Murray v. State Mut. Life Ins. Co.

• Decision Date: 25 March 1901
• Parties: MURRAY v. STATE MUT. LIFE INS. CO.
• Court: Rhode Island Supreme Court

48 A. 800

22 R.I. 524

MURRAY

v. STATE MUT. LIFE INS. CO.

Supreme Court of Rhode Island.

March 25, 1901.

Action by Thomas Murray, executor, against the State Mutual Life Insurance Company. Plaintiff's demurrer to defendant's plea in bar sustained.

Hugh J. Carroll and Irving Champlln, for plaintiff.

Edward D. Bassett, for defendant.

TILLINGHAST, J. This action is brought to recover the amounts claimed to be due on two life insurance policies issued on the same date. The plaintiff sets up in his declaration that the policies were, by their terms, incontestable after two years from the date of their issue, and that more than two years had elapsed between the date of their issue and the death of the insured. The defendant has filed several pleas in bar to the effect that certain false and fraudulent answers were made by the insured in the applications. The plaintiff has demurred to these pleas, and the case is before us on that demurrer. The "incontestable" clause in each of the policies reads as follows: "This policy shall be incontestable after two years from the date of its issue, provided the premiums are paid as agreed." The only question raised by the demurrer is whether the defendant can be permitted to set up the defense which it has interposed. Counsel for defendant insists that it can, on the broad and familiar ground that fraud vitiates all contracts; and that courts will always refuse to lend their aid in enforcing contracts tainted with fraud, no matter what the agreements or stipulations of the parties may be. As to the correctness of the general proposition of law that fraud vitiates all contracts, there can be no doubt. "But, while fraud is obnoxious, and should be held to vitiate all contracts tainted thereby, courts should exercise care that fraud and imposition should not be successful in annulling a contract which provides, in effect, that, if cause be not found and charged within a reasonable and specific time, establishing the invalidity thereof, it should thereafter be treated as valid." The stipulation in the contract sued on is that "this policy shall be incontestable after two years from the date of its issue, provided the premiums are paid as agreed." This is not an absolute stipulation to waive all defenses and to condone fraud. "On the contrary," as said by the court in Wright v. Association, 118 N. Y. 237, 23 N. E. 186, "it recognizes fraud and all other defenses, but it provides ample time and opportunity within which they may be, but beyond which they may not be, established." "It is in the nature of, and serves a similar purpose as, statutes of limitations and repose, the wisdom of which is apparent to all reasonable minds." That the parties to a contract may stipulate for a shorter period of limitation than that provided by law as to all matters which might, in the absence of such stipulation, be set up in avoidance of the contract, would seem to be entirely reasonable; and such is the well-settled rule of law. Such an agreement is neither expressly nor impliedly prohibited by our statutes of limitations, and is consistent with the policy upon which statutes of limitations are founded. Wilkinson v. Insurance Co., 72 N. Y. 499. The practical, and evidently the intended, effect of the stipulation in question, was to create a short statute of limitations in favor of the insured, within which limited period the insurer must, if ever, test the validity of the policy. It has repeatedly been held that an agreement limiting the time within which an action may be brought upon a policy of Insurance is not against public policy, and may be enforced, though less than the usual time imposed by law has been fixed. 2 May, Ins. (4th Ed.) § 478, and cases cited in note; 11 Am. & Eng. Enc. Law, 349, 350. And, as said by the court in Clement v. Insurance Co., 101 Tenn. 28, 46 S. W. 561, "if this be so it is difficult to see why a similar limitation upon the right of the insurer to contest should be against public policy, and why it should not be enforced by the courts." That the company holds out the special provision in question as an inducement to people to insure, and also that it is very effectual in accomplishing that object, no one can, for a moment, doubt. It clearly gives every...