Miccolis v. Mutual Ben. Health & Accident Ass'n

• Decision Date: 20 January 1941
• Docket Number: No. 7279.,7279.
• Citation: 115 F.2d 579
• Parties: MICCOLIS v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.
• Court: U.S. Court of Appeals — Seventh Circuit

115 F.2d 579 (1940)

MICCOLIS v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.

No. 7279.

Circuit Court of Appeals, Seventh Circuit.

October 28, 1940.

Rehearing Denied November 20, 1940.

Writ of Certiorari Denied January 20, 1941.

L. L. Bomberger and Rae M. Royce, both of Hammond, Ind., for appellant.

Oscar B. Thiel, Frank Rondinelli, and James A. Patterson, all of Gary, Ind., for appellee.

Before EVANS and KERNER, Circuit Judges, and BRIGGLE, District Judge.

Writ of Certiorari Denied January 20, 1941. See 61 S.Ct. 551, 85 L.Ed. ___.

EVANS, Circuit Judge.

The judgment from which this appeal was taken was entered upon a verdict for $5,000 in favor of the plaintiff, a beneficiary named in an insurance policy, issued to, and on her deceased husband's life. This policy bore date, December 10, 1931. Insured died March 29, 1934.

The defense is based on alleged material misrepresentations which were made in the insured's application for the policy. An alleged tender and an attempted rescission also present a sharply-disputed factual controversy.

The Indiana statute (Burns Ind.Stats. 1933, Sec. 39-801(3), as amended, Sec. 39-4206) making a life insurance policy incontestable after two years presents the first serious obstacle to the defendant's asserted defense. If sustained, it renders unnecessary our inquiry into the facts which deal with tender, attempted rescission, and alleged misrepresentations.

The contract was one which is generally known as an accident policy. It contained a subdivision entitled "Accident Indemnities." The clause which covers liability in the instant case provides that "for loss" sustained through "bodily injuries * * * which shall independently and exclusively of disease and all other causes * * *:" there be paid "For Loss of Life $5,000.00." Included in this same paragraph were coverages for loss of eyes, foot, hand, etc. Another provision called "for monthly indemnity" of "one hundred dollars per month, in case the insured be wholly and continuously disabled, etc."

Another paragraph was headed "Double Specific Losses." It provided for a payment of $10,000 for loss of life and double the amounts provided in the preceding paragraph, if the insured suffered lesser injuries, while riding on a railway car, etc.

The contract before us contained no incontestable clause. The Indiana statute (39-4206),^* however, if applicable prevents escape from liability on that ground. The Indiana statute is a part of every Indiana life insurance policy as fully as though the insurer expressly recognized it and inserted it into its contracts.

If, however, this Indiana statute is not applicable to the policy in suit (because an accident insurance policy), then defendant has avoided incontestability by not inserting such a provision in its contract.

Our inquiry, therefore, is limited to an ascertainment of the applicability of the Indiana statute and the Indiana law to an insurance policy which covers death "resulting from * * * bodily injuries" of a nature which we commonly describe as accidental.

The risks covered by this policy may be divided, naturally, into (a) death losses, and (b) lesser losses which do not result in the insured's death. Both, it may be conceded, have the same origin, to-wit, "bodily injuries" sustained "through accidental means."

In our approach we must recognize that the incontestable clause provisions of the statute statutes were inserted to protect the insured against efforts of the insurers to avoid liability after death had sealed the lips of the insured. It was believed unfair to the insured, whose death made it impossible for him to explain his answers or give his version of questions and answers in the application, to permit the insurer to assert misrepresentations unless this defense were made within a reasonable time. Likewise, it was not thought consonant with fair dealing, to permit the insurer to receive and retain premiums indefinitely and wait the judgment of Fate to finally determine the intention of the insurer in respect to the insured's alleged false statements. It was likewise unfair to permit the insurer, after years had elapsed and the insured was dead, to bring up these misstatements when often the insurer's agent knew or had reason to believe they were false when he took the insured's application. In short, these statutes were enacted to protect the insured. Their purpose was to compel the insurer to act within a reasonable time to rescind its contract, because of the insured's misstatements, or be bound by its death payment obligations.

The wisdom of the legislation was promptly recognized by most insurance companies, and they inserted time limitations more favorable to the insured than were required by the statutes. The incontestability statute and the incontestable clauses which appeared in the policies were mutually beneficial to both insurer and insured.

Where conflicts arose and litigation ensued, it became necessary to construe these statutes and clauses. The results of such litigation were uniform holdings to the effect that incontestable clauses and statutes are favored in the law. Courts construe them, if ambiguous or at all uncertain, in favor of the insured. American Jurisprudence, Vol. 29, "Insurance," Sec. 880.

The Indiana courts have disposed of the question in...