Jefferson Standard Life Ins. Co. v. Bomchel

• Decision Date: 11 January 1940
• Docket Number: 6 Div. 487.
• Citation: 194 So. 156,239 Ala. 135
• Parties: JEFFERSON STANDARD LIFE INS. CO. v. BOMCHEL.
• Court: Alabama Supreme Court

194 So. 156

239 Ala. 135

JEFFERSON STANDARD LIFE INS. CO. v. BOMCHEL.

6 Div. 487.

Supreme Court of Alabama

January 11, 1940

Rehearing Denied March 7, 1940.

Appeal from Circuit Court, Jefferson County; J. Edgar Bowron, Judge.

Action on a policy of life insurance by Maurice Bomchel against the Jefferson Standard Life Insurance Company. From a judgment for plaintiff, defendant appeals.

Affirmed.

Hugh A Locke and Frank M. James, both of Birmingham, for appellant.

Leader Hill, Tenenbaum & Seedman, of Birmingham, for appellee.

FOSTER Justice.

The primary question argued on this appeal is whether section 8365, Code, applies to contracts for the reinstatement of life insurance policies, which are in themselves complete policies in every respect, and, if so, to what extent in respect to that here involved. That is what is known as the incontestable feature of the insurance law, often also set out in the contract of insurance.

The statute makes it incontestable for fraud or irregularities in the application, after two annual premiums have been paid on the policy.

The policy in the instant case also provides for incontestability after it has been in force during the life of the insured for two full years from its date. It was made an exhibit to the complaint.

The question is here presented by assignments of error which relate to the judgment sustaining demurrer to pleas 6 and 7 respectively, to count 3 of the complaint. Count 3 set out the substituted policy. It claimed for the amount due on it, dated March 10, 1936, alleging that insured died March 3, 1938. It then alleges:

"Plaintiff further avers that on, to-wit, the 10th day of August, 1935, defendant issued to Bomchel a policy of insurance, numbered 547,702 under the terms of which it was expressly provided in part as follows: 'Should this policy cease and determine for non-payment of any premium, it may be reinstated at any time within five years by furnishing evidence of insurability satisfactory to the company, and the payment of the defaulting premiums, with interest at the rate of six per cent per annum added.'

"Plaintiff further avers that said policy, numbered 547,702, lapsed by reason of non payment of premium due November 10, 1936.

"Plaintiff further avers that on, to-wit, January 27, 1937, defendant stated to Bomchel in writing as follows: 'In your interest we urgently recommend that you apply for reinstatement of this policy. We shall be glad to consider reinstatement upon receipt of the enclosed health certificate executed in part 1, and your check for $14.85 covering the quarterly premium, and we will be glad to submit it to the home office for their consideration.'

"Plaintiff further avers that said policy No. 547,702 provided, in part, as follows: 'In lieu of the premium stated, the company will accept semi-annual installments of $29.09, or quarterly installments of $14.70, but the payment of any such installment shall not continue this policy in force beyond the month of grace allowed for payment of the next installment.'

"Plaintiff further avers that said policy No. 547,702 further provided in part for cash or loan values, paid up endowment insurance and guaranteed surrender values after the payment of three annual premiums.

"Plaintiff further avers that on, to-wit, the 12th day of June, 1937, Ben Bomchel made application to the defendant company for reinstatement of lapsed policy No. 547,702, in amount twenty-five hundred ($2,500.00) dollars, and plaintiff further avers that thereafter, on, to-wit, June 24, 1937, he was informed and notified in writing by the defendant company, as follows:

" 'Re Policy No. 616-232-Bomchel.

" 'We are pleased to enclose the above numbered policy which is a reinstatement and reissue of policy No. 547,702, for $2,500.00, your application for reinstatement and reissue having been approved by our home office.

" 'The new policy is written on the ordinary life form, non participating, on a quarterly premium payment basis, at a premium of $15.73. Inasmuch as you have already paid one year and one quarter on the old policy, we have dated the new policy March 10, 1936, and have used your payment in settlement of the quarterly premium due June 10, 1937, and our official receipt for this is attached hereto. The next quarterly premium will be due September 10, 1937.'

"Plaintiff further avers that said quarterly premium due September 10, 1937, was paid within the time required by said defendant company and thereafter the next quarterly premium due December 10, 1937 was paid within the time required by the defendant company, which premiums were payable and paid in advance.

"Plaintiff further avers that defendant company issued policy No. 616,232 in lieu of reinstatement of policy No. 547,702 and dated the new policy March 10, 1936, in consideration of the one year and one quarterly premium paid on the old policy; and

plaintiff further avers that the credits on the policy sued on for the payment of premiums, together with the subsequent premiums paid by the assured, constitute the payment of two annual premiums made on said policy No. 616,232."

Plea 6 is based upon misrepresentation in the application for reinstatement of the old policy which lapsed on November 10, 1936. The application for reinstatement is alleged in this plea to have been made on June 12, 1937, and in it "he was asked to give the 'name and address of your (his) family physician,' and in response to said question he said, 'Do not have one, have not seen a doctor in six years.' Defendant alleges that said statement was untrue in that the said Ben Bomchel was a patient at the National Jewish Hospital, in Denver, Colorado, from to-wit: May 18, 1930, to to-wit: November 14, 1931, during which time he was treated for pulmonary tuberculosis, and that in said hospital, and during said period of time, he was examined and attended by physicians. Defendant further alleges that in said application the said Ben Bomchel expressly made an application dated the 20 day of June 1935, and part of the above described application and a part of the said policy No. 616232, the subject matter of this suit, and that in said application dated the 20 day of June 1935 the said Ben Bomchel was asked the following question: '12. Have you ever suffered from any ailment or disease of (B) the heart, lungs, pleurae, or chest?' and that in answer to said question the said Ben Bomchel said, 'No.' Defendant alleges that said representation was made subsequent to the time when he had spent approximately 18 months in the said tuberculosis sanitorium, as above alleged. Defendant alleges that said misrepresentations of fact were made with intent to deceive or that they increased the defendant's risk of loss under the policy. Defendant therefore alleges that the said policy, the subject of this suit, is void for fraud."

The plea then shows that insured died in two years after the reinstated policy was dated. It does not allege that defendant did not know of the falsity of such alleged representations, nor that defendant was misled by them.

Plea 7 alleges that as a part of the contract of insurance, insured agreed as follows:

" 'If any of the statements of representation contained herein shall prove to be incomplete or untrue, then this reinstatement shall be ipso facto, null and void.'

"Defendant alleges that the following question and answer were expressly agreed to be a part of said contract of insurance, namely:

" '8th. Name and address of your family physician?'

"Answer: 'Do not have one, have not seen a doctor in six years.'

"Defendant further alleges that the following question and answer were expressly agreed to be a part of said contract of insurance, namely: Question:

" '12. Have you ever suffered from any ailment or disease of (B) heart, lungs, pleurae, or chest?'

"Answer: 'No.'

"Defendant further alleges that both of said statements, or representations, were untrue in that the said Bomchel was a patient in the National Jewish Hospital, of Denver, Colorado, from to-wit: May 18, 1930, to to-wit: November 14, 1931, for treatment for pulmonary tuberculosis, which is a disease of the lungs."

We agree with appellant's contention that though the reinstatement of a lapsed policy is ordinarily a continuation of the original contract, yet if there was fraud or breach of warranty in effecting the reinstatement, defendant would not be barred of his right to make that defense because two years had elapsed after the date of the original contract. The theory on which this is based is well stated in New York Life Ins. Co. v. Ellis, 27 Ala.App. 113, 168 So. 200, certiorari denied 232 Ala. 378, 168 So. 203, and need not be repeated. See on that subject Tatum v. Guardian Life Ins. Co., 2 Cir., 75 F.2d 476, 98 A.L.R. 341; MacDonald v. Metropolitan Life Ins. Co., 304 Pa. 213, 155 A. 491, 77 A.L.R. 353; and notes, 31 A.L.R. 114, 85 A.L.R. 239; Mutual Life Ins. Co. v. Dreeben, D.C., 20 F.2d 394; New York Life Ins. Co. v. Seymour, 6 Cir., 45 F.2d 47, 73 A.L.R. 1523; Wallach v. Aetna Life Ins. Co., 2 Cir., 78 F.2d 647.

What effect then do the statute and policy provisions have on the reinstatement contract of insurance? As here set up, it is a new contract in the form of a new policy, not a mere reinstatement agreement. So that by it there is a new contract made, and in form and substance it is a complete policy of insurance. It supersedes the old. It is as said in Mutual Life Ins. Co. v. Lovejoy, 203 Ala. 452(4),

83 So. 591, to be within the right of the parties to contract for and make a new policy, even though different from the old. The new one is a complete policy in all its details and bears a different number from the old. The suit is...