Lydon v. New York Life Ins. Co.

• Decision Date: 25 March 1937
• Docket Number: No. 10660.,10660.
• Citation: 89 F.2d 78
• Parties: LYDON et al. v. NEW YORK LIFE INS. CO.
• Court: U.S. Court of Appeals — Eighth Circuit

89 F.2d 78 (1937)

LYDON et al. v. NEW YORK LIFE INS. CO.

No. 10660.

Circuit Court of Appeals, Eighth Circuit.

March 25, 1937.

Richard D. Shewmaker and John M. Holmes, both of St. Louis, Mo. (Thompson, Mitchell, Thompson & Young, of St. Louis, Mo., on the brief), for appellants.

William H. Becker, of Columbia, Mo. (Boyle G. Clark, James E. Boggs, and Paul M. Peterson, all of Columbia, Mo., on the brief), for appellee.

Before STONE, SANBORN, and VAN VALKENBURGH, Circuit Judges.

VAN VALKENBURGH, Circuit Judge.

This is a suit by the executors of Thomas F. Lydon, deceased, to recover under the permanent disability and waiver of premium provisions of a life insurance policy issued by appellee. The death benefits, in the sum of $25,000, have been paid and received without prejudice to this suit. The case was tried to the court upon an agreed statement of facts, which, in so far as essential to the disposition of this appeal, are in substance as follows:

The policy in question was executed and delivered to decedent by appellee, a New York corporation, February 19, 1926. It agreed to pay to Alice Stanley Lydon, wife, and the Mercantile Trust Company of St. Louis, Mo., designated beneficiaries, the sum of $25,000 in case of natural death, and $50,000 in case of death from accident as defined therein. The annual premium was $1,361.75. It also contained total and permanent disability provisions as follows:

"Disability shall be considered total whenever the Insured is so disabled by bodily injury or disease that he is wholly prevented from performing any work, from following any occupation, or from engaging in any business for remuneration or profit, provided such disability occurred after the insurance under this policy took effect and before the anniversary of the policy on which the Insured's age at nearest birthday is sixty.

"Upon receipt at the Company's Home Office, before default in payment of premium, of due proof that the insured is totally disabled as above defined, and will be continuously so totally disabled for life, or if the proof submitted is not conclusive as to the permanency of such disability, but establishes that the Insured is, and for a period of not less than three consecutive months immediately preceding receipt of proof has been, totally disabled as above defined, the following benefits will be granted:

"(a) Waiver of Premium. — The Company will waive the payment of any premium falling due during the period of continuous total disability, the premium waived to be the annual, semi-annual or quarterly premium according to the mode of payment in effect when disability occurred.

"(b) Income Payments. — The Company will pay to the Insured the monthly income stated on the first page hereof ($10 per $1,000 of the face of this policy) for each completed month from the commencement of and during the period of continuous total disability. If disability results from insanity, payment will be made to the beneficiary in lieu of the Insured.

"In event of default in payment of premium after the Insured has become totally disabled as above defined, the policy will be restored and the benefits shall be the same as if said default had not occurred, provided due proof that the Insured is and has been continuously from date of default so totally disabled and that such disability will continue for life or has continued for a period of not less than three consecutive months, is received by the Company not later than six months after said default."

Deceased paid to appellee the annual premiums for the years 1926 to 1932, inclusive. Again, February 19, 1933, he paid the premium for that year, by cash and application of accrued dividends. December 23, 1932, insured became totally disabled within the terms of the policy, and this disability continued from that date until his death June 4, 1933. At the time he made the premium payment, February 19, 1933, he had not been advised by his attending physician that he was in a serious condition, and he did not "believe that he would continue to be totally disabled or that he would die, but, on the contrary, thought that he would shortly be able to return to his normal duties at his office"; at the time defendant received this premium, it had no knowledge of the illness of insured. During his illness insured did not notify appellee thereof, nor make any claim that he was entitled to total and permanent disability benefits. Concurrently with submission of proofs of death appellants notified appellee by letter, asserting a claim for disability benefits, and, on August 10, 1933, requested forms of disability proof, which appellee declined to furnish. Thereafter appellees, on November 10, 1933, made proof, recognized by the agreed statement of facts, that the insured was totally disabled from December 23, 1932, until his death June 4, 1933. On February 19, 1926, deceased was fifty years of age.

The case was tried to the court. Appellants moved for judgment in their favor, which was overruled. The court took the case under advisement, and subsequently entered judgment for appellee. This appeal followed.

The items sought to be recovered, as stated in the first count of the petition filed, were the February, 1933 premium of $1,361.75, and disability benefits for six months at $250 per month, a total of $2,861.75. To this was added a prayer for 10 per cent. of the above amount as damages for vexatious delay, for a reasonable attorney's fee, and for costs.

The decision in Missouri State Life Insurance Company v. Jones, 290 U.S. 199, 54 S.Ct. 133, 78 L.Ed. 267, would seem to sustain the jurisdiction of the District Court in this case, and the jurisdiction is conceded. The position of appellee is thus succinctly stated:

"1. The receipt of due proof in the lifetime of the insured is a condition precedent to liability for total disability benefits and waiver of premiums.

"2. In no event are appellants entitled to recover the premium paid, (a) because the giving of proof of disability while the disability exists is a condition precedent to the waiver of premiums; (b) because there is no provision in the policy obligating the company to return premiums paid before proof of disability; (c) because there was no mutual mistake of fact which would justify its recovery in assumpsit; (d) because there was no compulsion and (e) because money voluntarily paid may not be recovered, even though there is no obligation to pay."

Appellants contend that the policy cannot be construed to mean that the company's liability under the disability provision terminated upon the death of the insured without having made proof of disability during his life and prior to accrual of benefits; that, even if so construed, the policy contains no express provision declaring a forfeiture in such case, and such insurance will not be forfeited for failure of strict compliance; that the agreement to waive the payment of premiums during the period of total disability included an obligation to refund one paid under the circumstances of this case; and that payment is recoverable as made under a mistake of fact. The cases cited are not entirely harmonious, and depend largely upon the varying facts presented. Both parties cite Bergholm v. Peoria Life Insurance Company, 284 U.S. 489, 52 S.Ct. 230, 76 L.Ed. 416, and counsel for appellee rely strongly upon it to support their contentions. The Supreme Court granted certiorari in that case to the Circuit Court of Appeals of the Fifth Circuit because of a supposed conflict in its decision 50 F.(2d) 67 with that of this court in Minnesota Mutual Life Ins. Co. v. Marshall, 29 F.(2d) 977. In the latter case this court held that the terms of the policy therein required a waiver of payment of premiums where the insured became totally and permanently disabled during the grace period, when payment of premiums might still be made, notwithstanding that proof of disability was not made before termination of the grace period. In the Bergholm Case 50 F.(2d) supra the Circuit Court of Appeals for the Fifth Circuit, upon the terms of the policy under its consideration, held that both claim by the insured and receipt of proof by the insurer were conditions precedent to the insured's becoming entitled to disability benefits, and that the failure of insured to make claim for such benefits during the life of the policy prevented recovery thereon by the beneficiary after death of insured. The decision of the Fifth Circuit was sustained by the Supreme Court (284 U.S. supra). The disability clauses in that policy were the following:

"Upon receipt by the Company of satisfactory proof that the Insured is totally and permanently disabled as hereinafter defined the Company will

"1. Pay for the Insured all premiums becoming due hereon after the receipt of such proof and during the continuance of the total and permanent disability of the Insured and will also

"2. Pay to the Insured a Monthly Income for life of 1% of this Policy; The first payment of such income to be paid immediately upon receipt of such proof. * * *

"3. To entitle the Insured to the above Total and Permanent Disability Benefits this policy at the time of making claim for such benefits must be in full force and all premiums becoming due prior to the time of making claim must have been duly paid."

While there was evidence in that record from which it might be found that the insured was totally and permanently disabled from a time before the premiums first became in arrears, and that this continued until death, no proof was furnished to the company; and the court held that, under the terms of that policy, the receipt of such proof by the insurer was a condition precedent to assumption of liability for payment of premiums becoming due after the receipt of proof; that, long prior to the death of insured, the policy had lapsed.

The Supreme Court...