Mutual Life Ins. Co. of N. Y. v. Daniels

• Decision Date: 05 May 1952
• Docket Number: No. 16592,16592
• Citation: 125 Colo. 451,244 P.2d 1064
• Parties: MUTUAL LIFE INS. CO. OF NEW YORK v. DANIELS.
• Court: Colorado Supreme Court

Page 1064

244 P.2d 1064

125 Colo. 451

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

No. 16592.

Supreme Court of Colorado, en Banc.

May 5, 1952.

Rehearing Denied June 2, 1952.

Pershing, Bosworth, Dick & Dawson, Winston S. Howard, Robert M. Johnson, Denver, for plaintiff in error.

H. T. McGarry, Colorado Springs, Ivor O. Wingren, Denver, for defendant in error.

JACKSON, Chief Justice.

This case involves the interpretation of a policy of life insurance issued by the Mutual Life Insurance Company of New York, hereinafter called the insurer, on the life of Cady L. Daniels, Jr., hereinafter called the insured, in the face amount of $10,000. At the time of the death of insured, plaintiff in the trial court, defendant in error here, was named as the beneficiary and will be so designated herein.

Insured died April 11, 1945, as a result of a crash resulting from the left engine burning out and falling from a military plane which he was piloting as an officer in the United States Air Force.

Under date of February 5, 1940, insured had filled out an aviation form of questionnaire for the insurer as a supplement to his application. This questionnaire related generally to the applicant's activities in the field of aeronautics. Neither party is asserting that this questionnaire was endorsed on the face of the policy, but that it merely accompanied insured's application. Subsequently, on March 29, 1940, insured had signed a statement, witnessed by an agent for the insurer, reading as follows:

'Death as a result of operating or riding in any kind of aircraft, whether as a passenger or otherwise, except riding as a fare-paying passenger in a licensed passenger aircraft provided by an incorporated passenger carrier and operated by a licensed passenger pilot on a scheduled passenger air service regularly offered over an established passenger route which is between definitely established airports and which does not involve a flight of more than six hundred successive miles over water, is a risk not assumed under this Policy and if the Insured shall die as a result, directly or indirectly, of such operating or riding in an aircraft, the amount payable shall be limited to the reserve held at the date of death for the face amount of this Policy and for any dividend additions. Any accumulated dividend deposits will be payable in addition to such reserve.'

This same clause, quoted above, was endorsed on the face of the policy itself under date of April 2, 1940.

One of the printed paragraphs of the policy is the incontestable clause, reading as follows:

'Except for non-payment of premiums, this Policy shall be incontestable after two years from its date of issue, but if the age of the Insured shall have been misstated, the amount payable by the Company shall be such as the premium paid would have purchased at the correct age.'

This clause was inserted in compliance with the provisions of section 57, chapter 87, '35 C.S.A., which reads in part as follows:

'It shall be unlawful for any foreign or domestic life insurance company to issue or deliver in this state any life insurance policy unless the same shall contain the following provisions:

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'2. A provision that the policy shall constitute the entire contract between the parties and shall be incontestable after it shall have been in force during the lifetime of the insured for two years from its date, except for nonpayment of premiums and except for violation of the conditions of the policy relating to naval and military service in time of war, or other prohibited risks, and at the option of the company provisions relative to benefits in the event of total and permanent disability and provisions which grant additional insurance specifically against death by accident may also be excepted.

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'4. A provision that if the age of the insured has been misstated, the amount payable under the policy shall be such as the premium would have purchased at the correct age. * * *'

The trial was to a jury. At the conclusion of plaintiff's evidence, counsel for defendant moved for a directed verdict in favor of plaintiff for $1,371.64, being the amount of premiums paid on the policy less dividends paid, plus interest; and counsel for plaintiff moved for a directed verdict for the full face of the policy plus any additions to which plaintiff would be entitled as a death claim. The trial court denied the motion of defendant and granted plaintiff's motion for a directed verdict in the amount of $12,958.30, and formal judgment was entered accordingly.

Counsel for the insurer argue their six specifications of error under three headings: (1) Insured's policy specifically excluded risk of death from aviation; (2) Colorado's incontestability statute does not concern or restrict the insurer's right to limit the risk assumed, but merely prohibits contesting the policy's validity; and (3) the aviation rider is not limited to civilian aviation.

The points raised in this case make it one of first impression in this jurisdiction. The trial court referred to this in its remarks, and also noted a difference in the authorities in other jurisdictions. Counsel for the beneficiary take the position, which the trial court adopted: (1) That, if the insurer intended to relieve itself of any liability under the policy from death caused from aviation, such a provision or limitation should have been included in the incontestable clause of the policy; and (2) that there was an inference that any exclusion of risk concerning aviation was limited to civilian aviation and that the exclusion did not cover so-called military or naval aviation.

We are of the opinion that the great weight of authority is contrary to these two contentions. It is argued that because the aviation rider was not included as an exception in the incontestable clause, it ceases to apply after the policy has been in effect for more than two years. We believe that counsel by this argument overlooks the purpose of an incontestable clause in a policy. The relation of the incontestable clause to the policy has been set forth by Williston on Contracts (revised edition), volume 3, page 2280, as follows:

'In determining whether the incontestable clause is applicable to a given situation a distinction should be noted between the matters of defense going to the invalidity of the whole policy on the one hand, and on the other hand provisions relating to excepted risks. The incontestable clause is intended not to enlarge the scope of the insurer's promise so as to include liability for death due to causes which are excluded either by express terms of the policy or by implication of law, but to make certain the enforceability of the promise as set out in the policy. Properly interpreted, therefore, the incontestable clause does not exclude a defense based on a suicide clause. Such a defense does not contest the validity of the policy, as does a defense of fraud in procuring the policy; it supports the policy, but asserts that by its terms the insurer is not bound to pay where death is caused by suicide. The contrary decisions which regard the two provisions as conflicting, and which, on the principle of interpreting against the insurer, hold that the incontestable clause prevails over the other, fail to observe this distinction. The same reasoning is applicable to a provision excluding, from the risk assumed by the insurer, death caused by engaging in aviation or in a forbidden occupation, or due to the insured's engaging in crime. For the same reason a provision in an automobile liability insurance policy excluding coverage in case of operation of the automobile by a person under the legal age limit was held a good defense to an action by an injured third person against the insurer.' Italics supplied.

This discussion by Williston has been either quoted or referred to in numerous opinions. Chief Judge Cardozo in Metropolitan Life Insurance Co. v. Conway, 252 N.Y. 449, 452, 169 N.E. 642, expressed the same situation in the following words:

'The provision that a policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years is not a mandate as to coverage, a definition of the hazards to be borne by the insurer. It means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid in its inception, or thereafter become invalid by reason of a condition broken. Like questions have arisen in other jurisdictions and in other courts of this state. There has been general concurrence with reference to the answer.' (Numerous cases are then cited.)

Reference is made in plaintiff's brief to the fact that the Conway case, supra, may later have been overruled by a New York statute (1939). For two reasons we are not inclined to agree with plaintiff in this diagnosis: (1) a reading of the statute does not seem to confirm this, and (2) the case of New York Life Ins. Co. v. Veit, 1944, 294 N.Y. 222, 62 N.E.2d 45, quotes with approval a portion of the opinion in the Conway case which we have already quoted in our opinion.

In 17 A.L.R.2d 1051 an annotation, which had not been published at the time of the trial of this case, on the subject of construction and provision of life or accident policy relating to areonautics, reads:

'Accordingly, it has been held in all the later cases that a clause in an insurance contract excepting or limiting liability where the injury or death of the insured results from his connection in some manner at the time thereof with aviation or aeronautics is not affected by an incontestability clause appearing in the same policy, and therefore an insurer is not, by reason of the presence of the latter clause, barred from urging the liability exception or limitation clause as a defense to a suit upon the policy.'

Although our opinion in Union Mutual Life Company of Iowa v. Bailey, 99 Colo. 570, 575, ...