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July 1, 1957


The opinion of the court was delivered by: Stukes, Chief Justice.

July 1, 1957.

The respondent was the beneficiary of a $1,000.00 policy of appellant upon the life of the insured, who was the uncle of respondent. The policy was dated and issued May 23, 1953. The insured died of heart disease on February 24, 1955. This action for the death benefit of the policy was commenced on August 8, 1955, which was more than two years after the date of the policy.

The application by the insured for the policy contained the following:

"Q. Are you in good health at present? A. Yes.

"Q. Have you been a patient in any Hospital during the past 10 years? If so, date: A. No.

"Q. Has it been necessary for you to consult a doctor during the past two years? If so, date: A. No."

The application was accompanied by the certificate and signature of an agent of the company, designated "Mgr.", presumably for manager, that he personally saw the applicant on May 12, 1953, and that he recommended acceptance of the application. The appellant insurer denied liability by reason of two provisions of the policy, which follow:

(1) "No obligation is assumed by the Company prior to the date hereof, nor unless on said date the insured is alive and in sound health and the policy delivered and the first premium paid thereon;"

(2) "Limitation of Insurance. In consideration of there being no medical examination of the physical condition of the insured, it is hereby understood and agreed that no liability of any kind is assumed by the company for death or specific losses, resulting directly or indirectly from diseases originating or accidents occurring before the date and delivery of this policy, except a refund of premiums paid."

"All companies which issue a policy or certificate of insurance on the life of a person shall, after a period of two years from the date of such policy or certificate of insurance, be deemed and taken to have waived any right they may have had to dispute the truth of the application for insurance or to assert that the assured person had made false representations and such application and representations shall be deemed and taken to be true. * * *"

The policy did not contain an incontestable clause, but the statute became a part of the policy upon issuance "as effectually as if it had been written therein." New York Life Ins. Co. v. Greer, 170 S.C. 151, 169 S.E. 837, 839. Weston v. Metropolitan L. Ins. Co., 206 S.C. 128, 33 S.E.2d 386, 157 A.L.R. 1198. "* * * A two year incontestability statute is part of a life policy. If such contract fails to contain this clause, it will be construed as if it had been incorporated therein at the time of issuance, and if any conflict arises between the policy and the statute, the conflict will be resolved in favor of the latter." 12 Appleman 75, Sec. 7046. "Incontestable, as used in life insurance policies, means indisputable; in other words, that after the expiration of a certain period of time, the insurer will no longer be able to set up matters which would formerly have been a defense to a suit on the policy." 1 Appleman 344, Sec. 311. The following definition is that of Justice Cardozo in Metropolitan L. Ins. Co. v. Conway, 252 N.Y. 449, 169 N.E. 642: "It (an incontestable clause) means only this, that within the limits of the coverage the policy shall stand, unaffected by any defense that it was invalid from its inception, or thereafter became invalid by reason of a condition broken." Our court said in Livingston v. Mutual Ben. L.I. Co., 173 S.C. 87, 174 S.E. 900, 901, per Chief Justice Blease: "The `incontestable clause' relates to the validity of the contract of insurance. It does not affect the construction of the terms of the contract. * * * The incontestable clause `controls all matters which would have the effect of defeating or destroying the contract of life insurance such as those relating to the cause of death or the habits of the insured, although it will not control matters which affect the remedy merely.' Elliott on Insurance, p. 410."

Statutes of some states require insurers to include incontestability clauses in their policies. See for example Guardian L.I. Co. of America v. Barry, Ind. App. 1937, 6 N.E.2d 725, and Horwitz v. New York L. Ins. Co., 9 Cir., 1935, 80 F.2d 295. In the latter it was held that the date of issue of the policy started the running of the statutory period of two years, rather than the date of the subsequent addition of the disability clause, with which the controversy was concerned.

By consent of counsel trial of the case in judgment was withdrawn from the jury and the issues were submitted to the court which found that the statute overrode the above quoted provisions of the policy, and ...

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