State Mut. Life Assur. Co. v. Heine

• Decision Date: 07 April 1944
• Docket Number: No. 9631.,9631.
• Citation: 141 F.2d 741
• Parties: STATE MUT. LIFE ASSUR. CO. OF WORCESTER, MASS., v. HEINE.
• Court: U.S. Court of Appeals — Sixth Circuit

141 F.2d 741 (1944)

STATE MUT. LIFE ASSUR. CO. OF WORCESTER, MASS., v. HEINE.

No. 9631.

Circuit Court of Appeals, Sixth Circuit.

April 7, 1944.

R. Lee Blackwell, of Louisville, Ky. (Wm. Marshall Bullitt, R. Lee Blackwell, and Bullitt & Middleton, all of Louisville, Ky., on the brief), for appellant.

L. H. Hilton and Lawrence S. Leopold, both of Louisville, Ky., for appellee.

Before HICKS, HAMILTON, and MARTIN, Circuit Judges.

HAMILTON, Circuit Judge.

This is a diversity of citizenship action commenced by appellant, the State Mutual Life Assurance Company of Worcester, Massachusetts, for a declaration of rights on an insurance policy of which appellee L. Allen Heine is beneficiary. Appellee counterclaimed, asserting he was entitled to the benefits of the policy. The trial court sustained his counterclaim and dismissed the petition.

On September 22, 1925, appellant on appellee's written application issued to him on his life a five year term policy in the principal sum of $7,000. On September 22, 1926, pursuant to the provisions of the term policy, on the written application of appellee, appellant issued to him a whole life policy for the principal sum of $7,000 and a supplementary disability contract. The annual premium on the life policy was $240.80 and on the disability policy $17.57, all of which has been paid. Under the supplementary contract, if insured, while no premium was in default, furnished due proof that before reaching the age of sixty years, because of accident or disease, he had become wholly, continuously and permanently unable to pursue any gainful occupation and would be unable for the balance of his life to perform any mental or manual work, or engage in any business for compensation or profit and said disability or its cause was sustained or contracted after September 22, 1926, the company would waive the payment of premiums becoming due under the policy and disability contract and pay the insured a monthly income of one per cent of the face amount of the policy excluding paid-up additions, if any. The first payment on the contract was to be made when the proof of claim was accepted and like payments each month while the insured's disability continued prior to the maturity of the policy. The policy was incontestable except for the nonpayment of premiums after it had been in force for one year. The policies were issued on a certificate of good health given to the insured by a physician selected by the insurer.

Until December 15, 1926, the insured in apparent good health was actively engaged in the general advertising business in Louisville, Kentucky. He was a devotee of golf and other sports which required physical activity.

On June 13, 1926, appellee, while riding in an automobile with his wife, suffered an accident in which his wife was seriously injured. Insured sustained no visible injury but thereafter appeared in a highly nervous condition. His wife recovered and insured continued his business activities and sports diversions until December 15, 1926, on which date he entered a hospital at Louisville, Kentucky, for a physical examination.

In 1903, insured contracted a luetic infection but took no treatment until 1921 at which time he discovered the disease was active. During the year 1925 insured had trouble with his arches and consulted a physician who advised him that the earlier infection was again active and the physician repeated the treatments, again arresting the infection. In the spring of 1926, although insured felt physically unfit, he did not consult a physician until December 1926, when he was advised that the luetic infection was progressive. This examination which took place at the hospital, showed that insured was in the second stage of locomotor ataxia and his physician stated that his condition was such as could have been caused from the luetic infection and that its insidious activity had probably produced the first and second stages of the disease. A part of the treatment given to insured by his physician consisted of a puncture in the spinal column and while this treatment increased insured's physical disablement, it prevented the further destruction of the brain cells which is said to be one of the effects of the ravages of this disease. Insured left the hospital on December 21, 1926, unable to walk without assistance and shortly thereafter became totally physically disabled and suffered slight mental impairment, and until 1936 remained unemployed and unoccupied in any mental or physical endeavor.

In this year insured created a syndicated pictorial strip for publication in newspapers entitled "You Be the Judge." His idea consisted of pictorially outlining with a word description, reported jury cases, leaving the reader to guess the verdict and in the following script disclosing the actual verdict. The material for the strip was prepared by insured's wife from reported cases found in law libraries. Her abstracts were given to the insured and he employed an artist to make the illustrations and to assist him in writing the accompanying descriptive words. Insured, without paying his wife any compensation, realized from the sale of the strip, the following net sums:

                  1937   $2,007.83
                  1938    2,900.00
                  1939    2,542.00
                  1940    2,212.00
                  1941    1,033.33
                  1942      959.00
                

On July 19, 1927, appellee notified appellant that he claimed disability benefits under the policy and on August 16, 1927, furnished proof thereof. On August 24, 1927, appellant rejected appellee's claim on the ground, among others, that his disability and the cause thereof were sustained by him before the effective date of the policy. On November 22, 1930, appellee commenced in the Jefferson Circuit Court for Jefferson County, Kentucky, two separate actions against appellant, one to recover $70 per month income provided under the contract for the period between August 27, 1929, to and including December 1930, aggregating $2,730 with interest thereon from the respective due date of each monthly installment, and the other to recover premiums of $817.04 paid on the policies during the years 1927 to and including 1930, together with interest. Appellant caused these actions to be removed to the United States District Court for the Western District of Kentucky on the ground of diversity of citizenship. Appellee made motions to remand, which were overruled February 18, 1931, and the two actions were assigned for trial on March 26, 1931. On March 9, 1931, appellee with leave of Court, dismissed the actions without prejudice and on March 24, 1931, filed new actions in the Jefferson Circuit Court seeking to recover therein only the accrued monthly disability benefits. Pleadings were completed and the action assigned to trial for January 12, 1932. On appellee's motion the case was removed from the trial docket and placed on the call docket and no further steps were taken therein until August 25, 1942, when it was dismissed without prejudice on appellee's motion. On April 21, 1941, appellee commenced another action against appellant in the Circuit Court of Floyd County, Indiana, for the recovery of disability benefits and premiums paid on these policies from September 1, 1927, to and including April 1, 1942. On May 11, 1942, appellant removed the action to the United States District Court for the Southern District of Indiana on the ground of diversity of citizenship and it was pending there at the time the present action was filed September 29, 1942. Appellant here, plaintiff below, seeks an injunction to prevent the further prosecution of the action in the Indiana District Court.

The trial court in the present suit awarded appellee a judgment in the aggregate amount of $25,334.71, which includes disability benefits from September 1, 1927, to December 1, 1942, and premiums paid on the policies within the same period, together with interest on each of these items.

Appellant urges that appellee has abandoned his claim for benefits on account of disability and that he is now estopped from asserting any such claim because of his acquiescence in appellant's rejection of the claim for fourteen years and eight months. It also urges that appellee's disability commenced before the policies were issued and further that appellee has not suffered physical disability to the extent insured against in the contract.

Appellant is a mutual company and is required under the laws of Massachusetts and the State of Kentucky annually to ascertain and distribute its divisible surplus among all of its policyholders. Appellant insists that if it must now pay appellee's claim, the result will be to disarrange its business and prejudice the interests of other policyholders, and that the appellee has, by reason of his delay in prosecuting his claim, received more than his equitable share of appellant's policyholders' surplus. Appellant therefore argues that these circumstances make applicable the rule of law that appellee has voluntarily abandoned his claim to benefits and the return of premiums under the contract.

The term abandonment symbolizes a concept which is sui generis in the law. It has acquired a technical meaning and is not to be confused with the doctrine of laches or estoppel. It means when applied to choses in action an absolute relinquishment or renunciation of the right. It has no application unless there is a total desertion by an owner without being pressed by necessity, duty or utility to himself, but simply because he no longer desires to possess the thing and willingly abandons it to whoever wishes to possess it. Sandy River Coal Company v. Champion Bridge Company et al., 243 Ky. 424, 48 S.W.2d 1062; Helvering v. Jones, 8 Cir., 120 F.2d 828.

The acts of appellee on which appellant bases its contention of abandonment lend no support to that conclusion. During the period of delay, appellee had an action pending in a court of competent jurisdiction which was instituted within a reasonable time...