American Life Insurance Co. v. Stewart

Facts

Reese Smith Stewart (Defendant) purchased two life insurance policies from the American Life Insurance Company (Plaintiff). The policies provided a two-year time period during which Plaintiff could contest the policy’s issuance. Three months after purchasing this coverage, Defendant died. Four months after Defendant’s death, Plaintiff filed two suits in equity (one for each policy) seeking to cancel the policies due to fraudulent statements made be Defendant in his application. Shortly after Plaintiff filed its suits, Defendant’s surviving family members filed an action at law seeking to enforce the policies. Both parties stipulated that the suits in law would be delayed until the suits in equity wer resolved. Defendant’s family filed an answer in the equity suit, alleging that the time period to contest the policy had elapsed. After trial, the district court held that the policies were fraudulently procured and that they should be cancelled. Defendant’s family appealed to the United States Court of Appeals for the Tenth Circuit, which reversed the district court’s ruling. The court of appeals held that the insurer had an adequate remedy at law, namely utilizing the fraud on Defendant’s part as a defense in the suit at law. Plaintiff appealed.