Court Opinion

ID: 3518748
Source: CourtListenerOpinion
Date Created: 2016-07-05 22:30:23.006623+00
Date Added: 2024-06-11T14:05:49.606886
License: Public Domain

This case involves the construction of a fraternal life insurance policy which provided that "If his death shall *Page 761 
occur . . . in consequence of any violation of law . . . then said benefit certificate shall be null and void and of no effect." The insured died by legal execution, and suit is by the widow, as beneficiary. The by-laws, expressly made a part of the policy, contain the following provision: "Sec. 25. Incontestability. — After any certificate of insurance issued by this Society has been in force during the lifetime of the member for two full certificate years, it shall be incontestable except for nonpayment of premiums and except with respect to the provisions contained in any rider attached thereto providing for additional benefits, and except also for risks not assumed."
There is no disagreement as to the payment of premiums or is any other ground for avoidance asserted except the death in consequence of a violation of criminal law. Unless, therefore, death by execution is one of the "risks not assumed," the incontestable clause would bar a defense based upon that ground. Before considering this question, it is well to refer to the provision of the policy first above quoted. Consideration of this provision would require a construction of the words "in consequence of any violation of law . . ." and would invite a resolving of the uncertainty whether a legal execution of the insured is "a consequence" of his illegal act of murder within the meaning of the policy. This, we need not undertake, unless 1) the language compels the conclusion that such death is the consequence of his criminal act, and 2) it would be against our public policy to allow such risk to be assumed by the appellant. If it is not against our public policy, the question is open whether the insurer is barred from setting up the defense, in view of the incontestable clause.
If the risk of death at the hands of the law could be assumed, as not being a violation of public policy, then the exclusion of such risk must arise from the terms of the contract and, unless a defense based thereon is precluded by the incontestable clause, and provided it is *Page 762 
held a consequence of his criminal act, the beneficiary could not recover. If, therefore, it is a risk that could lawfully be assumed, a waiver of a defense based thereon could lawfully be made.
That such a risk is not against public policy is now abundantly established. Northwestern Mut. Life Ins. Co. v. Johnson,254 U.S. 96, 41 S. Ct. 47, 65 L. Ed. 155; Collins v. Metropolitan Life Ins. Co., 232 Ill. 37, 83 N.E. 542, 14 L.R.A. (N.S.), 356, 122 Am. St. Rep. 54, 13 Ann. Cas. 129; Fields v. Metropolitan Life Ins. Co.,147 Tenn. 464, 249 S.W. 798, 36 A.L.R. 1250 (with extensive annotation at page 1255).
Wherefore, such risk was one which the insurer could legally assume, and, regardless of whether the subsequent death was in consequence of a criminal act, the policy was a valid contract and as such remained in force for over twenty years. Circumstances which might have arisen subsequent to its lawful inception were such as be interposed as defenses to a suit upon the policy. Fraud in its procurement could be invoked to avoid liability under the policy. So also, the policy was subject to avoidance by subsequent events, such as non-payment of premiums, death by suicide, or in consequence of a criminal act. It would not be correct to say that the policy was never in force nor to say that the appellee, after the death of the insured, had no policy. Vetter v. Massachusetts Nat. Life Association, 29 A.D. 72, 51 N.Y.S. 393. The simple fact is that she did have such policy and sued upon it. That it is still a valid obligation could be shown by its terms, supported by proof that the premiums had been paid. It is not void per se but per quod. The questions here raised have to do with the insurer's contest. If it is to be avoided, the insurer must act. Under its policy it would have been free to contest it upon any proper grounds whether mentioned in the contract or not. Yet, it chose to waive such right by fixing a two year period of limitation within which alone it could contest its liability. Ramsey v. Old Colony *Page 763 
Life Ins. Co., 297 Ill. 592, 131 N.E. 108. See also numerous citations in the annotations found in 6 A.L.R. 441, 448; 13 Id., pp. 672, 674; 35 Id., p. 1491, 1493; Weeks v. New York Life Ins. Co., 128 S.C. 223 122 S.E. 586, 35 A.L.R. 1482, with annotation in 35 A.L.R. 1491, 1492.
The risk of death at some time was of course assumed by the insurer. But for the exceptions as to the cause of death, the insurer would be liable in the event of death, however caused, provided the policy was in force and there was no fraud or misrepresentation involved in its procurement. Yet, these are defenses against liability, in other words, bases for contesting liability. The appellant, however, has waived all defenses by making the policy incontestable after two years from its date, except as above noted. This clause is not an assurance against the results of crime but is assurance against the hazard of litigation. Mutual Ins. Co. of New York v. Lovejoy, 201 Ala. 337,78 So. 299, L.R.A. 1918D, 860; Supreme Lodge K.P. v. Overton,203 Ala. 193, 196, 82 So. 443, 445, 16 A.L.R. 649; United Order of the Golden Cross v. Overton, 203 Ala. 335, 83 So. 59, 13 A.L.R. 672.
Having put out of view the question whether death by execution is a risk excluded by public policy, the saving phrase "except also for risks not assumed" has no force except such as is found in specific exceptions in the contract or its attached riders, or such as would be held as contrary to public policy. The incontestable clause is to be read in connection with the other provisions of the policy which, but for the clause, would provide a ground for contest. It would be meaningless if the words "except for risks not assumed" preserved the right to contest all claims arising out of the risks which the contract specifically excluded. If it did not assume a certain risk, the words would be unnecessary with respect thereto. Thus Section 25 of the by-laws (except as to non-payment of premiums and special provisions in an attached rider) would mean nothing, for the policy could in no case be contestable for risks assumed, and the waiver of contestability *Page 764 
could refer only to those risks not assumed. As held in Sun Life Ins. Co. v. Taylor, 108 Ky. 408, 56 S.W. 668, 94 Am. St. Rep. 383, "The language providing that the policy should be incontestable does not restrict it to any particular ground of contest, but it is broad and comprehensive enough to embrace any and every defense which might have been made to it before the expiration" of the contestable period. It did not undertake to incur any risk imposed upon it by fraud or misrepresentation, nor the risk of insuring one who should later hasten the maturity of the risk by his own suicidal act. Nor for that matter did it intend to assume the risks falling within the meaning of the phrase "in consequence of any violation of criminal law." Yet it did assume the risk of its failure to contest its liability upon such grounds within the contractual period. It could interpose its contest upon any of those grounds provided it acted within the contestable two year period. As stated in American Nat. Ins. Co. v. Tabor, 111 Tex. 155, 230 S.W. 397, 399, dealing with an incontestable clause written into the contract by statute. "The subdivision allows the insuring company to fix a period of time, not to exceed two years, during which it may make fully available to itself all the legal consequences of fraud which ought to be discovered through the exercise of proper diligence; but, after the expiration of the period fixed, the subdivision eliminates all defenses, save those specially mentioned. The parties could not, by contract, put something into the policy which was repugnant to the mandatory statute, and thus destroy a benefit to the insured which the statute was designed to guarantee. Hence the attempted reservation by the insurer of the right to interpose fraud by way of defense to a suit to enforce payment of the policy after it had been issued more than two years was void."
Cases involving fraud would seem to present the strongest defense since it affects the validity of the policy ab initio. Yet, the incontestable clause has been held effective to bar a contest on such grounds. Metropolitan *Page 765 
Life Ins. Co. v. Peeler, 71 Okla. 238, 176 P. 939, 6 A.L.R. 441, which annotations at p. 452, also 13 A.L.R. 674, 675; Weeks v. New York Life Ins. Co., supra.
Suicide, involving as it does a deliberate act, and upon occasion done purposely to hasten maturity of the obligation, as well as inviting considerations of public policy, would seem also to challenge the power of the incontestable clause to forbid recovery. Yet, suicide has long since been accepted as one of the risks assumed by the insurer and subject to the incontestable clause. See authorities cited in preceding paragraph. Indeed, its mortality tables take such contingency into account. Jackson v. Loyal Additional Ben. Association, 140 Tenn. 495, 205 S.W. 318; Fields v. Metropolitan Life Ins. Co., supra.
There is no occasion to compare the relative risk of suicide against the possibility that the insured may, as an incident of his criminal act, be tried, convicted, sentenced, and executed. Arguments based upon the degree of risk are for the insurer in fixing its rates. Public policy is a matter for legislative inquiry and determination or judicial construction.
So that for two years the insurer retained the right to avoid the contract upon any proper contest. Thereafter, it could contest it only upon the grounds above set out, none of which are found here to exist. The circumstance that death is here traceable back to the crime of murder stimulates adverse reactions which are dissipated by the focused light of the general and now firmly established principle that such eventuality was a risk which the insured could assume, and also, even as in the case of suicide, could retain as a basis for a future contest. Such right of contest could in turn be waived either by a failure to include it within the excepted risks assumed, or by restricting its right to assert such contest within the period of the incontestable clause.
The waiver, therefore, includes the right to contest the policy upon the ground that the insured came to his death in consequence of a violation of criminal law. *Page 766 
United Order of the Golden Cross v. Overton, supra; Philadelphia Life Ins. Co. v. Arnold, 97 S.C. 418, 81 S.E. 964, Ann. Cas. 1916C, 706; Ex parte Weil, 201 Ala. 409, 78 So. 528; Weil v. Travelers' Ins. Co., 16 Ala. App. 641, 80 So. 348; Murphy v. Metropolitan Life Ins. Co., 152 Ga. 393, 110 S.E. 178; Supreme Lodge K.P. v. Overton, supra; Sandel v. Philadelphia Life Ins. Co., 128 S.C. 239, 122 S.E. 591; Weil v. Travelers Ins. Co.,16 Ala. App. 641, 80 So. 352; Sun Life Insurance Co. v. Taylor, supra; Fields v. Metropolitan Life Ins. Co., supra; Weeks v. New York Life Ins. Co., supra; Mutual Life Ins. Co. of New York v. Lovejoy, supra; Kelly v. North American Union, 146 Ill. App. 611; Hanisch v. North American Union, 170 Ill. App. 79; Cooley, Briefs on Insurance, (2d Ed.), Vol. 6, p. 5201; 29 Am. Jur., Insurance, Sec. 886, p. 680.
Lavender v. Volunteer Life Insurance Co., 171 Miss. 169157 So. 101, 104, should be noticed. The insured was killed as a result of a violation of law. The policy contained a rider providing for double indemnity in the event of accidental death. This rider, only, referred to death from such cause. The face of the policy was paid despite death resulting from such cause and the contest was directed solely to the double indemnity contract. The language of the rider was "This agreement to pay double the amount insured in event of death as above recited does not cover . . . death resulting from any violation of the law . . ." The Court stated "In other words, the double indemnity clause did not insure against a death resulting from said causes."
It will be seen therefore that death from such cause was not only a risk not assumed but one which was affirmatively excluded. In Scarborough v. American Nat. Insurance Co., 171 N.C. 353,88 S.E. 482, L.R.A. 1918A, 896, Ann. Cas. 1917D 1181 death by legal execution was excluded from the risks assumed under the mandate of a recognized public policy. This case is typical of the earlier cases which excluded this risk as against public *Page 767 
policy and which have been later repudiated as shown by the annotated cases above set forth. Yet it is in point as showing that the risk was one that was positively excluded.
It is not enough that the policy state that fraud or death by suicide or by legal execution will render the policy void. Avoidance is a matter of defense. But for the incontestable clause such defenses would be available to the insurer. If the risk was, as in the Lavender case, never assumed, the incontestable clause could not be construed as importing such additional risk into the contract. This is likewise true when suicide is expressly excluded. Hearin v. Standard Life Ins. Co. (D.C.), 8 F.2d 202.
There is a difference between defenses which raise an issue whether there ever was a contract, and on the other hand those which seek to avoid liability on a policy admittedly valid in its inception. Between the extremes represented by those cases where provisions for avoidance are contrasted with specific exclusions from the area risks assumed, as in the Lavender case, there are cases where the language employed is susceptible of classification in either group. These cases call into play the principle requiring a construction favorable to the beneficiary. Illustration is found in Hurt v. New York Life Insurance Co., 10 Cir., 51 F.2d 936; Id., 10 Cir., 53 F.2d 453; Id.,285 U.S. 541, 52 S. Ct. 313, 76 L. Ed. 934, where the policy provided that the insurance "shall not take effect" unless the applicant had not consulted or been treated by a physician since her medical examination. An incontestable clause was held a bar to any attempt to establish such defense. This language goes much farther toward actual exclusion of the risk than that used in the case at bar.
Likewise, it was shown in Perilstein v. Prudential Insurance Co. of America, 345 Pa. 604, 29 A.2d 487, that there is a distinction between matters of defense going to the whole policy and provisions which specifically exclude *Page 768 
excepted risks (citing Williston, Contracts, Edn. 1936, Sec. 811, p. 2280). The point is clarified in Carothers v. Atlanta Life Insurance Co., 178 Tenn. 485, 159 S.W.2d 830, where it was held that the incontestable clause did not prevent a defense to suit based upon an excepted risk but was effective to bar a defense invoking invalidity at the inception of the policy, or where it became invalid by reason of a condition subsequently broken. Citing Metropolitan Life Insurance Co. v. Conway,252 N.Y. 449, 169 N.E. 642.
In Sun Life Insurance Co. v. Taylor, supra, the policy provided, as here, that death in consequence of the criminal act of insured would render the policy void. Yet, an incontestable clause was effective to prevent a contest on such ground, as against the contention that it would be incontestable only as to fraud and other causes existing at the date of the contract. As said in the Lovejoy case, supra [201 Ala. 337, 78 So. 303], "It (the incontestable clause) was not an agreement to pay him, his estate, or the beneficiary, that amount if he committed suicide or was executed by virtue of the criminal law, or in any other manner contributed to his own death. The company merely agreed and bound itself that it would not litigate any of these questions, though without the incontestable clause they would be a defense. To say that the clause applies to all other defenses except suicide while sane, or death by wrongful, criminal act of the insured, is to read into the policy terms which are not there, and which the very language of the policy excludes."
So it is revealed that such provisions are not self-executing. Liability is to be avoided, if at all, by a litigated contest upon this ground. A defense based on such condition is affirmative and requires strict proof. Cooley, op. cit., supra, Vol. 6, p. 5202. We quote further from the Lovejoy case, supra: "These incontestable clauses are material and valuable provisions in contracts of life insurance. They are stressed by insurance companies as *Page 769 
being valuable to the insured or to the beneficiary, because affording the assurance that if the insured lives up to his contract the company will not, upon his death, contest the payment of the amount agreed to be paid, though without such provision the company would have a good defense. It would not do to treat such clauses as mere glittering generalities, inserted in the contract by the insured to induce persons to insure in the company offering same, rather than in a company not so in advance agreeing to waive all defenses, except those specified, and then allow the insurer to defend, as if it had not, for a consideration, agreed to waive its right to defend. Unquestionably, the insurance company can waive any defense after death; and we see no reason why it cannot, as a part of the contract, waive before death the right to defend"; and again later in the opinion: "All the cases seem to hold that, where the policy provides that after a year or more the policy shall be incontestable except for certain grounds specified, and that time has elapsed, and none of the grounds excepted exists, then the policy will be given effect as it is written, and that it is incontestable on the ground of suicide or that of capital execution." To like effect are Supreme Conclave Improved Order of Heptasophs of Baltimore City v. Miles, 92 Md. 613, 48 A. 845, 84 Am. St. Rep. 528, 554; Goodwin v. Provident, etc., Assn., 97 Iowa 226, 66 N.W. 157, 32 L.R.A. 473, 59 Am. St. Rep. 411; Patterson v. Natural Premium Mutual Life Ins. Co., 100 Wis. 118, 75 N.W. 980, 42 L.R.A. 253, 69 Am. St. Rep., 899; Mareck v. Mutual, etc., Assn., 62 Minn. 39, 64 N.W. 68, 54 Am. St. Rep. 613; Mutual Reserve Fund, etc., Assn. v. Payne (Tex. Civ. App.), 32 S.W. 1063. Mr. Justice Holmes, in discussing the effect of the incontestable clause, said in Northwestern Mutual Life Ins. Co. v. Johnson, 254 U.S. 96, 41 S. Ct. 47, 49, 65 L. Ed. 155, 159, "The object of the clause is plain and laudable — to create an absolute assurance of the benefit, as free as may be from any dispute of fact except the fact of death." *Page 770 
So in Simpson v. Life Insurance Co. of Virginia, 115 N.C. 393,20 S.E. 517, the Court, in upholding the definition of the word "incontestable" as one "subject to no condition whatever," stated: "The quality of incontestability could with no propriety be predicated of this contract of insurance if it was still allowed to the insurer to dispute its liability to the insured for the `amount of the insurance' upon the ground that the death was caused `by the use of intoxicating liquor, or by opium, or from the violation of law, or any condition or agreement contained in this policy, or the application upon which this policy is issued.' And yet, if it may now, under its contract, contest with this beneficiary as to its liability for the amount of the insurance upon the allegation that the deceased committed suicide, it may contest with beneficiaries under other similar contracts upon the grounds enumerated above. If this can be done, the policy is certainly not incontestable, for the whole field of dispute would then be open to the defendant."
In Mutual Reserve Fund Life Ass'n v. Austin, 1 Cir., 142 F. 398, 401, 6 L.R.A. (N.S.) 1064, the language used was "The term `incontestable' is of great breadth. It is the `policy' which is to be incontestable. We think the language broad enough to cover all grounds for contest not specifically excepted in that clause."
These views find summary support in Cooley, op. cit., supra, Vol. 5, p. 4489, where it is stated: "It is of course evident that if the insured is still living at the expiration of the period fixed by the incontestable clause, the insurer cannot thereafter dispute the policy on any ground not excepted by the clause." This distinguished authority also supports the view that the incontestable clause abrogates an exception based on a provision that the policy shall become void if the insured dies while engaged in a violation of law.
It is our conclusion, therefore, that the judgment of the trial court ought to be, and it is, affirmed.
Affirmed. *Page 771