Lee v. Universal Life Ins. Co., 5

• Decision Date: 18 October 1967
• Docket Number: No. 5,5
• Citation: 420 S.W.2d 222
• Parties: Rejonah LEE, Appellant, v. UNIVERSAL LIFE INSURANCE COMPANY, Appellee. . Houston (14th Dist.)
• Court: Texas Court of Appeals

Page 222

420 S.W.2d 222

Rejonah LEE, Appellant, v. UNIVERSAL LIFE INSURANCE COMPANY, Appellee.

No. 5.

Court of Civil Appeals of Texas Houston (14th Dist.).

Oct. 18, 1967.

Rehearing Denied Nov. 8, 1967.

Dent & Cashin, Galveston, and Herschel B. Cashin, LaMarque, for appellant.

W. J. Durham, Dallas, for appellee.

TUNKS, Chief Justice.

On May 27, 1963, appellee issued a life insurance policy in the face amount of $480.00 on the life of Clara Walker. Appellant, Rejonah Lee, was named beneficiary in such policy. So far as the record indicates, premiums were timely paid on the policy until Clara Walker's death on January 20, 1964.

The policy of insurance, so issued by appellee, contained the following two provisions which are relevant to this litigation:

'Preliminary provisions--no liability, except that return of all premiums paid hereon, is assumed by the company prior to 12:00 o'clock noon, Central Standard Time, of the date hereof, unless at said time and date, the proposed insured is alive and in sound health.'

'Incontestability--this policy shall be incontestable after two full years from the date of issue, except for non-payment of premiums, and except as to provisions and conditions relating to total and permanent disability benefits.'

At no time within two years from the date of the issuance of the policy did appellee institute any proceeding to cancel the policy or otherwise contest its liability for the face amount of the policy.

Appellant, beneficiary, did not file suit on the policy until the 24th day of June, 1965. Defendant's original answer was filed on the 19th day of July, 1965. In its said answer, appellee alleged that it was not liable for the amount of the policy because of the fact that the insured, Clara Walker, was not of sound health at the time of the issuance of the policy, that is to say, on May 27, 1963.

In response to special issues, the jury found that the reasonable fee for the services of plaintiff's attorneys, through the trial in the District Court, was $727.50; that the reasonable additional fee for the services of the plaintiff's attorneys in the event of an appeal to the Court of Civil Appeals would be $679.25; that a reasonable additional fee for the services of plaintiff's attorneys in the event of further proceedings in the Supreme Court would be $654.25, and that the insured, Clara Walker, was not a person of sound health on May 27, 1963, the date of the issuance of the policy in question.

After the jury's verdict was returned, both parties made motions for judgment. The plaintiff's motion is designated merely a 'Plaintiff's Motion for Judgment.' We think it, however, susceptible of construction as a motion to disregard the jury's finding concerning the state of the health of the insured as of the date of the issuance of the policy and for judgment in her favor on the rest of the verdict.

Appellee's motion in the court below was designated a motion for judgment non obstante veredicto. We think it, however, susceptible of construction as a motion to disregard the jury's findings concerning attorney's fees and to enter judgment in its behalf on the jury's finding concerning the state of the health of the insured as of the date of the issuance of the insurance policy.

The trial court sustained a motion of the appellee and rendered judgment that appellant, plaintiff below, take nothing. From that judgment, appeal has been perfected.

The appellant's two points of error are to the effect that the trial court erred in admitting evidence concerning the state of the health of the insured as of the date of the issuance of the policy, and to the effect that the trial court erred in overruling her motion for judgment and to disregard the jury's finding concerning the status of the health of the insured.

Obviously, if the position taken by the appellee in the court below be considered a contest within the terms of the above quoted incontestability clause set forth in the policy, and if that clause is to be given its literal effect, then the beneficiary was entitled to recover on the policy. The appellee contends, however, that its allegations concerning the ill health of the insured as of the date of the issuance of the policy, are not a 'contest' of the policy within the terms of the clause; that the good health of the insured as of the date of the issuance of the policy was a condition precedent to the policy's becoming effective; that because of her ill health, that condition precedent was never met and that there is no policy to contest. It says, rather, that since the condition precedent to the effectiveness of the policy was not met, that the only contractual arrangement between the parties was one to the effect that the insurance company should repay the premiums paid by the insured; that, therefore, the position taken by it and its pleadings is consistent with the terms of the contract between the parties rather than a contest thereof.

It is true that in American National Insurance Company v. Lawson, 133 Tex. 146, 127 S.W.2d 294 (Tex.Commission of Appeals), it is held that a provision in an insurance policy in language quite similar to that above quoted as 'preliminary provisions' set forth conditions precedent.

It is also held in Guardian Life Ins. Co. v. Galoostian, Tex.Civ.App., 155 S.W.2d 396, ref. w.o.m., that such a denial of the occurrence of the condition precedent as here made by appellee, is not a 'contest' within the terms of the contestable clause required by Article 3.44, Sec. 3, V.A.T.S. Insurance Code. We are of the opinion, however, on the basis of the following authorities, that the great weight of authority in this state is to the effect that the defense asserted by the appellee in the court below constitutes a 'contest' within the terms of such incontestable clause: National Life Underwriters v. Williams, Tex.Civ.App., 197 S.W.2d 487, err. ref.; Reserve Loan Life Ins. Co. of Texas v. Brown, Tex.Civ.App., 159 S.W.2d 179, err. ref.; Reliable Life Ins. Co. v. Wyatt, Tex.Civ.App., 154 S.W.2d 288, err. dism'd.

As of the date of the issuance of the policy here in question, Vernon's Annotated Texas Statutes, Insurance Code, Article 3.44, contains the following provisions:

'No policy of life insurance shall be issued or delivered in this State, or be issued by a life insurance company organized under the laws of this State, unless the same shall contain provisions substantially as follows: * * * (3) That the policy, or policy and application, shall constitute the entire contract between the parties and shall be incontestable not later than two years from its date, except for non-payment of premiums; and which provision may or may not, at the option of the company, contain an exception for violations of the conditions of the policy relating to naval and military services in time of war.'

Effective 90 days after May 24, 1963, the above quoted language of Article 3.44, Section 3 of the Insurance Code was amended to read as follows:

'That the policy, or...