Appeal from the District Court of the United States for the Western District of Pennsylvania; Robert M. Gibson, Judge.
Before BUFFINGTON and DAVIS, Circuit Judges, and DICKINSON, District Judge.
The appellants are the father and mother of Oliver L. McGogney Jr., who died on May 29, 1931 as a result of an automobile accident. They are also the beneficiaries named in a policy of insurance issued by the appellee on the life of their deceased son which provided for ordinary death benefits of $5000 and double indemnity benefits of $10,000 under certain conditions not here material. Upon the refusal of the appellee to pay their claim under the policy, they brought suit in the District Court. In their original statement of claim they alleged that they were entitled to $10,000 under the double indemnity provisions, but by amendment, after making allowance for a loan of $191, they reduced their claim to $4809 which they alleged was due under the provisions for "continued term insurance" in section 9 of the policy. The District Court being of the opinion that the policy had lapsed for non payment of premiums prior to the death of the insured, directed a verdict for the appellee and entered judgment thereon. From that judgment this appeal was taken.
At the time that this suit was begun the decisions of the Supreme Court in the cases of Erie Railroad Co. v. Tompkins, 304 U.S. 64, 58 S. Ct. 817, 82 L. Ed. 1188, 114 A.L.R. 1487, decided April 25, 1938, and Ruhlin v. New York Life Ins. Co., 304 U.S. 202, 58 S. Ct. 860, 82 L. Ed. 1290, decided May 2, 1938, had not been handed down. The pleadings and arguments before the District Court were based upon the rule existing prior to those cases that "questions concerning the proper construction of contracts of insurance are 'questions of general commercial law'" upon which state law was not considered to be binding. Ruhlin v. New York Life Ins. Co., supra, 58 S. Ct. 861; Mutual Life Ins. Co. v. Johnson, 293 U.S. 335, 55 S. Ct. 154, 79 L. Ed. 398; Carpenter v. Providence Washington Ins. Co., 41 U.S. 495, 16 Wall. 495, 10 L. Ed. 1044. It does not appear where the policy was executed or delivered. As the record now stands, we only know that the insured probably lived, and that the appellants do live, in Pennsylvania, and that the appellee is a corporation domiciled in New York. On this ground alone, we might reverse the judgment and remand the case "with directions to permit such amendments of the pleadings as may be necessary for [the] purpose" of raising the question of state law. Ruhlin v. New York Life Ins. Co., supra; Brabham v. State of Mississippi, 5 Cir., 97 F.2d 251.
However, whatever law controls the case, we are of the opinion that it should have been submitted to the jury. Some of the questions here involved have not been passed upon by any court so far as we have been able to discover.
The basic question in issue is whether or not the policy had lapsed prior to the death of the insured. The determination of this question depends upon the interpretation to be given to several provisions in the policy, and upon whether or not the appellants have presented sufficient evidence to justify submitting to the jury the question of the payment of interest on a certain loan.
In deciding these questions, it is important to keep in mind five distinct dates as follows: (1) February 27, 1909, the date of the birth of the insured, which is important in the discussion of the appellant's method of computing the "continued" term insurance"; (2) August 2, 1927, the date the appellee issued the policy of insurance here involved; (3) July 19, 1930, the date the insured borrowed $191 from the appellee on the security of the policy; (4) November 2, 1930, the date on which a quarterly premium fell due but was not paid, and subsequent to which all premiums were defaulted; and (5) May 29, 1931, the date upon which the insured died.
It will be noted that between August 2, 1927, and November 2, 1930, there was a period of 3 1/4 years during which all premiums had been paid, and that between November 2, 1930, and May 29, 1931, there elapsed a period of 209 days during which no premiums were paid.
Since the insured died 209 days after the first default occurred in the payment of premiums, the question as to whether or not the policy had lapsed prior to his death resolves itself into the further question of whether or not the provisions in the policy for "continued term insurance" kept that policy alive for a period of 209 days. If it did, the appellants are entitled to recover, but if it did not, they are not entitled to recover.
This question depends upon the interpretation to be given to sections 8, 9, 10 and 11 of the policy*fn1 (relevant portions quoted in foot note) and also upon the question as to whether or not the interest on the $191 loan to the insured had been paid.
As will be seen from a reading of these sections, the determination of "continued term insurance" is a complicated matter, and it is fortunate that in this case it is not further complicated by "dividend additions" or "dividend deposits", for all dividends on the policy here involved were applied to the payment of the premiums between August 2, 1927 and November 2, 1930.
These provisions indicate that in computing "continued term insurance" it is necessary to determine the four facts: (1) The "cash value" of the policy, (2) its "net cash value", (3) the amount of "continued term insurance", and (4) the term insurance which the ...