Nalley v. New York Life Ins. Co., 10639.

• Decision Date: 18 October 1943
• Docket Number: No. 10639.,10639.
• Citation: 138 F.2d 318
• Parties: NALLEY v. NEW YORK LIFE INS. CO.
• Court: U.S. Court of Appeals — Fifth Circuit

138 F.2d 318 (1943)

NALLEY v. NEW YORK LIFE INS. CO.

No. 10639.

Circuit Court of Appeals, Fifth Circuit.

October 18, 1943.

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

W. Colquitt Carter and Shepard Bryan, both of Atlanta, Ga., for appellee.

Before SIBLEY, HUTCHESON, and McCORD, Circuit Judges.

McCORD, Circuit Judge.

In June, 1926, New York Life Insurance Company issued to C. V. Nalley two policies of life insurance, each in the amount of $10,000 and containing certain provisions for waiver of premiums and for payment of disability and double indemnity benefits. The policies were lapsed for nonpayment of premiums due December 16, 1937. The insured made application for reinstatement of the policies, and a medical examination was had. The medical examination disclosed that Nalley had suffered a heart ailment since issuance of the policies, but the examining physician stated that there had been no recurrence of his illness and that he had "worked every day and has had no symptoms of his past illness". The insurance company, however, declined to reinstate the policies with the disability and double indemnity provisions as first written. In February, 1938, at the written request of the insured, the policies were reinstated with the double indemnity and disability provisions voided, and the company returned to Nalley $25.80 of his tendered premiums, this being the amount computed and charged for the voided disability and double indemnity coverage. Nalley accepted the refund, and has since paid premiums on the policies as reinstated, and such policies, changed by the endorsements deleting and eliminating the disability and double indemnity features, are now in full force and effect.

By letter dated June 26, 1940, counsel for Nalley informed the insurance company that the insured was then in a hospital; that he was totally and permanently disabled, and had been so disabled since a heart attack in 1935; and that, notwithstanding the endorsements voiding the disability and double indemnity provisions of the policies, the insured was demanding disability benefits and waiver of premiums under the terms of the policies as originally issued. This letter of counsel was the first notice the insurance company had received of any claim for alleged disability of the insured. Prior to the receipt of the letter it had not been contended or suggested by anyone that Nalley was totally and permanently disabled. The insurance company denied liability on the claim, and Nalley brought this action alleging that he became totally and permanently disabled in May, 1935; that the insurer knew in February, 1938, when the disability and double indemnity provisions were eliminated, that he was totally and permanently disabled; and that the company fraudulently withheld and concealed such information from him, and by such fraud induced him to execute the request for reinstatement with elimination of the disability and double indemnity provisions. Nalley sought: (1) Rescission of the elimination of disability and double indemnity provisions. (2) Reformation so as to hold in full force and effect the disability and double indemnity provisions as originally written, and a declaration that the agreement to omit such provisions was void because of fraud and failure of consideration. (3) Recovery of $15,600 disability benefits, and refund of $3,901.60 in premiums paid since May, 1935, when he became totally and permanently disabled. The District Court denied the relief prayed for. A...