LOTMAN v. SECURITY MUTUAL LIFE INS. CO. OF NEW YORK

OPINION OF THE COURT

VAN DUSEN, Circuit Judge.

After the district court entered its September 23, 1971 order denying defendant's motion for judgment n. o. v. and for new trial,1 the defendant, Security Mutual Life Insurance Company of New York (hereafter Security Mutual), filed this appeal from a February, 1971 judgment entered on the verdict of a jury.

The plaintiffs,2 co-beneficiaries of a life insurance policy issued to the decedent3 by Security Mutual, brought this action to recover the proceeds under the decedent's policy. Security Mutual refused payment claiming three separate defenses: (1) the insured obtained her policy by fraud and misrepresentation; (2) her death from barbiturate poisoning was the result of suicide; and (3) the acceptance by the plaintiffs of a tendered check representing a return of the premiums paid under the policy constituted a mutual recision and waived any claim by the plaintiffs for proceeds under the policy.

A jury found in favor of the plaintiffs on the first two of these defenses. The claim of mutual recision was reserved by agreement between the parties for separate determination by the court on the basis of the deposition testimony of the plaintiffs. After completion of the trial, the court held that the plaintiffs' conduct did not constitute mutual recision and did not amount to a waiver of their claim to the proceeds of the life insurance policy.

The defendant raises three contentions in its appeal. Two contentions deal with the court's charge to the jury: that it erred in its instructions that the defendant had the burden of proving that the false answers given by the insured in the application for her insurance policy were made in bad faith for the purpose of deceiving it; and that the court erred in its instructions on the presumption of Minnie Glazer's sanity. Security Mutual also reasserts its claim that the conduct of the plaintiffs constituted an agreement of mutual recision of the policy.

On March 31, 1966, the insured applied to Security Mutual for a $25,000 life insurance policy. On April 2, 1966, Dr. Kermit Snyder, who performed medical examinations for Security Mutual, went to Minnie Glazer's apartment and completed the medical application and examination required for insurance. (N.T. 118).4 It is clear that false and material misstatements were made by insured and that Security Mutual would not have issued the policy had correct information been provided.5 The most significant of the misrepresentations in the answers given by the insured during the medical examination were as follows:

The insured answered "No" to each of these questions and then signed the application in the presence of Dr. Snyder, who also signed.6

However, her medical history, as revealed at trial, showed that she was admitted as a mental patient in need of immediate temporary care at Wissahickon Hall6a a private psychiatric hospital, in October of 1962. (N.T. 35). At that time she was diagnosed as psychotic depressive reaction. Six electro-shock treatments were administered. (N.T. 82-83). After six months at Wissahickon Hall the insured was discharged on an out-patient basis. However, a year later her symptoms were recurring and she continued to take medication. Nevertheless, a policy was issued by Security Mutual to Minnie Glazer in the amount of $25,000 on May 10, 1966 and on April 11, 1967 she died from barbiturate poisoning. (N.T. 11-12).

I.

The first issue is the propriety of the trial judge's instructions to the jury on whether the insured had (a) knowledge of the falsity of the answers in Part II of the application and (b) an intention to deceive the insurer.

The most recent Pennsylvania appellate court decision, quoting from that court's earlier decision in Baldwin v. Prudential Insurance Company of America, 215 Pa.Super. 434, 258 A.2d 660 (1969), on the defense to an insurance policy based on false and fraudulent misrepresentations, makes clear that "`[t]here are three elements that an insurer must establish to void a policy in the case of misrepresentation. These are: (1) the declaration must be false; (2) its subject matter must be material to the risk; and (3) the applicant must have known it to be false or must have made the statement in bad faith.'" Bremmer v. Protected Home Mutual Life Insurance Co., 218 Pa.Super. 364, 280 A.2d 664, 665 (1971).

In Bremmer, the court continued, using this language:

Contrary to the law as stated in the Bremmer case, the trial judge charged the jury as follows:

Plaintiffs rely on Schleifer v. National Life Insurance Co., 421 Pa. 359, 362, 219 A.2d 692, 694 (1965) to support the above language in the charge. In Schleifer there was a serious factual dispute over whether the insured knowingly gave false answers to a question in the application that he was being treated for a heart condition. The Schleifer court felt that because of the serious dispute as to whether the insured knew at the time of his examination that he might be suffering from a heart condition, the question of whether the insured intended to deceive the insurer was for the jury. The particular facts of Schleifer are inapposite to the facts developed on this record. This appeal involves a situation comparable to that in Bremmer. In both of these cases, the insured visited a physician, was aware of his or her condition, and then failed to convey that important information to the insurer. Bremmer only requires that the defendant prove that the applicant knew his or her representation "to be false" and does not require it to prove that inaccurate representations were made "for the purpose of deceiving the insurance company."

II.

Alleging that the decedent committed suicide, the defendant relied upon the following clause of the decedent's insurance policy:

Dr. Marvin Aronson, then the Acting Medical Examiner for the City of Philadelphia, testified that in his opinion Minnie Glazer swallowed "between 12 and 20 capsules . . . in a period of one half to two hours prior to death. . . . The high concentration in [her] stomach indicates that these capsules were taken in effect at once during the same three- or four-minute period of time." (N.T. 180).8

The court properly left to the jury the question of whether the ingestion by Minnie Glazer of a large quantity of barbiturates constituted suicide.9 However, the court improperly relied upon certain language in Tritschler v. Benefit Association, 180 Pa. 205, 36 A. 734 (1897). Quoting from Tritschler, the court instructed the jury as follows:

Defendant was entitled to an instruction pursuant to Point 8 of its Request for Instructions10 dealing with the definition of insanity which was taken from Ritter v. Mutual Life Insurance Co., 69 F. 505 (3 Cir. 1895), aff'd, 169 U.S. 139, 18 S.Ct. 300, 42 L.Ed. 693 (1897). Point 8 contains a definition of what is meant by the term "insanity" as it applies to a suicide under an insurance contract. In Ritter, the court, apparently relying on language found in American Life Insurance Co. v. Isett's Administrator, 74 Pa. 176 (1873), stated:

Tritschler and the more recent decision in Johnson v. Metropolitan Life Insurance Co., 404 F.2d 1202 (3rd Cir. 1968),11 which the court relied upon in its order denying defendant's motion for judgment n. o. v. and for new trial, are both inapplicable because of a crucial factual difference from this record. In both of those cases the record contained an admission that the decedent was insane at the time of suicide.

In addition, the charge failed to instruct the jury that under Pennsylvania law the defendant was entitled on this record to an instruction that the insured was presumed to be sane if the jury believed that she committed suicide when she could comprehend and understand the probable fatal result of taking the overdose of barbiturates. Neither Tritschler, nor Johnson addressed themselves to that particular question.

In Pennsylvania, sanity is presumed to be a normal condition of the mind, and there is a legal presumption that every one is sane until the contrary is established by evidence sufficient to satisfy a jury. An allegation of insanity casts the burden of proof upon the party asserting it. In Isett's Administrator, the trial court charged the jury as follows:

Isett's Administrator, supra 74 Pa. at 178. In affirming the judgment entered on the jury's verdict for the plaintiff, the court used this language:

Id. at 181 see Ritter, supra 69 F. at 507-508; cf. Supreme Council of Royal Arcanum v. Wishart, 192 F. 453 (3d Cir. 1912); Youngwood Building & Loan Ass'n v. Henry, 137 Pa.Super. 124, 8 A.2d 427, 428 (1939); McClaney v. Scott, 188 Pa.Super. 328, 146 A.2d 653 (1958).

Instead, the court refused defendant's request for an instruction that if the jury found that Minnie Glazer took an overdose of barbiturates with the intent to commit suicide, the law presumed that she was sane at the time of committing the act.12 The 19th Century decisions in Isett's Administrator and Ritter still appear to be valid on the issue of whether decedent was sane or insane at the time of the taking of his life.

Finally, the charge was misleading where, after explaining that "the mere commission of `suicide' or the fact of self-destruction in and of itself is not evidence of insanity," it was noted: ". . . you cannot infer suicide merely from the fact of self-destruction." At the least, the court should have added that you cannot overcome the presumption of sanity by the act of committing suicide. See Ritter, supra at 508 of 69 F.

Under Ritter and Isett's Administrator, the defendant was entitled to an instruction that the decedent was sane at the time of injesting the overdose of barbiturates, unless the plaintiffs had sustained their burden of rebutting the presumption of sanity.

III.

Security Mutual also submits that the district court erred when it concluded that there had been no mutual recision by the plaintiffs. In support of its contention, it argues that after the plaintiffs made a claim for the proceeds of Minnie Glazer's insurance policy, it rejected that claim and instead tendered a return of premiums by sending a check on June 8, 1967 in the amount of $1,483.50 payable to the "Estate of Minnie Glazer, Deceased." Bernard Lotman,13 a co-administrator of her estate, eventually received that check. He retained the check, but did not deposit it. Almost two years later after the check was stale, it was misplaced. B. Lotman requested the defendant to issue him a new check. The defendant sent him another check in the same amount and also payable to the "Estate of Minnie Glazer, Deceased." This check B. Lotman endorsed: "Estate of Minnie Glazer, Deceased, Bernard Lotman, Administrator C.T.A." He deposited it in a joint bank account which he maintained with his brother Charles.

Although it has been held that a beneficiary of a life insurance policy may, after the death of the insured, accept a return of premiums and waive all claims thereafter to the policy's proceeds, see Peterson v. New York Life Insurance Co., 185 Minn. 208, 240 N.W. 659 (1932),14 the district court concluded that "the insurance company made an offer of recision to the estate of the insured and not to the beneficiaries." 332 F.Supp. at 356. The court found that B. Lotman "deposited the refund of premiums for the purpose of safe-keeping in his role as co-administrator of his mother's estate" and "he did not intend to compromise any claim to the proceeds as co-beneficiary of the policy." Id. at 355.15 We are unable to say that these findings of fact are clearly erroneous. F.R.Civ.P. 52(a). Therefore, the conclusion of the district court that there was no binding recision which would bar the assertion of plaintiffs' claim was not erroneous.

We have concluded that the errors in the charge set forth in Parts I and II require a new trial. For the foregoing reasons the judgment will be reversed and the case will be remanded for a new trial consistent with this opinion.

Judge Adams concurs in the conclusions reached in Parts I and II of the foregoing opinion and concurs in the result reached remanding this case for a new trial.