Prudential Ins. Co. of America v. Ptohides
| Decision Date | 10 July 1936 |
| Docket Number | 94-1936 |
| Citation | 122 Pa.Super. 469,186 A. 386 |
| Parties | Prudential Insurance Company of America, Appellant, v. Ptohides |
| Court | Pennsylvania Superior Court |
Argued May 4, 1936
Appeal by plaintiff, from decree of C. P. Allegheny Co., July T. 1935, No. 1992, in case of The Prudential Insurance Company of America v. William Ptohides.
Bill in equity for cancellation of insurance policy.
The facts are stated in the opinion of the Superior Court.
Preliminary objections sustained and bill dismissed, before Reid, P. J Rowand and Smith, JJ., opinion by Rowand, J. Plaintiff appealed.
Error assigned was order dismissing bill.
Decree reversed; bill reinstated and record remitted with procedendo.
John H Scott, of Duff, Scott & Smith, with him John L. Miller, for appellant.
George A. Dawson, with him Walter L. Dipple and A. M. Oliver, for appellee.
Before Keller, P. J., Cunningham, Baldrige, Stadtfeld, Parker, James and Rhodes, JJ.
On July 9, 1934, the appellant insurance company issued its policy in the amount of $ 1,000 upon the life of James W. Ptohides. The father of the insured, William Ptohides, was named as beneficiary and the policy contained, inter alia, the following stipulations:
The insured having died on January 2, 1935, and no action at law having been brought by the beneficiary (although proof of death was filed January 12, 1935) the company, on May 20, 1935, filed its bill in equity in the court below, averring, inter alia, that the insured was not in sound health on the date of the policy but at that time was, and previously had been, under the care of a physician and afflicted with "mitral regurgitation and chronic valvular rheumatic heart disease" which resulted in his death within six months after the policy issued; that, upon discovery of these facts, the company elected to rescind its contract of insurance, notified the beneficiary of its intention and tendered to him the premiums it had received in the amount of $ 15.84; and that the beneficiary refused to surrender the policy for cancellation. The material prayer of the bill was that the beneficiary be directed to surrender the contract for cancellation upon receipt of the collected premiums.
The court below, in banc, sustained the beneficiary's preliminary objections and dismissed the bill "for the reason that plaintiff has an adequate remedy at law." This appeal is by the insurance company from that decree.
We, therefore, now have before us a case in which a policy, incontestable after one year from its date, matured within that period, by reason of the death of the insured, but no action at law had been brought upon it by the beneficiary up to the date of the filing, within the year, of the present bill.
As it is apparent from several other appeals, growing out of similar circumstances and now pending in this court, that there is some contrariety of opinion in our courts of common pleas as to what amounts to a "contest" of liability and with regard to taking and retaining jurisdiction in equity in such cases, [1] we deem it proper to express fully our conclusions upon the questions directly and incidentally here involved.
These questions may be thus stated:
First. Does the death of the insured during the period of contestability affect the obligation of the company to act within that period if it desires to contest its liability?
Second. What kind of action must be taken by the company in order to institute a valid contest of its liability?
Third. Has equity jurisdiction to entertain and finally determine bills to compel the surrender of policies for cancellation, or should such bills, upon preliminary objections by the beneficiary, be dismissed or certified to the law side of the court for the reason that the company has an adequate remedy at law?
1. It has been definitely decided in this state that, unless otherwise specifically provided, the death of the insured during the period of contestability does not affect either the running of that period or the obligation of the insurance company to act within the time specified, if it desires to contest its liability under the policy. In Feierman v. Eureka Life Ins. Co., 279 Pa. 507, 124 A. 171, our Supreme Court said, the "incontestable stipulation is not affected" by the death of the insured within the period; "it survives and continues in unbroken force until it expires by its own limitation." Our case of Cohen et al. v. Metropolitan Life Insurance Company, 112 Pa.Super. 314, 171 A. 106, in which the insured died within the contestable period and the company sought to contest its liability after the expiration thereof, is to the same effect. The Feierman case was one in which the policy provided that it should be incontestable after two years from its date; the insured died within that period but the proof of death was not filed until after it had expired. The company did nothing until the proof had been filed and suit commenced upon the policy; it then sought to defend upon the ground that the insured had made material representations relative to his risk which were false.
In considering that case, it must be kept in mind that the only thing actually decided by our Supreme Court therein was that the company could not defend upon that ground after the expiration of the period of contestability. It is true that in describing the purpose and effect of the clause, and in indicating the duty of the insurance company to take decisive action within the specified period, it was said:
In view of the question actually involved in that case, this language cannot properly be interpreted as a decision by our Supreme Court that mere notice to an insured, or, in case of his death, to his beneficiary, that the company intends to contest its liability, upon a specified ground, is sufficient. No notice of any kind had been given. Hence, the question of what action by the company would be sufficient to toll the running of the period was not before the court. If that question had been involved, it seems quite clear from the prior decision of the Supreme Court in Oplinger v. New York Life Insurance Co., 253 Pa. 328, 98 A. 568, that it would have been held that even a formal notice to a beneficiary, within the contestable period, to the effect that it rescinded the contract on the grounds of fraudulent representations and concealment of material facts by the insured and accompanied by a tender of the premiums collected, would not have been sufficient to enable the insurance company to defend, upon those grounds, against an action by the beneficiary upon the policy.
2. The next inquiry is whether the only legally effective way in which an insurer may "contest" its liability under a policy is by offensive or defensive proceedings in a court. In other words, is the contest contemplated by the clause a contest in court, either by the institution, within the time limited, of appropriate proceedings for the surrender and cancellation of the policy, or by making a defense to a suit brought within the period upon the policy?
In so far as we are informed, this question has not been squarely ruled upon by either of our appellate courts, but we think the rule established in New York and many other jurisdictions -- that appropriate proceedings in a court are essential to a valid contest by the insurer -- should be adopted here.
The opinion of Mr. Justice Cardozo, speaking as Chief Justice of the Court of Appeals of New York in the case of Killian et al. v. Metropolitan Life Insurance Company, 251 N.Y. 44, 166 N.E. 798, contains a full review of the authorities and an admirable discussion of the question.
The policy involved in that case provided that it should be incontestable after two years from the date of its issue except for nonpayment of premiums. It was issued November 28 1923; the beneficiaries were the insured's wife and children; the insured died October 20, 1924. The company gave notice in November of that year that it denied liability on the ground of breach of warranty and fraud and obtained a release from the widow. On February 23, 1928, an action was begun in behalf of the children; the company answered with...
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