United Insurance Company v. Massey

• Decision Date: 16 June 1932
• Citation: 159 Va. 832
• Parties: UNITED SECURITY LIFE INSURANCE AND TRUST COMPANY OF PENN., ETC. v. JOHN W. MASSEY AND RUBY O. PROCTOR, ADMINISTRATORS OF CHARLES O. PROCTOR, DECEASED, ET ALS.
• Court: Virginia Supreme Court

Page 832

159 Va. 832

UNITED SECURITY LIFE INSURANCE AND TRUST COMPANY OF PENN., ETC. v. JOHN W. MASSEY AND RUBY O. PROCTOR, ADMINISTRATORS OF CHARLES O. PROCTOR, DECEASED, ET ALS.

Supreme Court of Virginia, Wythebille.

June 16, 1932.

REHEARD January 12, 1933.

Present, Holt, Epes, Hudgins, Gregory and Browning, JJ.

1. LIFE INSURANCE — Application for Life Insurance — Application a Part of the Contract of Insurance. — An application is a part of the contract of insurance, and is to be read and construed in connection with the policy and other papers, if any, constituting the contract, where it and the policy and other papers are executed simultaneously as parts of one transaction, or where an intent to make the application a part of the policy appears, as where the policy refers to the application and expressly makes it a part of the policy.

2. LIFE INSURANCE — Endowment Policy — Limitation in Policy — Employment on Railroad — Case at Bar. — In the instant case an insurance company entered into a contract with the assured under which the company paid to the assured the face value of the policy, $5,000.00. The assured was to repay the company in monthly payments, continuing for fifteen years, if he should live so long, otherwise, so long as he lived. To secure the monthly payments the assured executed a bond of $10,000.00 and a deed of trust on his real estate. If assured died within the fifteen year period, the contract provided that the company would release the deed and return the bond to the wife of the assured, provided the terms of the contract were kept and performed by the assured. The assured was killed while serving as conductor on a railway train. The policy provided that the assured should not engage in service on any railway train, and upon his failure to keep this term of the contract, the contract should become null and void.

Held: That the insurer and the assured undoubtedly had the right to contract as they did, in the absence of any statutory provision to the contrary, provided their obligations were consistent with public policy; that the contract was valid and binding upon the parties and must be enforced unless it contravened the provisions of section 4228 of the Code of 1919.

3. LIFE INSURANCE — Exceptions from Risk — Right to Make Exceptions. — An insurer of life may, of course, make such exceptions from the risk assumed as it sees fit.

4. LIFE INSURANCE — Exception of Liability in Case Assured's Death Occurred in the Service of a Railway Train — Section 4228 of the Code of 1919, Providing that Policies Shall Be Incontestable after a Year — Case at Bar. — In the instant case the life insurance policy in question limited its coverage by excepting from its operation and effect the assured, if he should engage in service on a railroad train. The engagement in such service ipso facto put him outside the folds of the protection of the policy. Assured violated his warranty by engaging in service on a railroad train and thereby lost his life. The hazards of railway service were never assumed by the insurer because they were expressly excepted.

Held: That there was no inconsistency between the Virginia incontestable statutory provision (section 4228 of the Code of 1919) and the excepted risk provisions in the policy. The incontestable provision is not a mandate as to coverage, a definition of the hazards to be borne by the insurer.

5. LIFE INSURANCE — Incontestable Statutory Provision, Section 4228 of the Code of 1919 — Section 4228 of the Code of 1919 Not Meant to Stifle Free Right of Contract. — Life insurance is one of the great business of the world. Its use is universal and its existence in any particular instance is effectible by contractual relations. To say that by an incontestable statutory provision, such as is found in the Code of 1919, section 4228, the legislature meant to stifle and suppress the free and lawful employment and exercise of such relations, would be to go further than the courts should go by warrant of law or justification of reason.

6. LIFE INSURANCE — Incontestable Statutory Provision, Section 4228 of the Code of 1919 — Effect of the Statute. — Under section 4228 of the Code of 1919 the validity of the contract of life insurance as such, the truthfulness of the answers to the questions propounded to the applicant, and such like things cannot be questioned by the insurer as a defense against the policy, after the expiration of what some of the courts have termed "a short statute of limitations."

7. LIFE INSURANCE — Endowment Policy — Limitation in Policy — Employment on Railroad — Bond Given by Assured to Secure Payment of Premiums Where Assured Received Face Value of Policy — Case at Bar. — In the instant case an insurance company entered into a contract with the assured under which the company paid to the assured the face value of the policy, $5,000.00. The assured was to repay the company in monthly payments, continuing for fifteen years, if he should live so long, otherwise, so long as he lived. To secure the monthly payments the assured executed a bond of $10,000.00 and a deed of trust on his real estate. If the assured died within the fifteen-year period, the contract provided that the company would release the deed and return the bond to the wife of the assured, provided the terms of the contract were kept and performed by the assured. The policy also provided that in case of death at any time in consequence of a violation of law, then the above-mentioned bond shall at once, at the option of the said party of the second part, become due and payable for the amount shown to be then due by the table on the back of the agreement.

Held: That this provision was in the nature of a penalty providing a means for the immediate collection of the bond and did not have the effect of giving the insurance company the option to declare the policy void.

8. LIFE INSURANCE — Application — Non-Delivery of Application with Policy. — The non-delivery of the application for a life insurance policy, with the policy, to the assured, does not preclude the insurer from relying upon the application as a part of the contract, where the assured executed the application, and each instrument by reference and adoption, connected the one with the other by express terms.

ON REHEARING.

RICHMOND, JANUARY 12, 1933.

Present, All the Justices.

9. LIFE INSURANCE — Liability of Insurance Company — Death from Risk Not Covered by the Policy — Incontestable Provision of Section 4228 of the Code of 1930 — What Constitutes a Contest. — It is perfectly plain that an insurance company is not liable for a loss not covered by its policy, and a denial of liability for a loss not covered by the policy will not constitute a contest. But if liability were denied because of some condition subsequent broken, that would be a contest within the purview of section 4228 of the Code of 1930.

10. LIFE INSURANCE — Incontestable Provision in Section 4228 of the Code of 1930 — Coverage — Conditions Broken. — The incontestable provision contained in section 4228 of the Code of 1930 nowhere undertakes to define risks not assumed, and has nothing at all to do with coverage. It does apply, however, to conditions broken.

11. LIFE INSURANCE — Incontestable Policy — Condition Subsequent. — A condition subsequent broken cannot be availed of where a policy is incontestable upon its face, and for a like reason it is unavailable when made so by statute.

12. LIFE INSURANCE — Incontestable Policy — Section 4228 of the Code of 1930 — Case at Bar. — In the instant case appellant, a life insurance company, sought in a chancery suit the cancellation of an insurance agreement. The policy in question was a flat contract of insurance. In its inception no exceptions appear upon its face, and if defeated it must be, not because of original reservations, but because of some covenant broken. The latter possibility is one which the statute (section 4228 of the Code of 1930) was designed to meet.

13. DEMURRERS — Charges in Bill Accepted as True. — On demurrer the charges in the bill must be accepted as true.

14. LIFE INSURANCE — Application — Warranty of Answer — Statement by Assured that He Was a Lawyer — Assured in Reality a Railroad Conductor — Case at Bar. — In the instant case the assured in his application said that he was a lawyer, whereas in fact he was at that time in the forbidden railway service as a railroad conducter or brakeman. He warranted his answer as to occupation and made it part of the policy. It was material to the risk, untrue, and made the contract voidable from its inception. Code of 1930, section 4220. Under section 4228 of the Code of 1930 the company had one year in which to ascertain the facts and to act thereon. Having failed to act it must forever after hold its peace. The statute does not deal with rights of litigants, but is one of limitation, wisely conceived and to be liberally construed. If it did not apply to false warranties and to conditions broken, it would be of little value.

Appeal from a decree of the Circuit Court of the city of Newport News. Decree for defendants. Complainant appeals.

The opinion states the case.

Lett, Murray & Ford, for the appellant.

J. Winston Read, J. Winston Read, Jr., and John W. Massey, for the appellees.

BROWNING, J., delivered the opinion of the court.

On the 24th day of October, 1927, Charles O. Proctor made application to the United Security Life Insurance and Trust Company of Pennsylvania, appellant, for a fifteen year endowment life insurance contract, and on the 10th day of November, 1927, pursuant thereto, the company entered into an insurance contract with him, which was, in form, rather unusual and unique. It was, however, its accustomed method of business with its insured. The face value of the policy or contract was $5,000.00, which amount was at once advanced to Proctor, and which he was to repay to the company in monthly payments of...