Howley v. Scranton Life Insurance , 357 Pa. 243 ( 1947 )

Plaintiff, Thomas Joseph Howley, filed this bill in equity to recover from defendant, Scranton Life Insurance Company, a policy of insurance issued by defendant on plaintiff's life, and for a decree holding that the policy is in full force and effect under a provision of the policy waiving premium payments in case of permanent total disability. After hearing, the learned chancellor held that inasmuch as plaintiff had failed to make claim for waiver of payment of the premiums because of such disability while the policy was in force, as provided by the policy, he was not entitled to the relief sought, and, therefore, entered a decree nisi dismissing the bill. Upon the entry of a final decree, dismissing his exceptions and affirming the action of the chancellor, plaintiff appealed.

The following appear to be the pertinent facts: On August 28, 1934, defendant issued a policy of insurance on the life of plaintiff in the amount of $7,123. The premiums were paid by cash or by loan note to August 28, 1940. That premium and the indebtedness on the loan note not having been paid, defendant wrote plaintiff on September 20, 1940, that the grace period of thirty-one days would expire on September 28, 1940. On October 4, 1940, plaintiff went to defendant's office, signed another loan note in payment of the premium then due and the interest on his previous note, and gave a certificate of health and an application to reinstate the policy if a physical examination showed he was in good health. He was notified to appear before defendant's physican, but never appeared. Thereafter, on November 1, 1940, defendant returned to plaintiff the loan note which he had given on October 4, 1940, and advised him that it would give attention to his application for reinstatement upon receipt of a completed medical certificate and return of the loan note. Plaintiff did not submit to the requested examination, and on November 11, 1940, defendant wrote him that the policy was in default for non-payment of the premium and interest on the loan due August 28, 1940, that ". . . in accordance with the terms of this contract, the available cash surrender value has been used to pay the outstanding loan and the policy has automatically surrendered", and further that defendant's check covering a dividend credit would be delivered to him shortly. On November 19, 1940, plaintiff went to defendant's office, received the dividend of $6.91 due him, and returned the policy to defendant.

On April 12, 1943, plaintiff, then about 41 years of age, by his counsel, gave defendant written proof that he had been totally and permanently disabled since 1938, and demanded a return of the policy. Defendant refused to return the policy on the ground that it had been validly surrendered and cancelled on November 19, 1940, and further that plaintiff had failed to give proof of his disability as the policy required.

There is much uncontradicted testimony, both medical and lay, that plaintiff has been, since before the policy became in default on August 28, 1940, permanently and totally disabled. This evidence shows that plaintiff suffered head injuries in an automobile accident on December 16, 1938, and that thereafter he dragged one leg, his speech was "stammering" and "stuttering", his brain tissue became involved, and he was "mentally and muscularly in very bad shape." The testimony further establishes the fact that while plaintiff's condition has now somewhat improved, yet he is still totally disabled to follow any occupation. The Chancellor, in his adjudication, said: "Plaintiff is suffering from a disease that a physician says is multiple sclerosis. His mind wanders and he is forgetful and incompetent to act. He appears like a person under the influence of liquor. He was an attorney-at-law, giving up his law office before 1938. After being knocked down by an automobile in 1939 [1938] the symptoms of his disability appeared. They were noticeable to his friends and he was under the care of physicians. He has never fully recovered . . . The total disability of the plaintiff and that it will be continuous is not disputed by defendant. The exact date when he became totally disabled is questionable. The fair inference is that it was before the policy lapsed."

The terms of the policy with respect to disability read as follows: "If, while this policy is in full force and effect and not otherwise, proof satisfactory to the Company shall have been furnished by or on behalf of the Insured during his lifetime and prior to his fifty-fifth birthday, that, as the result of disease or of bodily injury, he has become and still is totally disabled, and that solely by reason of such disability he has been wholly and involuntarily prevented throughout not less than six consecutive months from doing any work at all, or engaging in any business or occupation whatsoever for compensation, gain or profit, then and in such case, the Company shall by endorsement thereon allow the presumption of permanent total disability, and undertake:

"To waive thenceforth, as they may successively become due, all premiums of said Policy during such permanent total disability; and in case there shall have been delay in makingclaim for this relief, to waive, or refund if paid, the premiumor instalments thereof, if any, which may have become dueduring the period of six months preceding the receipt, at theHome Office of the Company, of such proof of permanent totaldisability; and provided further, that to be valid and effective the written notice of disability claim must be given to the Company at its Home Office during both the lifetime of the Insured and the period of permanent total disability, unless it shall be conclusively shown that it was not reasonably possible to give such notice and that notice was given as soon as it was reasonably possible." (Italics added).

While the foregoing provision starts with the statement that proof must be received "while the policy is in full force and effect", this condition is expressly modified by the subsequent clause that "in case there shall have been delay in making claim for this relief, to waive, or refund if paid, the premium or instalments thereof, if any, which may have become due during the period of six months preceding the receipt . . . of such proof of permanent total disability." Therefore, it clearly appears that it was the parties' intention that proof of disability could be given at any time within six months after default, or until February 28, 1941. Even if we were of the opinion that these two statements in the disability provision created an ambiguity, still we would have to view the matter in the light most favorable to the insured: Sack v.Glens Falls Insurance Co., 356 Pa. 487.

Admittedly plaintiff did not give defendant the required notice until long after February 28, 1941. However, on November 11, 1940, which was prior to the six-month period after default, defendant erroneously advised plaintiff that "the policy has automatically surrendered". By so doing, plaintiff, who was then suffering from a serious malady which materially affected his mind, was obviously led to believe that the policy was no longer in force and had no further value. As a result, on November 19, 1940, he turned the policy over to defendant, without any consideration whatsoever. Plaintiff's reliance on defendant's representation that the policy was surrendered cannot be said to have been unreasonable. Under such circumstances, defendant is precluded from taking advantage of plaintiff's delay in furnishing proof of his total disability within the period of six months after the policy lapsed.

It was said in Morton v. Washgtn. Nat. Ins. Co., 156 Pa. Super. 77,80, 39 A.2d 154: "Even as the disability must occur before default, so must proof of the disability be given to the company before the lapse of the insurance." However, it is equally well settled, as this Court said in Arlotte v. Nat.Liberty Ins. Co., 312 Pa. 442, 445, 167 A. 295, that ". . . a party to a contract cannot escape liability under his obligation on the ground that the other party has failed to perform a condition precedent to the establishment of such liability or to the maintenance of an action upon the contract, where he himself has caused that failure. As stated in Williston, Contracts, section 677, 'It is a principle of fundamental justice that if a promisor is himself the cause of the failure of performance, either of an obligation due him or of a condition upon which his own liability depends, he cannot take advantage of the failure.' Thus, an insurer will not be permitted to take advantage of the failure of the insured to perform a condition precedent contained in the policy, where the insured itself is the cause of the failure to perform the condition."

We are convinced that defendant cannot set up the failure of plaintiff to perform the condition of the policy as to proof of his permanent and total disability, and for that reason the learned chancellor erred in not decreeing that defendant return the policy in suit to plaintiff, with an endorsement thereon allowing the presumption of permanent total disability, that all premiums be waived during such disability, and that the policy be recognized as being in full force and effect.

Decree reversed, and the record remitted to the court below in order that a decree be entered in accordance with this opinion. Costs to be paid by defendant.