Farmers Trust Co. v. Reliance Life Insurance Co. of Pittsburgh

• Citation: 140 Pa.Super. 115,13 A.2d 111
• Decision Date: 01 May 1940
• Docket Number: 46-1940
• Parties: Farmers Trust Company, Appellant, v. Reliance Life Insurance Company of Pittsburgh
• Court: Pennsylvania Superior Court

13 A.2d 111

140 Pa.Super. 115

Farmers Trust Company, Appellant, v. Reliance Life Insurance Company of Pittsburgh

No. 46-1940

Superior Court of Pennsylvania

May 1, 1940

Argued March 14, 1940.

Appeal from order of C. P. Cumberland Co., Sept. T., 1939, No. 138 in case of Farmers Trust Company, guardian of Charles L Henderson, an incompetent person, v. Reliance Life Insurance Company of Pittsburgh.

Assumpsit.

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

Affidavit of defense raising questions of law sustained and judgment entered for defendant, opinion by Reese, P. J. Plaintiff appealed.

Error assigned was the action of the court below in sustaining the affidavit of defense and in entering judgment for defendant.

Order affirmed.

Frederick J. Templeton, for appellant.

Robert L. Myers, Jr., with him John E. Myers, for appellee.

Before Keller, P. J., Cunningham, Baldrige, Stadtfeld, Parker Rhodes and Hirt, JJ.

OPINION

Stadtfeld, J.

This is an appeal by Farmers Trust Company, guardian of Charles L. Henderson, an incompetent person, from the judgment of the court below, in favor of the defendant, Reliance Life Insurance Company of Pittsburgh, Pennsylvania, sustaining the affidavit of defense raising questions of law.

The statement of claim, the legal sufficiency of which is questioned by the affidavit of defense, avers that on July 8, 1924, the defendant company issued to Charles L. Henderson a life insurance policy in consideration of an initial premium of $ 18.49, and a like sum payable on the 20th day of each December and June thereafter; that said policy provided inter alia as follows: "Total and Permanent Disability Benefits -- If the Insured, after one full year's premium has been paid on this policy and before a default in the payment of any subsequent premium or within sixty days after default, shall furnish proof satisfactory to the Company that while this policy is in force without default he has become totally and permanently disabled for life by bodily injury or disease, the Company will grant the following benefits: A. -- If the disability occurs before the anniversary of the policy nearest to the rated age of sixty years. (1). Waiver of Premium. -- Commencing with the anniversary of the policy next succeeding the receipt of such proof, the Company will on each anniversary waive payment of the premium for the ensuing insurance year, and, in any settlement of the policy, the Company will not deduct the premiums so waived. In such event the cash, loan and surrender values shall increase from year to year and this policy shall participate in any distribution of surplus in like manner as if the premiums had been regularly and duly paid by the Insured. (2) Installment Payments. -- Beginning immediately on receipt of such proof, the Company will pay to the Insured a monthly income of 1% of the face amount of the policy during the period of total and permanent disability until the death of the Insured. When the policy becomes a claim by death or matures as an endowment, the full face value of the policy shall be payable in accordance with its terms, less any existing indebtedness, without any deduction for income payments."

The statement of claim further avers that said Henderson paid the premiums up to and including the premium due December 20, 1937; that said Henderson, then 43 years old, became totally and permanently disabled by disease and mental illness on February 23, 1935; that by reason of his mental illness he was unable to know and appreciate the necessity for informing the defendant company of his disability and furnishing satisfactory proof thereof, and by reason of his mental condition was unable to furnish the proofs required by the terms of the policy; that he is still totally and permanently disabled and is now a mental patient in a government hospital.

It is also averred that on April 25, 1939, the lower court adjudged Henderson an incompetent person and appointed the plaintiff, Farmers Trust Company, as guardian of his estate. This action of assumpsit was instituted June 10, 1939, to recover the monthly disability payments of $ 10 each from February 23, 1935.

The policy provided that if a premium be not paid within a grace period of one month following the date on which the premium was payable, the policy should become void, except for options of cash surrender value and paid-up insurance. It follows that the policy lapsed and became void on July 20, 1938, unless, as contended by plaintiff, the waiver of premiums clause was then operative to keep the policy in force. The company agreed to waive premiums and make monthly disability payments, if the insured, before default of any premium after the first or within 60 days after default, shall furnish proof satisfactory to the company of total and permanent disability. Plaintiff contends that the insanity of the insured excused him from furnishing proof of his disability and that by reason of the disability the waiver of premiums clause was operative, the policy was not terminated by default and the company is liable for the monthly disability payments.

It is the contention of the defendant that the furnishing of proofs of disability, as required by the policy, is a condition precedent to the waiver of premiums and that failure to furnish proof of disability before default in the payment of premium is not excused by the physical disability or the insanity of the insured.

The question, therefore, is whether insanity of the insured excuses failure to furnish proof of total and permanent disability where the company under its policy agrees to waive premiums and make monthly disability payments if the insured furnishes such proof.

The precise question has never been decided by our appellate courts: Equitable Life Assurance Society v. McCausland, 331 Pa. 107, 111, 200 A. 85. In other jurisdictions there is a marked difference of judicial opinion. Some of the courts, adopting the view of the plaintiff, reach their decision on the ground that the furnishing of proofs of disability is a condition subsequent; others, on the ground that the provision as to proof is not clear and unambiguous and must be construed most favorably to the insured; and still others, simply on the ground that the contrary rule is too harsh on the insured. ^[1]

The question is one of interpretation of contract and should be governed by rules applicable thereto.

Our own appellate courts have repeatedly held that where a policy of life insurance provides that disability benefits will be payable upon receipt of due proof that the insured has become totally and permanently disabled, and that the payment of all premiums falling due after the receipt of such proof and during the continuance of such disability, will be waived, the furnishing of the proof of disability is a condition precedent: Courson v. N. Y. Life Insurance Co., 295 Pa. 518, 145 A. 530; Brams v. N. Y. Life Insurance Co., 299 Pa. 11, 148 A. 855; Perlman v. N. Y. Life Insurance Co., 105 Pa.Super. 413, 161 A. 752; Lucas v. John Hancock Mutual Life Insurance Co., 116 Pa.Super. 298, 176 A. 514; Lyford v. New England Mutual Life Insurance Co., 122 Pa.Super. 16, 184 A. 469; Jenkins v. Mutual Life Insurance Co. of N. Y., 130 Pa.Super. 442, 198 A. 486; Garabedian v. Metropolitan Life Insurance Co., 135 Pa.Super. 320, 5 A.2d 379; Buntz v. General American Life Insurance Co., 136 Pa.Super. 284, 7 A.2d 93.

In the case of Lucas v. John Hancock Mutual Life Insurance Co., supra, this court said, pp. 301, 302: "It appears that under these provisions due proof of the disability then existing is a condition precedent to the payment, not for disability that has existed, but for the disability then existing and which shall continue from the time that the company has due proof of the existence of the disability. The language clearly looks toward the future and the word 'grant' imports a future liability. The very purpose of the due proof clause is that prompt notice must be given in order that the company may have an opportunity to make a fair investigation of the claim. The unfairness of plaintiff's position is best established by the present claim, in asserting a disability that had existed for more than four years prior to his filing proofs of his disability. .... To be entitled to a waiver of premiums, he must be suffering from a disability, which is not determined until the due proof has been furnished ...."

We quote from the very able and exhaustive opinion by Reese, J in the instant case: "In the case cited (Courson v. N. Y. Life Insurance Co., supra) plaintiff was relying on the agreement to waive premiums which, however, was operative only if the insured furnished proof of total and permanent disability, and the court disagreed with...