New York Life Ins. Co. v. Adams

• Decision Date: 12 November 1924
• Docket Number: No. 11764.,11764.
• Court: Indiana Appellate Court
• Parties: NEW YORK LIFE INS. CO. v. ADAMS.

145 N.E. 499

NEW YORK LIFE INS. CO.

v.ADAMS.^*

No. 11764.

Appellate Court of Indiana, Division No. 2.

Nov. 12, 1924.

Appeal from Superior Court, Vanderburgh County; Edgar Downe, Judge.

Action by Tina Adams against the New York Life Insurance Company, in which defendant filed a cross-complaint. Judgment for plaintiff, and defendant appeals. Affirmed.

Louis H. Cooke, of New York City, D. H. Ortmeyer, of Evansville, and Gavin & Gavin, of Indianapolis, for appellant.

Walker & Walker and Denton & Denton, all of Evansville, for appellee.

McMAHAN, J.

On October 6, 1919, appellant issued to Henry W. Adams a life insurance policy for $1,000 naming appellee as beneficiary. This policy contained this clause:

“This policy *** shall be incontestable after two years from its date of issue except for non-payment of premiums.”

The insured died October 10, 1920. Appellee commenced suit on the policy October 31, 1921. The complaint, after alleging the issuance of the policy and the death of the insured, alleged that appellee gave appellant notice of the death of the insured and submitted proofs thereof as required by the policy. On January 24, 1922, appellant filed answer in two paragraphs, each of which alleged that the insured made false and fraudulent statements in his application for insurance, that the insured knew such statements were false, and that appellant relying upon the truth of the statements issued the policy; that appellant received the notice of the death of the insured with proofs November, 1920, and immediately began an investigation of the circumstances of the insured's death; that as soon as it learned the statements were false and fraudulent, that is, on February 3, 1921, it notified appellee of the information it had received concerning the falsity of such statements; that it desired to and did rescind the policy; and that it repaid to appellee the premiums paid with interest. Appellant also filed a cross-complaint in two paragraphs, alleging the same facts as alleged in its answer, and asked for a cancellation of the policy. On motion of appellee both paragraphs of cross-complaint were stricken from file, on the ground that appellant had an adequate remedy at law.

Appellee replied in five paragraphs. The first denied repayment of the premiums. The second denied the repayment of the premiums, set out the incontestable clause, and alleged that no legal action to contest the policy was commenced until more than two years after the date when the policy was issued. The third paragraph admitted the receipt through the mail of a check for the amount of the premiums and interest, and alleged that appellee never intended to accept the same, never cashed it, and had never seen an officer or agent of appellant to whom she could deliver it; that appellant had not requested its return or furnished her with postage for its return; but that the same had been kept by her as evidence of what had actually taken place, and also alleged the facts concerning the provisions of the policy relating to its incontestability and the expiration of the two-year period as alleged in the second paragraph of answer. The fourth paragraph denied the allegation of the second paragraph of answer relative to giving her notice of the claim on the part of appellant that the statements and answers of the insured in his application were false, and alleged that appellant did not within a reasonable time after learning of the facts notify her of its intention to rescind. The fifth paragraph set out the incontestable clause of the policy, alleged facts sufficient to show that the policy was executed in Illinois, and that according to the laws of that state proceedings must be instituted in court for contesting the validity of a policy containing an incontestable clause like the one in the instant case, within the stipulated period and after the election to rescind. Then follows a quotation from the opinion of the Supreme Court of Illinois in Ramsey v. Old Colony Life Ins. Co., 297 Ill. 592, 131 N. E. 108, which is alleged to be the law of Illinois, and which is to the effect that where the policy provides it should be incontestable after a certain number of years, fraud in procuring it could not be set up as a defense after the lapse of that period; that if the insurer did not within such period ascertain the facts and did not cancel or rescind the contract, it could not thereafter do so upon any ground then in existence, and if the insurer did not within that time contest the policy by proceedings in court to which the insurer and the insured, or his representatives or beneficiaries, were parties, it could not do so afterwards. It alleged the expiration of the two-year period during which the policy was contestable and that appellant took no legal action to contest the policy until it filed its answer January 24, 1922.

The facts were found specially and are in substance as follows: The insured resided in Illinois when he made the application for the insurance policy. Everything done in connection with the making of the application, the delivery of the policy, and the payment of premiums took place in Illinois; a copy of the application and policy being set in full. The insured in his application made certain statements and answered certain interrogatories material to the issuance of the policy. Such statements and answers were false and known by the insured when made to be false. The insured at that time was seriously diseased with tuberculosis of the lungs and with nephritis, from which diseases he died October 10, 1920. On November 3, 1920, appellee filed proofs of death showing the insured had died at the Printers' Home in Colorado from consumption with which he had been afflicted since November, 1918. As soon as appellant received information indicating the falsity of the statements and answers in the application, and that the insured was not in good health when the policy was delivered and the first premium paid, it started an investigation, and by January 12, 1921, learned of the falsity of the statements and answers and that it did not elect to rescind the policy until February 3, 1921, when it notified appellee of the information it had received, and the falsity of the representations and of its desire to rescind. This notice was in the form of a letter in which was inclosed a check for the premiums paid with interest thereon. Appellant, in order to keep such tender good, paid the amount of such check into court, for the use of appellee, when it filed its answer. Appellee received said check, but never cashed or intended to cash it. She never returned it and had no communication with appellant concerning it, until March 17, 1921, when certain attorneys employed by her notified appellant that she was not willing to accept a return of the premiums and had employed them to enforce collection of the amount due under the policy. Appellee's attorneys kept the letter from appellant and the check as evidence of what had taken place and introduced the same in evidence on the trial. Appellant did not notify appellee of its election to rescind within a reasonable time after learning the facts. The answer and cross-complaint were filed by appellant January 24, 1922, the cross-complaint being thereafter stricken out. No action to contest the policy for fraud was commenced by appellant within the period of limitation fixed by the laws of Illinois. The court also found that when this policy of insurance was executed there was in force in Illinois a statute requiring each life insurance policy issued or delivered in that state to contain a provision that the same should be incontestable after two years from its date except for nonpayment of premiums and except for other things not here involved.

Upon these facts the court stated as a conclusion of law that appellee was entitled to recover the amount of the policy and rendered judgment accordingly.

The errors assigned are that the court erred in striking the cross-complaint from file, in its conclusions of law, and in overruling appellant's motion for a new trial.

[1][2] The correctness of the action of the court in striking out the cross-complaint does not depend upon the sufficiency of that pleading to state a cause of action against the defendant named therein. That question can only be raised and presented by a demurrer for want of facts. However, if the facts alleged in the pleadings cannot, by amendment, be made germane to the complaint,it is not error to strike it out. Chicago, etc., R. Co. v. Dunnahoo, 63 Ind. App. 237, 112 N. E. 552.

[3] Appellant had an adequate remedy at law to the action on the policy. As was said in Phœnix Mutual Life Ins. Co. v. Bailey, 13 Wall. 616, 20 L. Ed. 501:

“Where a party, if his theory of the controversy is correct, has a good defense at law to ‘a purely legal demand,’ he should be left to that means of defense, as he has no occasion to resort to a court of equity for relief, unless he is prepared to allege and prove some special circumstances to show that he may suffer irreparable injury if he is denied a preventive remedy.”

In Cable v. United States Life Ins. Co., 191 U. S. 288, 24 S. Ct. 74, 48 L. Ed. 188, after action had been commenced in a state court on a policy of insurance, the insurance company brought suit in the United States Circuit Court for cancellation of the policy on the ground of fraud. A demurrer for want of equity was sustained, and on appeal from the Circuit Court of Appeals overruling the circuit court, the decree of the Circuit Court of Appeals was reversed and the cause remanded to the Circuit Court with direction to dismiss the bill. It was there held that an indequate remedy at law in the state court could not be successfully urged to sustain the equitable jurisdiction of the federal court of a suit to cancel an insurance policy for fraud, when the insurance company might have removed the action brought on the policy...