Petition for Writ of Certiorari — Ruhlin v. New York Life Insurance

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FILE COPY ERY

Supreme Court of the United States

Ocrosrer Term, 1937.

NEW YORK LIFE INSURANCE COMPANY,

, vs.

* JOHN G. RUHLIN, J ENNIE B. RUHLIN, JOHN B.

RUHLIN, et al., Petitioners.

PETITION FOR“A WRIT OF CERTIORARI TO

THE UNITED STATES CIRCUIT COURT OF

APPEALS FOR THE THIRD CIRCUIT AND’

_ BRIEF IN SUPPORT THEREOF. :

. ‘4 CHARLES J. MARGIOTTI,

720 Grant Building,

Pittsburgh, Pa.

_ CHARLES H. SACHS,

1124 Frick Building,

. Pittsburgh, Pa.

Attorneys for Petitioners.

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. BATAVIA TIMES, LAW PRINTERS,

BATAVIA, N.Y.

. JOSIAH SMITH CO., PENNSYLVANIA REPRESENTATIVE,

704 SECOND AVENUE, PITTSBURGH, PA.

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SUBJECT INDEX.

PAGE

Petition for a Writ of Certiorari........ Goeer cna whl

Statement ..... cata Jae awkanewesOhanencees 2

The Questions Presented............. Airs! 4

Reasons Relied On for the Allowance of the

WEEE ‘Mba tons obegnk sks sseesnkkceae thea Be a 5

Brief in Support of Petition....... et ees Gate 7

Opinions Below..... kee eK cles’ Mins Vets 7

Jurisdiction ..... Beg eRsa ene e ete es mie crete 7

tatement of the Case......... ne es Péaak 8

pecifications of Error...............00005. 8

SI TC cue cua tanta scab Sew ea seca 9

CII, 6 van cbacecacs URI LLan aeRO aak aka 11

Cases Crrep.

Coodley v. New York. Life Ins. Co., 70 Pac. (2d)

Dc. < dala bis Keun he cba ben neha che weaseuk.. 10

Metual Life Insurance Co. v. Markow itz, | 78 F.

(2d) 396, (cert. denied 296 U. S. 625)........ 6,10

Mutual Life Ins. Co. Vv. Margolis, 11 Cal. App. 2d,

iiss cscauseunacaws SE PELE er rer ryan 10

New York Life Insvrance Company v. Kaufman,

78 F. (2d) 398, (cert. denied 296 U. S.

eee ere peer ecelaenduatkes weeescs ee

“New York Life Insurance Company v. Truesdale,

a Poet |e Wrererrrrirrertttirrr 7,10

Ness v. Mutua] Life Insurance Co., 70 F. (2d) 59.7, 10

See. 240 (a), Judicial Code as amended by Act of

Feb. 13, 1925, c. 229 section 1 (438 Stat. 938,

28 U. 8. C. A., sec. 347; p. S59)... 08 2. eae 8...

Stroehmann v. Mutual Life Ins. Co., 300 U.S. 435,

2 rer veer ree ere 7,9. .

Thompson v. New York Lif Ins. y.< 9 F. Supp.

ee si SeO Ee enon oe 10

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AB GR Ste

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Petition For A Writ or CERTIORARI TO THE UNITED

States, Crrcurr Court or APPEALS FOR THE THIRD

Crrcuir anp Brier 1x Support THEREOF.

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To the Honorable Charles E. Hughes, the Chief Jus-

tice of the United States, and the Associate Justices

of the Supreme Court of, the United States:

John G. Ruhlin, Jennie B. Ruhlin, John B. Ruhlin,

William R. Ruhlin and Jean L. Ruhlin, the above

named petitioners, respectfully pray that a writ -of

certiorari issue to review the decree (R. 39) of the

United States Cireuit Court of Appeals for the Third

Circuit entered on Séptember 27, 1937, affirming the

order (R. 19) of the United States District Court for

‘the Western District of Pennsylvania, dated April 16,

1935, and made by Judge Schoonmaker, overruling

petitioners’ motion to dismiss the bifl in equity insti-

tuted on February 14, 1935, in said District Court: by

respondent (R. 2), praying for the deletion and elim-

ination of the disability and double indemnity provi-

sions contained in five life insurance policies issued

by respondent to John G. Ruhlin, one of the petition-

ers; and, pending the final disposition of said hill, that

petitioners be enjoined from instituting any action,

legal or equitable, against respondent, or, from pro-

ceeding in any way whatsoever with any action which

may have been instituted by petitioners, or any of.

them, prior to the filing of said bill or in any wise

on accqunt of said policies, including the action of as-

sumpsit brought by petitioner John G. Ruhlin, herein-

after referred to as insured, against respondent at

No. 353 Jannary Term, 1935, in the Court of Common

Pleas of Jefferson County, Pennsylvania, or from as-

signing or transferring any rights under said dis-

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ability or double inuemnity provisions or changing

the beneficiaries thereof, and overruling, also, the

motion to dissolve the temporary injunction granted

in accordance with the prayers of said -bill, and en-

- joining petitioners; pending final determination - of

said bill, according to the prayers of said bill.

STATEMENT .

Prior té February 14, 1935, John G. Ruhlin, the in-

sured, brought an action at law against respondent

in the Court of Common.Pleas of Jefferson County,

Pennsylvania, to recover certain monthly income pay-

ments, hereinafter referred to as disability payments,

equal to $10 per $1,000 of the face of five policies of

life insurance issued by-respondent to the insured and

under the terms of which respondent agreed to pay

to insured said benefits upon receipt of due proof

that the insured is totally and presumably perman-

ently disabled before age 60, as defined under ‘‘Total

and Permanent Disability’’ in said policies which

were issued on the following dates:

No. 10,452,365, December 1, 1928, face amount $10,000

No. 10,452,366, December 1, 1928, face amount 5,000

No. 11,165,728, July 7,1930, faceamount 4,000

No. 11,165,729, July 7,1930, faceramount 4,000

No. 11,165,730, July 7,1930, faceamount 4,000

(R. 2-4)

Each of the policies contained the following incon- .

.

testable clause:

‘‘Tncontestability.—This Policy shall be incon-

testable after two years from its date of issue

except for non-payment: of premium and except

-as to provisions and conditions relating to Dis-

‘ability and Double Indemnity Benefits.’’

—_—s§ ——— —-- ?———

3

On February 14, 1935 respondent eaused said hill

in equity to be filed. reciting the institution of said

action at law to recover. said disability benefits, the

issuance. of said policies, that they had: been obtained

by means of false and fraudulent answers to ques-

tions contained in the applications for said policies

and prayed for the reformation of said policies: by

eliminating and rescinding the disability and double

indemnity provisions from said policies and for an

injunction restraining the insured and the _ benefi-

ciaries. named therein, the other petitioners herein,

from instituting any action on said policies ineluding

said action at law, pending at the time of the filing

of the bill GR. 2).

Upon presentation of the bill the court issued a

restraining order and granted a rule to show cause

why a temporary injunction should not he granted

(RR. 12).

On March 2, 1935, petitioners filed motions te dis-

miss the bill of complaint and to dissolve the tem-

porary injunction (R. 14).

On April 16, 1935, the court made an order over-

ruling petitioners’ motions to dismiss the bill and to

dissolve the temporary injunction and enjoining pe-

tioners from instituting any actions against respond-

ent and from proceeding with said action instituted

in the state court and noted an exception to peti-

tioners (R. 19). |

On October 6, 1936, the Circuit Court of Appeals

(consisting of Cjreuit Judges Davis and Thompson

and District Judge Watson) filed an opinion affirming

that part of the decree of the Distriet Conrt which

4

refused to dismiss the bill insofar as it sought the.

cancellation of the disability benefit provisions, and

vacated the order restraining petitioners from prose-

. cuting the action brought in the state court. (R. 25).

On September 27, 1937, the Cireuit Court of Ap-

peals (consisting of Circuit Judges Buffington, Davis

and Thompson), after a reargument; rescinded the

previous decree of the Circuit Court of Appeals and

affirmed the decree of the District Court (R., 39).

THE QUESTIONS PRESENTED. &

1. The policies involved in this suit contain the fol-

lowing clause: 7 -

_ “Ineontestability—This Policy shall be incon-

testable after two vears from its date of issue ex-

cept for non-payment of premium and except as to

provisions and conditions relating to Disability

and Double Indemnity Benefits. ’’

The provisions and conditions relative to ‘‘Disabil-

ity and Double Indemnity Benefits’’ in said policies

provide they shall be payable upon receipt of proof,

and, as relates to double indemnity, that the benefits

shall be payable only if death resulted in a particular

manrer and not if it resulted from self destruction,

ete., ete., and, as relates to disability benefits, that. they

shall be payable only if the insured is through injury

or disease wholly prevented from performing any

work ete. for remuneration or profit, and then only if

such disability occurs before the insured reaches a

certain age; that they shall not apply if the disability

resulted from self inflicted injury or from military. or

naval service in time of war, or to the temporary or

paid up insurance provided under ‘‘Surrender

Values,’’ ete., ete.; that due proof of the continuance

of the disability may be demanded from time to time .

but, under certain circumstances, not more than once

a year. There is no mention in these ‘‘provisions or

eonditions’’ that the sums promised are not recov-

erable in case of false answers in the application or

anything to indicate that they stand upon a different

footing from the other obligations of the insurer in

the policy in regard to defenses for alleged fraud ‘in

the procurement of the contract.

Is an intent clearly shown to except disability hene-

fits from the incontestable clause where it merely pro-

vides that ‘‘except as to provisions and conditions re-

lating to Disability and Double Indemnity Benefits,”’

the policy shall be incontestable after two years from

its date of issue? | | |

2. If there is a diversity of opmion among courts

which have considered the identical incontestable

clause as to its meaning or effect is there not such un- —

certainty or doubt as to call for the application of the

settled rule that the insured is entitled to the benefit

of the resulting ae ? e

Cuar.es J. Marcrortt,

Cuar.es H.-Sacus,

Counsel for Petitioners.

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Reasons Revtrep On For THE ALLOWANCE OF THE WRIT.

A.

“This Court has ruled that in case of ambiguity in

the provisioys of a life insurance policy, that construc-

tion will be a opted which i is most favorable to the as-

sured because he language sa is that of the in-

6

surer ; that it is consistent with both reason and jus-

tice that any fair doubt as to the meaning of its own |

‘words should be resolved against it. The policy as a

‘whole, that is, the incontestable clause and the ‘‘pro-

visions and conditions relating to disability and double

indemnity benefits’? are drawn in such fashion as to

lead the average man to believe that what the company

reserved the right to contest is whether a man who

claims to be wholly and permanently disabled and un-

able to perfor m any work or engage in business is so

disabled, or whether such disability commenced before

he was of a certain age and not thereafter, or to raise

‘other questions as to whether the insured or the bene-

‘ficiary has qualified to receive. these payments under

the many provisions and conditions which hedge dis-

ability and double indemnity benefits, but not that dis-

tinctions are to be made between the death benefits and

disability and double indemnity benefits, as regards

the validity of the contract.

If the insurance company intended .to take away the

security of attack from claims of alleged false answers

in the application in-the one case and not in the other,

it was very easy for them to draw the contract in such

a way as to.clearly specify this.

B.

The decision in this case by the Cireuit Court of

Appeals for the Third Circuit is in irreconcilable con-

flict with the decisions of the United States Circuit

ourt of Appeals for the Ninth Circuit in the cases of

New York Life Insurance Company vs. Kaufman, 78

F. (2d) 398, (cert. den. 296 U. S. 626), Mutual Life

Ins. Co. vs. Markowitz, 78 F. (2d) 396, (cert. den. 296

U. S. 625), and of the United States Circuit Court of

«

7

Appeals for the Fourth Circuit in the cases of New

York Life Insurance Company vs. Truesdale, 79 F.

(2d) 481, and Ness vs. Mutual Life Ins. Co., 70 F. (2d)

59. It is also in conflict with the decision of this Court

in Stroehmann vs. Mutual Life Ins. Co., 300 U. 8. 435,

81 L. Ed. 502.

Wherefore, it is respectfully submitted that this

petition for a writ of certiorari to review the decree of

the Circuit ‘Court of Appeals for the Third Circuit,

should be granted.

Joun G. Runun, Jennizr B. Rug,

A Joun B. Rusiix, Wiiuuam R. Run-

te Lin and Jean L. Rug,

By

CHARLEs J. MARGIOTTI,

CuHarues H. Sacus,

Counsel for Petitioners.

BRIEF IN SUPPORT OF PETITION.

7 eS |

“Optntons Betow.

ri

but is found at page 19 of the Record.: The opinions

of the Circuit Court of Appeals are not reported and

"are found at pages 25 and 39 of the Record.

; II.

JURISDICTION.

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¢

The judgment of the Circuit Court of Appeals was

entered on September 27, 1987. (R. 43.) Jurisdiction

The opinion of the District Court is not repoyted -

¢

to issue the writ is found in the provisions of Section

240 (a) of thé Judicial Code as amended by the Act of

February 13, 1925, ¢. 229 section 1, (43 Stat. 938, 28

U.S. C. A. seetion 347, +P. 359).

as III.

s °

w-3 STATEMENT-OF THE Case.

. The principal facts are stated i in the foregoing peti-

- tion. .

. 3¥:. "

Specifications or Error.

1. The Circuit Court of Appeals erred in not re-

versing the order of the’ District Court, dated April

16, 1935, (R. 19.)

2. The Cireuit Court of — erred in affirming

‘the decree of the District Court dated April 16, 1935.

(R. 19.) +

3. The Circuit Court of Appeals erred in holding

that the expiration of the period reserved for con-

tests in the incontestable clauses in the policies did |

not preclude the respondents from vontesting the va-

lidity of the double indemnity and disability insurance —

contained therein on the ground of alleged fraud in

the protons thereof. a Dee

4. TheCrreuit Court of. Appeals weed in not hold-

ing that after, the expiration of ‘the period reserved

for contests in the incontestable clauses in the policies

the respondent. was precluded from contesting the.

validity of the double indemnity and disability insur-

ance contained therein on the ground of alleged fraud’

in the procurement thereof...

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“ARGUMENT.

. In New York Life Ins. Co. vs. Kaufman, 78 F. (2d) |

398, (C. C.. A. 9th cert. denied 296 U. S. 626), the

Court having before it an identical incontestable

clause, so far as disability benefits are concerned, in

a policy gotten up like thé ones. inv olved here, said:

**The ordinary man reading the clause would believe

the provisions referred to were those included in the

word ‘Policy’ at the beginning of the clause and not

to the provisions in the application which is not men-

tioned”’ (p. 404), and‘held that it precluded a contest

of the disability insurance for fraud in its procure-

ment after the expiration of the period reserved in

the policy for contest. \

This Court, in Stroehmann vs. Mutual Life Ins. Co.,

300 U.S. 435, 81 Law Ed. 502, where a substantially

similar incontestable clause was involved, held that ¥

intent was shown to except disability benefits from the

clause. The two clauses are‘as follows:

Stroehmann Case:

**Incontestability,—Ex-

cept for non- -payment of

premiums and except for

the restrictions and provi-

sions applying to the Dou-

e Indemnity and Disa-

bility Benefits as provided

in Sections 1 and 3 re-

spectively, this — Policy.

._ shall be incontestable af-

ter one vear from its date

of issue unless the Insured

dies in such year, in which

event it shall be inicontest-

able after two years from

its date of issue.’

This case:

**Ineontestability.— This

policy shall be incontest-

able after two years from ,

its date of issue except for

non-payment of premium

and except as to provi-

sions and conditions re-

lating to- Disability and

Double Indemnity Bene- °

fits.’’

(In the Kaufman case,

supra, the words “and

Double Indemnity’’ were

omitted. Otherwise, the

clauses are identical.)

6?

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Before the Stroehmann’ case was decided by this

Court; a similar incontestable clause was held to pre-

clude and debar the insurance company in its action

to nave the policy rescinded from raising the issue of

fraud in the procurement of the policy, in Ness vs.

- Mutual. Life Insurance Company, 70 F. (2d) 59, (C.

C. A. 4th Cir.). No applieation was made to this

Court for a writ of certiorari.. See also New York

Life Ins. Co. vs. Truesdale, 79 F. (2d) 481 decided by

the same cireuit court.

In Mutual Life Insurance Co. of N. Y. vss Markowitz,

78 F: (2d) 396, (C. C. A. 9th cert. denied 296 U. S.

626), the Court reached a similar conclusion on a

clause which was identical with the one in the Ness

case:

The California Supreme Court, in Coodley vs. New’

York Life Ins. Co., 70 Pae. (2d) 602, found the ‘‘great ,

weight of authority supports the position of the re-

spondent’’, the ,usured, and affirmed the judgment

_ of the lower ‘unt denying the right of the insurer to

contest the policy and rescind the disability portion

thereof on account of alleged false answers in the

application. The court, in its opinion, referred to

Mutual Life Ins. Co. vs. Margolis, 11 Cal. App. 2d,

382, where it was held that there was no ambiguity in

such a clause and that after the period of contesta-

« bility had expired, the incontestable clase precludes

any defense that the provisions in the policy for dis-

ability benefits were procured by fraud and pregludes

a contest-of the policy on any grounds whith are not

specifically excepted i in the clause itself.

In Thompson vs. New York Life Ins. Co., 9 F. Supp.

248, the Court considered the question whether the ex-

n co /

ception had reference to the disability insurance, as a

whole, or only to those group provisions relating to it

under a subhead entitled ‘‘ Disability Benefits’’, and re-

solved the ambiguity in the insured’s favor.

The language of the clause, ‘‘except for non-pay-

ment of premium and except as to provisions and con-

ditions- relating to. Disability and Double Indemnity

Benefits’’, suggests the prospective and induces the

belief that the subject matter of the defenses that .

may be asserted after the two year period refers to

future occurrences and not the past. —

CONCLUSION.

We submit the foregoing sufficiently: shows the con-

flict between the circuit courts which have passed up-

on the question here involved and the probable error

in the ruling of the court below. 2

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Respectfully submitted,

Crarues J. Marcrorti,

CrHarues H. Sacus, -

Counsel for Petitioners. —

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