New York Life Insurance Company v. Dandridge

• Decision Date: 31 March 1941
• Docket Number: 4-6272
• Citation: 149 S.W.2d 45,202 Ark. 112
• Parties: NEW YORK LIFE INSURANCE COMPANY v. DANDRIDGE
• Court: Arkansas Supreme Court

149 S.W.2d 45

202 Ark. 112

NEW YORK LIFE INSURANCE COMPANY v. DANDRIDGE

4-6272

Supreme Court of Arkansas

March 31, 1941

Appeal from Logan Chancery Court, Northern District; J. E. Chambers Chancellor; affirmed.

Judgment affirmed.

Louis H. Cooke and Rose, Loughborough, Dobyns & House, for appellant.

Arnett & Shaw, for appellee.

OPINION

MCHANEY, J.

Appellees, Mrs. Dandridge and the First National Bank of Paris, Arkansas, brought this action against appellant to compel it to perform specifically a contract of life insurance issued by it to her on October 18, 1927. The bank was made a party plaintiff because the policy had been pledged to it to secure an indebtedness. The complaint alleged that appellant had wrongfully lapsed the policy on its records and had continued it as extended term insurance which would expire February 22, 1948.

Appellant defended on the ground that the policy lapsed for failure to pay the quarterly premium due July 18, 1939, within the grace period; that application for reinstatement was made by insured on September 18, 1939, in which she stated she was in the same condition of health as when the policy was issued; and that within the preceding two years she had had no illness, disease or bodily injury, nor had she consulted or been examined by a physician. Appellant alleged that these statements were known by her to be false, in that she had consulted physicians at a Ft. Smith hospital and had been operated upon for a tumor of the breast within two years prior to her application for reinstatement, and had also consulted physicians within said period for other serious ailments. The policy was reinstated and it was alleged that in doing so it relied upon these false representations, and would not have reinstated same if she had stated the true facts regarding her condition of health and her consultations with and treatments by physicians. The answer further alleged that on May 10, 1940, insured notified it she desired to make a claim for disability benefits under the policy, and its investigation on this matter developed the fact that its approval of her application for reinstatement had been procured by said misrepresentations. It accordingly elected to rescind the reinstatement and tendered back all payments made, with interest, since reinstatement. The net value of the policy was thereupon applied to purchase extended insurance.

Appellees demurred to this answer which was sustained, and upon appellant's refusal to plead further, a decree was entered reinstating the policy and directing appellant to perform all its obligations as originally issued. This appeal followed.

The answer pleads and the demurrer concedes that the insured's policy was reinstated through fraudulent misrepresentation. The policy contained the following clauses, here material: "This policy may be reinstated at any time within five years after any default, upon written application by the insured and presentation at the home office of evidence of insurability satisfactory to the company and upon payment of overdue premiums with five per cent. interest thereon from their due date. Any indebtedness to the company at date of default must be paid or reinstated with interest thereon in accordance with the loan provisions of the policy."

"This policy shall be incontestable after two years from its date of issue except for nonpayment of premium and except as to provisions and conditions relating to disability and double indemnity benefits."

"In event of default in payment of premium after three full years' premiums have been paid, the following benefits shall apply:

"(a) Temporary Insurance--Insurance for the face of the policy plus any dividend additions and any dividend deposits and less the amount of any indebtedness hereon, shall, upon expiry of the period of grace, be continued automatically as temporary insurance as from the date of default for such term as the cash surrender value less any indebtedness hereon will purchase as a net single premium at the attained age of the insured, according to the American Table of Mortality and interest at 3 per cent. This temporary insurance will be without participation in surplus."

The question here presented for decision is exactly the same as was presented in New York Life Ins. Co. v. Campbell, 191 Ark. 54, 83 S.W.2d 542, and that is, as stated by appellant: "Where the holder of a life insurance policy has allowed it to lapse and has obtained reinstatement by misrepresenting the condition of his health, does the incontestable clause in the policy operate immediately to preclude the insurer from attacking the reinstatement?" This question was answered in the affirmative in that case, and we are now asked to reconsider and overrule it. It is conceded that unless we overrule that case, this must be affirmed. We agree that this concession is well taken, and are of the opinion that we would have to overrule also, in principle, all the cases cited therein, and particularly, the case of Ill. Bankers' Life Ass'n v. Hamilton, 188 Ark. 887, 67 S.W.2d 741, 94 A. L. R. 1194. Also, the decision in the Campbell case has been cited and quoted from with approval in the recent case of Union Life Ins. Co. v. Bolin, 201 Ark. 555, 145 S.W.2d 734, where this language is used: "Stress is laid upon the fact that the trial court found--and was warranted in finding--that Bolin correctly answered the questions contained in the reinstatement application. But this fact is not of controlling importance. It would have been had the policy been reinstated. In that event the company would be concluded by the fraud of its agent in not writing the correct answers given by Bolin in the application for the reinstatement. It was so held in the case of New York Life Ins. Co. v. Campbell, 191 Ark. 54, 83 S.W.2d 542, where it was said: 'Even so, the insurer had a fair opportunity to make such investigation in reference to the truthfulness of the answers contained in the application for reinstatement prior to the reinstatement as it saw fit and when it accepted the insured's statements in reference to his health, and physical condition, and the policy was reinstated by the insurer, the door was forever closed to future investigation.' In that case the policy had been reinstated. Here, it had not been, and unless and until it was, there was no contract of insurance."

The cases cited in New York Life Ins. Co. v Campbell, supra, in addition to the Hamilton case, are New York Life Ins. Co. v. Adams, 151 Ark. 123, 235 S.W. 412; Security Life Ins. Co. v. Leeper, 171 Ark. 77, 284 S.W. 12; Equitable Life Assur. Soc. v. King, 178 Ark. 293, 10 S.W.2d 891; and Life & Cas. Ins. Co. of Tenn. v. McCray, 187 Ark. 49, 58 S.W.2d 199. It is asserted that these cases are not in point and do not support the Campbell case. With this we cannot agree. One effect of all these cases is, as stated in the Adams case, that "the reinstatement was not granted as a gratuity on the part of the company, but as a part of the contract expressed in the policy itself to the effect that a reinstatement could be obtained, as a matter of right, at any time within five years after default 'upon presentation at the home office of evidence of insurability satisfactory to the company'." In that case, as also in the King case, the application for reinstatement provided that the statements by the insured as to his health, etc., contained therein should be deemed to be warranties, the exact language being "I warrant them to be full, complete and true." This court said: "The company had no right to enlarge the terms upon which reinstatement could be obtained, and the requirement of a warranty of the truth of the answers was a distinct enlargement of the contract." In the Leeper case, supra, that holding was reaffirmed by holding that an application for reinstatement which contained an agreement that "in the event of self-destruction, whether sane or insane, within one year from the date of approval by the company...