Court Opinion

ID: 9639813
Source: CourtListenerOpinion
Date Created: 2023-08-22 16:48:59.067182+00
Date Added: 2024-06-11T17:23:26.181341
License: Public Domain

WILBUR, Circuit Judge
(concurring).
I concur in the reversal for the following reasons:
This action was brought by the New York Life Insurance Company of New York to cancel a reinstatement after lapsation of two insurance policies of life and health, issued to Samuel L. Waterman, the appellee, upon the ground that such reinstatement was procured by fraudulent representation concerning his condition of health and insurability.
The trial court sustained a motion to dismiss upon the ground that the period of two years fixed in the insurance policy for contest had expired long before the reinstatement occurred and that the policy became incontestable for past or future fraud when that period expired. The Insurance Company has appealed from the judgment of dismissal.
The appellant contends that under a logical interpretation of the policies it had a reasonable period after the reinstatement to investigate the truth of the representations made to secure its consent to the reinstatement and that it made the investigation within a reasonable time, and that when it discovered the fraud it promptly gave notice of rescission and brought this action to rescind. It also contends that the state of New York is the place of performance of the insurance policy, and that under the law of California, where the policy was delivered, the law of the place of performance controls in the interpretation of the contract and, consequently, the incontestability clause must be interpreted in accordance with the law of New York, which it claims makes the incontestability clause also applicable to the reinstatement and thus fixes a period of not exceeding the two years specified in the policy wherein the Insurance Company may contest the reinstatement of the policies upon the ground that such reinstatement was procured by fraud.
The appellee contends that the incontestability clause prevents contest of the policy on any ground not excepted in that clause, later than two years after the issuance of the policy. Appellee contends that the law of California (the law of the forum and of delivery of the policy) controls in the determination of the validity of the reinstatement and, consequently, the question as to the applicability of the incontestable clause to the reinstatement is to be determined by the law of California, that the question has not yet been decided in California and, hence, is to be determined by this court according to its inde*994pendent judgment as to the proper interpretation of the contract.
Before passing upon these questions I will state the facts alleged in more detail.
The policy for $10,000 was executed and delivered March 17, 1926. The policy lapsed for the nonpayment of the premium due March 17, 1937. April 30, 1937, the appellee applied for reinstatement of the policy, making certain false statements as to his health, upon the faith of which the policy, was reinstated May 6, 1937. In September, 1937, the appellee applied for insurance benefits under the policy, claiming to be totally and permanently disabled. This claim of total disability, which was based upon a claim that the insured was disabled by arthritis, coming so soon after reinstatement, resuked in an investigation which disclosed -that the appellee was suffering from chronic' arthritis of an infectious type, and that at the time the insured applied for reinstatement, and contrary to his representations, he had consulted at least two physicians therefor, within two years of the application for reinstatement. On November 16, 1937, the appellant Insurance Company notified the insured that it rescinded the contract of reinstatement. The complaint herein was filed December 9, 1937. The second policy for $5,000 was issued February 8, 1932. The premium due January 25, 1937, was not paid and the policy lapsed. Reinstatement was applied for by the insured April 30, 1937. The application was granted May 13, 1937. The appellant Company ■ served notice of rescission of said reinstatement on November 16, 1937.
The incontestability clause1, the reinstatement clause2, the clause designating the place for the payment of benefits3, and the clause designating the place for the payment of premiums4, of the two policies, are shown in the margin.
The Supreme Court, in a recent decision, has held that an insurance policy delivered in a state is to be interpreted according to the law of that state. Mutual Life Insurance Co. v. Johnson, 293 U.S. 335, 55 S.Ct. 154, 79 L.Ed. 398. This holding is further fortified by the still more recent decisions in Erie R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487; Ruhlin et al. v. New York Life Ins. Co., 304 U.S. 202 58 S.Ct. 860, 82 L.Ed. 1290; New York Life Ins. Co. v. Jackson, 304 U.S. 261, 58 S.Ct. 871, 82 L.Ed. 1329; Rosenthal v. New York Life Ins. Co., 304 U.S. 263, 58 S.Ct. 874, 82 L.Ed. 1330, wherein it is held that it is the duty of the federal courts to apply the law-of the applicable state, although the same language of the policy may be construed differently in different states.
The statute of California (§ 1646 Cal. Civ.Code) provides that a contract made in California is to be interpreted according to the law or usage of the place where it is to be performed.5 The Supreme Court of California has held that an insurance policy is to be construed according to the law of the place of performance. Har-rigan v. Home Life Ins. Co., 128 Cal. 531, *995542, 58 P. 180, 61 P. 99; Progresso S. S. Co., v. St. Paul Fire & Marine Ins. Co., 146 Cal. 279, 280, 79 P. 967; § 1646, Cal. Civ.Code. That court has also held that the place for the payment of benefits is the place of performance. Burr v. Western States Life Ins. Co., 211 Cal. 568, 296 P. 273. The law of New York was applied by the Appellate Department of the Superior Court in and for the County of Los Angeles, State of California, in construing two policies of the appellant issued in California. The court held that under § 1646 Cal.Civ.Code, supra, the law of the place of performance controlled m interpreting the policies. Cora Smith, Admx., v. New York Life Ins. Co.,6 A-3788, decided April 14, 1938, and in Furst v. New York Life Ins. Co.,6 A-3895, decided April 22, 1938. The same rule was stated in Flittner v. Equitable Life Assur. Co. of United States, 30 Cal.App. 209, 157 P. 630, but was dictum. The home office of the appellant in New York City is designated as the place for the payment of benefits and premiums and for the presentation of the written application for reinstatement with evidence of insurability.
It is suggested by the appellee that because under the terms of the policy premiums might be paid elsewhere than in New York the place of performance is uncertain and, hence, the policy should be interpreted according to the law of California, the place of its execution by delivery. Appellee quotes 12 C.J. 451 to the effect that where a contract is to be performed partly in the state where made and partly in another the contract is to'be construed according to the law of the place where the contract is made.
It is sufficient to say that the only place named in the policy for the payment of premiums is New York, which is also the place for the payment of benefits. We are not confronted with a situation where the policy names different places of performance.
The Court of Appeals of the State of New York has held that the reinstatement of a policy is in legal effect a new contract and, consequently, that the incontestability period, so far as it pertains to fraud in securing the reinstatement, begins to run at the time of reinstatement. McCormack v. Security Mut. Life Ins. Co., 220 N.Y. 447, 116 N.E. 74; see, also, Teeter v. United Life Ins. Co., 159 N.Y. 411, 54 N.E. 72. See, also, Smith v. State Mutual Life Assur. Co. of Worcester, 321 Pa. 17, 184 A. 45; McCormack v. Security Mut. Ins. Co., 220 N.Y. 447, 116 N.E. 74; Pacific Mut. Life Ins. Co. v. Galbraith, 115 Tenn. 471, 91 S.W. 204, 112 Am.St.Rep. 862. Compare, Rosenthal v. New York Life Ins. Co., 8 Cir., 94 F.2d 675; Johnson v. Country Life Ins. Co., 284 Ill.App. 603, 1 N.E.2d 779; New York Life Ins. Co. v. Burris, 174 Miss. 658, 165 So. 116.
The appellee claims that the incontestability clause should be construed according to the law of California because it relates to the question of the validity of the policy. The question involved does not go to the validity of the policy but to the effect of the incontestability clause upon a reinstatement of the policy, whether considered as a new contract or waiver of a default under the old.
Appellee also claims that this incontestability clause is in the nature of a statute of limitation and, hence, the law of the forum should control. It has been likened by the courts to a statute of limitation when considering the question as to whether or not the parties could contract in such manner as to permit one of the parties to escape the consequences of fraud. However, it is not a statute of limitation, but is a contract to be construed according to the intention of the parties.
Appellee also claims that to interpret the policy according to the law of New York would be contrary to the public policy of the State of California and a violation of an express provision of the insurance code. This position can hardly be sustained in view of the statutory law of California, Cal.Civ.Code § 1646, supra, permitting persons to agree that their contract should be construed in accordance with the law of the state of performance. Nor is there anything in § 700 of the Insurance Code of California, St. 1935, p. 512, cited by appellee, requiring insurance agents to comply with the law of the state, to justify the contention that the laws of California are to be applied in the interpretation of a contract of insurance if the parties designate another state as the place of performance.
If, however, we assume, as appellee contends, that the law of California controls, either because it is the place where *996the contract was made or' because there are different places of performance permitted in the policy or because it is the law of the forum and if, because there are no controlling decisions by the Supreme Court of California, we should exercise our independent judgment as to what is the law of California, we find that this court has already exercised its independent judgment as to the effect of the incontestability clause' upon a reinstatement procured by fraud, in Great Western Life Ins. Co. v. Snavely, 9 Cir., 206 F. 20, 21, 46 L.R A.,N.S., 1056 where we applied the New York rule (supra) in construing such a policy of life insurance. In that case we held that the reinstatement could not be attacked after the lapse of the one year period fixed in the policy there under consideration. The question of whether it could be attacked after the lapse of a reasonable period for investigation and before the expiration of the period fixed for incontestability was not considered in that case and need not be considered here for the reason that the appellant acted promptly in the case at bar in investigating fraud and in giving notice of rescission, and in bringing this action.

 “Incontestability. This policy shall be incontestable after two years from its date of issue except for nonpayment of premium and except as to provisions and conditions relating to disability and double .indemnity benefits.”

 “Reinstatement. This policy may be reinstated at any time within.five years after any default, upon written application by the insured and presentation at the home office of evidence of insurability satisfactory to the company and upon payment of overdue premiums with five per cent interest thereon from their due date. Any indebtedness to the company at date of default must be paid or reinstated with interest thereon in accordance with the loan provisions of the policy.”

 “The Contract. * * * All benefits under this policy are payable at the home office of the company in the city and state of New York.”

 “Payment of Premiums. All premi-urns are payable on or before their due date at the home office of the company or to an authorized agent of the company, but only in exchange for the company’s official premium receipt signed by Lhe president, a vice-president, a second vice-president, a secretary or the treasurer of the company, and countersigned by the person receiving the premium. No person has any authority to collect a premium unless he then holds said official premium receipt. * * * The payment of tiie premium shall not maintain the policy in force beyond the date when the next payment becomes due, except as to the benefits provided for herein after default in premium payment.”

 “§ 1646. Law of place. A contract is to be interpreted according to the law and usage of the place where it is to be performed; or, if it does not indicate a place of performance, according to the law and usage of the place where it is made.”

 No opinion for publication.