Lee v. Southern Life Health Ins. Co. , 19 Ala. App. 535 ( 1923 )

Action on a policy of life insurance. the complaint is substantially in Code form. By pleas, which are set out in the report of the case, defendant, appellee here pleads: (1) That the beneficiary under the policy unlawfully, intentionally, and feloniously took the life of the insured prior to the assignment of the policy to the appellant. (2) That the insured was murdered by the beneficiary in the policy, and the policy subsequently assigned to appellant. (3) A provision of the policy excepting death from a malicious act of the beneficiary as a risk covered by the policy and an allegation that the insured came to her death as the result of the malicious act of the beneficiary prior to the assignment of the policy. (4) A provision of the policy forfeiting the policy for failure to pay premiums when due, and a grace of four weeks, with an allegation that the policy was "paid up" to, to wit, December 5, 1921, and that no premiums were paid since that date, the insured having met her death on February 11, 1922.

By replications, which are set out, appellant replied, specially, in substance that the policy sued on contained an "incontestable clause" reading as follows:

"Incontestable. This policy shall be incontestable after one year from date of issue, except for fraud or misstatement of age."

And alleged that the insured came to her death more than a year after the policy was issued.

The special replications were demurred to, demurrer was sustained, and the case is here on the record.

The sufficiency of each of the replications as an answer to pleas 1 to 4 are the only questions before the court.

1. The appellant, as assignee of a transferable but nonnegotiable policy of life insurance, occupies, so far as the case at bar is concerned, the shoes of the assignor, with identical rights and subject to the same defenses.

2. The replications were a complete answer to the defense attempted by pleas 1 and 2. Mutual Life Ins. Co. v. Lovejoy,201 Ala. 337, 78 So. 299, L. R. A 1918D, 860; Mutual Life Ins. Co. v. Lovejoy, 203 Ala. 452, 83 So. 591; Supreme Lodge of Knights of Phythias v. Overton, 203 Ala. 193, 82 So. 443, 16 A.L.R. 649; United Order of Golden Cross v. Overton,203 Ala. 335, 83 So. 59, 13 A.L.R. 672.

No incontestable clause was involved in the case of Mutual Life Ins. Co. v. Armstrong, 117 U.S. 591, 6 Sup. Ct. 877,29 L.Ed. 997, or in Murchison v. Murchison (Tex.Civ.App.)203 S.W. 423, and like cases. For the reason stated, they are inapplicable here.

3. A contract of insurance must be construed as a whole. The pleas and replications shed but meager light on the entire contract, but we are informed (by plea 3) that the policy contained a provision excepting death resulting from a malicious act of the beneficiary as a risk covered by the contract. The incontestable clause was no answer to this plea. The legal effect of this plea was to say that the death of the insured was caused by a malicious act of the beneficiary and a risk of that kind was not covered by the policy and specifically excepted therein. Construing both clauses together, each has a field of operation.

4. Applying the foregoing principles to plea 4, the opinion here prevails that the incontestable clause is no answer to the plea setting up a forfeiture of the policy for failure to pay the premium as it became due. The payment of a premium at a specified time is the foundation of the insurance business. The clause forfeiting the policy after expiration of the grace period is in no wise affected by the incontestable clause.

An agreement on its part not to contest except for fraud or misstatement of age must be construed in connection with the further provision that a default in payment of the premium, after expiration of the grace period, forfeited the policy. Each clause may be enforced without doing violence to the rights of either party. Thompson v. Fidelity Mutual Life Ins. Co., 116 Tenn. 557, 92 S.W. 1098, 6 L.R.A. (N.S.) 1039, 115 Am. St. Rep. 823.

Reversed and remanded.

On Rehearing. In addition to the authorities cited in the original opinion, the following cases from other jurisdictions sustain the ruling there announced: N.W. Mutual Life Ins. Co. v. Johnson,254 U.S. 96, 41 Sup. Ct. 47, 65 L.Ed. 155; Hardy v. Phoœnix Mutual Life Ins. Co., 180 N.C. 180, 104 S.E. 166; Plotner v. N.W. National Life Ins. Co. (N.D.) 183 N.W. 1000.

The court has consulted the case of Slocum v. Metropolitan Life Ins. Co. (Mass.) 139 N.E. 816, and Johnson v. Metropolitan Life Ins. Co., 85 W. Va. 70, 100 S.E. 865, 7 A.L.R. 823; Riggs v. Palmer, 115 N.Y. 506, 22 N.E. 188, 5 L.R.A. 340, 12 Am. St. Rep. 819, cited by appellant, and it does not appear that any incontestable clause was involved in either of said cases.

The application for rehearing is overruled.