Prudential Ins. Co. of Am. v. Connallon

• Decision Date: 23 May 1930
• Citation: 150 A. 564
• Parties: PRUDENTIAL INS. CO. OF AMERICA v. CONNALLON.
• Court: New Jersey Court of Chancery

150 A. 564

PRUDENTIAL INS. CO. OF AMERICA

v. CONNALLON.

Court of Chancery of New Jersey.

May 23, 1930.

Syllabus by the Court.

A clause in a policy of insurance that the policy shall not take effect if the insured be not in sound health at its date must be read in connection with another clause making the policy incontestable after one year from its date of issue. After one year from the date of issue, the insurer cannot contest the policy on the ground that the insured was not in sound health at the date of the policy. Syllabus by the Court.

The death of the insured within one year from the date of issue of the policy will not suspend the operation of the incontestability clause.

Syllabus by the Court.

The date of the policy does not necessarily determine its date of issue. If the insurer agrees that the policy shall be effective from the date of application therefor, the application date will be considered the date of issue, and the incontestability clause will run. from the earlier date.

Syllabus by the Court.

If a copy of the application be not indorsed upon or attached to the policy, the insurer cannot set up the falsity of any statement in the application in avoidance of the policy or as a defense to a claim thereunder.

Additional Syllabus by Editorial Staff.

Insurer's assistant superintendent testified that copy of application was attached to original policy by clips punched through both policy and such copy, and that he handed policy to agent for delivery, but agent was not produced as witness; beneficiary testified that copy of application was not attached to policy when delivered to him by such agent, and policy bore no evidence that anything was attached thereto by adhesion or clips punched through sheets, though some small pinholes appeared therein.

Suit by the Prudential Insurance Company of America against William A. Connallon.

Bill dismissed.

Perkins & Drewen, of Jersey City, for complainant.

Donald M. Waesche, of Ridgefield Park, for defendant.

FIELDER, Vice Chancellor.

The complainant issued its monthly premium policy of insurance, dated August 6, 1928, on the life of Martin Connallon, wherein the defendant William A. Connallon is named as beneficiary. The insured died June 23, 1929, and the complainant, by its bill filed August 2, 1929, seeks a decree that the policy never took effect, because at its date the insured was not in sound health, and that the policy was obtained through fraudulent representations made by the insured as to his condition of health and freedom from certain diseases, and prays a restraint against the beneficiary from bringing suit on the policy and for surrender of the policy for cancellation.

The complainant contends that the insured was not in sound health at the date of the policy, and therefore the policy did not take effect, and it bases its contention on a clause in the policy which reads: "This policy shall not take effect if on the date hereof the insured be not in sound health." In a case involving a policy containing a similar provision, our Court of Errors and Appeals held that the sound health of the insured at the date of the policy was a condition precedent to the liability of the insurer, and, not being complied with, the policy had no legal effect. Levandoski v. Equitable Society, 103 N. J. Law, 643, 137 A. 414. The policy contract here under consideration contains another provision which was not considered in the Levandoski Case and which should be read in connection with the sound health clause. It is as follows: "This policy shall be incontestable after one year from its date of issue, except for non-payment of premium." The complainant argues that this provision cannot be given effect for two reasons: First, if the policy did not take effect, it was ab initio void and no provision thereof could become operative; Second, the death of the insured within one year from the date of the policy suspended the operation of the incontestability provision.

The substance of the complainants first contention is that the incontestability clause was intended to be conditional, that is, conditional upon the policy taking effect. Under such construction the clause is deceptive, meaningless, and ineffectual to the insured, because, although it purports to state that the policy shall be incontestable for any reason after one year, it shall nevertheless be contestable at any time on the ground here urged. If the policy is to be regarded as never in force so as to permit the insurer to show that the insured was not in sound health at its date, although the insured's death may not occur until many years after the policy date, then an incontestability clause is of but little value and is a deceptive inducement to an insured to accept it. I think the sound health clause here in question must be read with the incontestability clause, and that the two, taken together, must be construed to mean that, if within one year after the complainant issued its policy it discovered that the insured was not in sound health at its date, the contract could be rescinded, but that when one year had elapsed the policy would be considered in force and incontestable for any reason, except nonpayment of premium. Drews v. Metropolitan, etc., Co., 79 N. J. Law, 388, 75 A. 167; Wright v. M. B. L. Association, 118 N. Y. 237, 23 N. E. 186, 6 L. R. A. 731, 16 Am. St. Rep. 749; Webster v. Columbia, etc., Co., 131 App. Div. 837, 116 N. Y. S. 404, affirmed 196 N. Y. 523, 89 N. E. 1114; Chinery v. Metropolitan, etc., Co., 112 Misc. Rep. 107, 182 N. Y. S. 555; Mutual, etc., Association v. Austin (C. C. A.) 142 F. 398, 6 L. R, A. (N. S.) 1064; Commercial, etc., Co. v. McGinnis, 50 Ind. App. 630, 97 N. E. 1918; Monahan v. Fidelity, etc., Co., 242 Ill. 488, 90 N. E. 213, 134 Am. St. Rep. 337; Dibble v. Reliance, etc., Co., 170 Cal. 199, 149 P. 171, Ann. Cas. 1917E, 34; Healy v. Metropolitan, etc., Co., 37 App. D. C. 240; Mohr v. Prudential, etc., Co., 32 R. I. 177, 78 A. 554.

The complainant's second reason is that by the incontestability clause the complainant agreed to make no defense against the policy after one year, provided the policy remained in force for that period; that the death of the insured within the period terminated the policy as a risk and converted it into an obligation to pay. An incontestability clause is for the benefit of the beneficiary as well as the insured, and it cannot be taken to mean that the policy will become incontestable only in case the insured shall live one year. It makes the policy incontestable for any reason not excepted, whether the insured lives or dies within the period therein mentioned. Mutual, etc., Co. v. Hurni, 263 U. S. 167, 44 S. Ct. 90, 68 L. Ed. 235, 31 A. L. R. 102; Feierman v. Eureka, etc., Co., 279 Pa. 507, 124 A. 171, 32 A. L. R. 646.

This brings us to the consideration of the question whether the complainant has contested the policy within one year from its date of issue. The defendant has brought no action thereon, and this suit is the only proceeding by way of contest of the policy. The policy is dated August 6, 1928, and the bill of complaint was filed August 2, 1929, so that, on the face of this proceeding, the complainant is not barred by the incontestability clause, but the defendant contends that there is a distinction to be made between the date of the policy and...