Prudential Ins. Co. of America v. Ruby

• Citation: 219 Ark. 729,244 S.W.2d 491
• Decision Date: 17 December 1951
• Docket Number: No. 4-9626,4-9626
• Parties: PRUDENTIAL INS. CO. OF AMERICA v. RUBY et al.
• Court: Arkansas Supreme Court

Page 491

244 S.W.2d 491

219 Ark. 729

PRUDENTIAL INS. CO. OF AMERICA v. RUBY et al.

No. 4-9626.

Supreme Court of Arkansas.

Dec. 17, 1951.

Rose, Meek, House, Barron & Nash, Little Rock, for appellant.

Carlos B. Hill, C. D. Atkinson and Chas. W. Atkinson, Fayetteville, for appellees.

McFADDIN, Justice.

In this appeal we are asked to construe, under the laws of the State of Utah, a clause in a life insurance policy which reads: 'This policy shall be incontestable, except for default in payment of premium for more than thirty-one days, after it has been in force during the lifetime of the insured for two years from date of issue hereof.'

On October 21, 1947 the appellant, Prudential Life Insurance Company, hereinafter called 'Insurance Company', issued to the insured, Freeda L. McLain, in Salt Lake City, Utah, a life insurance policy which contained the above quoted clause referred to herein as 'the incontestable clause'. The beneficiaries named in the said policy are the appellees in this appeal. The insured died in Salt Lake City, Utah, on December 29, 1947. Some of the beneficiaries live in Washington County, Arkansas; and on February 23, 1951 all of the beneficiaries as plaintiffs, filed the present action seeking to recover on the policy.

The Insurance Company, in paragraphs three to seven, inclusive, of its answer, alleged in detail that in her application for the policy, the insured made certain material answers in regard to her health, etc., which answers were known by the insured to be false, willful, fraudulent and material; that the Insurance Company would not have issued the policy if it had known the truth; that with due diligence the truth was not learned until after the death of the insured; and that the return of all premiums had been tendered to the plaintiffs on March 30, 1948. The plaintiffs demurred to the said paragraphs three to seven, inclusive, of the defendant's answer, and moved that the said paragraphs be stricken, because of the said incontestable clause previously copied. The Trial Court granted the motion over defendant's objection; and likewise upon trial the Court refused the defendant the right to introduce evidence in support of the matters stated in the said paragraphs three to seven of the answer. From a judgment for the plaintiff-beneficiaries the Insurance Company brings this appeal.

Both sides agree that the insurance contract is to be construed according to the laws of the State of Utah, because the contract was made in that State. In Howcott v. Kilbourn, 44 Ark. 213, we said: 'Matters bearing upon the execution, the interpretation and validity of the contract, are to be determined by the law of the place where it is made.' In J. R. Watkins Medical Co. v. Johnson, 129 Ark. 384, 196 S.W. 465, 466, after quoting the language from Howcott v. Kilbourn we added: 'It is to be noticed that the rule extends to the interpretation of the contract, as well as to other questions relating to its enforcement, and that the interpretation placed upon the contract by the courts of the state where it is made will be accepted in other states for the purpose of testing its validity and of affording remedy for its enforcement.' See also Leflar on Conflict of Laws, Sec. 94. Thus we conclude that the rights of the parties are to be measured by the laws of Utah; and if there be a ruling of the courts of that State on such issue we will follow such ruling.

The chronology of these dates is important:

The policy issued, October 21, 1947;

Insured died, December 29, 1947;

This action filed, February 23, 1951.

Thus, the insured lived less than three months after the issuance of the policy, but the suit was not filed until more than three years after the issuance of the policy or the death of the insured. The appellant insists that under the incontestable clause here involved the policy became incontestable only if the insured lived and kept the policy in force for a period of two years; and appellant cites and relies on such cases as Lance v. Prudential Ins. Co. of America, 22 A.2d 3, 19 N.J.Misc. 551; Carpentieri v. Metropolitan Life Ins. Co., 138 Pa. Super. 1, 10 A.2d 37; Sun Life Assur. Co. v. Allen, 270 Mich. 272, 259 N.W. 281; Chicago Nat. Life Ins. Co. v. Carbaugh, 337 Ill. 483, 169 N.E. 218; Nat. Life & Acc. Ins. Co. v. Preston, 194 Ga. 583, 22 S.E.2d 157; Equitable Life Ins. Co. v. Mann, 229 Iowa 945, 295 N.W. 461 and Greenbaum v. Columbian Natl. Life Ins. Co., 2 Cir., 62 F.2d 56.

The appellees insist, and the trial court apparently held, that the incontestable clause, here involved, means that the policy will be incontestable two years from date of its issuance, and that the language in the clause, 'in force during the lifetime of the insured', has no direct bearing on the case. In support of their position appellees cite and strongly rely on the case of Tracy Loan & Trust Co. v. Mutual Life Ins. Co., decided by the Supreme Court of Utah on January 25, 1932 and reported in 79 Utah 33, 7 P.2d 279, and hereinafter referred to as the 'Tracy case'. If that cited case supports the appellees' contention then they are entitled to win, so we examine it in considerable detail.

In the said Tracy case the incontestable clause read: 'This policy shall be incontestable after two years from its date of issue except for non-payment of premiums.' The two policies in that case were issued March 16, 1925. The death of the insured is not given; but action on the policy was filed in the State Court on April 27, 1926. The answer of the Insurance Company--alleging fraud by the insured--was not filed in the State Court until November 20, 1928, which is obviously more than two years after the date of the issuance of the policy. Upon such facts the Supreme Court of Utah held that the defense of the insurance company was too late. In urging that the effect of the holding of the Supreme Court of Utah in the Tracy case necessitates an affirmance in the case at bar, the appellees cite Sec. 43-3-24 of the Utah Code of 1943 which provides: 'It shall be unlawful for any life insurance company to issue or deliver in this state any life insurance policy unless the same shall contain * * * (3)[a] provision that the policy shall be incontestable after it shall have been in force during the lifetime of the insured for a period of two years from its date, except for nonpayment of premiums * * *'

Appellees argue that the effect of the Utah statute as above quoted was one of the matters that necessarily entered into the decision in the Tracy case. But the appellees' argument, about the Statutes of Utah, loses all force in the light of the following:

1. In the Tracy case the Supreme Court of Utah, in discussing the statutes of that State regarding incontestable clauses, made reference to Sec. 1154, sub-division 2 of the Compiled Laws of Utah of 1917; and such statute reads: '* * * it shall be unlawful for any * * * insurance company to issue or deliver in this state any life insurance policy unless the same shall contain the following provisions * * * (2) A provision that the policy shall be incontestable after two years from its date, except for non-payment of premiums * * *' Thus the Supreme Court of Utah decided the Tracy case when the Utah statute was entirely different from the present Utah statute.

2. It was not until the Revised Statute of 1933 that the Legislature of Utah changed Sec. 1154, sub-division 2 of the Compiled Laws of Utah of 1917 to read as found in Title 43-3-24 of the present Code of 1943, and as previously copied. ¹

Thus in the Tracy case the Utah Supreme Court (a) was construing an incontestable clause which did not have in it the words, 'in force during the lifetime of the insured'; and (b) was referring to a statute of Utah which did not have such words in it. So the Tracy case gives the appellees no support and we must look further to determine the law of Utah involving an...