Case Name: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Appellant, v. Clyda TARRENCE, Appellee
Court: United States Court of Appeals for the Sixth Circuit
Jurisdiction: United States
Decision Date: 1957-05-15
Citations: 244 F.2d 86
Docket Number: No. 12940
Parties: JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Appellant, v. Clyda TARRENCE, Appellee.
Judges: 
Reporter: Federal Reporter 2d Series
Volume: 244
Pages: 86–90

Head Matter:
JOHN HANCOCK MUTUAL LIFE INSURANCE COMPANY, Appellant, v. Clyda TARRENCE, Appellee.
No. 12940.
United States Court of Appeals Sixth Circuit.
May 15, 1957.
Martin, Circuit Judge, dissented.
See also D.C., 126 F.Supp. 752.
Thomas W. Bullitt, Louisville, Ky. (Wm. Marshall Bullitt, M. Brooks Senn (of Bullitt, Dawson & Tarrant), Louisville, Ky., on the brief), for appellant.
Sandy Paniello, Louisville, Ky., for appellee.
Before SIMONS, Chief Judge, and MARTIN and STEWART, Circuit Judges.

Opinion:
STEWART, Circuit Judge.
In this case a Kentucky district judge was called upon to resolve a narrow and elusive question of New York law. His decision is now reviewed by a court composed of judges from Michigan, Tennessee and Ohio. Such an anomaly, though not unfamiliar, is never fortunate.
The facts are not in dispute. The ap-pellee was the beneficiary of life insurance policies aggregating $9,300, issued by the appellant company on the life of her husband, Roy Tarrence. The policies had been issued pursuant to a prior group policy, which provided that they should "be deemed to be issued and delivered in the State of New York and shall be construed according to the law thereof." In 1953 Roy Tarrence was convicted of murder and sentenced to death. He was executed by electrocution in the state penitentiary at Eddyville, Kentucky, in 1955. The insurance policies contained two-year incontestability clauses, and it is undisputed that the period of contestability had elapsed prior to Tarrence's death.
The appellant refused payment under the policies, and the appellee sued to recover in a Kentucky state court. The cause was removed by the appellant to the District Court for the Western District of Kentucky. There both parties filed motions for summary judgment. They were in agreement, as the district judge stated, "that the case presents the sole and single question of whether under the law of New York death by lawful execution for crime committed avoids liability for death benefits under a policy of life insurance as being against public policy." [139 F.Supp. 770.] The court granted judgment for the appellee, relying upon a 1942 decision of the District Court for the Eastern District of New York, Prudential Ins. Co. of America v. Goldstein, 43 F.Supp. 765.
The facts in the Goldstein case were substantially the same as those presented here. In that case, as in this, the insurance policy contained a clause making it incontestable at the time of the death of the insured. There as here the victim of the murder for which the insured had been executed was a stranger to the insurance contract. Finding nothing in the law or public policy of New York which would prevent recovery under these circumstances, the court in the Goldstein case decided in favor of the insurance beneficiary.
Counsel for the appellant, in elaborate briefs and extensive and able oral argument, vigorously maintains that the Goldstein case does not express the law of New York upon the question in issue. The true rule, according to the appellant, is to be found in an earlier decision of an intermediate appellate court of New York, Smith v. Metropolitan Life Ins. Co., 2d Dept. 1925, 125 Misc. 670, 211 N.Y.S. 755, "the only New York ease on the question," denying recovery where the insured died by lawful execution. It is strenuously argued that in deciding the Goldstein case the District Court for the Eastern District of New York failed to follow the law of New York expressed in the Smith case, although its duty to follow a decision of an intermediate state appellate court in a diversity case, the highest court of the state not having spoken on the question, was absolute. West v. American Tel. & Tel. Co., 1940, 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139. Therefore, the appellant argues, to discover the law of New York, the district court in the present case should have disregarded Gold-stein and looked instead to Smith.
The appellant's basic premise is, of course, entirely sound. There can no longer be any question of the unqualified obligation of a district court in a diversity case to follow the law expressed by an intermediate state appellate court, if the state's highest court has not declared it, and to do so even if the federal court may think the law as so expressed is unsound in principle. West v. American Tel. & Tel. Co., supra; Six Companies v. Joint Highway Dist., 1940, 311 U.S. 180, 61 S.Ct. 186, 85 L.Ed. 114; Fidelity Union Trust Co. v. Field, 1940, 311 U.S. 169, 61 S.Ct. 176, 85 L.Ed. 109.
We cannot agree, however, that in deciding Prudential Ins. Co. of America v. Goldstein, the district judge disregarded this obligation. The Supreme Court's decisions in West v. American Tel. & Tel. Co., supra, Six Companies v. Joint Highway Dist., supra, and Fidelity Union Trust Co. v. Field, supra, had been announced more than a year before Judge Moscowitz was called upon to decide the Goldstein case, and there is no reason to suppose that he was unmindful of their teaching. In reaching his decision in the Goldstein case, Judge Moscowitz gave explicit consideration to Smith v. Metropolitan Life Ins. Co. and concluded that it was inapplicable upon the facts, D.C., 43 F.Supp. 766-767.
The Smith case did involve facts substantially different from those presented in the Goldstein case and the case at bar. In Smith the insured had been executed for murdering the beneficiary. Upon the death of the beneficiary the proceeds of the policy became payable to the insured's estate. To permit an insured to enrich his estate by murder-, ing the beneficiary named in the policy was declared to. be contrary to the public policy of New York. It is also noteworthy that in deciding the Smith case the New York appellate court assumed that the insurance policy there in question did not contain an incontestable clause. 125 Misc. 676, 211 N.Y.S. 761. By contrast the policies in the present case contained clauses providing: "This policy, except any supplementary provision hereof granting any additional insurance specifically against death by accidental means, shall be incontestable after it has been in force during the lifetime of the insured for two years from its effective date of issue, except for non-payment of premium." While the Smith opinion discusses cases from other jurisdictions expressing conflicting views upon the issue of whether an incontestable clause permits recovery where the insured meets death by suicide or lawful execution after the period of contestability has elapsed, the court in the Smith case was not faced with this issue and did not rule upon it.
Moreover, it is clear that the decision in the Smith case is not, as the appellant argues, premised upon the theory that death by lawful execution is a risk which the insurer never assumes in New York as a matter of law. Although recovery by the insured's estate was denied, the court declared that "the rule is otherwise if the policy be payable to a beneficiary who has a vested interest." 125 Misc. 678, 211 N.Y.S. 763. That statement is inconsistent with the view that the risk was not one assumed under the policy as a matter of law. Compare Scarborough v. American Nat. Ins. Co., 1916, 171 N.C. 353, 88 S.E. 482, L.R.A.1918A, 896, and Collins v Metropolitan Life Ins. Co., 1905, 27 Pa.Super. 353.
The Goldstein case is thus the only decision directly in point upon the precise question of New York law here in issue. It was decided by a court "in effect, only another court of the State," Guaranty Trust Co. of N. Y. v. York, 1945, 326 U.S. 99, 108, 65 S.Ct. 1464, 1469, 89 L.Ed. 2079, by a federal judge versed in the law of that state. The district court in the present case correctly followed that decision. MacGregor v. State Mut. Life Assurance Co., 1942, 315 U.S. 280, 62 S.Ct. 607, 86 L.Ed. 846. See Steele v. General Mills, 1947, 329 U.S. 433, 439, 67 S.Ct. 433, 91 L.Ed. 402; Hillsborough Tp., Somerset County v. Cromwell, 1946, 326, U.S. 620, 630, 66 S.Ct. 445, 90 L.Ed. 358.
The authority of the Goldstein case was not impaired by the later decision of the Appellate Division in Udisky v. Metropolitan Life Ins. Co., 2d Dept. 1942, 264 App.Div. 890, 35 N.Y.S.2d 1021, reversing Udisky v. Metropolitan Life Ins. Co., 1941, 177 Misc. 960, 32 N.Y.S.2d 579, cited in the Goldstein opinion. The question in Udisky was whether there could be recovery of double indemnity for accidental death of an insured who died while in the commission of a felony. The insurer had paid single benefits under the policy without dispute. See Udisky v. Metropolitan Life Ins. Co., Sup., 1945, 54 N.Y.S.2d 732 (Referee's opinion upon remand). The Appellate Division simply held that New York public policy as expressed in Jacob v. Prudential Ins. Co. of America, 4th. Dept., 256 App.Div. 884, 9 N.Y.S.2d 27, affirmed 1939, 281 N.Y. 623, 22 N.E.2d 177 (disallowing recovery of double indemnity where the insured had died: while submitting to an illegal operation) had not been changed by the New York. Legislature
It follows that the district court correctly discerned and correctly applied the: law and public policy of New York.
The judgment is affirmed.
. New York Insurance Code, McK.Consol.Laws, c. 28, § 155(1) (b), while making mandatory a two-year incontestable clause in life insurance policies, does not require that such a clause be applicable to double indemnity provisions.
. Although the question was not discussed in the district court, it appears that the conclusion reached is in accord with the public policy of the forum. Sun Life Ins. Co. v. Taylor, 1900, 108 Ky. 408, 56 S.W. 668.