Court Opinion

ID: 9559746
Source: CourtListenerOpinion
Date Created: 2023-08-21 17:34:56.469804+00
Date Added: 2024-06-11T09:11:37.546412
License: Public Domain

CARTER, J.
I dissent.
The decision reached here by the majority of this court is another instance where lip-service is paid to a salutary rule by recognizing its existence only to find that under the facts presented it has no application. The rule to which I refer is the old and just one—that a contract of insurance shall be construed most strictly against the insurer.
The incontestability clause in the policy under consideration here provided that “This Policy shall be incontestable after two years from its date of issue except for non-payment of premium and except as to the provisions and conditions relating to disability and Double Indemnity Benefits.” In spite of the fact that none of the three exceptions is involved here, the majority of this court cites many authorities in sup*87port of the following statement: “It is generally held that the incontestable clause, after the lapse of time it specifies, prevents nullification of the insurance contract for cmy cause not excepted in the clause.” Of course, it is explained that what we have here is not a nullification of the contract, and not a contest, but only an effort to have the policy enforced according to its terms. This explanation is achieved by holding that the age adjustment clause if the age of the insured has been misstated, the amount payable hereunder shall be such as the premium paid would have purchased at the correct age) is not within the scope of. the incontestable clause.
To hold that the insurer here is not contesting the policy is to play with words. The insurer is resisting payment of part of the face value of the policy despite the fact that it is claimed that it seeks only to enforce it according to its value as reformed. No matter what the insurer claims, this action destroys the validity of the policy in part. In Arnold v. Equitable Life Assur. Soc. of U. S., 228 F. 157, the court said that under the terms of the policy no one would contend that the defendant could make an absolute defense upon the ground of misrepresentation as to age, so if it could not make a defense to the whole policy, how could it make a defense to it in part? And yet the defendant there, as here, denied liability for the face value but admitted liability for a smaller sum, the denial being based upon misrepresentation in the application for insurance. The court concluded that the partial defense pleaded could not be sustained.
An incontestable clause in an insurance policy is intended to free the beneficiary from delay, annoyance and expense in acquiring the amount which had been carefully provided. Premiums on life insurance policies are often paid at a great sacrifice, and one of the most disturbing and unsatisfactory features of the insurance contract is the fact that, after these sacrifices and payments have been made for a number of years, and the insured has died, so that his testimony and perhaps that of others has been rendered unavailable by the lapse of time and the occurrence of death, instead of receiving the promised reward, the beneficiary will be met with a contest and a lawsuit to determine whether the insurance ever had any validity or force. Hence it has become an almost universal practice with insurance companies to provide against any contest or forfeiture of their policies after a certain length of time, greater in some cases and less in others (Clement v. New York Life Ins. Co., 101 Tenn. 22 [46 S.W. 561, 70 Am.St. *88Rep. 650, 42 L.R.A. 247].) As was said in Humpston v. State Mut. Life Assur. Co., 148 Tenn. 439, 441, 467 [256 S.W. 438, 31 A.L.R. 78] : “The incontestable clause in the policies sued on was written into them by the defendant [insurance company] 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. ’ ” It is my belief that this is a correct analysis of the purpose of the incontestable clause in a policy of insurance. It is most definitely within the power of the insurer to include any exceptions it wishes to make within the clause itself, or specifically to refer to other clauses which it would make a part of the incontestable clause.
We are told here that when an insurance policy by its provisions is made .incontestable after a specified period, as this one was, that the intent of the parties is to fix a limited time within which the insurer must discover and assert any grounds it might have to justify a rescission of the contract; that accordingly, the insurer must make its “contest of the policy” within the prescribed period, either by the institution of a suit to cancel the policy or by setting up misrepresentation or fraud in the procurement of the policy as a defense in an action brought by the insured or the beneficiary. As I have pointed out, the present action is a “contest” as to part of the policy whether or not it is actually called that.
We are also told that the correct age of insurants is the chief cornerstone of the life insurance structure but that “it does not appear reasonable to conclude that when the parties’ contract expressly provided for an adjustment to rectify such inaccuracy, plaintiff nevertheless had the burden of making discovery of such error and was bound to litigate that misstatement within the two-year contestable period or be foreclosed from having the correction of defendant’s age square with the fact.” To my mind, if the correct age of the applicant is of such vital importance to life insurance companies, it would appear to be much more reasonable to require the insurers to discover any such errors than to hold that the incontestable clause does not apply.
*89It would be as simple, and far more just, for this court to hold that the clause providing for adjustment when a misstatement of age has occurred, prevents rescission of the entire contract, provides for reformation so that the amount payable shall correspond to that which the premium paid would have purchased at the correct age, and that this reformation must take place within the time limited in the clause preventing a contest after the two-year period. In so doing, effect would be given to both the incontestable clause and the misstatement of age clause because both are general clauses, neither controlling the other. Thus both general clauses are construed together and effect given to both. In Lincoln Health & Acc. Ins. Co. v. Jones, 175 Okla. 211 [52 P.2d 793], the court pointed out that the company had, in such a situation, ample time to make inquiry about the age of the insured within the two years after the date of the policy. That if the insured understated his age, the company might have readjusted the policy on the basis of true age, but after two years had elapsed defenses are no longer available unless the grounds are excepted by the terms of the policy. It was concluded that the misstatement of age provision can only be taken advantage of by the insurance company during the two-year period provided for by the incontestable clause. (See, also, Mutual Life Ins. Co. of New York v. New, 125 La. 41 [51 So. 61, 136 Am.St. Rep. 326, 27 L.R.A. 431] ; Mitchell v. Pennsylvania Mut. Life, 90 Pa.Super. 426; Arnold v. Equitable Life Assur. Soc. of U. S., supra, 228 F. 157.)
If the foregoing construction is placed upon the policy here involved, the contract of insurance will be construed most strongly against the insurer, as it should be.
I would affirm the judgment.