Penn Mut. Life Ins. Co. v. Joseph

• Decision Date: 12 February 1934
• Docket Number: No. 2738.,2738.
• Citation: 5 F. Supp. 1003
• Parties: PENN MUT. LIFE INS. CO. OF PHILADELPHIA v. JOSEPH.
• Court: U.S. District Court — District of Minnesota

5 F. Supp. 1003

PENN MUT. LIFE INS. CO. OF PHILADELPHIA v. JOSEPH.

No. 2738.

District Court, D. Minnesota, Fourth Division.

February 12, 1934.

Cobb, Hoke, Benson, Krause & Faegre, of Minneapolis, Minn., for plaintiff.

Meshbesher & Anderson and Simon Meyers, all of Minneapolis, Minn., for defendant.

NORDBYE, District Judge.

Defendant makes a motion to dismiss the bill of complaint on four grounds: (1) That the court is without jurisdiction because it appears upon the face of the bill that the amount in controversy in said action is less than the sum of $3,000, exclusive of interest and costs; (2) that no ground for equitable relief or jurisdiction appears in said bill; (3) that plaintiff has an adequate remedy at law; and (4) that the bill does not contain sufficient facts to constitute a cause of action in equity against the defendant.

It appears from the bill that the defendant is insured in three policies issued to him by the plaintiff, which, for convenience, will be referred to as policies Nos. 1, 2, and 3, respectively. Policy No. 1 (No. 972738) is a life policy issued March 28, 1921, with a supplemental indorsement as of July 14, 1926, providing for waiver of premium and the payment of an annuity in the event of total and permanent disability. This policy was further amended on June 12, 1930, by providing for a monthly payment of $25 for each completed month of defendant's total and permanent disability, with waiver of premium during such disability. This latter supplemental agreement further provided that the policy should be incontestable after a period of one year, except for nonpayment of premiums, and except as to any provisions relating to disability and double indemnity benefits contained therein.

Policy No. 2 (No. 1233752) was issued as a life policy on July 22, 1926. It lapsed during 1928, and was reinstated by plaintiff in reliance upon a health certificate dated July 25, 1928. This policy was reinstated with a $3,500 death benefit and with a provision for waiver of premium and the payment of an annuity in event of total and permanent disability. The provisions with reference to incontestability are substantially the same as contained in policy No. 1. On June 12, 1930, policy No. 2 was further amended and supplemented by provisions providing for the payment of $35 a month and waiver of premium during total and permanent disability, and the same provisions as to incontestability.

Policy No. 3 (No. 1516252) was issued on June 3, 1930, as a life policy providing for a $4,000 death benefit. This policy had indorsed thereon a supplemental agreement called "Total and Permanent Disability Benefits and Double Indemnity Benefit." It also contained a provision for waiver of premium and $40 a month payment during the total and permanent disability. The provisions regarding incontestability were substantially the same as in policies Nos. 1 and 2.

The bill alleges that the supplemental agreement indorsed on policy No. 1 as of June 12, 1930, providing for waiver of premium and monthly benefits during total and permanent disability, the reinstatement of policy No. 2 in 1928 with supplementary provisions, the supplemental indorsement on policy No. 2 as of June 12, 1930, providing for waiver of premium and monthly benefits in case of total and permanent disability, and the entire policy No. 3 issued as of June 3, 1930, were issued by the plaintiff in reliance upon certain false and fraudulent representations with respect to matters material to the risk, and which increased the hazard assumed by the plaintiff. It is averred that defendant knew the representations to be false, and that they were made for the purpose of inducing plaintiff to rely thereon. All of the alleged false and fraudulent representations are said to have been made to a medical examiner in the course of the medical examination and contained in the written application signed by the defendant.

It will be observed that the policies are life insurance contracts with supplemental provisions covering certain benefits in case of total and permanent disability. All of the life insurance contracts are now incontestable. The supplemental disability benefits are expressly made contestable at any time. Prior to the alleged fraud, the only policy that contained any disability provisions and waiver of premium in the event of total and permanent disability was policy No. 1. Plaintiff in this action seeks a decree of this court canceling and declaring void the disability clause attached to policy No. 1 dated on or about June 12, 1930, the disability clause attached to policy No. 2 dated on or about June 12, 1930, the disability clause on said policy at the time it was reinstated in 1928, the disability clause attached to policy No. 3, and for an order of this court directing the defendant to deliver up all of said policies to be canceled and rewritten as they were prior to the time the said disability clauses were attached thereto.

Plaintiff contends that the value of the object sought by the bill, exclusive of interest and costs, exceeds $3,000. It alleges that defendant is 33 years of age with a life expectancy of thirty-three years; that he now claims to be totally and permanently disabled within the meaning of the disability provisions of the policies; that the yearly disability payments to which plaintiff would be subject on the three alleged fraudulent policies would be the sum of $1,200 a year, and annual premiums waived would aggregate $252.98. It is also alleged that, if the disability provisions are not canceled, plaintiff will be required to establish a reserve in an amount more than $3,000 in excess of the reserve that would be otherwise required.

In a suit which has for its object the prevention of a future loss or damage, it is generally held that the object to be gained by the bill is the test of the jurisdictional amount; that is, if the value of the right to be protected exceeds $3,000, the court has jurisdiction regardless of the fact that no actual damage had occurred at the time the suit was commenced. New York Life Insurance Co. v. Swift (C. C. A.) 38 F.(2d) 175. Furthermore, the jurisdiction of this court is not necessarily defeated because it is difficult to measure with exactness the value of the object of the suit. It must be conceded that the objective sought to be protected by plaintiff in the suit at bar has some pecuniary value. There is a contingent liability of many thousands of dollars if defendant is now totally and permanently disabled. Obviously, if plaintiff accepted the defendant as a good risk and determined its premiums accordingly, and it now appears that the defendant is a poor risk and that he deceived the company as to his true condition, it must be apparent that, under such circumstances, the avoiding of liability by the plaintiff, contingent or otherwise, has a pecuniary value. The absolving of plaintiff as an insurer of a liability to pay benefits during many years and to protect defendant with life insurance without any premiums may be of considerable value. The court is not unmindful that plaintiff's liability to pay any specified sum by way of disability benefits is now uncertain and contingent on many future events. Plaintiff does not now admit that defendant is totally and permanently disabled. It may develop that no claim is made by the defendant under these disability provisions, or perchance, if a claim is made, the plaintiff may defeat such contention on its merits. The decided weight of authority recognizes that the jurisdictional requirement is satisfied when an action in equity seeks to cancel a life insurance contract in excess of $3,000 on the grounds of fraud. New York Life Insurance Co. v. Swift, supra; New York Life Insurance Company v. Seymour (C. C. A.) 45 F.(2d) 47, 73 A. L. R. 1523; Jensen v. New York Life Insurance Co. (C. C. A.) 50 F.(2d) 512; Brown v. Pacific Mutual Life Insurance Co. (C. C. A.) 62 F.(2d) 711. The court evidently concluded in these cases that the amount of the policy measures the loss that plaintiff will suffer if the policy is not canceled, because death is inevitable, and, with the uncertainty of life, it may occur at any time. It may not be amiss to point out,...