Metro. Life Ins. Co. v. Peeler
| Decision Date | 10 December 1918 |
| Docket Number | Case Number: 10171 |
| Parties | METROPOLITAN LIFE INS. CO. v. PEELER. |
| Court | Oklahoma Supreme Court |
¶0 1. Insurance -- Life Insurance -- Incontestability--Fraud.
A provision in a life insurance policy that "this policy (and the application therefor) constitutes the entire contract between the parties and shall be incontestable after one year from the date of its issue, except for nonpayment of premiums," includes fraud on the part of the insured in obtaining the insurance, and, after one year from the date the policy is issued, the insurance company cannot plead such fraud as a defense to an action brought by the beneficiary under the policy to recover the amount thereof, or in a cross-action to cancel the policy and rescind the insurance contract.
2. Same -- Incontestability Clause--Public Policy.
Such a provision in a life insurance policy is neither unreasonable nor contrary to public policy.
3. Same--Validity.
Such a provision in a life insurance policy is not contrary to any express provision of law, nor contrary to the policy of express law, though not expressly prohibited, nor otherwise, contrary to good morals.
Error from District Court, Oklahoma County; Geo. W. Clark, Judge.
Action by Willie B. Peeler against the Metropolitan Life Insurance Company. Plaintiff's motion for judgment on the pleadings sustained, and defendant brings error. Affirmed.
Embry, Crockett & Johnson, for plaintiff in error.
E. G. McAdams and D. S. Levy, for defendant in error.
¶1 On August 8, 1916, the Metropolitan Life Insurance Company issued its policy of insurance on her life to Nannie D. Lloyd, in which Willie B. Peeler was named as beneficiary. On August 1, 1917, one year and two days after the policy was issued, the insured died. Suit was brought by the beneficiary against the insurance company to recover the amount of the policy of insurance, and a copy of the policy was attached to the petition and, by special reference, made a part of it. This policy contained the following clause: Incontestability.--This policy (and the application therefor) constitutes the entire contract between the parties and shall be incontestable after one year from the date of its issue except for nonpayment of premiums."
¶2 The insurance company defended the action brought against it by alleging in its answer that the insured, for the purpose of obtaining the policy and defrauding it, falsely represented to it in her written application which by its terms formed the basis of the insurance and was made a part of the policy that she had never had cancer or tumor, had never had any illness since childhood, had never been attended or prescribed for by a physician, had never been confined to the house by illness, and had never been an inmate of or visited a hospital or sanitarium for treatment; when, in fact, she was, during the month of January, 1916, afflicted with cancer of the breast, that she consulted with and was attended by a physician and surgeon on account of this affliction, who performed an operation removing the cancer, which operation resulted in a personal injury or deformity, that she was an inmate of a hospital during the month of January, 1916 and that, for a long time after the cancer was removed, she was confined to her home on account of the disease and the operation. The company also alleged that the statements and representations so made by the insured to it were knowingly and falsely made by her with the fraudulent interest to induce it and by means whereof it was induced, to issue the policy of insurance on her life; and that, on account of the fraud of the insured in obtaining the insurance, the beneficiary named in the policy was not entitled to recover. A cross-petition was also filed by the insurance company alleging substantially the same facts and praying for a cancellation of the policy on the ground of fraud in its procurement.
¶3 A motion for judgment on the pleadings was filed by the beneficiary and sustained by the court. From this judgment the insurance company appeals.
¶4 Accepting the allegations in the answer and cross-petition of the insurance company as true, as they had to be accepted by the trial court in rendering its judgment on the pleadings, there is no question but what the insured was not a fit and suitable subject for insurance at the time the policy was issued; that ill health and bodily infirmities of a serious character, well known to her and concealed by her in making her application, would have caused the company to reject the application had it known of the same.
¶5 The rights of the parties to this suit are therefore made to turn on the force and effect of the incontestable clause in the insurance policy, which expressly stipulates that it "shall be incontestable after one year from the date of its issue except for non-payment of premiums."
¶6 It is to be presumed that the insurance company had some purpose in view when it offered to the insured a policy containing this stipulation, and that the stipulation itself had some meaning. It was not inserted as a mere matter of form. It was an inducement for the insured to take the insurance. It guaranteed her that her policy should not be contested after the expiration of one year, provided the premiums were paid. It carried with it the assurance that, if she paid the premiums and died after one year from the date it issued, the beneficiary selected by her and for whom she attempted to provide would not be met with a contest and lawsuit to determine whether the insurance ever had any validity or force. The stipulation is broad in its terms. There is only one condition upon which the validity of the policy can be questioned after the lapse of a year, and that is the nonpayment of premiums. The meaning of the provision is that, if the premiums are paid, the liability shall be absolute under the policy, and that no question shall be made of its original validity. The language admits of no reasonable construction other than that the company reserves to itself the right to ascertain all the matter and facts material to its risk and the validity of its contract for one year; and that if within that time it does not ascertain all the facts, and does not cancel and rescind the contract, it may not do so afterwards upon any ground then in existence. Mutual Life Insurance Co. v. Buford, 61 Okla. 158, 160 P. 928; Clement v. Insurance Co., 101 Tenn. 22, 46 S.W. 561, 42 L. R. A. 247, 70 Am. St. Rep. 650; Thompson v. Fidelity Insurance Co., 116 Tenn. 557, 92 S.W. 1098, 6 L. R. A. (N. S.) 1039, 115 Am. St. Rep. 823; Wright v. Mutual Ben. Ass'n, 118 N.Y. 237, 23 N.E. 186, 6 L. R. A. 731, 16 Am. St. Rep. 749.
¶7 It is urged by the insurance company that on account of the fraud of the insured in procuring the policy the contract of insurance is null and void; that in this, as in other cases, fraud vitiates the agreements and undertakings based upon it, and may be set aside at the instance of the party defrauded. It is true that fraud in procuring the policy would vitiate it at the option and upon the motion of the party defrauded; but, under the stipulation in question, the defrauded party must within the year after the policy is issued test its validity by exercising his right to repudiate and rescind it. The stipulation is in the nature of, and serves a similar purpose as, the statutes of limitation, which are sometimes called statutes of repose. It creates by contract a limitation for the benefit of the insured, within which limited period the insured must test, if ever, the validity of the policy.
¶8 The general rule is anounced in Ruling Case Law, vol 14, § 380, of the article on Insurance, as follows:
"A provision in a contract of insurance limiting the time in which the insurer may take advantage of certain facts that might otherwise constitute a good defense to its liability on such contract, precludes every defense to the policy other than the defenses excepted in the provision itself, including false answers in the application, and even fraud where the time fixed by the contract is not unreasonably short." Indiana Life Ins. Co. v. McGinnis, 180 Ind. 9, 101 N.E. 289, 45 L. R. A. (N. S.) 192; Great Western Life Ins. Co. v. Snavely, 206 F. 20, 124 C.C.A. 154, 46 L. R. A. (N. S.) 1056; Mass. Ben. Life Ass'n v. Robinson, 104 Ga. 256, 30 S.E. 918, 42 L. R. A. 261; Citizens' Life Ins. Co. v. McClure, 138 Ky. 138, 127 S.W. 749, 27 L. R. A. (N. S.) 1026; Kansas Mut. Life Ins. Co. v. Whitehead, 123 Ky. 21, 93 S.W. 609, 13 Ann. Cas. 301; Clement v. New York Life Ins. Co., 101 Tenn. 22, 46 S.W. 561, 42 L. R. A. 247, 70 Am. St. Rep. 650.
¶9 It was said by the Supreme Court of Tennessee, in the case of Clement v. New York Life Ins. Co., supra:
"Fraud is always required to be set up promptly when discovered, or it may be treated as waived, and the effect of this stipulation is that the insurer must exercise due diligence to discover such fraud within the year, and, if it fails to do so, it will treat it as waived, and no inquiry will be made or allowed into such matters."
¶10 But the insurance company contends that this stipulation is void, being against public policy, and that the interpretation and construction we have given it is repugnant to section 973, Revised Laws 1910, which reads:
"All contracts which have for their object, directly or indirectly, to exempt any one from responsibility for his own fraud, or willful injury to the person or property of another or violation of law whether willful or negligent, are against the policy of the law."
¶11 This contention, it seems to us, is based upon an entire misconception of the object and meaning of the stipulation. It was not a stipulation to exempt any one from responsibility for his own fraud. On the contrary, it recognizes the possibility of fraud, but provides ample time and opportunity within which it may be established.
¶12 Under the title...
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