Wilmington Trust Co. v. Mutual Life Ins. Co.

• Decision Date: 27 September 1946
• Docket Number: No. 499.,499.
• Parties: WILMINGTON TRUST CO. v. MUTUAL LIFE INS. CO. OF NEW YORK.
• Court: U.S. District Court — District of Delaware

68 F. Supp. 83

WILMINGTON TRUST CO. v. MUTUAL LIFE INS. CO. OF NEW YORK.

No. 499.

District Court, D. Delaware.

September 27, 1946.

E. Ennalls Berl, William S. Potter, and Vincent A. Theisen (of Southerland, Berl & Potter), of Wilmington, Del., and Donovan, Leisure, Newton & Lumbard, of New York City, for plaintiff.

James R. Morford (of Marvel & Morford), of Wilmington, Del., and Charles I. Thompson, of Philadelphia, Pa., for defendant.

LEAHY, District Judge.

This is a suit by plaintiff as executor for recovery under two life insurance policies. On June 26, 1935, defendant issued two endowment policies for $100,000 to Richard C. duPont. On September 11, 1943, the insured was killed as a result of riding as an observer in the testing of an army experimental transport glider.

Each policy contained a limiting endorsement in the form of an aviation rider which provided: "Death as a result of operating or riding in any kind of aircraft * * * is a risk not assumed under this Policy and if the Insured shall die as a result, directly or indirectly, of such operating or riding in an aircraft the amount payable shall be limited to the reserve held at the date of death for the face amount of this Policy and for any dividend additions." Defendant has tendered plaintiff $48,517.84, the total premiums paid with compound interest at 3%. The single question, arising on cross-motions for summary judgment, is whether defendant may in Delaware limit its policies of insurance to exclude liability to pay the face of the policies under the circumstances found in the case at bar. The policies were delivered and the premiums paid in Delaware. These contracts are therefore governed by Delaware law.

Under the Delaware law, Rev.Code of Delaware 1935, paragraph 496, Sec. 35, an incontestable clause is a required standard provision which must be in all policies issuing in Delaware. The statute provides: "A provision that * * * the policy * * * shall be incontestable after it has been in force during the lifetime of the insured for a period of not more than two years from its date, except for non-payment of premiums and except for violations of the conditions of the policy relating to naval or military service in time of war and, at the option of the company, provisions relative to benefits in the event of total and permanent disability and provisions which grant additional insurance specifically against death by accident may also be excepted." The policies in suit contained the required incontestable clause. In Sec. 12 of each policy it is provided: "Except for non-payment of premiums, this Policy shall be incontestable after one year from its date of issue unless the Insured dies in such year, in which event it shall be incontestable after two years from its date of issue."

From defendant's point of view the aviation rider attempts to define what risks it will not assume under the policy. The question is whether the Delaware statute and the incontestable clause in the policies bar defendant's right to rely on the aviation rider.

Plaintiff states its contention in this fashion: That the aviation exception in the policies in suit was operative only during the first policy year, during which period the policies remained contestable, i. e., plaintiff's position is that the policies were delivered in Delaware and since the Delaware statute provides for incontestability after a stated period, subject to four exceptions specified in the statute, the rule of expressio unius precludes the insurer from relying upon a further exception not authorized by the statute.

The excellent briefs filed by the parties show the great contrariety of judicial discussion which has occurred on or about statutory¹ and non-statutory incontestability provisions².

Jurisdiction is based upon diversity and Delaware law accordingly controls. Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. Absent any direct or indirect Delaware authority, it is necessary to consider what a Delaware court probably would decide in the light of the available facts.³ Stentor Electric Mfg. Co. v. Klaxon Co., 3 Cir., 125 F.2d 820. First, it becomes necessary, therefore, to examine the matter of principle underlying the problem presented by the instant case.

That a policy is incontestable means that its validity can not be questioned, usually after a certain period of time as fixed by statute or by a provision in the policy of insurance itself. Incontestability has nothing whatever to do with the extent or limits of coverage agreed to between the parties to the insurance contract. Every court, our analysis discloses, has so interpreted incontestability where the matter was directly in issue. See, Head v. New York Life Ins. Co. (Head v. Hartford Accident Indemnity Co.), 10 Cir., 43 F.2d 517, 520; Metropolitan Life Ins. Co. v. Conway, 252 N.Y. 449, 169 N.E. 642; Woodbery v. New York Life Ins. Co., 129 Misc. 365, 221 N.Y. S. 357; Flannagan v. Provident Life & Accident Ins. Co., 4 Cir., 22 F.2d 136; Mack v. Connecticut General Life Ins. Co. of Hartford, 8 Cir., 12 F.2d 416; Field v. Western Indemnity Co., Tex.Civ.App., 227 S.W. 530; Murphy v. Travelers' Ins. Co., 134 Misc. 238, 234 N.Y.S. 278. The doctrine of these cases is that the legislative policy behind incontestability clauses is to eliminate the right to question the validity of the policy after the lapse of time, except in the specific situations excepted in the statutes pertaining to incontestability. It is a non-sequitur to say that because validity after the passage of time can only be questioned within certain statutory exceptions that the insurance company must and can not, in the first instance, contract relative to its limit of coverage. What the Legislature has said is that no matter what risk you assume, your Insurance Company can only question validity, after the passage of time, in certain respects; it has not said and it does not follow that you must issue a policy, if it is to be issued at all, covering every conceivable risk, except those mentioned in statutes governing incontestability. The two situations are wholly separate and distinct.

The business of writing insurance is generally said to be "affected with the public interest". Hence, it is probable that a Legislature could constitutionally require as a condition of doing business in a particular state that all matters excepted should go to both validity and coverage. But, it would appear such a legislative intention should be expressed in unmistakably clear language, for the result would be a legal anomaly; i. e., during the first year of the policy, the Insurance Company would be liable for risks A and B, and, after the expiration of the two-year period, for example, such a company would be liable for risks A and B and, also, C, D, and E to infinity.

The leading case upon the question whether an aviation rider is consistent with an incontestable statute is Metropolitan Life Ins. Co. v. Conway, 252 N.Y. 449, 169 N.E. 642. The statute there involved was substantially similar, if not almost identical, to the Delaware statute. This case is authority for the conclusions already stated. Mr. Justice Cardozo, then Judge, wrote the opinion for a unanimous court. He said: "The provision that a policy shall be incontestable after it has been in force during the lifetime of the insured for a period of two years is not a mandate as to coverage, a definition of the hazards to be borne by the insurer. It means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid in its inception, or thereafter became invalid by reason of a condition. * * *

"The meaning of the statute in that regard is not changed by its exceptions. A contest is prohibited in respect of the validity of a policy, `except for non-payment of premiums and except for violation of the conditions of the policy relating to military or naval service in time of war' (Sec. 101, subd. 2). Here again we must distinguish between a denial of coverage and a defense of invalidity. Provisions are not unusual that an insured entering the military or naval service shall forfeit his insurance. A condition of that order is more than a limitation of the risk. In the event of violation, the policy, at the election of the insurer, is avoided altogether, and this though the death is unrelated to the breach. No such result follows where there is a mere restriction as to coverage. The policy is still valid in respect of risks assumed."⁴

In Pacific Mutual Life Insurance Co. of California v. Fishback, 171 Wash. 244, 17 P.2d 841, 842, the court said of the aviation rider: "It is merely a part of the definition or description of the risk or hazard assumed by the insurance company. The language is, with reference to death occurring under any of the specified conditions, `is a risk not assumed under this policy.' It seems plain to us that a risk `not assumed' by such express language is a matter not at all inconsistent with the required statutory incontestable provision, and that the resisting by an insurance company of a claim for loss which by such express terms of the policy is `not assumed' by the insurance company is not a contesting of the policy within the meaning of the statutory incontestable clause required to be embodied therein."

Validity, in short, has nothing whatever to do with the risk and does not dictate the quantum of risk which a company must assume by agreement with the insured.

Plaintiff urges us to follow a contra doctrine to the Conway case, found in, at least, three comparatively recent decisions. These are: United States v. Patryas, 303 U.S. 341, 58 S.Ct. 551, 82 L.Ed. 883; Bernier v. Pacific Mutual Life Ins. Co. of California, 173 La. 1078, 139 So. 629, 88 A.L.R. 765; State ex rel. Republic Nat. Life Ins. Co. v. Smrha, 138 Neb. 484, 293 N.W. 372.

United States v. Patryas is of little...