Conlon v. Northern Life Insurance ( 1939 )

The trial court took the view that, since the policy of insurance was admitted without objection, except the general objection to the sufficiency of the complaint, the complaint would be deemed amended to conform to the proof and findings. Whether this view is correct under the facts here is unimportant. In considering the propriety of the court's conclusion that the policy was in effect at the time of Stokke's death, I will assume that the court was not warranted in deciding the case against defendant on a theory different from that relied upon in the pleadings, if the ground upon which he decided the case be capable of explanation consistent with no liability.

This makes it necessary to ascertain whether, if defendant is given opportunity to do so, it can show anything that would defeat its liability on the theory adopted by the trial court. To answer this question makes it necessary to examine the terms of the policy. So far as applicable here, it is sufficient to say that the policy contains provisions for indemnity in case of bodily injuries through external, violent and accidental means, resulting in certain disabilities which provisions need not be specifically pointed out here. It then provides for sickness indemnities. The policy in this connection provides as follows:

"(A) If affirmative proofs be furnished the Company that the Insured has suffered from any sickness or disease contracted during the continuance of this insurance, whereby he has been totally disabled for one year and will continue to be permanently unable to engage in any occupation for wages or profit, and such sickness or disease has not resulted in death but that solely and independently of any other cause, has resulted in the entire and irrecoverable loss of sight of both eyes or permanent paralysis or insanity as below specified, he shall be entitled to one of the following benefits.

Entire loss of sight of both eyes ......................... $1,250
Paralysis of both hands ...................................  1,250
Paralysis of both feet ....................................  1,250
Paralysis on one hand and one foot ........................  1,250
Insanity ..................................................  1,250

"Provided that either or any of the indemnities payable as last above provided shall be inclusive of any other payments on account of the same sickness or disease, and shall not exceed one-half the principal sum.

"Monthly indemnity, total loss of time $100

"(B) If proofs as above show such sickness or disease not to have caused loss of sight or paralysis of members or insanity as stated in clause `A' but that the Insured has thereby been totally disabled for not less than seven consecutive days, and on account of which he could perform none of the duties of his occupation and been under regular treatment of a licensed physician, then the Company will pay him the amount of the Monthly Indemnity last above stated, for the period of such total disability, not exceeding twelve months, and not extending beyond the time of death. After payment of monthly indemnity for twelve months as aforesaid, the Company will continue payment of such monthly indemnity thereafter, so long as the Insured during life shall be wholly and continuously disabled by such disease from engaging in any occupation or employment for wage or profit."

It is under subdivision (B) that the trial court found there was more due to the insured than the amount of his quarterly premium due on September 7, the day before he died, which should have been applied in payment of the premiums due, and hence that the policy was in effect at the time of the insured's death. The proof in the record by stipulation is that Stokke was in the hospital continuously from the 10th day of August, 1932, to September 8, 1932, was under the care of a physician and that he was sick and disabled all of that time. The defendant contends that this proof is not sufficient to show liability under subdivision (B) of the policy without proof that the sickness was contracted during the continuance of the policy as provided in subdivision (A). The evidence amply supports the conclusion that the sickness was contracted during the continuance of the policy of insurance. If the sickness had been contracted before the policy was issued, it never would have been issued. Defendant could not now assert that the policy was never a valid one because it admits in its answer that the policy insured the life of Stokke upon the terms contained in it.

Defendant further contends that it is not shown that such sickness has not resulted in death, within the provisions of subdivision (A). That limitation, however, has to do only with injuries specified in subdivision (A), and has no application to sickness for which indemnity is allowed under subdivision (B). If this were not so, then the insured here could never have obtained monthly indemnity no matter how long his sickness continued, because he would have been obliged to wait to see whether the sickness resulted in his death. Such an interpretation of the contract is not warranted.

The other provisions of subdivision (A) also have application only to the disabilities particularly covered in subdivision (A), and do not apply to subdivision (B). Nor do I think it will avail the defendant to assert that the insured failed to prove that the sickness did not cause loss of sight or paralysis of members or insanity, as stated in clause (A). If the sickness did produce loss of sight, paralysis of members or insanity, then defendant instead of being relieved of the duty of paying monthly indemnity would have been obliged to pay much more namely the sums specified in subdivision (A).

Defendant also contends that it should have opportunity to show if it can that Stokke was suffering from an ailment not covered by the policy. The policy contains a clause which exempts the company from certain risks, which reads as follows: "Risks not assumed. Suicide, or any loss or disability resulting from an attempt thereat, whether sane or insane, or loss or disability resulting from the insured having participated in a submarine expedition or any aerial flight (except as provided elsewhere herein under (Aviation Coverage), or caused directly or indirectly, wholly or partly by war, riot or insurrection or any act incident thereto, either on land or water, or from violation of criminal law, or from military or naval service of any kind or police duty in any military, naval or political organization, are all risks not assumed under this supplemental contract."

The stipulation above referred to, to the effect that Stokke was sick, shows that this case does not fall within the clause that relieves the company from certain risks. "Sick" usually means affected with disease, ill, indisposed. (State v.Douglas, 124 Kan. 482, 260 P. 655.) A contract allowing benefits to one "who is sick and unable to work" has been held not to apply to material illness following the breaking of a leg; sickness being disabilities which are the natural results of disease arising from a pathological condition. (Beaudoin v. La Societe, etc.,116 Me. 428, 102 A. 234, L.R.A. 1918B, 641.) Sickness does not generally extend to or include accidental injuries. (Poole v.Imperial Mut. Life etc. Co., 188 N.C. 468, 125 S.E. 8, andVillone v. Guardla Perticara, (Sup.) 114 N.Y. Supp. 801.) It may under certain circumstances include accidental injuries. (Murray Hospital v. Angrove, 92 Mont. 101, 10 P.2d 577.) Whether it does or not in any specific instance depends upon the connection in which the term is used and the intention of the parties using it. Here the policy in question made liberal provision for accident indemnities in addition to sickness indemnities. When the parties stipulated that Stokke was sick from August 10 to the date of his death, and disabled during all of that time they doubtless used the word "sick" in contradistinction to the word "accident." In any event, if his ailment was in fact due to an excepted risk, it seems preposterous that able counsel for defendant would not have so pleaded in its answer as a complete defense to any liability under the policy.

Counsel do not now suggest that the ailment from which Stokke died was in fact something excluded from the coverage under the policy. Their only contention is that they should have the opportunity to so show.

I am not disposed to believe that counsel for the insurer would have stipulated that Stokke was sick during the time in question if in fact he were suffering from one of the unassumed risks as defined in the policy.

Defendant also contends that because of the supposed change of theory between the pleadings and the findings it was not given the opportunity to show, if such were the fact, that because of other insurance carried by the insured it would only be liable for a pro rata share of the loss. No claim is made that the insured carried any other insurance. If he did, defendant would doubtless have so pleaded as a partial defense to this action on its merits.

Defendant's counsel, in their brief, suggest the probability that plaintiff prior to bringing action had canvassed the possibility of resting his complaint upon the theory adopted by the trial court, but discovered that defendant had a perfect defense thereto. Such a probability cannot be indulged under the record here. Here it is alleged in the complaint that plaintiff demanded the return of the policy of insurance to her, but that defendant fails, neglects and refuses to do so and that by reason thereof plaintiff is unable to state all of the provisions of the policy. Defendant, by its answer, admits that plaintiff demanded that defendant give the policy to plaintiff and that it refused to do so. Under these facts it is a more reasonable probability that if defendant had either a complete or partial defense under the policy if would have pleaded it in its answer.

There is no defense that might be asserted by the defendant company under the admitted facts here that would relieve it of the obligation to pay the monthly indemnity specified in subdivision (B).

The trial court's ruling was justified for another reason. Analysis of the pleadings discloses that defendant was put on notice that plaintiff was relying on the policy of insurance in its entirety.

The complaint in paragraph 3 contained these allegations: "That during all of the times mentioned herein, the said policy of insurance No. 132113-5Q was in full force and effect and that it was never cancelled or forfeited, nor was said Stokke in default in any of the premiums to be paid by him or any of the other conditions therein required to be performed by him." This was a proper plea of performance of all conditions required of the insured under the contract. (Sec. 9170, Rev. Codes.)

The complaint also alleged the waiver of premium due to the physical, total and permanent disability of Stokke after August 10, 1932. Defendant, by its affirmative defense, alleged in substance that Stokke had not paid the premium of $55.50 due on August 7, 1932, or within the grace period thereafter, and that by reason thereof the policy terminated and all of the rights and privileges of the insured ceased and terminated before his death. By her reply plaintiff admits that by the terms of the policy the insured was required to pay $55.50 as a premium within 31 days after August 7, 1932, unless he "was excused from such payment under the provisions of said policy, and alleges the fact to be that under said policy as a whole and all of its provisions he was not required so to do." The reply thus put defendant on notice that plaintiff was relying upon the whole of the policy and all of its provisions. The reply was not a departure from the complaint but was consistent with that part of paragraph 3 of the complaint above quoted. Defendant might have required plaintiff to make her reply more definite and certain, but no attempt was made so to do. Defendant was thus put on notice that the entire policy of insurance was relied upon by plaintiff.

The policy contains this special provision: "Any indebtedness to the company on account of this policy and any unpaid portion of the premium for the insurance year in which the death of the insured occurs will be deducted in any settlement hereunder." Also subdivision 18 of the Standard Provisions provides: "Upon the payment of claim hereunder any premium then due and unpaid or covered by any note or written order may be deducted therefrom." Defendant was advised by the allegation of total disability that it must defend against whatever consequences such disability produced under the policy, particularly where, as here, it was expressly stipulated that the disability was due to sickness.

The court was warranted under the facts here to find that the policy was in effect at the time of the death of Stokke by reason of the fact that sickness indemnities under the admitted facts more than offset the amount of premium due under the policy. (Birlew v. Mutual Ben. Health Acc. Assn., 53 Idaho, 472,24 P.2d 677; Pfeiffer v. Missouri etc. Co., 174 Ark. 783,297 S.W. 847, 54 A.L.R. 600; Equitable Life Assur. Soc. of U.S. v. Pettid, 40 Ariz. 239, 11 P.2d 833; Washington Nat.Ins. Co. v. Dukes, 53 Ga. App. 293, 185 S.E. 599; American Nat.Ins. Co. v. Foster, (Tex.Civ.App.) 108 S.W.2d 689;Benefit Assn. Ry. Employees v. Bray, 226 Ala. 444,147 So. 640; Carter v. Washington Fidelity etc. Co., 10 La. App. 14,120 So. 424; Olezene v. Eagle Life Ins. Co., 11 La. App. 153,121 So. 881; Inter-Ocean Casualty Co. v. Copeland,184 Ark. 648, 43 S.W.2d 65; Ruderman v. Massachusetts Acc. Co.,120 N.J. Eq. 251, 184 A. 520.)

In Long v. Monarch Acc. Ins. Co., (4 Cir.)30 F.2d 929, the court read into the general rule a qualification to the effect that before this rule applies the money must be absolutely due by the insurer to the insured and held in effect that this condition did not obtain until such time as the insurer admitted its liability after conducting such investigation as it might see fit. I agree that the rule has no application unless the money is absolutely due from the insurer to the insured, but I cannot agree with the view that whether it is due or not must await the insurer's admission of liability, or is dependent upon lapse of time for investigation. Investigation, of course, can be made but when it shows liability, that liability dates back to the period when the insured was disabled because of sickness. And it is of no consequence that proof of loss was not made until after the premiums were past due, and where were it not for the application of funds due to the insured the policy would have lapsed. (Birlew v. Mutual Benefit H. A. Assn., 53 Idaho, 472,24 P.2d 677; Mid-Continent Life Ins. Co. v. Harrison,175 Okla. 543, 53 P.2d 266), particularly where, as here, notice of sickness was given before the lapsing of the grace period.

Was there compliance with the terms of the policy relative to giving notice of sickness and proof of loss? The telegram which was received by defendant on September 7 and before the expiration of the grace period stated, "Bertel M. Stokke disabled in hospital letter today." The letter written that day but not received until after expiration of the grace period advised defendant that Stokke was sick in the hospital and under the care of a doctor. It specifically advised defendant to pay the premium due out of moneys due him under the policy. This telegram and letter constituted notice and proof of loss, respectively.

Under our statute proof of loss need not be in such form as would be necessary in a court of justice. (Sec. 8143, Rev. Codes;Da Rin v. Casualty Co. of America, 41 Mont. 175,108 P. 649, 137 Am. St. Rep. 709, 27 L.R.A. (n.s.) 1164; Wick v.Western Life Casualty Co., 60 Mont. 553, 199 P. 272;Caldwell v. Wash. etc. Co., 94 Mont. 431, 23 P.2d 257.)

Section 4 (C) of the Standard Provisions of the policy requires notice of sickness within ten days after the commencement of disability from such sickness. It also provides: "Failure to give notice within the time provided in this policy shall not invalidate any claim if it shall be shown not to have been reasonably possible to give such notice and that notice was given as soon as reasonably possible." The failure to give this notice within ten days after the commencement of disability does not forfeit the whole claim but at most only that part that had accrued up to ten days prior to the notice to the insurer. (Barron v. Equitable Life Assur. Soc., 197 Minn. 367,266 N.W. 845.)

The notice here given was at least ample to establish a claim accruing for the ten day period prior to giving it. That would establish a claim for about $33. After insured's death there was no occasion to apply any of the amount due to the insured in payment of premiums to keep the policy alive thereafter. At the death of the insured, the policy matured if in fact it did not do so at the time he became disabled because of sickness. (CompareMid-Continent Life Ins. Co. v. Harrison, supra.) The insurer, after the death of the insured, had the right under the policy to deduct from the amount due under the policy the unpaid portion of the premium for the insurance year in which the death occurred.

The insured's death on September 8 left only 1 month and 1 day for which the insured was in arrears on his premiums if we eliminate the grace period. The monthly premium would have been about $20. Hence, there was more due to the insured from defendant on September 7, the date when it was notified of his sickness, and on September 8 when insured died than the amount of premiums earned up to the time of his death.

The fact that proof of the loss and investigation had to be made after death and after the premium was past due rather than before does not alter the conclusion that this sum was absolutely due and payable on September 7, the last day allowed for the payment of the premium, and this should be applied to keep the policy alive. Nor is it necessary that the mechanical act of making application of the sum due to insured, should have been done before the death of the insured or before the time when the premium was due. Justice and fair dealing require that to be done now to prevent the lapse of the policy. Had Stokke survived his illness, I have no doubt defendant would have applied his disability benefits to keep the policy in effect. This court ought not permit defendant to escape its obligation to the insured on the assertion that it had not investigated the claim for sickness benefits before the lapse of the grace period. I think the trial court properly held that sick benefits should be applied in payment of the premium and that the policy was in effect at the time of Stokke's death.

Was there a change in beneficiary? As above noted, Stokke caused the letter to be written by Skulason to the company requesting the change and forwarding the policy to the company. It was stipulated in the record that in doing so "Skulason was acting for Mr. Stokke at Mr. Stokke's request." A somewhat similar case is that of Bell v. Criviansky, 98 Mont. 109,37 P.2d 673, 678. In that case after reviewing a number of authorities, some of which held that the change of beneficiary was consummated under facts less conclusive than those here, the court announced the true rule as follows: "We think the true rule is that, if the insured has pursued the course pointed out by the laws of the association and has done all in his power, under the facts and circumstances of the case, to change the beneficiary, but before the new certificate is actually issued or the change of beneficiary is indorsed on the old, he dies, a court of equity will decree that to be done which ought to be done, and act as though the certificate had been issued or the indorsement made."

The contract provides such change may be made only in writing, and the defendant contests the change because this part of the contract was not complied with, and the insurer has a right to have this provision of the contract substantially complied with. On the same question the intervener argues that when an act is required to be in writing, if done by an agent, his authority must likewise be in writing. This contention, I think, is unsound. Section 7939, Revised Codes provides: "An oral authorization is sufficient for any purpose, except that an authority to enter into a contract required by law to be in writing can only be given by an instrument in writing." This provision of the Codes applies to acts required by express statutes to be in writing, such as the statute of frauds, section 7519, Revised Codes, not to private contracts, where the parties have stipulated certain things shall be in writing. (See, also,Sunburst Oil Gas Co. v. Neville, 79 Mont. 550, 562,257 P. 1016.)

Skulason could have been authorized verbally to request the defendant to change the beneficiary. This the agreed facts show was done. The case falls within the rule announced, and within the authorities relied upon, in the Bell Case.

I think the judgment should be affirmed.

MR. JUSTICE ERICKSON concurs in the above dissenting opinion of MR. JUSTICE ANGSTMAN.

Rehearing denied July 15, 1939.