Metropolitan Casualty Ins. Co. of New York v. Brownell

• Decision Date: 28 February 1934
• Docket Number: No. 4969.,4969.
• Citation: 68 F.2d 481
• Parties: METROPOLITAN CASUALTY INS. CO. OF NEW YORK v. BROWNELL.
• Court: U.S. Court of Appeals — Seventh Circuit

68 F.2d 481 (1934)

METROPOLITAN CASUALTY INS. CO. OF NEW YORK v. BROWNELL.

No. 4969.

Circuit Court of Appeals, Seventh Circuit.

January 12, 1934.

Rehearing Denied February 28, 1934.

James W. Noel, Hubert Hickam, Alan W. Boyd, and Robert D. Armstrong, all of Indianapolis, Ind., for appellant.

Charles D. Hunt, of Sullivan, Ind., and Samuel D. Miller and Sidney S. Miller, both of Indianapolis, Ind., for appellee.

Before EVANS, SPARKS, and FITZHENRY, Circuit Judges.

FITZHENRY, Circuit Judge.

This action was brought upon a bond, executed by appellant, whereby it agreed to indemnify the People's National Bank & Trust Company to the extent of $5,000 for losses occurring by reason of the dishonesty of any employee, to recover the full penalty of the bond for losses alleged to have occurred by reason of the dishonesty of the cashier of said bank. Appellant demurred to the amended complaint, which demurrer was overruled, and it thereupon filed an answer, to which a demurrer of appellee was sustained. Appellant elected to stand upon its pleadings and refused to plead further, and the court thereupon entered a judgment for appellee for the full penalty of said bond with interest, from which judgment this appeal is taken. The errors relied on arise out of the rulings of the court on the demurrer to the amended complaint and the demurrer to the answer, to each of which rulings the appellant duly excepted.

The amended complaint alleges in substance that on or about the 12th day of March, 1927, the appellant, in consideration of an annual premium, executed the bond in question, by the terms of which it agreed to indemnify the People's National Bank & Trust Company, of which appellee is receiver, to the extent of $5,000 for any losses resulting from the dishonesty of any employee of said bank. Said bond remained in force until December 15, 1928, at which time it was canceled by the bank. During the years 1927 and 1928 while the bond was in force, losses are alleged to have occurred through the dishonesty of one Edgar D. Maple, cashier, in receiving notes, from the president of another bank, which he knew to be forged and for which he gave full credit on the books of the bank. The losses for each year exceeded the penalty of the bond. The 1927 losses were eliminated from the amended complaint by a motion to strike out all allegations with reference to such losses, which was sustained. The losses for the year 1928 are alleged to have been discovered within a few days subsequent to January 16, 1929. It is further alleged that within fifteen days thereafter the bank notified appellant of the loss and within four months thereafter, on April 12, 1929, furnished appellant due proof of loss in accordance with the terms of the bond.

The bond sued on contains, among others, the following provisions:

"Time for Investigation by the Underwriter.

"(6) That the Underwriter shall have two (2) months after presentation of sworn statement of claim within which to verify same by appropriate investigation, during which time no legal proceedings shall be brought against the Underwriter as to that claim, nor may such proceedings be brought at all as to that claim after the expiration of fifteen (15) months from the date of its presentation."

This action was commenced January 15, 1932, more than fifteen months, and almost three years, after the presentation of the claim.

Appellant contends the action was not commenced within the time limited by the terms of the bond. Appellee contends, and the court held, that said provision requiring the commencement of the action within fifteen months after the presentation of the claim is rendered invalid by section 9139, Burns' Ann. St. 1926 (Acts 1865, Sp. Sess., p. 105), of the statutes of Indiana, providing as follows: "9139. (4803.) Conditions forbidden. — 6. No such insurance company shall insert any condition in any policy hereafter issued requiring the insured to give notice forthwith, or within the (a) period of time less than five days of the loss of the insured property; * * * and any provision or condition contrary to the provisions of this section, or any condition in said policy inserted to avoid the provisions of this section, shall be void, and no condition or agreement not to sue for a period of less than three years shall be valid."

As construed by the Supreme Court of Indiana, this statute purports to render invalid any provision in a policy of insurance issued by a company of another state doing business in Indiana restricting the time for commencing action to a period shorter than three years. No such restriction is imposed upon insurance companies organized under the laws of Indiana. It is appellant's contention that this statute so construed, applying only to foreign corporations, denies to such corporations the equal protection of the laws, in violation of the Fourteenth Amendment to the Constitution of the United States; that it is consequently invalid and cannot destroy the validity of the limitation in the bond. The question is presented by the ruling of the District Court overruling appellant's demurrer to the amended complaint and sustaining appellee's demurrer to the answer which affirmatively sets up the provisions of the bond and the invalidity of the Indiana statute in question.

The sole question presented by this recond is whether or not section 9139, Burns' Ann. Stat. of Indiana, is a valid enactment, in the light of the Fourteenth Amendment to the Constitution of the United States.

The section of Burns' Annotated Indiana Statutes, the validity of which is being attacked in this case, was passed by the Legislature of Indiana in 1865, before the Fourteenth Amendment to the Constitution of the United States was adopted. It has been upheld as a valid exercise of legislative discretion by the Supreme Court of Indiana as affecting foreign insurance companies. American Surety Co. v. Pangburn, 182 Ind. 116, 119, 105 N. E. 769, Ann. Cas. 1916E, 1126; Caywood v. Supreme Lodge, etc., 171 Ind. 410, 86 N. E. 482, 23 L. R. A. (N. S.) 304, 131 Am. St. Rep. 253, 17 Ann. Cas. 503.

Another statute (Burns' Ann. St. 1926, § 9037) prohibits a life insurance company from incorporating a provision in a policy limiting the time within which any action at law or equity may be commenced to less than three years after the cause of action shall accrue, and this provision has also been held valid by the Supreme Court of Indiana. Insurance Co. v. Brim, 111 Ind. 281, 12 N. E. 315; Caywood v. Supreme Lodge, etc., supra.

The writing of an insurance contract is not a transaction in commerce, nor is the insurance contract an article of commerce, but merely a simple contract of indemnity. Paul v. Virginia...