Philadelphia Life Insurance v. Erwin

Chinn, J., delivered the opinion of the court. This action was brought by Walter C. Erwin to recover $50 per month disability benefits under an insurance contract with the Philadelphia Life Insurance Company. -There was a verdict and judgment in favor of the plaintiff below for the sum of $600, being $50 per month for the period of twelve (12) months from April 20, 1932, until the institution of this action on April 25, 1933. The notice of motion alleges that judgment would be asked for $50 a month from January 23, 1932, “under and by virtue of that certain contract of insurance in writing made by you on my life, wherein you insured me in the sum of $50 a month against total disability occurring while said contract of insurance was in force, and wherein you further insured me in the sum of $5,000 against • death occurring while said contract of insurance was in force, which said policy or contract of insurance is numbered 92,703, and was issued by you to me on my application dated December 2, 1931, and upon my surrender of that certain five year term policy which I had carried •with your said company from January 20, 1927, the grounds of my said claim being that while my said policy of insurance was in force, on January 23, 1932, I was totally disabled by reason of pulmonary tuberculosis arid nervous and mental trouble, and thereby prevented from — 472 — engaging in any occupation or employment and from performing any work for compensation or profit, and had been so disabled for the period of three months next proceeding said date of January 23,1932, and have continued to be totally disabled since that date, and that I have performed all the conditions required of me under said policy and have violated none of its prohibitions, * * *.” Filed with the notice of motion is a policy of insurance for $5,000 on the life of Walter C. Erwin, dated January 20, 1932. Attached to the policy is an “Additional Provision,” whereby the company promised to pay the insured $50 a month for total disability, beginning with the fourth month from the commencement of said disability, upon proof “that the insured has, while both said policy and this additional provision are in full force * * *, become totally disabled as a result of bodily injury or disease occurring after the issuance of this additional provision and after the initial premium payment hereunder, * * *.” There is also attached to the policy the following paper signed by the insured and his wife, who were therein named beneficiaries: “PHILADELPHIA LIFE INSURANCE COMPANY “Home Office, 111 North Broad St., Philadelphia “Release of Old Policy For New Policy “In the matter of Policy No. 92,703 in the Philadelphia Life Insurance Company for FIVE THOUSAND Dollars, issued January 20th, 1927, on the life of WALTER C. ERWIN on the Five Year Term, non participating, non renewable plan with disability and double indemnity benefits. “We hereby surrender, release and discharge the Company from any and all liability, claims and demands whatsoever, of, in and to the above policy in consideration of receiving from the Company a new policy on the same life for FIVE THOUSAND Dollars dated January 20, — 473 — 1932, on the Ordinary Life Preferred Risk. Participating plan with disability and double indemnity benefits and at the premium of $141.00, payable semi-annually. “It is expressly understood and agreed that, in this exchange of policies, the new policy described above is issued on the basis of the application for the original policy, which application shall be taken and considered as the application for said new policy and a part of the new contract of insurance.” Plaintiff alleged in his bill of particulars, and proved, that he had been totally disabled from October 1, 1931. This is conceded by the insurance company, but it is contended that the action is based entirely on the policy and disability provision dated January 20, 1932, issued after the disability occurred, and, therefore, under the terms of that provision, plaintiff cannot recover. The plaintiff contends on the other hand that the disability for which he seeks to recover occurred after the issuance of the term policy of January 20, 1927, referred to in the notice of motion, which said policy was in force at the time he became totally disabled on October 1,1931, and continued in force until it was surrendered to the company in exchange for the new policy and disability provision dated January 20,1932, which last named policy is but a continuation of the five year term policy which expired on that date. Upon a careful consideration of the pleadings and the record, we do not think the defendant’s contention that the action is based entirely upon the policy of January 20, 1932, should be sustained. The notice of motion alleges that the defendant is indebted to the plaintiff for total disability occurring under his policy or contract of insurance No. 92,703 “issued by you to me on my application dated December 2, 1931, and upon my surrender of that certain five year term policy which I had carried with your said company from January 20, 1927, the grounds of my said claim being that while my said policy of insurance was in force on January 23, 1932, I was totally dis — 474 — abled * * * and had been so disabled for the period of three months next preceding said date of January 23, 1932.” It necessarily follows from the above allegation, (1), that the five year term policy of January 20, 1927, therein mentioned, did not expire until January 20, 1932; and (2), since plaintiff had been totally disabled for at least “three months next preceding January 23,1932,” said disability must have occurred while said term policy was in force. We, therefore, think that while the pleadings might have been more specific in that respect, the allegations of the notice sufficiently show that the disability for which plaintiff seeks to recover occurred while the 1927 policy was in force and not after the new policy was issued, as defendant contends. It is argued that even if the notice of motion is sufficient to show that the plaintiff was claiming disability benefits under the policy dated January 20, 1927, it cannot he said what those benefits are because the policy was not produced in evidence. In the so-called release attached to the policy of January 20,1932, it is stated that policy No. 92,703 in the Philadelphia Life Insurance Company for $5,000 was issued to the plaintiff on January 20, 1927, on the Five Year Term, non participating, non renewable plan, with disability and double indemnity benefits, which said policy was surrendered to the company in consideration of a new policy for the same amount dated January 20, 1932, “on the Ordinary Life Preferred Risk, Participating Plan, with disability and double indemnity benefits, at the premium of $141.00, payable semi-annually.” Said release also expressly states, “that the new policy described above is issued on the basis of the application of the original policy, which application shall be taken and considered as the application for said new policy and a part of the new contract of insurance.” The application for the original policy of January 20, 1927, is attached to the new policy of January 20,1932, and — 475 — made a part thereof. It is also shown by the parol evidence and not controverted that the application for disability benefits under the policy of 1927 was made by the plaintiff in December, 1931, to T. E. Warriner, agent of the insurance company who had negotiated the original policy, and a request that the term policy should be converted at its expiration on January 20, 1932, was made at the same time; but Mr. Warriner advised the plaintiff to wait until the new policy was issued on January 20, before putting in his claim for disability benefits. It may here be said that counsel for the company claims that Mr. Warriner was not acting as agent of the company at that time, but there is no evidence to that effect, and it was testified that he continued to look after the business he had written when he was agent. Accordingly he had received the term policy from the plaintiff for exchange and the company sent him the new policy to be delivered to the insured. The record, therefore, shows that the term policy of 1927 contained a disability provision, and was surrendered to the company at the expiration of the said five years on Januáry 20, 1932, in exchange for the Ordinary Life policy of that date containing a disability provision, based upon the same application, the same medical examination, and bearing the same number. That this exchange was made in accordance with the original contract, and that the disability provision in the old policy was similar to that in the new, may we think be plainly inferred from the pleadings and the facts and circumstances shown by the record. In fact, the defendant does not undertake to deny or in any way controvert the truth of these inferences. Nor has the defendant company any right to complain because the original policy, itself, was not produced. It had taken the policy from the plaintiff and issued a new one to him under the circumstances above detailed and it is quite evident that in surrendering the policy, the plaintiff acted in good faith and in accordance with its terms. If, therefore, the contention of the — 476 — plaintiff as to the terms of the policy is not correct, it lay within the power of the company to produce the policy to show the contrary. From the fact that it did not do so, it may fairly be presumed that the production of the policy would have been in plaintiff’s favor. Under the foregoing circumstances we think the evidence amply sufficient to sustain the contention of the plaintiff that the policy of the insured sued on was but a continuation of the original policy and not a new and separate contract. That an insurance contract issued in fulfillment of a term contract of insurance does not constitute a new contract, but is simply a continuation of the old or original contract seems well settled. As said in the case of Aetna Life Insurance Company v. Dunken, 266 U. S. 389, 45 S. Ct. 129, 132, 69 L. Ed. 342: “The second policy here * * * was issued not as a result of any new negotiation or agreement, but in discharge of pre-existing obligations. It merely fulfilled promises then outstanding; and did not arise from new or additional promises. The result in legal contemplation was not a novation, but the consummation of an alternative specifically accorded by, and enforceable in virtue of, the original contract.” See also, Tayloe v. Merchants’ Fire Ins. Co., 9 How. 390, 405, 13 L. Ed. 187; Carter v. Standard Accident Ins. Co., 65 Utah 465, 238 P. 259, 41 A. L. R. 1495. In the case of Silliman v. International Life Insurance Co., 131 Tenn. 303, 174 S. W. 1131, 1132, L. R. A. 1915F, 707, the insured took out a life insurance policy for five years which provided that he might at any premium date exchange it for any form of policy then in use at the premium fixed by his age at the time the exchange was made or at the age of the original policy by paying the difference in premiums for the past years with interest. The policy also provided that in case of suicide within one year from its date the company would be liable only for the return of the amount of the premiums already paid. After carrying the policy for four years the insured surrendered the same to the company in exchange for a con — 477 — verted policy. The new policy provided that in case of “suicide within one year from the date on which this insurance begins” the limit of recovery shall be the return of the premiums already paid. The insured committed suicide within less time than a year after the exchange of policies was made, and the company denied liability except to the extent of the premiums paid under the new policy. In that case the court held that the two policies were, in effect, one and the same contract, and that the insurance came within the meaning of the suicide clause of the second at the time of the issuance of the original policy. The court stated: “It seems to us quite clear that under the facts stated the new policy was but a continuation of the same insurance contract. It was based on the old application and the old medical examination, and the new terms were in strict accord with the provisions of the first policy, granting to the insured the right to make just such a selection to take the place of the original form.” See also, McDonnell v. Alabama Gold Life Insurance Company, 85 Ala. 401, 5 So. 120, 125, in which case the court said: “The onus is on the defendants to show that the taking of the new policy was in discharge of the contract evidenced by the first policy, or that it was a novation; the whole question being one of intention to he established by facts.” In the case of Rosenberg v. Equitable Life Assurance Society of United States, 193 N. C. 126, 136 S. E. 364, the insured had been carrying three $5,000 Term Policies with disability and double indemnity provisions, and with the right reserved to him to exchange these policies for Converted Life Insurance without any further medical examination. On his application to change the three Term Policies for a Converted Life Policy carrying disability and double indemnity provisions, the company offered to provide the insured with the stated amount of Converted Life Insurance, but declined to issue him a policy carry — 478 — ing disability insurance without undergoing further physical examination. The insured brought suit to compel specific performance on the part of the company, namely, to compel the company to issue him $15,000 of Converted Life insurance with disability and double indemnity provisions without requiring him to stand any further physical examination, and on the trial of this case the court found in favor of the insured and required the company to issue the insurance requested. In Wamboldt v. Reserve Loan Life Insurance Company, 191 N. C. 32, 131 S. E. 395, 45 A. L. R. 1360, there was a rider attached in 1921 to a policy which had been issued in 1915. The insured became partly blind a few months before the rider was attached to the policy, and the question was of what date the attached rider became effective —when it was attached in 1921, or the date of the policy in 1915. The court in that case held that the rider was subject to and dated from the date of the original policy with reference to the incontestability law, and required the payment of the claim for blindness occurring just a few months before the rider was attached to the policy. It may be finally said that the’ insured paid the premiums for the disability benefits under the old policy from January 20,1927, to January 20,1932; that this policy was in force at the time he became totally disabled, and before the term policy was exchanged for the new policy. It is, therefore, clear that plaintiff was entitled to the disability benefits accruing to him by virtue of his policy, beginning three months after October 1, at the time he requested Mr. Warriner in December, 1931, to assist him in making application for the benefits, and in exchanging the term policy for the new one to which hie was also entitled. That plaintiff is .so entitled is not denied or in any way controverted by the defendant, nor is it claimed that the defendant is released from its obligations by the rider; neither does it seem to us that such a claim could be made in good faith under the circumstances. — 479 — As already said, the only defense offered is based upon the technical ground that the plaintiff declared on the 1932 policy alone, and cannot recover under that contract because he became totally disabled before same was issued. For the reasons stated, we do not think this defense should be sustained, and the judgment of the court below is, therefore, affirmed. Affirmed. Hudgins and Browning, JJ., dissenting.