Mutual Life Ins. Co. of New York v. Drummond

• Decision Date: 24 May 1940
• Docket Number: No. 11607.,11607.
• Citation: 111 F.2d 282
• Parties: MUTUAL LIFE INS. CO. OF NEW YORK v. DRUMMOND.
• Court: U.S. Court of Appeals — Eighth Circuit

111 F.2d 282 (1940)

MUTUAL LIFE INS. CO. OF NEW YORK v. DRUMMOND.

No. 11607.

Circuit Court of Appeals, Eighth Circuit.

May 2, 1940.

Rehearing Denied May 24, 1940.

James C. Jones, Jr., of St. Louis, Mo. (James C. Jones and Web A. Welker, both of St. Louis, Mo., and Louis W. Dawson, of New York City, on the brief), for appellant.

Lyon Anderson, of St. Louis, Mo. (Lambert E. Walther and Leahy, Walther, Hecker & Ely, all of St. Louis, Mo., on the brief), for appellee.

Before SANBORN, THOMAS, and VAN VALKENBURGH, Circuit Judges.

SANBORN, Circuit Judge.

This appeal is from a decree in favor of the insured (plaintiff-appellee), who brought a declaratory judgment suit to establish her rights to disability benefits under the provisions of a $5,000 life policy issued to her at age 16 by the appellant company on July 16, 1927.

The policy, which was an Illinois contract, contained the following pertinent provisions:

"The Mutual Life Insurance Company of New York * * * if the Insured is totally and presumably permanently disabled before age 60 will pay to the Insured Fifty Dollars monthly during such disability, increasing after five and ten years continuous disability, besides waiving premium payments, all upon the conditions set forth in Section 3.

* * *

"Section 3. Benefits in Event of Total and Permanent Disability before Age 60.

"Total Disability. — Disability shall be considered total when there is any impairment of mind or body which continuously renders it impossible for the Insured to follow a gainful occupation.

"Permanent Disability. — Total disability shall, during its continuance, be presumed to be permanent;

"(a) If such disability is the result of conditions which render it reasonably certain that such disability will continue during the remaining lifetime of the Insured; or,

"(b) If such disability has existed continuously for ninety days.

"When Benefits become Effective. — If, before attaining the age of sixty years and while no premium on this Policy is in default, the Insured shall furnish to the Company due proof that he is totally and permanently disabled, as defined above, the Company will grant the following benefits during the remaining lifetime of the Insured so long as such disability continues.

"Benefits. (a) Increasing Income. — The Company will pay a monthly income to the Insured of the amount stated on the first page hereof ($10 per $1,000 face amount of Policy), beginning upon receipt of due proof of such disability and increasing after sixty consecutive monthly payments have been made to one and one-half times such amount and after sixty further consecutive monthly payments have been made to twice such amount at which it shall remain while total and permanent disability continues.

"(b) Waiver of Premium. — The Company will also, after receipt of such due proof, waive payment of each premium as it thereafter becomes due during such disability."

The policy had the following rider endorsed upon it:

"Supplementary Benefits to Section Entitled `Benefits in Event of Total and Permanent Disability before Age 60.'

"Benefits if Proof Delayed and No Premium in Default. — If, while no premium is in default, the proof furnished the Company under the section providing for `Benefits in Event of Total and Permanent Disability before Age 60' is such as to entitle the Insured to the Disability Benefits provided for therein, and if due proof is also furnished the Company that such disability has been continuous since its beginning, the Company will;

"(a) Begin the monthly income payments provided for in such section as of the end of the first completed month of such disability if earlier than the date of receipt of such proof instead of as of the date of receipt of such proof, and,

"(b) Return any premium due after the beginning of such disability which has been paid during the continuance thereof.

"Benefits if Premium in Default not over Six Months. — If, not later than six months after the due date of any premium in default and provided no previously due premium is also in default, due proof is received by the Company that the Insured was totally and permanently disabled, as defined in the section entitled `Benefits in Event of Total and Permanent Disability before Age 60', at the date when such premium in default fell due, and has been continuously so disabled since said due date, the Policy will be reinstated without evidence of insurability and the waiver of premium and disability income benefits shall be the same as if such default had not occurred."

The premium due July 16, 1933, on this policy was not paid when due, and during the grace period the insured requested the company to reduce the amount of insurance to $1,000. This request was granted by the company and evidenced by an endorsement dated August 23, 1933, stamped upon the policy, reading as follows: "Reduction of Face Amount of Policy. — It is understood and agreed that commencing the 16th day of July 1933, the face amount of this policy is reduced from Five Thousand Dollars to One Thousand Dollars and that the amounts of any and all other pecuniary benefits accruing under this policy are reduced in like proportions; and that from said date the premium due on this policy is changed to Twenty-one Dollars and fifty-six cents falling due annually on the 16th day of July in each year." The company paid to the insured the cash surrender value of the $4,000 of insurance released by her, except so much of the cash value as was applied to the payment of the premium due July 16, 1933, on the policy as reduced.

On April 9, 1937, the insured furnished to the company proofs that she had become totally and presumably permanently disabled on February 10, 1933, when $5,000 of insurance was in force. The company, after investigation, allowed her claim as of July 30, 1933, when $1,000 of insurance was in force, refunded to her the premiums which she paid in 1934, 1935 and 1936, and paid to her $10 for each month of disability beginning with August 30, 1933. The position of the company relative to the insured's claim is disclosed by its letter to her dated May 17, 1937, as follows:

"Dear Miss Drummond:

"The proofs which have been submitted to this Company in your behalf, in our opinion, are not sufficient to show you to have been totally and permanently disabled within the meaning of the terms of the policy prior to July 30, 1933; neither has the Company obtained other information which shows you to have been totally and permanently disabled prior to that date. Therefore, we have approved the claim in accordance with the terms of the policy contract allowing monthly disability benefits from August 30, 1933, the end of the first completed month of total and permanent disability. The above statement of our reasons for failing to allow disability benefits prior to the date mentioned above, is, of course, made without prejudice to the right of the Company to assert other reasons for disallowing the claim prior to that date.

"It is always this Company's desire to fulfill its part of the policy contract and not withhold or deny the payment of any disability benefits to which you are justly entitled. Should you have additional evidence or proof which you wish to submit of total and permanent disability prior to July 30, 1933, we shall be very glad to receive and review the same.

"The request that your policy be reinstated to its original status as it was before you requested the Company to reduce the amount of insurance under this policy on August 14, 1933, has been given careful consideration, but we cannot reinstate the insurance which was surrendered. Therefore, our approval of your claim is on the basis of $1,000. insurance."

The insured then brought this suit to secure a declaration that she had become totally and permanently disabled within the definition of the policy on February 10, 1933, and was entitled to the benefits provided by the policy before the amount of insurance was reduced. The company denied that she had become so disabled before July 30, 1933, and asserted that no claim for disability benefits had accrued until after the policy had been reduced and its benefits proportionately diminished.

The trial court found that the insured had become totally and permanently disabled on February 10, 1933, as the result of a nervous breakdown diagnosed as psychoneurosis. It also found that the insured did not learn that her policy contained provisions for disability benefits until the early part of 1937. The court concluded that she was entitled to the disability benefits provided by her policy as it was originally written.

The company challenges the sufficiency of the evidence to sustain the finding of total and permanent disability as of February 10, 1933, upon the ground that the evidence conclusively shows that the insured was gainfully employed up to and including July, 1933. We think there is no merit in this contention. The insured was a student at the St. Louis University and had a "fellowship" which yielded her twenty-five dollars a month while she was enrolled as a student. There is no basis for concluding that what she received because of this fellowship was anything more than a gratuity to assist her in maintaining herself while in attendance at the college. The finding of the court below that the insured was totally and permanently disabled on February 10, 1933, which is based upon conflicting evidence and is not clearly erroneous, is binding upon this Court.

The...