National Life & Acc. Ins. Co. v. Mixon

Decision Date30 August 1973
Citation291 Ala. 467,282 So.2d 308
PartiesIn re The NATIONAL LIFE & ACCIDENT INSURANCE COMPANY v. Arthur MIXON. Ex parte Arthur MIXON. S C 117.
CourtAlabama Supreme Court

Brobston & Brobston, Bessemer, for petitioner.

Lange, Simpson, Robinson & Somerville, Birmingham, for respondent.

HEFLIN, Chief Justice.

This case comes before this court by way of a petition for a writ of certiorari to the Court of Civil Appeals wherein the petitioner-appellee-complainant, Arthur Mixon (hereinafter referred to as 'insured') avers that the holding of the Court of Civil Appeals is in conflict with a prior decision of this court, Independent Life Insurance Co. v. Carroll, 222 Ala. 34, 130 So. 402 (1930).

The facts giving rise to the instant controversy have been stipulated to by both parties. On October 23, 1961 the respondent-appellant-defendant (hereinafter referred to as 'insurer') issued a policy of insurance to the insured, at which time the insured was suffering from glaucoma and was totally and permanently blind in his right eye. The insured is totally and permanently blind in both eyes at present, and is, and has been Since before the issuance of this policy, under the care of Dr. James B. Collier for the treatment of such disease.

The pertinent policy provisions under which the insured claimed benefits for total loss of eyesight, and under which the insurer denied his claim are as follows:

'Benefits for loss of Eyesight or Limbs--Upon receipt during the lifetime of the Insured of due proof that the Insured has suffered (a) . . ., or (b) the complete and irrecoverable loss of sight of both eyes prior to attainment of age 70, or (c) . . ., the Company, will pay, in case (a) or case (b), a sum equal to twice the Amount of Insurance . . ..

In all cases, benefits under this provision shall be allowed only if the loss (1) occurs while no premium is in default beyond the grace period, and (2) Is caused solely by disease or injuries contracted or sustained after the Date of Issue. Such benefits shall not be allowed if any such loss is intentionally self-inflicted or if it results from an act of war . . . while the Insured is in the armed forces of any country, international organization or combination of countries.

Definition--. . ..

Premium--. . ..

Reinstatement--. . ..

Age--. . ..

Incontestability--This policy shall be incontestable one year from the Date of Issue, except for non-payment of premiums.' 1 (Emphasis supplied)

The case was tried in the Circuit Court of Jefferson County, Bessemer Division, without a jury, upon the stipulated facts, wherein judgment was rendered for the insured in the amount of $1,000, the total damages claimed. This judgment was reversed and rendered in favor of the insurer by the Court of Civil Appeals, 50 Ala.App. 697, 282 So.2d 306, holding that the incontestable clause did not preclude the insurer from asserting the defense of pre-existing disease, and, therefore, under the stipulated facts, the insurer was not liable under its policy, as it had never assumed the risk of loss of eyesight due to a disease which existed on and prior to the issuance date of the policy.

In Carroll, supra, the beneficiary of a life insurance policy brought suit claiming benefits under said policy. The policy contained a clause which stated that 'no obligation is assumed by the company unless on the date and delivery hereof the insured is alive and in sound health.' The policy also contained the following incontestable clause:

'This policy shall be incontestable from date of issue except for non-payment of premium, actual and intended fraud or for engaging in military or naval service in time of war, without permission from the company; if insured died by his or her own hand within one year from date thereof, whether sane or insane, or resulting from a crime or any attempt thereat only one-half of the premium actually paid to the company will be the company's liability hereunder.'

The insurer sought to avoid liability under the policy by setting up the fact that the insured was suffering from a disease at the time of issuance and delivery of the policy. However, this court held that the incontestability clause precluded such a defense, reasoning that the 'usual rules of construction governing the interpretation of insurance policies are applicable to the construction of incontestable clauses therein, and if there is reasonable doubt as to the extent of the application of the incontestable clause it must be solved in favor of the beneficiary.'

This court had occasion to consider a similar issue one year later in the case of Moore v. Bankers' Credit Life Insurance Co., 223 Ala. 373, 136 So. 798 (1931). In Moore the policy in question contained an incontestability provision which did not include suicide in the exceptions from its operation.

The policy in Moore also contained a suicide clause which stated that '(i)f the insured shall within two years from the issue date of this policy, die by his or her own hand, or act, whether sane or insane, this policy shall be valid only for an amount equal to the premiums received on the policy.'

The insured in Moore took his own life within the two year period, but suit was not brought until after the expiration of the two year period. The beneficiary contended that because suit was not brought until after the expiration of the two year period, the case was governed by the incontestable clause, and being so governed, the insurer could not contest liability under the policy by setting up suicide as a defense. This court rejected this contention, holding that the incontestable clause did not preclude the defense of suicide, as death by suicide was not a risk assumed by the insurer, 2 exactly the same contention asserted by the insurer in the instant case.

This court in Moore found no conflict between the suicide and incontestable clause, observing that:

'In strictness, they relate to different subjects. One relates to engaging quality of the contract, and the other to Definition of risk. Observing the distinction, at the end of (two years) the company was bound to the full extent of the risk it assumed, But it was not liable on a risk which it stipulated it would not assume, (i.e., death by suicide) and the defense that the assured committed suicide no more contested the policy than a defense that he is still alive.' (Emphasis added)

This court went on to conclude that to hold that there was a conflict between the incontestable and suicide clauses and that the general provision of the incontestable clause supersede and nullify those of the suicide clause would do violence to the clear intention of the parties plainly and unambiguously expressed.

It would appear on the surface that Carroll and Moore are in conflict with each other since in both the policy contained an incontestable clause. However, different treatment was given because in Carroll the clause that 'no obligation is assumed by the company unless on the date and delivery hereof the insured is alive and in sound health' was held to be a warranty.

A warranty is a contractual obligation which enters into and becomes an integral part of the completed contract. 12 Appleman, Insurance Law and Practice, § 7341, at 440 (1943). In the early case law of this state a warranty was construed as a part and parcel of the contract of insurance and strict compliance was required before the assured was entitled to recover on the policy. Alabama Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 So. 125 (1886). Harsh results often occurred when a clause was classified as a warranty. In some instances clauses were liberally construed to give them the label of a representation rather than a warranty in order to avoid the harshness of the early case law warranty rules. In Alabama Gold Life Justice Henderson M. Somerville analyzes the distinction between a representation and a warranty in the following language:

'A representation is not, strictly speaking, a part of the contract of insurance, or of the essence of it, but rather something collateral or preliminary, and in the nature of an inducement to it. A false representation, unlike a false warranty, will not operate to vitiate the contract, or avoid the policy, unless it relates to a fact actually material, or clearly intended to be made material by the agreement of the parties. It is sufficient if representations be substantially true. They need not be strictly or literally so. A misrepresentation renders the policy void on the ground of fraud, while a non-compliance with a warranty operates as an express breach of the contract.'

In order to alleviate the harshness of the technical distinctions between warranties and representations, a statute, which now appears in Code of Alabama, 1940, and the 1958 Recompiled Code as Title 28, Section 6 3, was enacted. That statute stated:

'No written or oral representation or Warranty therein made, in the negotiation of a contract or policy of life insurance, or in the application therefor or proof of loss thereunder, shall defeat or avoid the policy, or prevent its attaching, unless such misrepresentation is made with actual intent to deceive, or unless the matter misrepresented increase the risk of loss.' (Emphasis supplied)

In Empire Life Ins. Co. v. Gee, 171 Ala. 435, 55 So. 166 (1911), in assessing the meaning of this statute this court reasoned:

'Perhaps our own statute does not say what it means as clearly as it might. But by its introduction of the word 'warranties' it makes even clearer than do the statutes of those other states, to which we have referred, that it was intended to break down in a measure the technical distinction between warranties and representations, for it puts warranties and misrepresentations in a class together by providing that no misrepresentation or warranty shall defeat or avoid the policy, unless 'such misrepresentation' is made with actual intent to deceive, or unless the matter...

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