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court, and a judgment was entered concealments relied on by defendant dismissing plaintiff's suit.
in its pleas were made by the inFrom this judgment plaintiff ap- sured with the intent to defraud, pealed to the court of civil appeals. and did defraud defendant in that That court reversed the judgment of it induced it to issue said policies, the trial court, and sustained plain- which, but for said fraudulent mistiff's motion for a directed verdict, representations, would not have and entered judgment against de- been issued. fendant for the principal amount of Fourth, that the court of civil apsaid policies and interest, but denied peals erred in sustaining plaintiff's plaintiff a recovery for the stat- motion for a directed verdict, and utory penalty.
in rendering judgment against deThe case is now before this court fendant for the amount of said polupon a writ of certiorari, sued out icies, with interest and costs. by defendant, for review, and errors Fifth, that the court of civil aphave been assigned.
peals erred in not affirming the By the first assignment of error, judgment of the circuit court in it is insisted that the court of civil favor of defendant and dismissing appeals erred in giving effect to the plaintiff's suit with costs. incontestable clause contained in As we view the case, only three said policies; that the court should questions need be determined, and, have held:
if determined in favor of the judgFirst, that, upon the death of the ment of the court of civil appeals, insured within one year from the they are conclusive of the case. The date of the issuance of said policies, first is, Did defendant's letter of they became mature demands, and January 30, 1920, in which it denied the rights of the parties in respect the justice of plaintiff's claim, and to liability or nonliability became refused to pay the same, amount to fixed as of that date, and that de- a rescission of the policies? and the fendant could not set up any defense second is, whether or not the policies to plaintiff's action existing as of are contestable at all by defendant, that date, and in holding that de
in view of the incontestable clauses fendant was bound to take affirm- contained therein and the facts; ative action to rescind the policies and, third, Did plaintiff waive said within a year from the date of their incontestable clauses by his failure issuance; that, in any event, the to rely on them in his pleadings? court erred in not holding that, There is no merit in the first conplaintiff having sued on said pol- tention of defendant, that its letter icies, defendant had the right by of January 30, 1920, had the effect proper pleas to contest the same, re- of rescinding the policies. There gardless of when its pleas were was no evidence offered which tendfiled.
to show that Second, that the court of civil ap- plaintiff consented peals erred in holding that plaintiff to a rescission of necessity of had not waived the incontestable
the policies. His clauses contained in said policies, by
consent was necessary to accomplish his failure to expressly plead the
such a result. On this point no ausame, either in his declaration or
thorities need be cited. by way of replication to defendant's
On the second point, it is the conpleas.
tention of defendant that the conThird, that the court of civil ap
tracts of insurance became mature peals erred in holding that the mat- demands upon the death of the inters set up in defense of plaintiff's sured, and that liability or nonliabilaction were immaterial; but on the ity became fixed by that event. record it should have held that said While it is contended by plaintiff matters were material to the risk, that the insured's death within the and that the representations and year in which said policies, by their
(- Tenn. 256 8. W. 438.) terms, might be contested, did not the date of issuance, except for nonrelieve defendant of the necessity payment of premiums." of taking some affirmative action, The usual incontestable clause within one year from the date of contained in policies of life insurthe issuance of said policies, to re- ance is :
“After this policy shall scind them or have them canceled have been in force [for a specified for fraud, and not having done so time] it shall become incontestable, within the year, it is precluded from except for nonpayment of premidoing so in this action.
ums.' It was held by this court in Clem- The identical question arose in the ent v. New York L. Ins. Co. 101 case of Monahan v. Metropolitan L. Tenn. 22, 42 L.R.A. 247, 70 Am. St. Ins. Co. 283 Ill. 136, L.R.A.1918D, Rep. 650, 46 S. W. 561, that incon- 1196, 119 N. E. 69. The policy sued testable clauses inserted in insur- on in that case contained the followance policies similar to the one in ing clause: “After two years this question are reasonable and valid, policy shall be noncontestable, exand that the practical and intended cept for the nonpayment of premieffect of such a clause is to create a ums as stipulated or for fraud." short statute of limitation in favor In that case the court said: "In of the insured, within which limited passing upon the validity of inconperiod the insurer must, if ever, test testable clauses in policies of insurthe validity of the policy. The court ance, the courts have defined their in that case said: “It has been well purpose, and when this purpose as said: “The effect of the provision so judicially determined is considis to prevent the insurer from in- ered it aids in the construction of terposing as a defense the falsity of the language used in an incontestthe representations of the insured, able clause. Incontestable proviwhich is a fraud. But it does not sions in insurance policies have been prevent abandonment, rescission, held valid as creating a short statand cancelation of the contract for ute of limitations in favor of the such fraud, provided the action for insured, the purpose of such provithat purpose is brought within a sions being to fix a limited time year. It is virtually saying to the within which the insurer must asinsured that 'I will take one year in
certain the truth of the representawhich to ascertain whether your tions made. Royal Circle v. Achterrepresentations are false or not, and rath, 204 Ill. 549, 63 L.R.A. 452, 98 whether you have been guilty of any Am. St. Rep. 224, 68 N. E. 492; fraud in obtaining the contract, and, Flanigan v. Federal L. Ins. Co. 231 if within that period I cannot or do Ill. 399, 83 N. E. 178; Weil v. Fednot detect such falsity and fraud, I eral L. Ins. Co. 264 Ill. 425, 106 N. will obligate myself to make no fur- E. 246, Ann. Cas. 1915D, 974. This ther inquiry into these matters, and being the purpose for fixing a specito make no defense on account of fied time after which the policy them.'”
shall be incontestable, it is not apIt is insisted by counsel for de- parent, as plaintiff in error sugfendant that the principle which is gests, that the meaning of the clause laid down in the Clement Case is here involved is that the policy shall not applicable to a case where death not become incontestable until it has occurs during the one-year period. been in force for two years. There
This insistence is not sound, in is nothing in this clause to indicate view of the peculiar language con- that the parties were contracting
tained in the incon- that plaintiff in error should have -death of insured within testable clauses in two years during the lifetime of year-effect.
the policies under Fay in which to investigate and deconsideration. We will here quote
We will here quote termine whether false statements them again: “This policy shall be had been made in the application for incontestable after one year from the insurance. Plaintiff in error reserves two years' time in which to tate of the insured, there was no make such investigation and to de- one to whom premiums could be termine whether there has been such tendered, as there was no benefia breach of warranty as would ciary in existence until an adminisauthorize it to rescind its contract.” trator was appointed. On this point
The court also held in that case the court said: “The appellant's that the incontestable clause is not right of action to contest the validonly for the benefit of the insured, ity of the policy was necessarily in but inures to the benefit of the bene- abeyance after the death of the inficiary after the insured's death. In sured until the appointment of an passing on this point, the court said: administrator. There was no per“Plaintiff in error cites John Han- son in existence to be sued, the escock Mut. L. Ins. Co. v. Schlink, 175 tate of the insured being the beneIll. 284, 51 N. E. 795, in support of ficiary in the policy, until such its proposition that the rights of the appointment. There was no person parties under a contract of insur- to whom the company could tender ance become fixed at the time of the the premiums which it had received death of the insured. The decision or against whom it could proceed in that case has no bearing what- for the cancelation of the policy. ever upon the point raised here. The statute makes no provision for Some of the rights and obligations the appointment of an administraof the parties to a contract of insur- tor who is not of kin to or a creditor ance necessarily become fixed upon of the decedent or the public adminthe death of the insured. The bene- istrator. The persons interested in ficiary has an interest in the con- the estate having refused or failed tract, and, as between the insurer to take out letters of administraand the beneficiary, all the rights tion, the appellant, without any and obligations of the parties are fault of its own, found it impossible not determined as of the date of the to begin any suit to invalidate the death of the insured. The incon
The incon- policy within the year reserved to testable clause in a policy of insur- it. If the condition is to be literally ance inures to the benefit of the applied in all cases where the inbeneficiary after the death of the in- sured dies before the expiration of sured as much as it inures to the the incontestable period, even on the benefit of the insured himself during day after the date of the policy, the his lifetime. The rights of the par- persons interested in his estate have ties under such an incontestable it in their power, in cases of policies clause as the one contained in this payable to the estate of the insured, contract do not become fixed at the by refusing to take out letters of date of the death of the insured. In administration, to deprive the comcase of a breach of warranty
pany of any opportunity of making the insurer must assert its claim its defense, no matter how meritowithin the two-year period, wheth- rious a defense it may have. Where er the insured survives that period one party to a contract has by its or not, either by affirmative action own act made it impossible for the or by defense to a suit brought on other party to comply with the conthe policy by the beneficiary within tract and thus protect his interest in the two years."
it, he cannot avail himself of the To the same effect is the holding noncompliance of the other party to of the court in Ramsey v. Old Col- enable him to enforce performance. ony L. Ins. Co. decided by the su- The impossibility of maintaining preme court of Illinois on April 21, the suit because no person is in ex1921, in 297 Ill. 592, 131 N. E. 108. istence who may be sued will not be In that case the policy was made permitted to work the injustice of payable to the estate of the insured, depriving the company of its right and the court held that, where pol- to maintain an action to cancel the icies were made payable to the es- policy at any time within the year (- Tenn. 256 S. W. 438.) after its date. Either the death of parties to the contract in assenting the insured must fix the rights of to it, to stipulate that appellee's the parties, so that the policy, if right to contest should be limited to contestable then, may be contested a period of one year, only in case the whenever suit is brought, or the policy continued in force for that cause of action of the company must length of time or longer, it would be regarded as suspended during the seem that apt language to that effect time it is prevented from suing by might have been employed.” the failure to appoint an adminis- Also another case directly in point trator, and, upon the appointment of is Hardy v. Phænix Mut. L. Ins. Co. an administrator, the suit may be 180 N. C. 180, 104 S. E. 166. In maintained, provided that the whole that case the court said: time allowed the company for that “The remaining question, and one purpose does not exceed one year.” not heretofore decided in this court,
Another case directly in point is is as to the effect on the incontestthat of Ebner v. Ohio State L. Ins. able clause of the death of the inCo. 69 Ind. App. 32, 121 N. E. 315, sured within one year from the date decided by the court of appeals of of the policy, and this depends largeIndiana in December, 1918. In that ly upon the language used, and the case the court, with respect of the purpose for which the clause was question of whether or not the in- inserted in policies. contestable clause inures to the "It says it shall be incontestable benefit of the beneficiary upon the after one year from its date, except death of the insured, said:
for nonpayment of premiums,' and, "The policy, under the heading if we adopt the view of the defend'Incontestability,' contained the fol- ant that this means 'that, if the pollowing provision: '(1) After one icy had been in force one year, or if year this policy shall be incontest- the insured should survive one year able except for nonpayment of pre
after the date of the policy, it should miums.'
be incontestable,' we must insert in "Proceeding to a consideration of the contract, expressed in simple, the case in its general features, we unambiguous language, stipulations are first required to construe the in- which do not appear there, and contestability provision of the pol- which materially affect the contract icy, which, for purposes of this case, of the parties, which we are not at is as follows: ‘After one year this liberty to do. policy shall be incontestable.
“If, therefore, there is nothing in There were certain exceptions which the clause itself changing its terms need not be further noticed, as they or effect upon death of the insured are not applicable here. It is appels within one year, if the clause was lee's contention that this provision inserted for the benefit of the inshould be construed to mean that a surance company, to enable it to inpolicy containing it is noncontest- crease its business, if the period of able after one year, provided it con- one year after which the policy was tinues in force for that length of to become incontestable was to aftime, or provided it does not mature ford opportunity to the company to by the death of the insured before make its investigations and to comthe expiration of the year; that, mence an action for the cancelation where the insured dies within the of the policy, and if, during the year, the provision has no applica- whole of the year, someone has been tion.... It is apparent that the in existence, the beneficiary, against construction for which appellee con- whom an action could be brought, tends requires that there be read we see no reason for refusing to give into the provision something which the plaintiff the full benefit of the it does not in terms contain. Had clause as it is written. it been the purpose of the author of “The death of the insured did not the provision, or the intent of the place the defendant at any disadvantage under the policy, nor stop and the policy then becomes payable its investigations, nor did it affect according to its terms, but the terms its right to commence an action, and, of the contract are not changed by in most cases, death would inure to the death of the insured. The right the benefit of the company if it con- to contest the policy does not theretemplated an action to cancel the by become an absolute, unlimited policy by removing a hostile witness. right, but it is still controlled by the
"Our investigations, and those of provision of the contract that it counsel, indicate that the question must be exercised within one year has arisen very few times, and that 'from the date of the policy. The the question, then, has been decided company is not relieved from the in accordance with this opinion. obligation of its contract to ascerEbner v. Ohio State L. Ins. Co. su- tain all the facts material to its liapra, and Monahan v. Metropolitan bility and cancel or rescind the conL. Ins. Co. 283 Ill. 136, L.R.A. tract within that time or be barred 1918D, 1196, 119 N. E. 68, are di- from thereafter contesting the liarectly in point."
bility. The death of the insured Another case also directly in point neither enlarged nor abridged the is Metropolitan L. Ins. Co. v. Peeler, appellant's right. It was still en
Okla. 6 A.L.R. 441, 176 Pac. titled to make any defense or take 939. In that case the court said: any action necessary to enforce its “There is only one condition upon rights. The right to do so was as which the validity of the policy can complete as in the insured's lifebe questioned after the lapse of a time, and was subject to the same year, and that is the nonpayment of limitation. The right of the compremiums. The meaning of the pro- pany to defend against the policy is vision is that, if the premiums are not greater than the right of the paid, the liability shall be absolute beneficiary to collect the money, and under the policy, and that no ques
either right may be lost by mere tion shall be made of its original lapse of time,—the latter by virtue validity. The language admits of of the Statute of Limitations, the no reasonable construction other former by the limitations estabthan that the company reserves to lished by the contract. The rule in itself the right to ascertain all the regard to the construction of ammatter and facts material to its risk biguous language has no applicaand the validity of its contract for tion. The language is not ambigone year; and that if within that uous. It admits of no reasonable time it does not ascertain all the construction, as the courts have said facts, and does not cancel and re- in the cases already cited, other scind the contract, it may not do so than that the company may have afterwards upon any ground then in one year, and no more, for investigaexistence. Mutual L. Ins. Co. v. Bu- tion of the questions material to its ford, 61 Okla. 158, 160 Pac. 928; risk, and if it does not within that Clement v. New York L. Ins. Co. 101 time, either as plaintiff or defendTenn. 22, 42 L.R.A. 247, 70 Am. St. ant, contest the policy, it cannot do Rep. 650, 46 S. W. 561; Thompson so afterward. Such contest can be v. Fidelity Mut. L. Ins. Co. 116 made only by proceedings in court Tenn. 557, 6 L.R.A. (N.S.) 1039, 115 to which the insurer and the inAm. St. Rep. 832, 92 S. W. 1098; sured, or his representatives or Wright v. Mutual Ben. Life Asso. beneficiaries, are parties. American 118 N. Y. 237, 6 L.R.A. 731, 16 Am. Trust Co. v. Life Ins. Co. 173 N. C. St. Rep. 749, 23 N. E. 186."
558, 92 S. E. 706; Mutual L. Ins. Co. In Ramsey v. Old Colony L. Ins. v. Buford, supra.' Co. 297 Ill. 592, 131 N. E. 108, the In support of its contention that court said: “It is true that the the rights of the parties became cause of action upon the policy ac- fixed upon the death of the insured, crues upon the death of the insured, defendant has cited the cases of