Provident Mut. Life Ins. Co. v. Parsons

• Decision Date: 25 April 1934
• Docket Number: No. 3572.,3572.
• Citation: 70 F.2d 863
• Parties: PROVIDENT MUT. LIFE INS. CO. OF PHILADELPHIA v. PARSONS et al.
• Court: U.S. Court of Appeals — Fourth Circuit

70 F.2d 863 (1934)

PROVIDENT MUT. LIFE INS. CO. OF PHILADELPHIA v. PARSONS et al.

No. 3572.

Circuit Court of Appeals, Fourth Circuit.

April 25, 1934.

J. Bat Smathers, of Asheville, N. C. (Leon A. Hamilton, of Philadelphia, Pa., and Johnson, Smathers & Rollins and T. A. Uzzell, Jr., all of Asheville, N. C., on the brief), for appellant.

J. W. Pless, of Asheville, N. C. (W. C. Berry, of Bakersville, N. C., and J. Will Pless, Jr., of Asheville, N. C., on the brief), for appellees.

Before PARKER and NORTHCOTT, Circuit Judges, and CHESNUT, District Judge.

CHESNUT, District Judge.

The Provident Mutual Life Insurance Company of Philadelphia (hereinafter called the "Insurance Company") the appellant in this case, filed its bill of complaint in equity in the District Court on April 14, 1933, to secure cancellation of two life insurance policies, with disability benefits, issued to the appellees, Frank Parsons, the insured, and Claude Wilson, as beneficiary. The premiums paid on the policies had been tendered in return to the insured and were paid into court. The ground alleged for the cancellation was a material misrepresentation in the written application for each policy. Both policies contained the now familiar incontestable clause, and the suit was filed within the period allowed for contest. The plaintiff also prayed for an injunction against the prosecution by the insured of suits for recovery of disability benefits which had shortly previously been instituted in the state court. The defendant's answer resisted the cancellation of the policies on the ground that the facts had been correctly stated to the insurance company's soliciting agent. After hearing testimony the District Judge, on controverted evidence, adopted as a finding of fact that the agent had been correctly advised by the insured, and ruled as a matter of law that the Insurance Company was estopped to rely upon the material omission in the application. The appellant's suit was thereupon dismissed.

The record presents three questions for determination: (1) Was there a sufficient amount in controversy to establish the jurisdiction of the District Court in this case; (2) did the trial judge apply the correct substantive law to the case, and (3) if there was jurisdiction of the court and error as to the law, is the plaintiff entitled to an injunction against further prosecution of the suits in the state court.

1. Jurisdiction of the Court. This was based solely on diverse citizenship of the parties (28 USCA ß 41 (1) which is limited to cases involving more than $3,000 in controversy exclusive of interest and costs. Neither policy was in principal amount for more than $3,000, one being for $2,500, and the other for $2,000; but the two combined exceed the statutory minimum. In our opinion the requirements of the statute are met in this case. It has been so held in similar situations by several District Courts. New York Life Ins. Co. v. Jones, 2 F.Supp. 600 (D. C. W. D. N. C.); Mutual Life Ins. Co. v. Rose, 294 F. 122 (D. C. E. D. Ky.), reversed on other grounds (C. C. A.) 19 F.(2d) 280; Metropolitan Life Ins. Co. v. Dunne, 2 F.Supp. 165 (D. C. E. D. N. Y.). Compare New York Life Ins. Co. v. Marshall (D. C.) 21 F.(2d) 172; Id. (C. C. A.) 23 F.(2d) 225; Columbian National Life Ins. Co. v. Harrison, 12 F.(2d) 986 (C. C. A. 6). The object of the statutory limitation as to amount is intended merely to prevent invoking federal jurisdiction where the amount in controversy is not substantial. While it has been held that separate claims of two or more plaintiffs, each less than the jurisdictional amount, may not be combined to confer jurisdiction (Lion Bonding & Surety Co. v. Karatz, 262 U. S. 77, 86, 43 S. Ct. 480, 67 L. Ed. 871), nevertheless a single plaintiff having several claims, each less than the jurisdictional amount, may properly combine them for the purpose of establishing the requisite amount in controversy where they can properly be joined in one suit or action. Hughes Fed. Practice, vol. I, ßß 412, 485; Yates v. Whyel Coke Co., 221 F. 603, 606 (C. C. A. 6); Hartford Fire Ins. Co. v. Erie Railway Co. (C. C.) 172 F. 899; Massachusetts Protective Ass'n v. Kittles, 2 F.(2d) 211 (C. C. A. 5); Baltimore & O. S. W. R. Co. v. United States, 220 U. S. 94, 31 S. Ct. 368, 55 L. Ed. 384. There is no objection to joining in one equity suit both policies for purposes of cancellation, as this is entirely permissible under Equity Rule 26 (28 USCA ß 723).

It may also be noted that in addition to the principal amount of each of said policies, payable upon the death of the insured, there were also payable disability benefits in the amount of $25 per month under one policy and $20 per month under the other, for an indefinite long period, which might possibly have made the total liability under each policy more than $3,000.

The general equity jurisdiction in a case of this kind where the policies contain the incontestable clause and the insured is still living, is well established. Brown v. Pacific Mutual Life Ins. Co., 62 F.(2d) 711, 712; Jefferson Standard Life Ins. Co. v. Keeton, 292 F. 53; Jones v. Reliance Life Ins. Co., 11 F.(2d) 69, all recently decided by this court.

2. Was the correct substantive insurance law applied by the District Court. This raises an important question of substantive law affecting life insurance policies. As a matter of general law it must be determined here on the federal decisions, in the absence of a controlling state statute. Fountain & Herrington v. Mutual Life Ins. Co., 55 F.(2d) 120 (C. C. A. 4). The question is presented under the following conditions:

In the written application attached to each policy the insured specifically inquired whether the applicant had pending elsewhere an application for life, health or accident insurance, with a direction to state the amount, company and what disability benefits. In each case the information given in the application in reply to this question was only "Occidental, $5,000 with disability." Both applications also inquired as to what insurance the applicant carried, with what disability benefits, to which the reply was "$1,000 Atlantic Life and $2500 New England Mutual, both with disability benefits." The application for the first policy was signed by the insured on May 3, 1932, the answers to the questions being then written by the soliciting agent of the Company; and the application for the second policy was signed by the insured in blank a few days later, the date not being inserted at that time. It was forwarded to the home office of the Company where it was filled out in typewriting, copying the information given in the first application. It was dated May 24, 1932, and a copy attached to the policy issued. It is admitted that at the time of signing the application for the first policy the insured, in addition to the pending application for insurance in the Occidental Insurance Company also had pending an application for a policy for $5,000 with disability benefits in the Security Mutual Life Insurance Co., and the policy thereon was actually issued to the insured on May 5, 1932, but no mention thereof is contained in either application, either as a pending application for insurance or an actually issued policy. Both applications contain the following printed provision immediately above the insured's signature:

"It is hereby declared and agreed (1) that this application consists of two parts and that the answers and statements therein set forth are all complete and true and that this application and any policy which may be issued thereon shall constitute the entire contract between the parties."

One policy was issued under date of May 18, 1932, and the other is dated May 24, 1932. Both policies contain the following provisions:

"This Policy and the application therefor, copy whereof is attached to this Policy and made a part thereof, shall constitute the entire contract between the parties, and, except for non-payment of premium, shall be incontestable after one year from its date of issue if the insured shall be then living, otherwise two years from its date of issue. * * * All statements made by the insured shall, in the absence of fraud, be representations and not warranties, and no such statement shall avoid this Policy or be used in defense of a claim unless it is contained in the application and a copy of such application is attached to this Policy when issued.

"Agents are not authorized * * * to alter or waive any of the provisions of this Policy, nor to bind the Company by making any promise or by accepting any representation or information not contained in the application for this Policy."

The testimony of the insured, which was accepted by the District Judge, although contradicted by the testimony of the agent of the Company, was to the effect that he signed the application for the first policy on the date it bears, May 3, 1932, and answered all questions read to him from the application by the agent including the one specially above mentioned, and in answer thereto correctly informed the agent that he also had pending an application for a policy in the Security Life Insurance Co.; and that he supposed the agent recorded in the application correctly and fully the information given, and that he, the insured, did not in fact read over the application or the answers written therein when he signed it; nor did he read the policy or copy of the application attached thereto when he received it, although he was able to read and understand it. He further testified that he did not apply for the second policy (in the amount of $2,000) when he signed the first application but that a few days later he was persuaded by the agent to sign a second application form in blank without the understanding on his part that it was intended to be the basis of further insurance, and under the representation by the agent that it was in substance only formal routine; but that...