Court Opinion

ID: 8302276
Source: CourtListenerOpinion
Date Created: 2022-10-17 11:14:20.395359+00
Date Added: 2024-06-11T16:44:23.599503
License: Public Domain

*463ON PETITION TO REHEAR.
This case is before the court on defendant’s petition to rehear on one point, viz. that, plaintiff’s suit haying been brought within the contestabfe period provided in the policies sued on, this suspended the running of the period within which defendant might contest. •
It is said that this question was overlooked by the court and was not passed on in its opinion filed on a former day of the term.
The question was considered by the court in the determination of the case, but does not appear to have been directly discussed in the opinion filed.
It is defendant’s insistence that the incontestable clause contained in the policies sued on is a statute of limitation, and, the plaintiff having brought his suit before the statute run, this suspended the running of the statute, and defendant could present its defenses against the policies after that time in the orderly progress of the case. In support of this contention it cites the case of Lewis v. Turnley, 97 Tenn., 197, 36 S. W., 872.
In that case suit was instituted upon a note. Defendant filed an answer and a cross-bill, and in the cross-bill contended that when the property was sold, for which the note was given as a part of the consideration, the vendor agreed that certain insurance upon the improvements on the premises was to be transferred, and that the vendor agreed that, if the property burned before the insurance was transferred, he would be liable for the insurance. The vendor failed to transfer the insurance and the insured’s property burned. The plaintiff interposed the statute of limitations to the set-off of defendant,, and the *464court held that, since the' claim of the defendant was a proper set-off and was evolved from the consideration of the original contract the filing of the bill saved the bar of the statute.
The other cases cited by defendant involved a similar question.
In Clark v. Duncanson, 79 Okl., 180, 192 Pac., 806, 16 A. L. R., 315, plaintiff commenced an action within twelve months of the recording of his tax deed, to quiet title. He made the former owner of the property a party defendant. The defendant, after the expiration of twelve months from the recording of the tax deed, filed an answer, entitled the sanie “Answer and Cross-Petition,” in which he assailed, on several grounds, the validity of the tax sale and tax deed, and prayed judgment against the plaintiff for possession and damages. It was held that the so-called cross-petition was a counterclaim, within the meaning of section 4746, Revised Laws 1910, and within the statute of limitations until the claim of the plaintiff is so barred.
We think these cases have no application to the question under consideration. While incontestable clauses in insurance policies have been referred to by some of the decisions as a short statute of limitations, it is not such. It is a contractual limitation, and is not governed by principles applying'to statutes of limitations. A similar clause to the one in the policies sued on has been construed in a number of cases.
In Monahan v. Metropolitan Life Insurance Co., the court said:
“In case of a breach of warranty . . . the insurer must assert its claim within the two-year period, whether the insured survives that period or not, either by affirma*465tive action or by defense to a suit brought on the policy by the beneficiary within the two years.”
In Ebner v. Ohio State Life Insurance Co., the court said:
“. . . That if, as a result of such investigation or of knowledge otherwise obtained, the insurer desires to contest the policy, appropriate steps to that end, either by defense to an action brought on the policy in case of the death of the insured, or by proper affirmative action, must be taken within the year.”
In Insurance Co. v. Peeler, the court said:
“. . . The language admits of no reasonable construction other than that the company reserves to itself the right to ascertain all the matter and facts material to its risk and the validity of its contract for one year; and that if within that time it does not ascertain all the facts and does not cancel and rescind the contract, it may not do so afterwards upon any ground then in existence.”
In Ramsey v. Old Colony Life Insurance Co., the court said:
“It admits of no reasonable construction, as the courts have said in the cases already cited, other than that the company may have one year, and no more, for investigation of the questions material to its risk, and if it does not within that time, either as plaintiff or defendant, contest the policy, it cannot do so aftenvard.”
The court further said in that case:
“The death of the insured within the year did not remove the contractual limitation upon the right of the company to contest its liability on the policy, but the fact that, without the fault of the company, there was no party in existence against whom it could begin suit, and that it *466bad no power to have an administrator appointed for that purpose, suspended the operation of this provision until an administrator was appointed.
“When the insured died, on April 13,1917, seven months of the year after the policy was issued had elapsed. The administrator was not appointed until July 19, 1918'. After that there was nothing to prevent the defendant from contesting its liability on the policy. S'uit Aas begun against it in November’, 1918, but it filed no plea denying its liability upon the policy until May 12, 1919, nearly ten months after the appointment of the administrator, and, excluding the time during which it was prevented from bringing suit by reason of the failure to appoint an administrator, nearly seventeen months after the date of the policy. The plea alleged that knowledge of the falsity of-the answers did not come to the defendant until July 1, 1918, but there were several months after its discovery of the fraud and after the appointment of the administrator before the expiration of the year in which it might have filed a bill to cancel the policy. It failed to do so, and by its neglect permitted the incontestable period fixed by the policy, even under the construction which we have given it, to elapse.”
These cases are all cited in the opinion of the court heretofore filed in this case.
In Mutual Life Insurance Co. of New York v. Buford, 61 Okl., 158, 160 Pac., 928, it was said:
“ ‘It seems to be a well-recognized principle of insurance law that a provision in a contract of insurance limiting the time in which the insurer may take advantage of certain facts that might otherwise constitute a good defense to- its liability on such . . . policy other than the defenses excepted in the provision itself. It also *467seems to be generally held that such a clause precludes the defense of fraud, as well as other defenses, and that it is hot invalid on the theory that it is against public policy, provided the time in which.the defenses must be made is not unreasonably short. An examination of the following cases will show that the holding of the courts of this country have, been . . . universally that every defense to a policy of insurance embraced within the terms of the “incontestable clause” is completely lost to the insurer, if it fails to make the defense or take affirmative action within the time limited by the policy.’ ” Citing many authorities. „ • '
It is true that in none of these cases suit was brought before the contestable period had expired, but they show the construction that was - piqued on an incontestable clause, similar to the one in question, and it was held in all of them that the insurer must assert its claim within the period stipulated, either by affirmative action or by defense to a suit brought on the policy, within the contractual period.
The incontestable clause in the policies sued on was written into them by the defendant itself. It was contractual, and the effect of it was to prevent the insurer from interposing as a defense the falsity of the representations of the insured, which might be- fraudulent. In other words, defendant said to the insured:
“I will take one year in which to ascertain whether your representations are false, and whether you have been guilty of any fraud in obtaining the contract, and, if within that period, I do not ascertain or discover such falsity and fraud, I agree to make no further inquiry into, these matters, and make no defense on account of them.”
There was no stipulation for a suspension of the run*468ning of the limitation for any reason. The right of the defendant to contest, except for nonpayment of premiums, was, by the stipulation, foreclosed at the expiration of the period contracted for, notwithstanding plaintiff’s suit was brought two days before the limitation expired. The letter of defendant written on January 30, 1920, to plaintiff would indicate that it had knowledge or information of the insured’s alleged misrepresentations on that date, which was more than a month before the period of limi-' tation expired, still it took no action to rescind the policies on that ground.
The clause in question being merely contractual, and containing no provision for its suspension in the event suit should be brought by the insured within the limitation, we cannot read such a provision into it. Defendant was therefore precluded from contesting the policies at the time it filed its pleas.
This court, in the case of Guthrie v. Indemnity Association, 101 Tenn., 643, 49 S. W., 829, held that a contractual limitation of action contained in an insurance policy is not affected by the rules of law goveiming statutes of limitation. In that case the court said;
- “While it is true the original suit was dismissed for insufficient service of process, and not for any cause concluding plaintiff’s right of action, we are of opinion that the statute is wholly inapplicable in the present instance. It clearly refers to statutory, and not to contractual, limitations; for otherwise a statute could be made utterly subversive of contracts executed by parties upon the most deliberate consideration. It was held by the United States supreme court, in Riddlesbarger v. Hartford Ins. Co., 74 U. S. (7 Wall.), 258, that The contractual limitation is not affected by' the fact that a, previous action, which was *469dismissed, had been commenced within that period, and that the statute oí a State which allows a party who suffers a nonsuit in an action to bring a new action for the same cause within one year afterwards, does not affect the rights of the parties in such a case.’ This must be true, for, if the contractual limitation is valid, the parties are not bound by the general limitation of the statute, and, for a like reason, they are not bound by the savings of the statute. The question is purely one of contract, and is not regulated by the terms of the statute. ‘The rights of the parties,’ says Field-, J., ‘flow from the contract. That relieves them from the general limitations of the statute, and, as a consequence, from its exceptions also.’ In Riddlesbarger v. Insurance Co., 74 U. S. (S. C., 7 Wall.), the court said: ‘The action mentioned which must be commenced within the twelve months, is the one which is prosecuted to judgment. The failure of a previous action, from any cause, cannot alter the case. The contract declares that an action shall not be sustained unless such action, not some previous action, shall be commenced within the period designated. It makes no provision for any exception in the event of the failure of an action commenced, and the court cannot insert one without changing the contract.’ This view is supported by the cases of Wilkinson v. Insurance Co., 72 N. Y., 499; Arthur v. Insurance Co., 78 N. Y., 402; Wilson v. Insurance Co., 7 R. I., 301; Insurance Co. v. Burr, 94 Pa. St., 345; Insurance Co. v. Burr, 128 Pa. St., 386; Hocking v. Insurance Co., 130 Pa. St., 170; Ostrander on Insurance, sections 410, 411; 2 Beach on Insurance, sections 1258-1265; Joyce on Insurance, section 3205.”
The petition to rehear will therefore be denied.