Rasmussen v. Nebraska Nat. Life Ins. Co.

• Decision Date: 05 September 1969
• Docket Number: No. 53258,53258
• Citation: 170 N.W.2d 370
• Parties: C. C. RASMUSSEN, Administrator, Estate of Harold W. Rasmussen, Appellee, v. NEBRASKA NATIONAL LIFE INSURANCE CO., Appellant.
• Court: Iowa Supreme Court

Page 370

170 N.W.2d 370

C. C. RASMUSSEN, Administrator, Estate of Harold W. Rasmussen, Appellee, v. NEBRASKA NATIONAL LIFE INSURANCE CO., Appellant.

No. 53258.

Supreme Court of Iowa.

Sept. 5, 1969.

Rehearing Denied Nov. 10, 1969.

Reimer, Boddicker & Vipond, Denison, for appellant.

Bruce M. Snell, Jr., Ida Grove, for appellee.

MASON, Justice.

This is a law action by plaintiff as administrator of Harold W. Rasmussen's estate to recover $10,000 on a creditor group life insurance policy issued by defendant Nebraska National Life Insurance Company to Ida County State Bank, Ida Grove.

Defendant appeals from the trial court's adjudication of law points under rule 105, Rules of Civil Procedure, holding defendant's policy of insurance on decedent's life was incontestable, and afforded coverage for losses incident to heart disease or disorders since defendant is bound under the original policy with the bank. This ruling disposed of the whole case.

The issue presented involved determination as to whether decedent was covered by defendant's first or second insuring agreement with the bank.

The first policy issued by defendant sometime before August 17, 1960, provided coverage to the extent of $10,000 for each insured debtor of the bank or the amount of the debtor's indebtedness to the bank upon his death, whichever was less.

No individual policy is issued by the company to the debtor whose life is insured. The debtor does not submit an application or any other document to the insurance company, and no medical examination is made. The only document signed by the debtor is the authorization of coverage under the bank's policy. Insurance becomes effective as the bank makes loans to debtors who are within the coverage of the policy.

Any sum payable under the policy was to be paid the bank and applied to the debtor's account.

For an explanation of this variety of life insurance see 1 Appleman, Insurance Law and Practice, section 20.

August 17, 1960, plaintiff's decedent received a loan from the bank and simultaneously applied for insurance coverage under defendant's master policy with the bank. As a result of an authorization signed by decedent, the policy premiums were paid through the bank by charging his account monthly with the amount thereof. Copies of the authorization and first policy are set out in plaintiff's petition.

The policy provides in part:

'Incontestability: Except for the nonpayment of premiums, this policy shall be incontestable after one year from the effective date hereof.

'* * *

'Discontinuance of Coverage: Company at any time may discontinue insuring new debtors by giving thirty days written notice thereof to Creditor. Such notice shall not affect any insurance previously made effective, while this policy is in force, provided premiums for such insurance are regularly paid when due. Insurance granted to any insured debtor hereunder shall terminate: * * * (c) upon repayment of the indebtedness in connection with which this insurance is granted. * * *.'

July 23, 1965, defendant entered into a new creditor group life insurance contract with the bank. The copy of the second insuring agreement attached to defendant's answer as exhibit 1 provides in part:

'If said indebtedness is renewed or otherwise extended any insurance issued in connection with such renewal or extension shall constitute new insurance and the effective date thereof shall be the date of said renewal or extension. In no case shall any insurance originate on or after the date of first medical diagnosis known to the debtor of any disease or disorder of the heart or heart system or cancer, and if through error, oversight or otherwise, insurance is thereafter effected, the death benefit payable hereunder shall be limited to the amount of premium paid, together with interest thereon at 6% Per annum, compounded annually.' This coverage limitation is not contained in the first policy.

The new agreement extended the incontestability clause from one to two years. Both policies contained renewal privileges.

Harold W. Rasmussen died of a heart attack December 4, 1966, owing the bank $10,642.92. January 20, 1967, plaintiff paid the indebtedness and received an assignment of the bank's rights and interest in the policy. On defendant's refusal to pay the face value of the policy plaintiff brought this action.

I. We do not review the case de novo but only on errors assigned. Rule 334, Rules of Civil Procedure, Bates v. United Security Insurance Co., Iowa, 163 N.W.2d 390, 392.

Defendant asserts as errors relied on the trial court's ruling on the adjudication of law points: (1) The insurance policies involved should be construed strictly against defendant, (2) The incontestability caluse of the first policy and that contained in section 509.2(2), Code, 1966, bar the defense that the first policy was terminated by the parties thereto in accordance with its terms, (3) The first policy was not validly terminated because plaintiff's decedent did not consent to termination, (4) The first policy was not validly terminated because plaintiff's decedent was not given notice of termination, (5) Allegations of notice to plaintiff's decedent of termination of the first policy contained in Division III of defendant's answer are insufficient and (6) The incontestability clauses of the second policy and in section 509.2(2) bar the defense plaintiff's decedent was not within the coverage of the second policy at death.

These assignments will not be considered in the order argued.

II. Rule 105, R.C.P., provides: 'The court may in its discretion, and must on application of either party, made after issues joined and before trial, separately hear and determine any point of law raised in any pleading which goes to the whole or any material part of the case. In shall enter an appropriate final order before trial of the remaining issues, adjudicating the point so determined, which shall not be questioned on the trial of any part of the case of which it does not dispose. If such ruling does not dispose of the whole case, it shall be deemed interlocutory for purposes of appeal.'

In ruling on the application for adjudication of law points, only uncontroverted issues which present points of law may be determined. Unresolved factual issues prevent any judgment or determination of the whole case in such hearing. National Farmers Union Etc. Co. v. Nelson, 260 Iowa 163, 168, 147 N.W.2d 839, 843.

In answer defendant admitted its creditor group life insurance contract with the bank in effect August 17, 1960, was correctly quoted in plaintiff's petition, all payments due on this coverage were made by the bank and charged against Rasmussen's account as provided in the authorization but denied that the same policy had been continuously in effect from the issuance date until Rasmussen's death. In a separate division defendant alleged that on or about July 23, 1965, it entered into a new creditor group life insurance contract with the bank and attached a copy; this contract replaced the one set out in plaintiff's petition and when entered into terminated the August 17, 1960, insuring agreement; it discontinued insuring new indebtedness under the former contract; this policy was in effect from July 23, 1965, until Rasmussen's death; July 22, 1965, a medical diagnosis was made that Rasmussen had 'a disease and disorder of the heart and heart system' which diagnosis was known to him on that date; all decedent's indebtedness to Ida County State Bank July 23, 1965, was repaid before his death; and decedent's indebtedness to the bank at death originated on or after September 22, 1965.

Defendant alleged in the third division decedent was notified the 1960 policy was replaced by the July 1965 policy and attached to this amendment as exhibit 2 a copy of the 'Notice of Change' alleged to have been given Rasmussen and as exhibit 3 a 'Certificate of Insurance and Charge Slip' alleged to have been given Rasmussen the end of each month for which a charge was made against his account for the creditor group life insurance.

In reply plaintiff denied defendant's affirmative allegations and alleged if the insurance company and bank had entered into a new insuring agreement July 23, 1965, as alleged, his decedent as beneficiary should have been entitled to the policy benefits which are the same as prayed in his petition. He further alleged the incontestability provision of the second insuring agreement and that of Code section 509.2(2) made the validity of this policy incontestable.

This Code section provides:

'A provision that the validity of the policy shall not be contested, except for nonpayment of premiums, after it has been in force for two years from its date of issue; and that no statement made by any person insured under the policy relating to his insurability shall be used in contesting the validity of the insurance with respect to which such statement was made after such insurance has been in force prior to the contest for a period of two years during such person's lifetime, nor unless it is contained in a written instrument signed by him.'

This statutory wording corresponds with the incontestability clause contained in the original policy issued by defendant except by is provision for a two-year contestability period rather than one year.

In this stage of the pleadings plaintiff made application under rule 105, R.C.P., for separate adjudication of law points raised by his pleadings relating to the incontestability of the first policy issued or any amended, substituted, revised or newly issued policy insuring Rasmussen's life.

The court's holding defendant is bound under the original insuring agreement with the bank because the first policy was not effectively terminated is based on back of consent by plaintiff's decedent to the termination of the first contract and lack of formal notice to Rasmussen. The court concluded decedent was entitled to a formal notice of...