1. Where an insurance policy, by its terms, is incontestable
after a time limited except for nonpayment of premium and "except
as to provisions and conditions relating to disability and double
indemnity benefits," the question whether the latter exception
embraces, and excludes from the limitation, the right of the
insurer to rescind the agreement to pay disability and double
indemnity benefits because of fraud in the application is not a
question of "general law" which a federal court may determine
independently, but a question of state law which the federal court
must determine in accordance with the decisions of the appropriate
state court.
Erie Railroad Co. v. Tompkins, ante p.
304 U. S. 64. P.
304 U. S.
204.
2. The doctrine of
Erie Railroad Co. v. Tompkins is
applicable to a question of construction of a contract arising in a
suit in equity. P.
304 U. S.
205.
3. Conflict among the Circuit Courts of Appeals on questions of
state law is not, of itself, a reason for granting a writ of
certiorari. P.
304 U. S.
206.
Page 304 U. S. 203
4. The petition in this case did not show, as a basis for
certiorari, that the important question of local law involved was
decided below "in a way probably in conflict with applicable local
decision," or that the decision was "probably untenable," and
therefore probably in conflict with the state law as yet undeclared
by the highest court of the State. Rule 38(5)(b).
5. Where a suit dependent on the construction of an insurance
policy was presented and decided below on the mistaken assumption
that the construction was a question of "general" or "federal" law,
this Court, on certiorari, declined to decide upon the rule of
state law applicable, but vacated the judgment and remanded the
cause to the District Court for further proceedings in conformity
with the opinion and with directions to permit such amendments of
the pleadings as might be necessary for that purpose. P.
304 U. S.
206.
93 F.2d 416 reversed.
Certiorari, 302 U.S. 681, to review the affirmance of an
interlocutory decree enjoining the institution of actions on
certain insurance policies, including an action in a state court,
pending the determination of a suit to cancel the policies in part
for fraud.
MR. JUSTICE REED delivered the opinion of the Court.
On February 14, 1935, the New York Life Insurance Company,
respondent here, filed its bill of complaint in the District Court
for Western Pennsylvania to rescind, because of certain
misrepresentations, the disability and double indemnity provisions
in five policies issued on the life of defendant John G. Ruhlin,
and made in favor of the other defendants as beneficiaries.
The bill alleged that the plaintiff is a mutual life insurance
company incorporated under the laws of the State of New York and
lawfully engaged in business in Pittsburgh,
Page 304 U. S. 204
Pa.; that the defendants are temporarily living in Pennsylvania,
though plaintiff does not know where their legal residence is;
that, on December 1, 1928, plaintiff wrote two policies of life
insurance on the life of John G. Ruhlin, in the face amounts of
$10,000 and $5,000; that, on July 7, 1930, it wrote three
additional, similar policies in the face amount of $4,000 each;
that certain questions in the applications were answered falsely
and fraudulently by the insured; that, on November 1, 1934, John G.
Ruhlin presented a claim for total and permanent disability
benefits under each of the five policies. The company tendered into
court the sum of $1,045.42, the aggregate amount of premiums paid
for disability and double indemnity benefits, and prayed that the
disability and double indemnity provisions be rescinded and for
other relief not material here.
The defendants filed a motion to dismiss the complaint on the
ground that the policies had become incontestable, since the suit
was brought more than two years after the date of each policy
involved. The "incontestability clause" of each of the policies
reads as follows:
"Incontestability. -- This Policy shall be incontestable after
two years from its date of issue except for nonpayment of premium
and except as to provisions and conditions relating to Disability
and Double Indemnity Benefits."
The District Court overruled the motion to dismiss. The Circuit
Court of Appeals, 93 F.2d 416, affirmed the order, holding that, in
view of their express terms, the incontestability clauses had no
application to liability for disability and double indemnity
benefits. It recognized that its decision was contrary to that
reached by the Circuit Court of Appeals for the Ninth Circuit
(
New York Life Insurance Company v. Kaufman, 78 F.2d 398),
and by the Circuit Court of Appeals for the Fourth Circuit (
New
York Life Insurance Company v. Truesdale, 79 F.2d 481), which
had held that the exception in the
Page 304 U. S. 205
incontestability clause related only to provisions and
conditions actually set forth in the policy itself,
compare
Strochmann v. Mutual Life Ins. Co., 300 U.
S. 435, and that fraud was not mentioned in any of those
provisions. Ruhlin petitioned for certiorari, asserting the
conflict of circuits. The company filed a memorandum admitting the
conflict, and raising no objection to the granting of the writ.
Because of the conflict of circuits, the Court granted
certiorari.
It was stated in
Carpenter v. Providence
Washington Ins. Co., 16 Pet. 495,
41 U. S. 511,
that questions concerning the proper construction of contracts of
insurance are "questions of general commercial law," and that state
decisions on the subject, though entitled to great respect, "cannot
conclude the judgment of this Court." A limitation was put on this
doctrine in
Mutual Life Ins. Co. v. Johnson, 293 U.
S. 335,
293 U. S. 340.
Putting aside all questions of power, the Court interpreted a
specific provision of an insurance contract in accordance with the
decision of the highest court of the state of Virginia, where
delivery was made.
"All that is here for our decision is the meaning, the tacit
implications, of a particular set of words, which, as experience
has shown, may yield a different answer to this reader and to that
one. With choice so 'balanced with doubt,' we accept as our guide
the law declared by the state where the contract had its
being."
The decision in
Erie R. Co. v. Tompkins, ante, p.
304 U. S. 64, goes
further, and settles the question of power. The subject is now to
be governed, even in the absence of state statute, by the decisions
of the appropriate state court. The doctrine applies though the
question of construction arises not in an action at law, but in a
suit in equity.
Compare Mason v. United States,
260 U. S. 545,
260 U. S.
557-558.
Had
Erie R. v. Tompkins been announced at some prior
date, the course of this case might have been different. This Court
might not have issued a writ of certiorari.
Page 304 U. S. 206
Rule 38(5) of the Supreme Court Rules indicates that this Court
will consider, as a reason for granting a writ of certiorari, the
fact that "a Circuit Court of Appeals has rendered a decision in
conflict with the decision of another Circuit Court of Appeals on
the same matter." Since jurisdiction to bring up cases by
certiorari from the Circuit Courts of Appeals was given to this
Court in order "to secure uniformity of decision,"
Magnum
Import Co. v. Coty, 262 U. S. 159,
262 U. S. 163,
a showing of a conflict of circuits on a matter concerning which
the federal courts had never denied their right to independent
judgment prompted this Court to grant the writ.
E.g.,
Aschenbrenner v. United States Fidelity & G. Co.,
292 U. S. 80,
292 U. S. 827;
Stroehmann v. Mutual Life Ins. Co., 300 U.
S. 435,
300 U. S. 440. As
to questions controlled by state law, however, conflict among
circuits is not, of itself, a reason for granting a writ of
certiorari. The conflict may be merely corollary to a permissible
difference of opinion in the state courts. The rules indicate that
the Court will be persuaded to grant certiorari where a Circuit
Court of Appeals "has decided an important question of local law in
a way probably in conflict with applicable local decisions." No
such showing was attempted by the petition. Nor was it contended
that the decision below was "probably untenable," and therefore
probably in conflict with the state law as yet unannounced by the
highest court of the state.
No decision at the present time could reconcile any "conflict of
circuits," or do more than enunciate a tentative rule to guide
particular federal courts. Therefore, even assuming that it is
adequately presented on the record, we decline to decide the issue
of state law. However, we shall not dismiss the writ of certiorari
as improvidently granted. In view of the fact that the question in
the case was regarded below, both by the courts and by counsel, as
one of "general" or "federal" law, the
Page 304 U. S. 207
interest of justice requires that the judgment be vacated and
the cause remanded for the enforcement of the applicable principles
of state law.
See Villa v. Van Schaick, 299 U.
S. 152,
299 U. S.
155-156;
Duke Power Co. v. Greenwood County,
299 U. S. 259,
299 U. S.
267-268;
Watts, Watts & Co. v. Unione
Austriaca, 248 U. S. 9,
248 U. S. 21.
It is true that the Circuit Court of Appeals, in rendering
judgment on reargument, said (
see 93 F.2d 416, 417):
"Furthermore, both the Court of Appeals of New York and the
Supreme Court of Pennsylvania have held that the incontestability
clause here involved clearly excepts the double indemnity and
disability provisions from its operation.
Steinberg v. New York
Life Ins. Co., 263 N.Y. 45, 188 N.E. 152;
Manhattan Life
Insurance Co. v. Schwartz, 274 N.Y. 374, 9 N.E.2d 16;
Guise v. New York Life Ins. Co., 127 Pa.Super. 127, 191 A.
626. We have read the recent opinion of the Supreme Court of
California in the case of
Coodley v. New York Life Ins.
Co., [
9 Cal. 2d 269,]
70 P.2d 602, and the opinion of Judge Coughlin in the case of
New York Life Ins. Co. v. Thomas, 27 Pa.Dist. &
Co.Rep. 215, but are not persuaded that the learned District Judge
erred. Since the company is domiciled in New York and the insured
lives in Pennsylvania, and 'all that is here for our consideration
is the meaning, the tacit implications, of a particular set of
words,' 'for the sake of harmony and to avoid confusion,' we shall
follow the decision of those courts and hold that the insurance
company is not barred by the incontestability clause from
rescinding the double indemnity and disability provisions.
Mutual Life Ins. Co. v. Johnson, 293 U.S.
293 U. S.
340;
Trainor Co. v. Aetna Casualty Company,
290 U. S.
47,
290 U. S. 54."
It is not necessary here to consider whether, in the
determination of the substantive Pennsylvania rule, the Circuit
Court of Appeals was correct in declining to follow
Page 304 U. S. 208
the
nisi prius Thomas case, directly in point, and in
applying the
Guise case, which was decided by an
intermediate appellate court (127 Pa.Super. 127, 191 A. 626), and
not the Supreme Court of the state as the court below stated, and
which involved a defense of coverage, available even under an
ordinary incontestability clause as the opinion in the
Guise case clearly states (127 Pa.Super. 127 at 133, 191
A. 626). [
Footnote 1]
A different case might have been presented, and the facts and
authorities developed in another fashion, if the parties had had in
mind from the first the rule the Pennsylvania court would have
applied. The pleadings might have shown in what place the policy
was delivered [
Footnote 2] and
perhaps other facts attending the making of the insurance contract.
It may be noted that petitioner's brief asserts, without record
reference, that the applications for the first two policies were
made in Pennsylvania, and the application for the remaining three
policies were made in Ohio. But, as the record stands, we know only
that, at the time of bringing suit, the respondent company was
incorporated in New York and lawfully engaged in business in
Pittsburgh, and that the defendants were then temporarily living in
Pennsylvania.
Application of the "State law" to the present case, or any other
controversy controlled by
Erie R. Co. v. Tompkins,
Page 304 U. S. 209
does not present the disputants with duties difficult or
strange. The parties and the federal courts must now search for and
apply the entire body of substantive law governing an identical
action in the state courts. Hitherto, even in what were termed
matters of "general" law, counsel had to investigate the enactments
of the state Legislature. Now they must merely broaden their
inquiry to include the decisions of the state courts, just as they
would in a case tried in the state court, and just as they have
always done in actions brought in the federal courts involving what
were known as matters of "local" law.
The judgment is vacated, and the cause remanded to the District
Court for further proceedings in conformity with this opinion, with
directions to permit such amendments of the pleadings as may be
necessary for that purpose.
Judgment vacated.
MR. JUSTICE CARDOZO took no part in the consideration or
decision of this case.
[
Footnote 1]
The Superior Court said (127 Pa.Super. 127 at 133, 191 A. 626,
629):
"An examination of the clauses discloses that the disability
provisions of the policies are expressly excluded from their
operation. Even if that exemption had not been inserted, the
clauses would not have prevented the interposition of the defense
here set up.
Mayer v. Prudential Life Insurance Company of
America, 121 Pa.Super. 475, 184 A. 267."
[
Footnote 2]
Under the general doctrine, the interpretation of an insurance
contract depends on the law of the place where the policy is
delivered.
Mutual Life Ins. Co. v. Johnson, 293 U.S.
293 U. S. 339.
We do not now determine which principle must be enforced if the
Pennsylvania courts follow a different conflict of laws rule.