Klanian v. N.Y. Life Ins. Co.

• Decision Date: 09 June 1942
• Docket Number: No. 8431.,8431.
• Parties: KLANIAN v. NEW YORK LIFE INS. CO.
• Court: Rhode Island Supreme Court

26 A.2d 608

KLANIAN

v. NEW YORK LIFE INS. CO.

No. 8431.

Supreme Court of Rhode Island.

June 9, 1942.

Exceptions from Superior Court, Providence and Bristol Counties; Alberic A. Archambault, Judge.

Action of assumpsit on two life policies containing provisions for waiver of premiums and payment of monthly benefits in case of disability, by John Klanian against the New York Life Insurance Company. A verdict was directed for the plaintiff, and the defendant brings exceptions.

Exceptions sustained in part and overruled in part, and case remitted for new trial.

Jasper Rustigian, Perkins, Higgins & McCabe, and James A. Higgins, all of Providence, for plaintiff.

Haslam, Arnold & Sumpter, Harry A. Tuell, and Walter D. Harris, all of Providence, for defendant.

CONDON, Justice.

This is an action of assumpsit on two life insurance policies containing provisions for waiver of premiums and payment of monthly benefits in case of disability. After a jury trial in the superior court the trial justice directed a verdict for the plaintiff and refused to direct a verdict for the defendant. Defendant excepted to the denial of its motion for a directed verdict and also to the granting of the plaintiff's motion. The case is here on these exceptions and fourteen other exceptions which the defendant took during the trial. In its brief and argument the defendant seggregated these exceptions into three separate groups. We shall so consider them in this opinion.

The controverted issues arise from the following undisputed facts: The two policies in question were issued to the plaintiff upon his written application. The first poky No. 9876096, in the amount of $2,000, was issued on June 1, 1927; the second, No. 10874576, in the amount of $3,000, was issued on December 3, 1929.

Policy No. 9876096 is involved herein only because of a plea in setoff which the defendant filed in addition to the general issue. Defendant admits that such policy is in all respects in full force and effect and that plaintiff's right to disability payments thereunder is not in question here on its exceptions. All references hereinafter to policy provisions will, therefore, be to the second policy No. 10874576.

This policy provided for waiver of premiums and the payment to the plaintiff of $10 a month for each $1,000 of insurance upon receipt of proof that he had become totally and permanently disabled after the insurance took effect and before the anniversary of the policy on which his age at his nearest birthday was sixty. In 1935 the plaintiff made satisfactory proof of disability under such provision. From May 15, 1935, to May 15, 1940, inclusive, the defendant waived the premiums and made the payments for disability as provided by the policy. It did not make the payments which were due on June 15, 1940, and July 15, 1940, although the defendant admitted that the plaintiff was still disabled within the meaning of the policy.

Defendant's reason for not making such payments is set out in the following letter, which was received by the plaintiff on August 2, 1940:

"July 30, 1940.

"Mr. John Klanian,

"31 Whipple Street,

"Providence, Rhode Island.

"In re: Policy #10874576—your life "Dear Sir:

"New York Life Insurance Company hereby notifies you that it elects to and does hereby rescind the provisions for disability and double indemnity benefits contained in the above numbered policy because it has just recently learned that you failed to disclose to it in your application for the above numbered policy that prior to the date thereof you suffered a serious ailment or disease or ailments or diseases on account of which you consulted, were examined and treated by physicians and on account of which you received treatment at the Charles V. Chapin Hospital. The Company tenders to you, by its check to your order for $172.41 enclosed herewith, return of the amounts received by it on account of the premiums paid for said benefits with interest thereon from the dates of receipt to the date of this tender and the Company further offers to do whatever else, if anything, it ought to do for the purpose of such rescission.

"By reason of the rescission of said provisions for said benefits the semi-annual premium is reduced to $86.34.

"You are further advised that the Company recalls its waivers of the semi-annual premiums due June 3, 1935 to December 3, 1939, inclusive, and demands that you at once remit the ten semi-annual premiums now in default totaling the sum of $863.40 and that you repay to the Company the sum of $1830.00, the amount of the monthly disability income benefits paid to you from May 15, 1935, to May 15, 1940, inclusive.

"Very truly yours,

"New York Life Insurance Company, "By W. F. Rohlffs

"Secretary."

The check referred to in the above letter bore on its face in the upper left-hand corner the following recital: "Refund premiums with interest a/c rescinded disability and double indemnity on Pol. No. 10874576—Klanian." Plaintiff admitted that this recital was on the check when he received it, but he testified that he did not understand it or the letter. Nevertheless he cashed the check on August 2, 1940, and it was not until the next day that he learned from his insurance agent, an employee of the defendant, what the letter and the writing on the check meant. Thereupon plaintiff, being unable either to read or write, had his daughter write the following letter to the defendant:

"August 3, 1940 N. Y. Life Insurance Co.

"Dear Sirs:

"We received your letter with $172.41 check included but we did not understand the letter which you have sent us. We kept the check over two days and turned it in without understanding the meaning of the letter. Our agent H. V. Siranossian came yesterday afternoon and explained the meaning of the letter and we do not agree with it. We have all ready the amount to refund or replace the check if it is necessary.

"Yours Sincerely,

"Mr. John Klanian

"John Klanian."

Plaintiff thereafter consulted counsel who, on August 9, 1940, wrote to the defendant to the effect that the plaintiff was an illiterate man; that he did not understand defendant's letter of July 30, 1940, or the recital on its check; that he did not agree to any rescission of his policy and that he was ready to return the amount of the check to the defendant. Later, on August 16, 1940, counsel mailed their certified check for $172.41 to the defendant together with a letter in which they advised the defendant that they had brought suit for the recovery of disability payments which were due according to the policy. Defendant returned this check by letter of August 21, 1940, and indicated therein that it would litigate the matter by retaining counsel to represent it in this state.

The policy contains the following incontestability clause: "This Policy shall be incontestable after two years from its date of issue except for non-payment of premium and except as to provisions and conditions relating to Disability and Double Indemnity Benefits." Defendant contends that under this clause the disability insurance is excepted from incontestability and that it is entitled to rescind that portion of the policy on proof of misrepresentations made by the plaintiff in his written application for the policy even though more than two years have elapsed since the date of issue of the policy. Under this contention the defendant argues that the trial justice erred in not allowing it to introduce evidence of such misrepresentations. This contention is made in support of exceptions 1, 2, 3, 4, 11, 12 and 14 which defendant has grouped under its first point.

Defendant further contends that its letter and check of July 30, 1940, coupled with plaintiff's conduct in indorsing and cashing such check constitute, as a matter of law, a mutual rescission of the disability provisions of the policy. Under this contention it argues that it was error for the trial justice to admit into evidence testimony of the plaintiff as to his ignorance of the meaning of the letter and the check, and of his lack of intention to rescind. This point is raised under defendant's second group of exceptions, namely, 5, 6, 7, 8, 9, 10 and 13.

We shall now consider the first group of exceptions. It is clear that those exceptions stand or fall on the answer to the following question: "Does the incontestability clause of the policy by its terms expressly except in its entirety the disability portion of the policy?" This question has not hitherto arisen in this court under this particular type of policy written by the defendant or under any other policy with an essentially like clause. However, it has arisen in a considerable number of cases in other jurisdictions, particularly in the federal courts.

The question was answered in the negative in Penn Mutual Life Ins. Co. v. Kelley, 88 N.H. 351, 189 A. 345; Stroehmann v. Mutual Life Ins. Co., 300 U.S. 435, 57 S. Ct. 607, 81 L.Ed. 732; Coodley v. New York Life Ins. Co., 9 Cal.2d 269, 70 P.2d 602; Malloy v. New York Life Ins. Co., 1 Cir., 103 F.2d 439; Ostroff v. New York Life Ins. Co., 9 Cir., 104 F.2d 986; New York Life Ins. Co. v. Truesdale, 4 Cir., 79 F.2d 481; New York Life Ins. Co. v. Kaufman, 9 Cir., 78 F.2d 398; Thompson v. New York Life Ins. Co., D.C, 9 F.Supp. 248; Blair v. New York Life Ins. Co., 40 Cal.App.2d 494, 104 P.2d 1075; New York Life Ins. Co. v. Yerys, 4 Cir., 80 F.2d 264; Horwitz v. New York Life Ins. Co., 9 Cir., 80 F.2d 295; Braun v. New York Life Ins. Co., 46 Cal.App.2d 335, 115 P.2d 880; Mutual Life Ins. Co. of New York v. Childs, 64 Ga.App. 658, 14 S.E.2d 165; Pacific Mutual Life Ins. Co. v. Alsop, 191 Ind. 638, 134 N.E. 290; Ness v. Mutual Life Ins. Co. of New York, 4 Cir., 70 F.2d 59; Mutual Life Ins. Co. of New York v. Markowitz, 9 Cir., 78 F.2d 396.

The following cases answer the question in the affirmative: Terry v. New York Life Ins. Co., 8 Cir., 104 F.2d 498; Ruhlin v. New York Life Ins. Co., 3 Cir., 93 F.2d 416; ...