Thomas v. Metropolitan Life Ins. Co.

• Decision Date: 07 May 1932
• Docket Number: 30483.
• Parties: THOMAS v. METROPOLITAN LIFE INS. CO. THOMAS et al. v. SAME.
• Court: Kansas Supreme Court

10 P.2d 864

135 Kan. 381

THOMAS v. METROPOLITAN LIFE INS. CO.

THOMAS et al. v. SAME.

No. 30483.

Supreme Court of Kansas

May 7, 1932

Syllabus by the Court.

Provision making policy incontestable after it had been "in force" 2 years held inapplicable where insured died within 2 years.

Defenses of fraud asserted in actions brought on policies within 2-year incontestable period and dismissed held available in subsequent actions brought after period expired.

1. Defendant issued two life insurance policies in reliance on insured's representations touching his condition of health and related matters. Each policy contained a provision that it would be incontestable "after it had been in force for two years from date of issue, except for nonpayment of premiums." Insured died in less than 2 years after date of issue. Held, the policies were not "in force" for such length of time as to preclude the insurance company from maintaining a defense of fraud in their procurement.

2. Under the circumstances outlined in syllabus paragraph 1 plaintiffs filed actions in Missouri to recover on the policies. In less than 2 years from the dates of issue defendant answered, setting up a defense of fraud in their procurement. Plaintiffs were ordered to give security for costs. This order was disobeyed, and the actions were dismissed on that ground. Thereafter, when the 2-year period since the policies were issued had elapsed, actions of the same character were begun in a Kansas trial court. Defendant pleaded the same defenses of fraud it had timely interposed in the Missouri actions. All the pertinent facts including the files of the Missouri cases were presented, and the trial court held that the defenses of fraud which were timely pleaded in the Missouri actions were available to defendant in the later Kansas actions. This ruling was correct, and the judgment is affirmed.

Appeal from District Court, Wyandotte County, Division 2; Clyde C Glandon, Judge.

Actions by Linnea Thomas and by Clara T. and Richard E. Thomas against the Metropolitan Life Insurance Company. Judgment for defendant, and plaintiffs appeal.

W. W McCanles, of Kansas City, Mo., for appellants.

E. S. McAnany, M. L. Alden, and T. M. Van Cleave, all of Kansas City, Kan., for appellee.

DAWSON J.

The plaintiffs brought these actions to recover on life insurance policies in which they were named as beneficiaries. The defense of present concern was that the policies were procured by the fraud of the insured. The legal question to be determined in this appeal is the significance which should be given to an incontestable clause which was one of the terms of the policies.

On March 27, 1927, one Herbert S. Thomas made applications to the Metropolitan Life Insurance Company for two policies of life insurance, one in which his wife, Linnea Thomas, was to be named beneficiary, and the other in which the proposed beneficiaries were Clara T. and Richard E. Thomas. In each of the applications was a questionnaire requiring answers by Thomas touching his health, last sickness and its duration, his infirmities, if any medical and hospital attention he had received in the preceding five years, and the like. In reliance on the answers of Thomas to this questionnaire, two policies of $1,000 each, dated April 26, 1927, were issued by the defendant company. In each of these policies was the following provision: "This policy shall be incontestable after it has been in force for a period of two years from its date of issue, except for nonpayment of premiums. ***"

On October 23, 1928, which was 1 year, 5 months, and 27 days after these policies were issued, Thomas died. On February 11, 1929, these plaintiffs filed suits in the circuit court of Jackson county, Mo., to recover on the policies. On March 13, 1928, defendant filed answers in those suits, pleading that the policies had been issued in reliance upon the truth of the statements and representations Thomas had made in his applications, and that those statements and representations were false in material matters specified in detail.

On motion of defendant the circuit court ordered plaintiffs to give security for costs. That order was not obeyed. Defendant then filed a motion to dismiss; and on May 3, 1929, the actions were dismissed for failure of plaintiffs to give security for costs.

About a year later, on April 11, 1930, the present actions to recover on the policies were commenced in the district court of Wyandotte county, Kan. On May 10, 1930, defendant filed its answers setting up the same defenses of fraud it had pleaded in the Missouri actions. Defendant pleaded the commencement of the Missouri cases, and that it had timely pleaded its defenses of fraud therein. On June 8, 1931, at the request of counsel for the litigants, these causes were set down for hearing on questions of law in advance of trial on the issues of fact. The pleadings, policies, and copies of the files and orders in the Missouri cases and certain explanatory statements of counsel were presented and submitted to the court to enable it to decide in each of the cases "whether defendant, because of the incontestable clause in its policy, is thereby precluded from establishing its defenses, as stated in its answer, to plaintiffs' action on said policy."

The trial court ruled that defendant was not precluded by the incontestable clauses from maintaining its pleaded defenses. From this ruling plaintiffs appeal.

The main point urged against the judgment is that, when these actions were filed in Wyandotte county, the policies containing the incontestable clause had been in force and effect for more than 2 years from their date of issue, and in consequence defendant was barred from setting up the defense of fraud alleged to have been practiced by the insured in obtaining them. Plaintiffs insist that the mere filing of answers in the Missouri cases setting up the defenses of fraud was not a contest of the validity of the policies; and they argue that, when an action is begun and then dismissed, it leaves the parties in the same position as though no action had ever been instituted. Plaintiffs also suggest that, when defendant filed its motions in the Missouri court that the actions be dismissed because of plaintiffs' failure to obey the order of court to give security for costs, such tactics were equivalent to a withdrawal of its answers in which it had pleaded the defense of fraud. In plaintiffs' behalf it is also suggested that, in order for defendant to be relieved of its liability on the policies on account of fraud, it was incumbent upon it to initiate and prosecute some appropriate action or proceeding within 2 years to have the policies canceled on account of fraud, and, having neglected to do so, the incontestable clause effectually barred such a defense to the present actions.

In support of the foregoing line of argument, plaintiffs cite various precedents, including our own case of Priest v. Kansas City Life Ins. Co., 119 Kan. 23, 237 P. 938, 41 A.L.R. 1100.

In that case a clause in the insurance policy making it incontestable "after one year from date of issue" was enforced according to its terms. In the policies before us, however, the incontestable clause is materially different in text and terms. They are to be incontestable after they have been in force for a period, of 2 years from date of issue except for nonpayment of premiums. Ere that period elapsed, Thomas had died, and the obligation of the policies was thereby matured and transformed into a debt due from defendant to the beneficiaries, subject to whatever valid defenses could be effectively offered thereto. It is rather obvious, we think, that this incontestable clause contemplated that the insured should be alive and in good standing with the insurance company by payment of the requisite premiums regularly for the 2-year period.

In Jordan v. United States (C. C. A.) 36 F. (2d) 43, 73 A.L.R. 312, the action was upon two policies of war risk insurance. The government's main defense was that plaintiff's infirmities did not arise from his service in the army, but that he was thus afflicted at the time of his enlistment. The terms and conditions of the war risk insurance policy were modified (to the greater advantage of the insured) by later acts of Congress, so that it was ultimately enacted that such policy should be incontestable after it "has been in force six months." Plaintiff had enlisted on February 5, 1918. On March 11, 1918, the first policy was dated and issued to him, and the second on June 1, 1918. During the month of June he developed epilepsy and on July 1, 1918, he became totally and permanently disabled, and he was discharged from the Army on September 14, 1918. The Circuit Court...