Priest v. Kansas City Life Insurance Company

• Decision Date: 11 July 1925
• Docket Number: 24,358
• Citation: 237 P. 938,119 Kan. 23
• Parties: MARY F. PRIEST, Appellee, v. KANSAS CITY LIFE INSURANCE COMPANY, Appellant
• Court: Kansas Supreme Court

237 P. 938

119 Kan. 23

MARY F. PRIEST, Appellee, v. KANSAS CITY LIFE INSURANCE COMPANY, Appellant

No. 24,358

Supreme Court of Kansas

July 11, 1925

Decided July, 1925.

Appeal from Cloud district court; JOHN C. HOGIN, judge. Opinion on rehearing filed July 11, 1925. Judgment ordered for plaintiff. (For original opinion of reversal see 116 Kan 421, 227 P. 538. For opinion denying a rehearing and a modification of judgment see 117 Kan. 1, 230 P. 529.)

Judgment modified.

SYLLABUS

SYLLABUS BY THE COURT.

1. LIFE INSURANCE--Incontestability Clause--Time for Contesting. A clause of a life insurance policy making it incontestable after one year from its date requires a contest, in order to be effective, to be begun within that period, notwithstanding the insured dies before its expiration.

2. SAME--Incontestability Clause--Validity of Limitation. A clause of a life insurance policy making it incontestable after one year from its date is not invalidated by the statute which renders void "an agreement for a different time for the commencement of actions" from that fixed by the statute of limitations.

3. SAME--Incontestability Clause--Public Policy. The incontestability clause of a life insurance policy is not invalid as against public policy.

4. SAME--Incontestability Clause--Manner of Contesting. The incontestable clause of a life insurance contract requires it to be contested, if at all, by means of a proceeding in court begun within the time fixed.

Robert Stone, George T. McDermott, Robert L. Webb, Beryl R. Johnson, all of Topeka, James C. Jones, of St. Louis, Mo., and Frank W. McAllister, of Kansas City, Mo., for the appellant.

Park B. Pulsifer, Clyde L. Short, Charles L. Hunt, Frank C. Baldwin and C. J. Putt, all of Concordia, for the appellee.

OPINION OPINION ON REHEARING.

MASON, J.:

A judgment for the plaintiff upon a life insurance policy issued by the defendant to her husband was reversed. ( Priest v. Life Insurance Co., 116 Kan. 421, 227 P. 538, 117 Kan. 1, 230 P. 529.) Pending a new trial a point of law was raised by the plaintiff which if well taken would end the litigation, and in her behalf application was made for this court to recall its mandate and decide the new question as a part of the original appeal. The defendant having expressed a preference that the matter should be determined in this way, the application was granted and this hearing is upon the question so presented.

The policy sued upon is dated January 26, 1914, and contains the clause, "This policy is incontestable after one year from date of issue." The insured died November 9, 1914. This action was begun May 20, 1915. The insurance company had instituted no litigation in its own behalf and its first answer was filed October 16, 1915. The plaintiff contends that because of the failure of the defendant to contest the validity of the policy prior to January 27, 1915, it then became incontestable upon any ground, including that of fraud on the part of the insured in procuring it. The defendant claims that the death of the insured within a year from the date of the policy fixed the rights of the parties, and it could thereafter raise the issue of fraud in an action upon the policy whenever brought. It contends further that the clause of the policy quoted is inoperative because of the provision of the statute of limitations that, "Any agreement for a different time for the commencement of actions from the times in this act provided shall be null and void as to such agreement." (R. S. 60-306, subdiv. seventh.)

1. Upon the question whether all right to contest the validity of the policy expires if no action to that end has been taken within a year from its date, notwithstanding the insured has died within that period, the weight of authority is so strongly in favor of the affirmative as to be practically controlling. The cases bearing on the matter are collected in 37 C. J. 543, notes 84 and 86, and 31 A. L. R. 108, note.

In Mutual Ins. Co. v. Hurni Co., 263 U.S. 167, 68 L.Ed. 235, 44 S.Ct. 90, the case annotated in the A. L. R. note just cited, the argument in support of the majority view is thus stated:

"The argument advanced in support of the second ground relied upon for reversal, in substance, is that a policy of insurance necessarily imports a risk, and where there is no risk there can be no insurance; that when the insured dies, what had been a hazard has become a certainty, and that the obligation then is no longer of insurance but of payment; that by the incontestability clause the undertaking is that after two years, provided the risk continues to be insured against for the period, the insurer will make no defense against a claim under the policy; but that if the risk does not continue for two years (that is, if the insured dies in the meantime) the incontestability clause is not applicable. Only in the event of the death of the insured after two years, it is said, will the obligation to pay become absolute. The argument is ingenious but fallacious, since it ignores the fundamental purpose of all simple life insurance, which is not to enrich the insured but to secure the beneficiary, who has, therefore, a real, albeit sometimes only a contingent, interest in the policy. "It is true, as counsel for petitioner contends, that the contract is with the insured and not with the beneficiary, but nevertheless it is for the use of the beneficiary, and there is no reason to say that the incontestability clause is not meant for his benefit as well as for the benefit of the insured. It is for the benefit of the insured during his lifetime and upon his death immediately inures to the benefit of the beneficiary. As said by the supreme court of Illinois in Monahan v. Metropolitan Life Ins. Co., 283 Ill. 136, 141, 119 N.E. 68:

"'Some of the rights and obligations of the parties to a contract of insurance necessarily become fixed upon the death of the insured. The beneficiary has an interest in the contract, and as between the insurer and the beneficiary all the rights and obligations of the parties are not determined as of the date of the death of the insured. The incontestable clause in a policy of insurance inures to the benefit of the beneficiary after the death of the insured as much as it inures to the benefit of the insured himself during his lifetime. The rights of the parties under such an incontestable clause as the one contained in this contract do not become fixed at the date of the death of the insured.'

"In order to give the clause the meaning which the petitioner ascribes to it, it would be necessary to supply words which it does not at present contain. The provision plainly is that the policy shall be incontestable upon the simple condition that two years shall have elapsed from its date of issue; not that it shall be incontestable after two years if the insured shall live, but incontestable without qualification and in any event." (p. 176.)

We accept the majority rule and hold that the death of the insured within a year of the date of the policy did not affect the force of the incontestability clause. Whether the death of the insured within the year, where the policy is payable to his estate, would extend the time until an administrator could be appointed need not be here considered.

2. We discover no instance, save one (where the decision may have been influenced by another local statute), in which a court in its opinion has discussed and passed upon the direct question whether a clause making a policy incontestable after a fixed date is in conflict with a statutory provision invalidating an agreement undertaking to fix a time for the commencement of an action different from that of the statute of limitations. In several cases, however, the incontestable clause has been upheld in states having such a statutory provision, without anything being said about it in the opinion.

See Plotner v. Northwestern Nat. Life Ins. Co., 48 N.D. 295, 183 N.W. 1000; Williams v. Insurance Co., 189 Mo. 70, 87 S.W. 499; Harris v. Insurance Co., 248 Mo. 304, 154 S.W. 68.

The defendant quotes an opinion (unpublished) in Russ v Great Southern Life Insurance Company, decided by the federal court of this district, in which the incontestability clause was upheld, no reference being made therein, however, to the Kansas statut...