Equitable Life Assurance Society v. Jalowsky

MURPHY, Chief Judge. We must here determine, in light of two Maryland statutes, the proper method for computing the commencement date of a two-year period delineated in the incontestability provision of a life insurance policy. Maryland Code (1957, 1979 Repl.Vol.) Art. 48A, § 390 of the Insurance Code mandates that a life insurance policy “shall be incontestable, except for nonpayment of premiums, after it has been in force during the lifetime of the insured for a period of two (2) years from its date of issue.” Code (1957, 1985 Repl.Vol.) Art. 94, § 2, relating to time computations, provides: “In computing any period of time prescribed or allowed by any applicable statute, the day of the act, event, or default, after which the designated period of time begins to run is not to be included. The last day of the period so computed is to be included unless: (1) It is a Sunday or a legal holiday, in which event the period runs until the end of the next day, which is neither a Sunday or a holiday; or, (2) the act to be done is the filing of some paper in court and the office of the clerk of said court on said last day of the period is not open, or is closed for a part of a day, in which event, the period runs until the end of the next day which is neither a Sunday, Saturday, a legal holiday, or a day on which the said office is not open the entire day during ordinary business hours.” I. On April 16, 1981, Dr. David Jalowsky completed an application for life insurance with The Equitable Life Assurance Society of the United States (Equitable).

Edward and Fay Jalowsky, his parents, were designated as beneficiaries. ²⁵⁹ Dr. Jalowsky indicated in his insurance application that he had never been treated for cancer and that he had not consulted a physician over the preceding five years. These representations were false as Dr. Jalowsky was undergoing treatment for Hodgkin’s Disease, a form of cancer, at the time he completed the application. Moreover, in March of 1981, the month prior to his application, the insured underwent a supraclavicular node biopsy, a laparotomy, a splenectomy and iliac biopsies. The insurance policy contained the following incontestability clause: “INCONTESTABILITY.

All statements made in the application are representations and not warranties. We have the right to contest the validity of this policy based on material misstatements made in the application. However, this policy will become incontestable after it has been in effect during the lifetime of the Insured for two years from the Date of Issue shown on page 3.” April 16, 1981 was the date upon which the policy was issued. Dr. Jalowsky died on April 16, 1983.

The Jalowskys filed a claim for the policy proceeds which Equitable rejected because of the insured’s misrepresentations as to the state of his health. Thereafter, the beneficiaries instituted suit in the Circuit Court for Baltimore County to recover the policy proceeds. Cross-motions for summary judgment were filed on the issue of the calculation of the two-year period in the incontestability clause. The court (Cicone, J.) ruled that the life insurance policy was in effect on April 16, 1981 and as that day was included in the calculation of the two-year incontestability period, the beneficiaries were entitled to recover.

The court held that Art. 94, § 2 could not override a provision in an insurance contract, especially in light of the provisions of Art. 48A, § 390, measuring the two-year incontestability period from the day of the policy’s issuance. On appeal, the intermediate appellate court affirmed, placing reliance upon our decision in Holtze v. Equitable Life Assurance, 276 Md. ²⁶⁰ 681, 351 A.2d 139 (1976). We granted certiorari to consider the important issue raised in the case.

II

Equitable contends that § 2 of Art. 94 is applicable in this case and operates to exclude April 16, 1981, the date of issue of the policy, and include April 16, 1983, the date of the insured’s death, which was within the period of contest-ability. Pursuant to the statutory language of Art. 94, § 2, Equitable asserts that the two-year incontestability clause is “prescribed by statute” (Art. 48A, § 390) and consequently the date of issue is a day or event under § 2 which is “not to be included” in the time computation. Conversely, the Jalowskys posit that Art. 94, § 2 is simply inapplicable in this case and that Art. 48A, § 390 is the controlling statute. Under this view, the two-year period, during which the policy was subject to contest, commenced on April 16, 1981 and concluded on April 15, 1983, one day prior to the death of the insured.

The Jalowskys rely, as did the intermediate appellate court, upon Holtze v. Equitable Life Assurance, supra, as precedent for this position.

III

Holtze concerned the timing of an incontestability clause in a life insurance policy and required a determination as to which of two dates triggered the two-year period. Procedurally, Holtze originated in the federal district court and reached us vis-a-vis two certified questions, to wit: “(i) What items in the record [of this case] constitute the ‘written instrument in which the contract is set forth’ for purposes of Code [(1957, 1972 Repl.Vol.) Art. 48A, § 364]? (ii) What was the ‘date of issue’ of the involved policy (i.e., the ‘written instrument in which the contract of insurance is set forth’) for purposes of Code [(1957, 1972 Repl.Vol.) Art. 48A, § 390]?” 276 Md. at 682-83 , 351 A.2d 139 . ²⁶¹ The incontestability clause in Holtze provided that the policy would be incontestable, “except for non-payment of premiums, after it [had] been in force during the lifetime of the Insured for two years from the Date of Issue shown on page three.” Page three reflected November 28, 1969 as the date of issue. The conditional premium receipt was dated October 24, 1969 and the first premium was paid on that date.

The insured died on November 19, 1971. When the insured’s beneficiary attempted to collect the policy proceeds, the insurer rejected the claim on the basis of misrepresentation regarding the medical history contained in Holtze’s application. The insurer contended that Holtze died within two years of November 28, 1969—the date reflected in the policy—and, hence, it had the right to contest the policy. The beneficiary maintained that the death did not occur within two years of October 24, 1969— the date of the conditional receipt—and therefore the policy was incontestable.

We held that the date of issue was the date of the conditional receipt. We stated: “On the facts before us, we hold that (1) the conditional receipt, together with Parts I and II of the application, are part of the ‘written instrument in which the contract is set forth,’ (2) ‘the date of issue’ of ‘the written instrument in which the contract of insurance is set forth’ was October 24, 1969, and that the two-year period of contest-ability commenced to run on that date.” Id. at 688-89, 351 A.2d 139 . The Jalowskys conclude that Holtze is a flat holding that the date of issuance is included when computing the two-year period of contestability. We think this reading is overbroad.

A review of our opinion in Holtze and the briefs filed by the parties indicate that the applicability of Art. 94, § 2 was not before the Court. Hence, we did not conclude in Holtze that, notwithstanding Art. 94, § 2, the day upon which the policy was issued commenced the running of the incontestability period. ²⁶² III. It is the general common law rule that when time is to be computed from a particular day, act or event, the designated first day is excluded and the last day of the period is included. 6 G. Couch, Cyclopedia of Insurance Law § 31:24, at 40 (2d ed. 1985). Early on, our predecessors observed that “the tendency of modern cases is to exclude the day of the act or event, unless for a special reason, it may be necessary to include it.” Calvert v. Williams, 34 Md. 672, 674 (1871).

Statutes governing time computations, which call for exclusion of the first day and the inclusion of the last, are essentially codifications of the general common law rule. 1 Couch, supra, § 31:24, at 40. Article 94, § 2, which was originally enacted as ch. 522 of the Acts of 1941, is thus a codification of the common law rule. Its purpose, as described in the Act’s title, was to establish “a uniform method of computing any period of time prescribed or allowed by the rules of any court, or by order of Court, or by any applicable statute.” (Emphasis supplied.) Article 48A, § 390 was initially enacted by ch. 19 of the Acts of 1956, fifteen years after the Legislature codified its policy for the uniform computation of time “prescribed or allowed by any applicable statute.” Art. 94, § 2. Section 390 of Art. 48A specifically provides that an insurance company cannot in any way protest the payment of the proceeds of a life insurance policy after said policy “has been in force during the lifetime of the insured for a period of two (2) years from its date of issue.” Clearly, this provision was intended to protect the insured, together with the policy beneficiary, from either the nonpayment or dilatory payment of proceeds by the insurer.

Of course, the purpose of incontestability provisions is “to put a checkmate upon litigation; to prevent, after the lapse of a certain period of time, an expensive resort to the courts—expensive ²⁶³ both from the point of view of