Myers v. The Liberty Life Insurance Company

• Decision Date: 09 July 1927
• Docket Number: 27,547
• Parties: EDNA A. MYERS, Appellee, v. THE LIBERTY LIFE INSURANCE COMPANY, Appellant
• Court: Kansas Supreme Court

257 P. 933

124 Kan. 191

EDNA A. MYERS, Appellee, v. THE LIBERTY LIFE INSURANCE COMPANY, Appellant

No. 27,547

Supreme Court of Kansas

July 9, 1927

Decided July, 1927.

Appeal from Republic district court; JOHN C. HOGIN, judge.

Judgment reversed and cause remanded.

SYLLABUS

SYLLABUS BY THE COURT.

LIFE INSURANCE--Construction of Policy--Effect of Incontestable Clause on Suicide Provision. A life insurance company issued a policy on September 10, 1923, in which it agreed to pay to the insured's wife as beneficiary the sum of $ 3,000 immediately on receipt of proof of death of the insured provided premiums had been paid and the policy was in force. The policy contained these provisions:

"This policy shall be incontestable after one year from the date of issue, if premiums have been duly paid.

"In case of suicide of the insured, whether sane or insane, within two years from the date of this policy, the liability of the company shall be limited to the amount of the premium actually paid."

The insured committed suicide by hanging on August 27, 1924. The policy was in force, the premium had been paid, and proof of death was made. Held, the entire policy considered, liability of the company is limited to the amount of premium actually paid.

Stephen H. Allen, Otis S. Allen and George S. Allen, all of Topeka, for the appellant.

Nelson J. Ward, of Belleville, for the appellee.

OPINION

BURCH, J.:

The action was one by the beneficiary in a life insurance policy to recover from the company issuing it. The company contended its liability was limited to the amount of premium which had been paid. Judgment was rendered for plaintiff for the face amount of the policy, and defendant appeals.

The policy was dated September 10, 1923, and was delivered to the insured shortly thereafter and before September 25, 1923. The policy recited that the company insured the life of Walter E. Myers, and agreed to pay, at its home office, immediately on receipt of proof of death of the insured, provided premiums had been paid and the policy was in force, the sum of $ 3,000 to his wife, Edna E. Myers, beneficiary. Privilege was reserved to the insured to change beneficiary, and if no beneficiary survived the insured the policy was payable to his executors, administrators, and assigns. These were the initial provisions of the policy. Following them various subjects of contract were dealt with under headings, or words which served for headings, in bold-face capital letters. The first one of the succeeding provisions covered the subject of incontestability:

"(1) THIS POLICY SHALL BE INCONTESTABLE after one year from the date of issue, if premiums have been duly paid."

On the second page of the policy, under the heading "General Provisions," which was as prominent as any other, appeared seven numbered provisions. The fourth read as follows:

"(4) In case of suicide of the insured, whether sane or insane, within two years from the date of this policy, the liability of the company shall be limited to the amount of the premium actually paid."

The case was submitted on an agreed statement of facts and some depositions supplementing the agreed statement. The agreed statement contained the following:

"4. That on the 27th day of August, 1924, the said Walter E. Myers committed suicide by hanging. . . . That on September 22, 1924, proofs of death of said Walter E. Myers were made and delivered to the defendant, showing that the said Walter E. Myers had committed suicide by hanging, . . . That on the 30th day of September, 1924, the defendant tendered to the plaintiff the sum of $ 120, being the full and actual amount of premiums paid by the said Walter E. Myers on said policy. . . .

"5. This action was instituted on the 11th day of April, 1925, and no other action has been commenced in any court concerning said policy of insurance."

The depositions tended to show the company received information on September 3, 1924, that the insured had committed suicide, which was seven days after the event, and seven days before the policy became incontestable.

Plaintiff contends the company undertook to contest the policy, and was precluded from doing so because contest was not begun within one year from the date the policy was issued. In support of this contention plaintiff cites the case of Priest v. Kansas City Life Ins. Co., 119 Kan. 23, 237 P. 938. In the Priest case the company defended on the ground the insured in his application for insurance knowingly made false representations regarding the state of his health and other matters material to the risk. (Priest v. Life Insurance Co., 116 Kan. 421, 227 P. 538.) The binding force of the contract pleaded as a basis of liability was challenged because the company was induced to enter into it by fraud of the insured, and the case was a typical case of contest of the policy. We have no such case here.

The company has no quarrel whatsoever with the policy. Its position is, the policy is valid in all respects, expresses the obligation of the company, and the company desires to fulfil that obligation. What the company contests is an assertion of liability which it says the policy did not create.

By agreeing not to contest the policy, the company did not agree to stand mute before any unfounded claim which might be predicated on the policy. The application was made a part of the policy, and stated the applicant's age. Amount of premium is fixed according to age, and the policy contained the following provision:

"If the age of the insured was misstated, the amount payable hereunder shall be such as the premium paid would have purchased at the correct age."

Suppose it were admitted the age of the applicant was misstated, the premium based on the stated age would purchase insurance to the amount of $ 2,500 only, and the beneficiary sued for the face amount of the policy, $ 3,000. In contesting liability for more than $ 2,500, the company would be insisting on the contract, not contesting it, and it would be unfair to other policyholders paying the proper rate, as well as unfair to the company, not to enforce the policy according to its plain terms. The policy contained provisions relating to loans made to the insured. One of them was that any indebtedness to the company secured by the policy should be deducted in making settlement of benefit. Suppose the beneficiary should sue for the face amount of the policy, it should be admitted an unpaid loan was made to the assured on security of the policy, and the company should resist payment of more than the difference between the amount of the loan and the face amount of the policy. It would be idle to contend the company was contesting the policy. Whatever grounds may exist or may have existed for rescission, cancellation, modification, or other attack on the policy, after expiration of one year from date of issue the policy stood as the indisputable contract, unalterably determined the liability of the company, and the obligation of the contract expressed by the policy must be fulfilled. But to say this determines nothing with respect to what the terms of the contract are which must be fulfilled. Both plaintiff and the company insist that the policy be enforced according to its terms, and the difference between them is a difference respecting interpretation.

What is the extent of the company's liability on the policy, the insured having committed suicide within two years from date of issue? Plaintiff contends the provision for limited liability in case of suicide renders the policy ambiguous and it must be interpreted most favorably to the insured. The policy provided for payment of $ 3,000 immediately on receipt of proof of death of the insured. Suppose that, under the heading "General Provisions," the policy provided the company would pay double the face amount if death resulted from accident occurring within two years from date of issue. Nobody would say such a provision rendered the policy ambiguous with respect to extent of liability, if the contingency occurred, and if in an action to recover on the policy the company should deny double liability on the ground the insured did not die as the result of accident, it could not be urged successfully that the company was contesting the policy. The policy provided that any unpaid balance of the current year's premium would be deducted in any settlement of the policy as a death claim. It is not likely any candid person would contend the provision rendered the policy ambiguous with respect to extent of liability if the assured died owing premium for the current year. The policy further provided that if death occurred as the result of suicide within two years the liability of the company should be limited to amount of premium paid. The policy did not end with the provision for payment of $ 3,000 on receipt of proof of death. That provision was merely the beginning of the contract. Numerous subjects were to be treated, and various contingencies were to be provided for. The whole contract could not be stated intelligibly without breaking it up into paragraphs, each of which related to a specific subject, and the engagements contained in paragraphs succeeding the first one, or the first two or three, are just as binding as if the order were reversed. To ascertain its meaning the policy must be read through, and each provision must be accorded its reasonable, natural and probable meaning when considered in relation to others pertaining to the same subject, and in relation to the instrument as a whole. The purpose of doing this is not to discover some "curious hidden sense which nothing but a hard case and the ingenuity of a trained and acute mind" might suggest (Hearin v. Standard Life Ins. Co., 8 F.2d...