Nalley v. New York Life Ins. Co.

• Decision Date: 05 January 1943
• Docket Number: No. 293.,293.
• Citation: 48 F. Supp. 470
• Parties: NALLEY v. NEW YORK LIFE INS. CO.
• Court: U.S. District Court — Northern District of Georgia

48 F. Supp. 470

NALLEY v. NEW YORK LIFE INS. CO.

No. 293.

District Court, N. D. Georgia, Gainesville Division.

January 5, 1943.

Boyd Sloan and Joe K. Telford, both of Gainesville, Ga., for plaintiff.

Bryan, Carter & Ansley, of Atlanta, Ga., for defendant.

LOVETT, District Judge.

Plaintiff, the holder of two policies of life insurance issued by defendant to him, seeks in equity to cancel certain endorsements subsequently made on them. The policies as originally written contained provisions for payment of a certain monthly income and for waiver of premiums upon due proof before default in payment of premiums of total and permanent disability of the insured, and for double indemnity for death caused by accidental means. The endorsements eliminated these provisions.

If the equitable relief sought is granted, plaintiff asks for a money judgment for the premiums paid and benefits accruing after the time he says he became disabled.

The plaintiff contends that upon being informed his policies had lapsed for nonpayment of premiums he agreed to the changes made by the endorsements on the policies under a misconception of his physical condition and because the defendant with knowledge of his condition fraudulently concealed the facts from him. Alternatively, if fraud has not been established, he says there was a mutual mistake of fact by both parties concerning his physical condition. At the time the additional benefits granted by the policies were taken out of them he urges that, though he did not then know it, he was totally and permanently disabled, and the policies by their terms had, therefore, matured, and further premiums were waived.

The defendant replies that the policies having lapsed for non-payment of premiums, upon application by the insured for reinstatement it was discovered that he was not as good insurance risk as he was when the policies were written; that it was unwilling to restore the insurance—and was under no obligation to do so—unless the additional benefits were withdrawn, and so informed plaintiff; that thereupon he, with as much or more knowledge concerning his own physical condition as the defendant had, agreed to the changes in the policies. Standing on the language of the policies, defendant insists that the insurance had lapsed before the insured applied for reinstatement and the changes by endorsement were made. Fraud is denied, and issue is joined as to the total and permanent disability of the insured at the time it is claimed the policies lapsed.

Evidence has been heard, briefs and arguments of counsel have been considered, and the case is ready for final decree.

Findings of Fact.

The facts are not greatly in dispute. Continuously since 1926, when the policies were issued, plaintiff has been an automobile dealer and distributor in Gainesville, Georgia, with subdealers and agencies in several other places in northeast Georgia. Until 1935 he was active and industrious in the management and supervision of his business, frequently working from twelve to eighteen hours each day. In May 1935, while en route to Detroit, Michigan, with his wife, he suffered a heart attack. He continued to Detroit, called a doctor, was given sedatives and something to relieve the pain from which he was suffering, and was advised to return home by airplane and consult his own physician. He remained at Detroit for three days and then returned home by automobile, his wife driving the greater part of the way, he some of it. On reaching home his family physician advised consulting a heart specialist in Atlanta, which he did in June. He was then informed that a blood vessel of his heart had ruptured, was placed on a diet and was told that he should rest and restrict his activities in his business. Cardiograms were made and he understood their purpose. This physician said to him: "Well, I am going to gamble with you; I believe you can restrict your activities and may be I can pull you through". He observed the required regime, going to his business daily for an average of three to five hours, and delegating to others many of the duties he had previously performed. At that time he believed his condition was temporary and that he would eventually recover. He gave the insurer no notice of his changed physical condition and at that time claimed no disability benefits, continuing as theretofore to pay the premiums on the policies. For the next two years he remained under the care of his doctor and from time to time his condition showed some improvement. His blood pressure had been low but approached normal again. In the summer of 1937 he applied to the insurer for additional life insurance. A medical examination revealed the heart attack in 1935 and the additional insurance was not obtained. Premiums on the policies became due on December 16, 1937. On January 15, 1938, plaintiff sent the defendant his check for the premiums —within the grace period by one day. The bank on which it was drawn returned the check unpaid for insufficient funds to the credit of plaintiff. The defendant promptly advised him the check was unpaid, and on January 22 he sent a cashier's check to cover it. The defendant thereupon informed him the policies had lapsed for nonpayment of the premiums and that before they could be reinstated a medical examination would be required. That examination also revealed the previous heart attack. The defendant then saying the evidence of insurability not warranting it declined to reinstate the policies as written, but indicated if the disability benefits, waiver of premium and double indemnity provisions were eliminated, the policies might be reinstated and continued as life insurance and for smaller premiums. Thereupon the plaintiff signed written requests (later attached to the policies) to change the policies "without Disability and without Double Indemnity benefits". The endorsements to this effect were made on the policies on March 10, 1938, and a refund was made of the excess premiums included in the cashier's check. In connection with the medical examination plaintiff signed an application dated January 28, 1938, in which it was stated "I hereby apply for the reinstatement (of the policies) which lapsed for nonpayment of premiums", etc. In answer to the question in this application. "Have you ever consulted a physician * * * for or suffered from any ailment or disease of * * * (B) The heart, Blood Vessels or Lungs", his written reply was "yes, ailment unknown, one attack, May 1935, duration 4 mos. Severity mod. Cured in so far as symptoms both objective and subjective." The examining doctor's report called attention to the previous examination by the same doctor in 1937 and a letter written at that time describing plaintiff's past illness, and added "Since that examination he has worked every day and has had no symptoms of his past illness. He has had no doctor except a check up by (a named physician) in July 1937." Thereafter until June 26, 1940, plaintiff regularly paid the reduced premiums on his policies as thus modified, and gave no notice of claim of disability. At that time, meanwhile having suffered other heart attacks of greater severity (one in September 1938 as a result of which he remained in the hospital three weeks and another in June 1940 even worse), he consulted counsel, who promptly wrote the defendant stating plaintiff was totally and permanently disabled before February 14, 1938, and claiming waiver of premiums and disability benefits. Blanks for proof of disability were requested. The defendant replied denying liability. These proceedings followed. The physicians familiar with plaintiff's physical condition agreed that he was totally disabled from May 1935. Applying the Georgia rule hereafter mentioned as to what constitutes total disability, I find that he was. I do not find any mutual mistake of fact, or mistake by the insured and fraud by the insurer, for the reasons hereinafter given.

Conclusions of Law

The first and crucial question to be determined is whether or not the policies had lapsed when the defendant agreed to reinstate them without the disability and double indemnity benefits, because different consequences follow. If lapsed, new contracts were made. If still of force, the original contracts were never at an end.

The question turns on the proper construction of the pertinent provisions of the policies. They read as follows:

Face of policy:

The "Company agrees to pay to (the beneficiaries) * * * the face of this policy upon receipt of due proof of the death of (the insured)", and to pay to the insured a named amount "upon receipt of due proof that the insured is totally and presumably permanently disabled before age 65, as defined under `Total and Permanent Disability' on the second page hereof".

On second page:

"Upon receipt at the Company's Home Office, before default in payment of premium, of due proof that the insured is totally disabled as above defined, and will be continuously so totally disabled for life, or if the proof submitted is not conclusive as to the permanency of such disability, but establishes that the insured is, and for a period of not less than three consecutive months immediately preceding receipt of proof has been, totally disabled as above defined, the following benefits will be granted:

"(a) Waiver of Premium.—The Company will waive the payment of any premium falling due during the period of continuous total disability, the premium waived to be annual, semi-annual or quarterly premium according to the mode of payment in effect when disability occurred.

"(b) Income Payment.—The Company will pay to the insured the monthly income stated on the first page hereof ($10 per $1,000 of the face of this policy) for each completed month from the commencement of and during the period of continuous total disability. If disability results from insanity, payment will be made to the beneficiary in lieu of the insured.

"In event of...