** ordered and decreed by the court that the defendant be and it is hereby permanently enjoined and restrained from allowing the policies sued on to lapse during the total and permanent disability of the plaintiff. That the defendant is hereby ordered and directed to waive all of the premiums under the policies sued on, for and during the total and permanent disability of the plaintiff, in conformity with the provisions of the policies sued on. It is further ordered and decreed that the defendant be and it is hereby required and directed to specifically perform the provisions of the policies during the permanent and total disability of the plaintiff, with reference to the payment of the disability benefits and waiver of premium as provided by the policies sued on. The costs of this proceeding are taxed against the defendant." A motion for new trial was overruled, and the defendant excepted.

Lovejoy & Mayer, of La Grange, for plaintiff in error.

Wyatt & Morgan, of La Grange, for defendant in error.

ATKINSON Justice.

1. The plaintiff in error complains that the court erred in striking all of its defenses based upon fraud or material misrepresentations in the procurement of the contracts of insurance, on the ground that the incontestable clause in the policies precluded the defendant from making such defense. The policy sued on in the first count, originally issued as a life-insurance policy, contained the clause: "This policy shall be (a) incontestable after it has been in force during the lifetime of the insured for a period of one year from its date of issue, provided premiums have been duly paid, and (b) free from restrictions on travel, residence, occupation, or military or naval service." When the policy was rewritten so as to cover disability, the following clause was added: "The provisions of said policy with respect to incontestability and freedom of travel, residence, and occupation shall not apply to these disability and double-indemnity provisions." The policy contained the clause: "This policy, except as to the provisions relating to disability and double indemnity, shall be (a) incontestable after it has been in force during the lifetime of the insured for a period of one year from its date of issue, provided premiums have been duly paid, and (b) free from restrictions on travel, residence, occupation, or military or naval service." It is contended by the insurance company that the incontestable clauses expressly except from their application the provisions of the policies which relate to disability benefit.

The case of Mutual Life Ins. Co. of New York v. Childs, 64 Ga.App. 658, 14 S.E.2d 165, 171, involved the clause: "Except for nonpayment of premium and except for the restrictions and provisions applying to the double indemnity and disability benefits as provided in sections 1 and 3, respectively, this policy shall be incontestable after one year from its date of issue." The decision of the Court of Appeals fully discussed conflicting decisions in other jurisdictions where the incontestable clauses and provisions were similar to the clause involved in that case. After quoting at length from Stroehmann v. Mutual Life Ins. Co., 300 U.S. 435, 57 S.Ct. 607, 81 L.Ed. 732, and Ness v. Mutual Life Ins. Co., 4 Cir., 70 F.2d 59, it was held: "We find nothing in the provisions of the policies sued on which reserves to the insurance company the right to contest the validity of the policies on the ground of fraud or misrepresentations in their procurement. Sections 1 and 3 referred to in the incontestable clause do not contain anything with reference to this. This right not having been specifically reserved in the incontestable clause, or in sections 1 and 3 of the policies therein referred to we think and so hold that the proper construction of this incontestable clause is that it precluded the defendant company from making any defense of fraud or material misrepresentations in the procurement of the policies sued on, where the time limit for contesting the policies had expired, as was true in this case."

Counsel for the insurance company insist further that the incontestable clause in the case under consideration differs materially from the one dealt with in Mutual Life Ins. Co. v. Childs, supra, and also from the clause involved in Penn Mut. Life Ins. Co. v. Childs, 65 Ga.App. 468(6), 16 S.E.2d 103, 105, where it was held: "The clause 'This policy shall be incontestable after it has been in force during the lifetime of the insured for a period of one year from its date of issue, except for non-payment of premiums and except as to provisions relating to the disability benefits', renders the entire contract, after the date indicated, incontestable for fraud in its procurement. Accordingly, such clause precluded such defense to defeat recovery for disability benefits otherwise arising within the terms of the provisions." It was said in the opinion: "The phrase 'except as to provisions relating to disability benefits' is not an express exception literally designating 'fraud in the procurement of the policy' as a defense specifically preserved from the force of the clause. The question then is whether, in designating objectively the disability feature, the defense of fraud in procurement of the policy is included in the exception by necessary implication. *** We think it was the intention of the parties at the time the contract was executed to exempt the entire contract, both life and disability features, from the defense of fraud in procurement of the policy after the year and from the date the incontestable clause became of force; to preserve the defense at all times of failure to pay premiums; and to preserve to the insurer as to the disability benefit feature all defenses save that of fraud in procurement of the policy; this we think is the proper application of the incontestable clause." Certiorari was denied in each of the above cases.

In Kiriakides v. Equitable Life Assur. Soc., 174 S.C 140, 177 S.E. 40, it was held: "Provision that life policy was incontestable after one year except as to provisions relating to disability and double indemnity did not make disability clause contestable, but entire policy was incontestable after one year, so that, in action to recover disability payments after policy had been in effect one year, evidence that...