Court Opinion

ID: 3246702
Source: CourtListenerOpinion
Date Created: 2016-07-05 16:18:43.339689+00
Date Added: 2024-06-11T13:40:25.832433
License: Public Domain

On Rehearing.
It has been pointed out in several cases that the term sometimes employed in connection with an incontestable clause, that it is a short statute of limitations, is not intended in the sense in which such a statute fixes the time after which a suit is barred. But as said in one case, the sole question in respect to such a clause is, "Does the stipulation of the policy in question preclude appellant from making the defense set up in the answer? * * * It is incontestability of the policy, and not the limitation, that bars the defense. The parties * * * did not substitute a shorter period of limitation for that provided by the statute. The stipulation has no reference to limitation, but to a waiver by the insurer of the right of defense on the ground of fraud that may have been practiced by the insured in obtaining the policy, in consideration of the latter's making payment of premiums as required by the policy; the time for the policy to become incontestable being fixed * * * to give the insurer time to satisfy itself that no fraud was committed by the insured." Citizens' Life Ins. Co. v. McClure, 138 Ky. 147, 127 S.W. 749, 27 L.R.A. (N.S.) 1026, quoted in Metropolitan Life Ins. Co. v. Peeler, 71 Okl. 238, 176 P. 939, 943, 6 A.L.R. 441, 447, 448.
Other cases hold that an incontestable clause after a certain date is not of the character of a limitation by agreement upon the time in which a suit may be begun contrary to statute prohibiting agreements shortening the statute of limitations. Priest v. Kansas City Life Ins. Co., 119 Kan. 23, 237 P. 938,941, 41 A.L.R. 1100; Humpston v. State Mut. Life Assur. Co.,148 Tenn. 439, 256 S.W. 438, 445, 31 A.L.R. 78. Quoting from Priest v. Kansas City Life Ins. Co., supra, "It is competent for the insurance company to agree that its liability on the policy shall be absolute from the beginning, notwithstanding any intentionally false statements that may have been made in the application. An agreement that the policy shall be incontestable after a certain time is substantially the same thing, with a condition or qualification incorporated allowing time for fuller investigation and inquiry."
Our cases treat such a clause as "not an assurance against crime but an assurance against the hazard of litigation." United Order of G. Cross v. Overton, 203 Ala. 335, 83 So. 59, 13 A.L.R. 672; Supreme Lodge, etc., v. Overton, 203 Ala. 193,82 So. 443, 16 A.L.R. 649; Mutual Life Ins. Co. v. Lovejoy,201 Ala. 337, 87 So. 299, L.R.A. 1918D, 860; Independent Life Ins. Co. v. Carroll, 222 Ala. 34, 130 So. 402.
We cannot agree with the contention that an incontestable clause, such as we are considering, violates section 8951, Code, which prohibits an agreement to shorten the statute of limitations.
Our attention is called to paragraph four of the bill, which alleges that the application for insurance was attached to, and made a part of, the policy, and contained the statement and agreement that if the answers to inquiries set out in it were false, with the intent to deceive and materially affect the risk, it *Page 229 
would bar the right to recover under the contract of insurance.
The original bill and the amendment allege that a copy of the policy is attached, but this is not in fact done, nor does it otherwise appear. The amendment alleges that the policy contains a clause which is copied in the original opinion. It therefore appears that there is confusion or inconsistency in the allegation as to whether the policy reserves the right to contest or cancel for fraud. The original bill alleges that the policy contains a clause whereby it is incontestable and noncancellable after a year from date of issuance, except for nonpayment of premiums. The amendment strikes out that allegation and avers that the policy makes it noncancellable from date of issuance, etc.
We must construe the bill most strongly against the complainant on demurrer. So construed, and without an allegation that the noncancellable clause is modified by the terms of the application, or otherwise, so as to reserve fraud as a cause for cancellation, we think that we correctly construed the policy as pleaded in the bill. But on account of the apparent confusion and the absence of a copy of the policy as a part of the bill, which might clear this confusion, our judgment now is that complainant should not be entirely cut off from presenting its case in its true aspect; that is, to plead the contract of insurance in its entire effect, including the application, if it is a part of the contract, so as to make clear its terms. For that purpose we think that feature of the decree of the circuit court which dismisses the bill should be reversed, but affirmed to the extent that the demurrers were sustained for the reasons assigned in our opinion.
The application for rehearing is therefore granted, and the decree of the circuit court is affirmed to the extent that the demurrers were sustained, and reversed to the extent that the bill was dismissed, and remanded for further proceedings.
Affirmed in part, reversed in part, and remanded.
ANDERSON, C. J., and GARDNER and BOULDIN, JJ., concur.