Modern Woodmen of America v. Kehoe

• Decision Date: 25 March 1946
• Docket Number: 36034.
• Citation: 25 So.2d 463,199 Miss. 754
• Court: Mississippi Supreme Court
• Parties: MODERN WOODMEN OF AMERICA v. KEHOE.

25 So.2d 463

199 Miss. 754

MODERN WOODMEN OF AMERICA v. KEHOE.

No. 36034.

Supreme Court of Mississippi

March 25, 1946

Stone & Stone, of Coffeeville, and Geo. G Perrin and Geo. H. McDonald, both of Rock Island, Ill., for appellant.

John Horan, of Water Valley, for appellee.

ALEXANDER, Justice.

This case involves the construction of a fraternal life insurance policy which provided that 'If his death shall occur * * * in consequence of any violation of law * * * then said benefit certificate shall be null and void and of no effect.' The insured died by legal execution, and suit is by the widow, as beneficiary. The by-laws, expressly made a part of the policy, contain the following provision 'Sec. 25. Incontestability.--After any certificate of insurance issued by this Society has been in force during the lifetime of the member for two full certificate years, it shall be incontestable except for nonpayment of premiums and except with respect to the provisions contained in any rider attached thereto providing for additional benefits, and except also for risks not assumed.'

There is no disagreement as to the payment of premiums or is any other ground for avoidance asserted except the death in consequence of a violation of criminal law. Unless therefore, death by execution is one of the 'risks not assumed,' the incontestable clause would bar a defense based upon that ground. Before considering this question, it is well to refer to the provision of the policy first above quoted. Consideration of this provision would require a construction of the words 'in consequence of any violation of law * * *,' and would invite a resolving of the uncertainty whether a legal execution of the insured is 'a consequence' of his illegal act of murder within the meaning of the policy. This, we need not undertake unless 1) the language compels the conclusion that such death is the consequence of his criminal act, and 2) it would be against our public policy to allow such risk to be assumed by the appellant. If it is not against our public policy, the question is open whether the insurer is barred from setting up the defense, in view of the incontestable clause.

If the risk of death at the hands of the law could be assumed, as not being a violation of public policy, then the exclusion of such risk must arise from the terms of the contract and unless a defense based thereon is precluded by the incontestable clause, and provided it is held a consequence of his criminal act, the beneficiary could not recover. If, therefore, it is a risk that could lawfully be assumed, a waiver of a defense based thereon could lawfully be made.

That such a risk is not against public policy is now abundantly established. Northwestern Mut. Life Ins. Co. v. Johnson, 254 U.S. 96, 41 S.Ct. 47, 65 L.Ed. 155; Collins v. Metropolitan Life Ins. Co., 232 Ill. 37, 83 N.E. 542, 14 L.R.A.,N.S., 356, 122 Am.St.Rep.

54, 13 Ann.Cas. 129; Fields v. Metropolitan Life Ins. Co., 147 Tenn. 464, 249 S.W. 798, 36 A.L.R. 1250 (with extensive annotation at page 1255).

Wherefore, such risk was one which the insurer could legally assume, and, regardless of whether the subsequent death was in consequence of a criminal act, the policy was a valid contract and as such remained in force for over twenty years. Circumstances which might have arisen subsequent to its lawful inception were such as would be interposed as defenses to a suit upon the policy. Fraud in its procurement could be invoked to avoid liability under the policy. So also, the policy was subject to avoidance by subsequent events, such as non-payment of premiums, death by suicide, or in consequence of a criminal act. It would not be correct to say that the policy was never in force nor to say that the appellee, after the death of the insured, had no policy. Vetter v. Massachusetts Nat. Life Association, 29 A.D. 72, 51 N.Y.S. 393. The simple fact is that she did have such policy and sued upon it. That it is still a valid obligation could be shown by its terms, supported by proof that the premiums had been paid. It is not void per se but per quod. The questions here raised have to do with the insurer's contest. If it is to be avoided, the insurer must act. Under its policy it would have been free to contest it upon any proper grounds whether mentioned in the contract or not. Yet, it chose to waive such right by fixing a two year period of limitation within which alone it could contest its liability. Ramsey v. Old Colony Life Ins. Co., 297 Ill. 592, 131 N.E. 108. See also numerous citations in the annotations found in 6 A.L.R. 441, 448; 13 Id. pp. 672, 674; 35 Id. p. 1491, 1493; Weeks v. New York Life Ins Co., 128 S.C. 223, 122 S.E. 586, 35 A.L.R. 1482, with annotation in 35 A.L.R. 1491, 1492.

The risk of death at some time was of course assumed by the insurer. But for the exceptions as to the cause of death, the insurer would be liable in the event of death, however caused, provided the policy was in force and there was no fraud or misrepresentation involved in its procurement. Yet, these are defenses against liability, in other words, bases for contesting liability. The appellant, however, has waived all defenses by making the policy incontestable after two years from its date, except as above noted. This clause is not an assurance against the results of crime but is assurance against the hazard of litigation. Mutual Ins. Co. of New York v. Lovejoy, 201 Ala. 337, 78 So. 299, L.R.A. 1918D, 860; Supreme Lodge K. P. v. Overton, 203 Ala. 193, 196, 82 So. 443, 445, 16 A.L.R. 649; United Order of the Golden Cross v. Overton, 203 Ala. 335, 83 So. 59, 13 A.L.R. 672.

Having put out of view the question whether death by execution is a risk excluded by public policy, the saving phrase 'except also for risks not assumed' has no force except such as is found in specific exceptions in the contract or its attached riders, or such as would be held as contrary to public policy. The incontestable clause is to be read in connection with the other provisions of the policy which, but for the clause, would provide a ground for contest. It would be meaningless if the words 'except for risks not assumed' preserved the right to contest all claims arising out of the risks which the contract specifically excluded. If it did not assume a certain risk, the words would be unnecessary with respect thereto. Thus Section 25 of the bylaws (except as to non-payment of premiums and special provisions in an attached rider) would mean nothing, for the policy could in no case be contestable for risks assumed, and the waiver of contestability could refer only to those risks not assumed. As held in Sun Life Ins. Co. v. Taylor, 108 Ky. 408, 56 S.W. 668, 94 Am.St.Rep. 383, 'The language providing that the policy should be incontestable does not restrict it to any particular ground of contest, but it is broad and comprehensive enough to embrace any and every defense which might have been made to it before the expiration' of the contestable period. It did not undertake to incur any risk imposed upon it by fraud or misrepresentation, nor the risk of insuring one who should later hasten the maturity of the risk by his own suicidal act. Nor for that matter did it intend to assume the risks falling within the meaning of the phrase 'in consequence of any violation of criminal law.' Yet, it did assume the risk of its failure to contest its liability upon such grounds within the contractual period. It could interpose its contest upon any of those grounds provided it acted within the contestable two year period. As stated in American Nat. Ins. Co. v. Tabor, 111 Tex. 155, 230 S.W. 397, 399, dealing with an incontestable clause written into the contract by statute, 'The subdivision allows the insuring company to fix a period of time, not to exceed two years, during which it may make fully available to itself all the legal consequences of fraud which ought to be discovered through the exercise of proper diligence; but, after the expiration of the period fixed, the subdivision eliminates all defenses, save those specially mentioned. The parties could not, by contract, put something into the policy which was repugnant to the mandatory statute, and thus destroy a benefit to the insured which the statute was designed to guarantee. Hence the attempted reservation by the insurer of the right to interpose fraud by way of defense to a suit to enforce payment of the policy after it had been issued more than two years was void.'

Cases involving fraud would seem to present the strongest defense since it affects the validity of the policy ab initio. Yet, the incontestable clause has been held effective to bar a contest on such grounds. Metropolitan Life Ins. Co. v. Peeler, 71 Okl. 238, 176 P. 939, 6 A.L.R. 441, with annotations at p. 452, also 13 A.L.R. 674, 675; Weeks v. New York Life Ins. Co., supra.

Suicide, involving as it does a deliberate act, and upon occasion done purposely to hasten maturity of the obligation, as well as inviting considerations of public policy, would seem also to challenge the power of the incontestable clause to forbid recovery. Yet, suicide has long since been accepted as one of the risks assumed by the insurer and subject to the incontestable clause. See authorities cited in preceding paragraph. Indeed, its mortality tables take such contingency into account. Jackson v. Loyal Additional Ben. Association, 140 Tenn. 495, 205 S.W. 318; Fields v. Metropolitan Life Ins. Co., supra.

There is no occasion to compare the relative risk of suicide against the possibility that the insured may, as an incident of his criminal act, be tried, convicted, sentenced, and executed. Arguments based upon the degree of risk are for the insurer in fixing its rates. Public...