New York Life Ins. Co. v. Calhoun, 11492.

• Citation: 114 F.2d 526
• Decision Date: 12 November 1940
• Docket Number: No. 11492.,11492.
• Parties: NEW YORK LIFE INS. CO. v. CALHOUN.
• Court: U.S. Court of Appeals — Eighth Circuit

114 F.2d 526 (1940)

NEW YORK LIFE INS. CO. v. CALHOUN.

No. 11492.

Circuit Court of Appeals, Eighth Circuit.

August 2, 1940.

Rehearing Denied August 22, 1940.

Writ of Certiorari Denied November 12, 1940.

COPYRIGHT MATERIAL OMITTED

Vincent L. Boisaubin, of St. Louis, Mo. (James C. Jones, Jr., of St. Louis, Mo., Louis H. Cooke, of New York City, and Jones, Hocker, Gladney & Grand, of St. Louis, Mo., on the brief), for appellant.

William R. Gentry, of St. Louis, Mo. (John W. Calhoun, of St. Louis, Mo., on the brief), for appellee.

Before GARDNER and WOODROUGH, Circuit Judges, and MOORE, District Judge.

Writ of Certiorari Denied November 12, 1940. See 61 S.Ct. 141, 85 L.Ed. ___.

MOORE, District Judge.

The appeal in this action at law is from a judgment of the District Court for the Eastern Division of the Eastern Judicial District of Missouri, based on the jury's verdict in appellee's favor and against appellant for the sum of $10,000 (the principal amount of the policy sued on) with interest thereon at 6 percent from December 4, 1935, to date of verdict, which interest amounted to $1,771.71; finding appellant guilty of vexatious delay in refusing to pay the loss and fixing appellee's damages at $750 and her attorney's fees at $3,225, making the total amount awarded appellee by said verdict the sum of $15,746.71.

The policy in question was issued under date of January 30, 1934, to William J. Calhoun. He gave his occupation as Vice-President of the Seidel Manufacturing Company; his age at his nearest birthday as 54, and named as his beneficiary his wife, Beulah C. Calhoun. The annual premium on the policy was $909.70.

The petition alleged the issuance of the policy for $10,000, the death of the insured on December 1, 1935, the performance of conditions; that the defendant vexatiously refused to pay, and asked for the face of the policy, interest and damages for vexatious refusal. The petition was filed in the State Circuit Court; the case was removed to the Federal Court, where the proceedings were stayed, by consent, pursuant to motion of defendant therefor, pending the outcome of a prior suit in equity between the same parties, in which the Insurance Company was plaintiff, and in which case the policy involved in the law action was sought to be cancelled, on the ground of misrepresentations in the application therefor. The lower court found the plaintiff Insurance Company was not entitled to have the policy cancelled for misrepresentations, and after appeal by the Insurance Company the lower court was affirmed. The appeal record in that case has been incorporated into the appeal record in this, the law case.

The mandate of this court in the equity case reached the lower court on August 3, 1938. On October 19, 1938, defendant in this action filed its answer.

The answer admitted the validity of the policy and the liability of the defendant for the full amount of $10,000 by reason of the decision of this court (in New York Life Ins. Co. v. Calhoun, 8 Cir., 97 F.2d 896, 897), determining the suit for cancellation against the company. The answer denied the refusal to pay was vexatious and without reasonable cause, and in this connection alleged that upon filing the proof of death of William J. Calhoun, which the defendant received on December 4, 1935, it at once investigated the cause of death and the truth or falsity of the statements made by him in his application for the policy; that on December 23, 1935, it received from the physician who attended Calhoun, and who made out the proofs of death and signed the death certificate, a definite statement that on November 2, 1933, the said Calhoun had had a gastric hemorrhage; that the application for the policy was dated January 24th and 25th, 1935; that further investigation disclosed that this hemorrhage was a result of a diseased condition of the blood vessels; and that the insured died from hemorrhages from the diseased blood vessels on December 1, 1935.

The answer alleged that from this and other information obtained it appeared to it that the insured had materially misrepresented the facts in his answers in the application for the policy, and upon advice of counsel defendant filed suit on January 9, 1936, to cancel said policy because of said misrepresentations.

The answer alleged that the deposition of the physician who attended insured and gave the defendant the information aforesaid, taken shortly after the filing of the equity suit, confirmed the facts above stated and fully established defendant's grounds for cancelling the policy.

The answer then alleged that pending the trial and appeal in the equity suit the law action was stayed; that defendant fully believed, on advice of counsel, that under the facts and law the equity suit would be finally determined in its favor, resulting in a cancellation of the policy, and had no cause to believe it would be liable under the policy until the equity suit was decided adversely on July 18, 1938.

The answer alleged the investigation of facts coming to its knowledge concerning the question of misrepresentations, and of Calhoun's knowledge of his condition of health prior to his application, which investigation did not end until October 6, 1938. That upon the completion of this investigation, counsel for the defendant were of the opinion that the new and additional facts were insufficient to establish a defense of misrepresentation in view of the peculiar character of the opinion of the Court of Appeals in its decision in the equity suit; that counsel, therefore, and on the same day (October 6, 1938) offered to pay to the plaintiff, through her counsel, the full amount of the policy, together with interest thereon at six per cent per annum from the date of the receipt of proof of death (December 4, 1935) to the date of said offer (October 6, 1938) and the costs of court accrued to said date; that counsel for plaintiff refused said offer. The answer renewed the said offer and offered to tender into court the amount involved for the benefit of plaintiff.

The insured died on December 1, 1935. Proofs of death were furnished the Company on December 5, 1935. The proofs, signed by Dr. Seabold, disclosed that Dr. Seabold had treated insured for "pyloric erosion" in November, 1933, and that the immediate cause of death was "hemorrhage-varicose veins-esophagus".

In his application the insured stated that albumin or sugar had never been found in his urine; he had never raised or spat blood; had never consulted a physician or practitioner for or suffered any ailment or disease of the heart, blood vessels or lungs, the stomach or intestines, liver, kidneys or bladder; that he had not consulted a physician or practitioner or been examined or treated by anyone within the past five years. His application did disclose a heart abnormality and for this reason the Company issued the policy at an advanced premium, making the advance in premium because of Calhoun's heart condition.

The insured in his application having given permission to interview any physician who had treated him, the company sent an investigator to inquire. The investigator reported that the doctor had treated insured in March, 1932, for acute nephritis, which responded readily to treatment and had cleared up by May 3rd of that year. He further reported that "on November 2, 1933, insured had a gastric hemorrhage which was treated"; that the insured had stomach trouble in May of 1934, pyloric erosion, but that the condition cleared under treatment.

On November 30, 1935, the insured again had a gastric hemorrhage; the doctor thought it was a recurrence of the ulcer, and though the insured went to the hospital and had blood transfusions, he died from hemorrhage. The doctor stated that he did not think that an ulcer could cause such bleeding and ordered an autopsy, which revealed that an aneurism had developed and ruptured, causing death. The doctor stated that he found a perfectly normal stomach; stating that "there is no connection whatever between the stomach condition for which I treated the insured and the rupture which caused his death". The doctor also wrote to the company as follows:

"December 20, 1935 "New York Life Ins. Co. "818 Olive St "St. Louis, Mo.

"Gentlemen:

"At the request of your representative, Mr. J. L. Glen, for more detailed information in the case of William J. Calhoun, I enclose the following data.

"I have been Mr. Calhoun's medical attendant for about ten years. During that period I treated him for numerous colds, and minor ailments. On March 15, 1932, he came to my office with an acute nephritis. The urine contained many red blood cells, few granular casts, and a large amount of albumin. This condition progressed favorably and he was discharged on May 3rd with normal urinary findings.

"On November 2, 1933, he had a moderately severe gastric hemorrhage. No x-ray examination was made at this time. This condition cleared readily and I did not see Mr. Calhoun until May of 1934 when he again complained of gastric discomfort. An x-ray examination at this time was made on April 30 by Dr. E. C. Ernst of St. Louis, who reported a pyloric mucous erosion or ulcer. Under ulcer regime Mr. Calhoun made a rapid recovery and I did not see him again until November 29, 1935.

"On this date he had a severe gastric hemorrhage. This was followed by rapid hemorrhages during the following twenty-four hours. On the evening of November 30, following a severe hemorrhage at his home, I had him removed to St. Mary's Hospital where he was given an immediate blood transfusion. Another severe hemorrhage occurred about midnight, and another in the early morning hours of December 1. About 7 A. M. he was given a second blood transfusion. At noon on December 1 he had a very severe hemorrhage and expired.

"A partial autopsy, performed about two hours after death, revealed a perfectly normal gastric mucosa. The cardiac end of the esophagus was unusually...