Yerys v. New York Life Insurance, 210 N.C. 442 (1936)

Sept. 23, 1936 · Supreme Court of North Carolina
210 N.C. 442


(Filed 23 September, 1936.)

1. Insurance E b—

Where a disability clause in a policy of life insurance is subject to the incontestable clause of the policy, insurer may not set up the defense of invalidity in a suit on the disability clause instituted after the time stipulated in the incontestable clause.

2. Judgments L b — Federal judgment held to bar plaintiff from setting up in State court matters presented in the suit in Federal court.

Final judgment of the Federal court dismissing plaintiff insurer’s suit to have the policies of insurance in question canceled for fraud and the disability provisions therein stricken out, and to recover disability benefits already paid, constitute a bar to plaintiff’s right to set up such matters in insured’s action instituted in a state court on the disability clauses of the policies.

3. Insux’ance E b—

An incontestable clause in a policy of insurance made applicable to the disability provisions of the policy does not prevent insurer from setting up the defense that the disability sued on is not covered by the provisions of the disability clause, or that the claim for disability is not genuine.

4. Appeal and Error A d—

An appeal from a judgment sustaining a plea in bar is not premature.

*443Appeal by defendant from McSlroy, J., at April Term, 1936, of BUNCOMBE.

Civil action to recover on total and permanent disability clauses in two contracts of insurance.

On 23 May, 1927, and again on 22 June, 1927, upon tbe payment of tbe first annual premiums, tbe defendant issued to tbe plaintiff a $5,000 life insurance policy, eacb providing for disability in case of total and permanent disability, “provided sucb disability occurred after tbe insurance under tbis policy took effect and before tbe anniversary of tbe policy on wbicb tbe insured’s age at nearest birthday is sixty.”

On tbe face of eacb policy is an incontestable clause in tbe following language:

“Incontestability: — Tbis policy shall be incontestable after two years from its date of issue except for nonpayment of premiums and except as to provisions and conditions relating to disability and double indemnity benefits.”

During tbe spring of 1929, plaintiff made claim for total and permanent disability benefits under tbe policies above mentioned, wbicb was allowed by tbe defendant up to and including tbe month of July, 1933, when tbe defendant notified tbe plaintiff that no further payments would be made, contending that proofs of claims were based upon false and fraudulent statements, wbicb tbe defendant relied upon to its hurt.

Tbis suit was instituted 26 November, 1934, to recover alleged disability benefits accruing since July, 1933, under tbe policies in suit.

Whereupon, on 27 December, 1934, tbe defendant filed a bill in equity in tbe United States District Court for tbe Western District of North Carolina, asking (1) that tbe policies in suit be canceled for fraud in their procurement; (2) that the provisions relating to disability and double indemnity benefits be stricken out; (3) that defendant recover amount of benefits already paid; and (4) that tbe plaintiff here, defendant there, be enjoined from prosecuting tbis action in tbe State court. Tbe bill was dismissed because of tbe incontestable clauses contained in tbe policies; and this was affirmed on appeal to tbe Circuit Court. New York Life Ins. Co. v. Yerys, 80 Fed. (2d), 264.

Thereafter, tbe defendant filed answer in tbe present action, setting up tbe defenses of invalidity and noncoverage, and pleaded counterclaim for benefits already paid.

Plaintiff filed reply contending that defendant was barred from setting up tbe defenses in its answer by reason of tbe incontestable clauses contained in tbe policies and tbe judgment of tbe Federal court.

From judgment sustaining tbe pleas in bar and striking out defendant’s “First and Second Further Defenses and Counterclaims,” tbe defendant appeals, assigning errors.

*444 Joseph A. Paña and Johnston & Horner for plaintiff, appellee.

Johnson, Rollins & Uzzell for defendant, appellant.

Stacy, C. J.,

after stating the case: The defense of invalidity is not available to the defendant in the present action. Mauney v. Ins. Co., 209 N. C., 499, 184 S. E., 82; Wamboldt v. Ins. Co., 191 N. C., 32, 131 S. E., 395; Hardy v. Ins. Co., 180 N. C., 180, 104 S. E., 166; Amer. Trust Co. v. Ins. Co., 173 N. C., 558, 92 S. E., 706. Neither is it entitled to be heard again on the question of reformation or cancellation, nor on the subject of its counterclaims. These matters were considered in a forum of its own choosing. They are now res judicata. Bunker v. Bunker, 140 N. C., 18, 52 S. E., 237; Distributing Co. v. Carraway, 196 N. C., 58, 144 S. E., 535; 15 R. C. L., 949, et seq.

“It is a familiar maxim that a man shall not be twice vexed for the same cause. If a final judgment or decree is rendered, the parties cannot again be heard upon any matter which was then litigated and determined, the controversy having passed in rem judicatam and become conclusive between the parties” — Adams, J., in Harvey v. Rouse, 203 N. C., 296, 165 S. E., 714.

The two questions still open for determination are (1) coverage, and (2) genuineness of plaintiff’s present claim. Mills v. Ins. Co., ante, 439.

The judgment below, as we understand it, is to this effect.

It is observed that the coverage clauses in the instant policies are not identical with those appearing in the Mills case, supra. Here, the disability must have “occurred” after the insurance took effect, while in the cited case the disability must have resulted from bodily injury or disease “occurring and originating” after the insurance became effective. However, as the issue of liability has not yet been determined, we refrain from further comment.

An appeal from a judgment sustaining a plea in bar is not regarded as premature. Royster v. Wright, 118 N. C., 152, 24 S. E., 746; Bethell v. McKinney, 164 N. C., 71, 80 S. E., 162.