Thompson v. New York Life Ins. Co., 4552.

• Citation: 9 F. Supp. 248
• Decision Date: 14 January 1935
• Docket Number: No. 4552.,4552.
• Parties: THOMPSON v. NEW YORK LIFE INS. CO.
• Court: United States District Courts. 10th Circuit. Eastern District of Oklahoma

9 F. Supp. 248

THOMPSON v. NEW YORK LIFE INS. CO.

No. 4552.

District Court, E. D. Oklahoma.

January 14, 1935.

Wilson & Wilson, of Oklahoma City, Okl., for cross-complainant.

R. E. Bowling, of Pauls Valley, Okl., and W. L. Farmer, of Oklahoma City, Okl., for defendants on cross-complaint.

FRANKLIN E. KENNAMER, District Judge.

By its cross-complaint, the New York Life Insurance Company, seeking cancellation of an insurance policy, and, as incidental thereto, other relief both legal and equitable, predicates its cause upon an alleged state of facts, substantially as follows:

The Insurance Company issued to Joseph B. Thompson a policy, effective February 23, 1924. This policy provides that the New York Life Insurance Company "* * * agrees to pay to Mary M. Thompson, Mother of the Insured, Beneficiary, Ten Thousand Dollars upon receipt of due proof of the death of Joseph B. Thompson, the Insured; or Twenty Thousand Dollars upon receipt of due proof that the death of the Insured resulted directly and independently of all other causes from bodily injury effected solely through external, violent and accidental cause, and that such death occurred within ninety days after sustaining such injury, subject to all the terms and conditions contained in Section 2 hereof.

"And the Company agrees to pay to the Insured One Hundred Dollars each month during the lifetime of the Insured and also to waive the payment of premiums, if the Insured becomes wholly and presumably permanently disabled before age 60, subject to all the terms and conditions contained in Section 1 hereof."

The policy stipulates for an annual premium of $357.70, of which amount it is recited that $15.40 is for the double indemnity benefit, and $18.60 for the disability benefits. Section 1, entitled "Disability Benefits," in eight numbered subdivisions, reads:

"1. Total Disability. — Disability shall be deemed to be total whenever the Insured is wholly disabled by bodily injury or disease so that he is prevented thereby from engaging in any occupation whatsoever for remuneration or profit.

"2. Permanent Disability. — Disability shall be presumed to be permanent, — (a) Whenever the Insured will presumably be so totally disabled for life; or — (b) After the Insured has been so totally disabled for not less than three consecutive months immediately preceding receipt of proof thereof.

"3. Benefits. — Upon receipt at the Company's Home Office, before default in payment of premium, of due proof that the Insured is totally and presumably permanently disabled and that such disability occurred after the insurance under this Policy took effect and before its anniversary on which the Insured's age at nearest birthday is sixty years, the following benefits will be granted:

"(a) Income Payments. — The Company will pay to the Insured a monthly income of $10 per $1,000 of the face of the policy during his lifetime and continued disability beginning immediately on receipt of said proof. Any income payment due before the Company approves the proof of disability shall be payable upon such approval. If disability results from insanity, income payments under this section will be paid to the beneficiary in lieu of the Insured.

"(b) Waiver of premiums. — The Company will waive payment of any premium falling due after approval of said proof and during such disability. Any premium due prior to such approval is payable in accordance with the terms of the policy, but if due after receipt of proof will, if paid, be refunded upon approval of proof.

"4. In the event of default in payment of premium after the Insured has become totally disabled, the policy will be restored upon payment of arrears of premium with interest at 5%, provided due proof that the Insured is totally and presumably permanently disabled, as herein defined, is received by the Company not later than six months after said default and the benefits under this section shall then be the same as if said default had not occurred.

"5. It is further agreed that the total and irrecoverable loss of the sight of both eyes, or of the use of both hands or of both feet or of one hand and one foot shall be considered total and permanent disability.

"6. Recovery from Disability. — The Company may from time to time demand due proof of the continuance of total disability, but not oftener than once a year after it has continued for two full years. Upon failure to furnish such proof, or if at any time it shall appear to the Company that the Insured is able to engage in any occupation for remuneration or profit, no further income payments shall be made nor premiums waived.

"7. The sum payable in any settlement of the policy shall not be reduced by income payments made nor by premiums waived under the above provisions. Dividends, loan and surrender values shall be the same as if the waived premiums had been duly paid. If any benefit under this section is unpaid at the time of the Insured's death it shall be payable to the person entitled to the proceeds of the policy.

"8. These Disability Benefits will not apply if the disability of the Insured shall result from self inflicted injury or from military or naval service in time of war."

Section 2, entitled, "Double Indemnity," is as follows: "The provision for Double Indemnity Benefit on the first page hereof will not apply if the Insured's death resulted from self-destruction, whether sane or insane; from any violation of law by the Insured; from military or naval service in time of war; from engaging in riot or insurrection; from war or any act incident thereto; from engaging, as a passenger or otherwise, in submarine or aeronautic operations; or directly or indirectly from physical or mental infirmity, illness or disease of any kind. The Company shall have the right and opportunity to examine the body, and to make an autopsy unless prohibited by law."

The policy also contains the following clause as to incontestability: "This Policy shall be incontestable after two years from its date of issue except for non-payment of premium and except as to provisions and conditions relating to Disability and Double Indemnity Benefits."

Proof of total disability of the insured was made on June 25, 1925, and thereafter the insurer commenced the payment of monthly disability benefits as of January 1, 1925, and continued such payments until April 1, 1934, and during the same period waived the payment of the recurring annual premiums. Under date of April 30, 1934, the insurer addressed a joint letter to the insured and the beneficiary, notifying them that it had recently learned of certain misrepresentations made by the insured in his application for the policy, and because thereof it rescinded the provision for disability and double indemnity benefits contained in the policy and made a tender of the amount of all premiums paid for such benefits, with interest thereon from the date of receipt to the date of tender. The letter also notified the addressees that by reason of the rescission of the disability and double indemnity benefits, the annual premium under the policy was reduced to $323.70, and that the insurer had recalled its waiver of payment of the ten annual premiums due February 23, 1925, to February 23, 1934, inclusive, and demanded payment of same, totaling $3,237, within 30 days, or in default of such payment the insurer would declare the policy lapsed for nonpayment of premium. A further demand was made for a return to the insurer of the sum of $11,015.20, the total of the monthly disability benefits theretofore paid. This letter was received by Mary M. Thompson, acting as guardian of Joseph B. Thompson, who had become an incompetent person, and she replied thereto refusing to accept the tender made and denying the right of the insurer to make the demands contained in the letter. The cross-complaint further alleged that the insured had made certain material representations in his application for the policy which had been relied upon by the insurer in its issuance of the policy, and which were wholly untrue and constituted a fraud, entitling the insurer to cancel the policy, and for other relief about in accordance with the demands of the letter above mentioned, and that the insurer had only a short time prior to April 30, 1934, learned of said fraud.

The motions to dismiss the cross-complaint were presented upon two grounds — want of equity and the existence of an adequate remedy at law.

The main argument urged in support of the first ground is that the incontestable clause of the policy bars the Insurance Company from the relief sought. It is contended that the effect of this clause is to prevent any defense of nonliability as to the disability or double indemnity benefits, but only secures the insurer in the right, after the expiration of the two year period, to preserve all its rights incident to double indemnity and disability benefits recited in sections 1 and 2 of the policy. In opposition, the contention of the company is that the presence of the exception relating to double indemnity and...