New York Life Insurance Company v. Fletcher
117 U.S. 519 (1886)

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U.S. Supreme Court

New York Life Insurance Company v. Fletcher, 117 U.S. 519 (1886)

New York Life Insurance Company v. Fletcher

Argued March 19, 1886

Decided March 29, 1886

117 U.S. 519

Syllabus

A person applied in St. Louis to an agent of a New York Insurance Company, for insurance on his life. The agent, under general instructions, questioned him on subjects material to the risk. He made answers which, if correctly written down and transmitted to the company, would have probably caused it to decline the risk. The agent, without the knowledge of the applicant, wrote down false answers, concealing the truth, which were signed by the applicant without reading, and by the agent transmitted to the company, and the company thereupon assumed the risk. It was conditioned in the policy that the answers were part of it, and that no statement to the agent not thus transmitted should be binding on his principal, and a copy of the answers with these conditions conspicuously printed upon it, accompanied the policy. Held that the policy was void.

Insurance Co. v. Wilkinson, 13 Wall. 222, and Insurance Co. v. Mahone, 21 Wall. 152, distinguished.

If an applicant for life insurance is required to answer questions relating to material facts in writing and to subscribe his name thereto as part of the application upon which the policy is issued, it is his duty to read the answers before signing them, and it will be presumed that he did read them.

If a policy for life insurance on which premiums have been paid is void by reason of untrue representations as to material facts in the application, made without design on the part of the applicant, the only recovery which can be had on the policy after the assured's death is for the premiums paid on it.

The New York Life Insurance Company, on the 22d of December, 1877, issued at its home office in the City of New York, to Chinonda S. Alford, a policy of insurance upon his life for the sum of $10,000. The consideration was $263.80 paid at the time, and the promise to pay a like sum on the 22d of December each year. The company is a corporation under the laws of New York, but it also transacts business in Missouri through agents residing there, and, of course, with reference to the business done in that state, is subject to its laws. The assured was a resident of Missouri, and in December, 1877, he applied to an agent of the company there for

Page 117 U. S. 520

such a policy, and submitted to an examination. He also made certain statements and representations respecting himself, his life, and his past and present health, to which he appended a declaration warranting their truthfulness and agreeing that they should be the basis of any contract between him and the company and that if they or any of them were in any respect untrue, the policy which might be issued thereon should be void, and that all moneys paid on account of the insurance should be forfeited, and further agreeing that inasmuch as only the officers at the home office had authority to determine whether or not a policy should issue on any application, and as they acted only on the written statements and representations referred to, no statements or representations made or information given to the persons soliciting or taking the application for the policy should be binding on the company or in any manner affect its rights unless they were reduced to writing and presented at the home office in the application. The statements and representations, with this declaration accompanying the application and forming a part of it, were forwarded to the home office. The policy was thereupon issued and sent to its agent at St. Louis for delivery to the assured. It recited that it was issued in consideration and upon the faith of the statements and representations contained in his application, all of which had been warranted by him to be true, and also in consideration of the cash payment and the annual premiums to be paid. It stipulated for the payment of the amount of the insurance within sixty days after due notice and satisfactory proof of his death, subject to the conditions specified therein. To the policy was annexed a copy of the application, and upon it was endorsed the following notice in red type, and conspicuously printed:

"For the information of the assured and in order that any unintentional errors or omissions which hereafter may be found to exist may be corrected, an abstract of the application upon which this policy is based may be found in the third page within. If corrections are desired, when satisfactory to the company, certificate to that effect will be issued over the signature of the president and actuary. "

Page 117 U. S. 521

The cash payment was made by the assured on the receipt of the policy, and the subsequent annual premiums were regularly paid to the agents of the company in Missouri until his death, which occurred September 24, 1880. The plaintiff was appointed his executor. Due notice and proof of his death were given to the company. Among the documents furnished was the affidavit of a witness, who testified that he had been the physician of the assured for ten years, and had attended him at one time for diabetes, and that he died of that disease. Payment of the insurance money was refused on the alleged ground of false statements and representations in the application. Thereupon the executor brought this action in a court of Missouri, and upon the petition of the company it was removed to the circuit court of the United States.

The petition, which is the designation given to the first pleading in an action under the system of procedure in Missouri, alleges the incorporation of the defendant under the laws of New York and its license to do business in Missouri, the issue of the policy, the payment of the premiums, the death of the assured, the appointment of the plaintiff as executor, the giving of notice and furnishing of proof of the death, and the nonpayment of the insurance money, and prays for judgment for the amount, with interest. The company answered, admitting its incorporation under the laws of New York and the issue of the policy, but set up that it was executed at the home office upon the faith of the answers and statements contained in the assured's written application, which were warranted to be true; that it was stated in the application that he never had a disease of the kidneys or any serious disease, and had never been seriously ill, and had no regular medical attendant, whereas he had been afflicted with diabetes, which is a serious disease of the kidneys, and had been under medical treatment for it; that such statement was not only false but was material to the risk; that he actually died of the disease which he thus concealed, and that the policy was void by reason of these false statements.

The plaintiff replied that two agents of the company at St. Louis, who were personally acquainted with the assured, and

Page 117 U. S. 522

knew his past and then physical condition, had solicited him on different occasions to take out a policy in the company; that he told each of them on those occasions that he did not believe he was insurable; that they knew he had been in bad health, and had been under medical treatment for diabetes, though he thought he was then well; that they assured him that he was insurable; that the fact that he had had the disease made no difference, and that if he would take out a policy and pay the premiums required, he would have no trouble; that finally, about the 18th of December, 1877, he consented to take a policy; that they then told him it would be necessary for him to answer certain questions as a matter of form; that one of them thereupon read to him certain questions from a printed blank, and, as he answered them, the other pretended to take down and write in the blank the substance of the answers as given, not reading over to the assured what he had written nor consulting him about it nor informing him what it was, but saying that what he did was a mere formality; that when he was asked with respect to his having had any disease of the kidneys, he replied that his condition was well known to the agents, who were aware that he had been sick and under treatment by Dr. Brokaw for diabetes, and that the doctor's office was opposite, and they could go there and find out everything they wanted to know; that the assured had faithfully answered all the questions, but the agents inserted in the blank false answers; that he had no reason to suppose that the answers were taken down differently from those given; that after answering all their questions, he was asked to sign his name to the paper to identify him as the party for whose benefit the policy was to be issued, and for that purpose he signed the paper twice, without reading it or the written answers; that the agents did not read to him any part of the application except the questions, and did not read the clause set forth in the defendant's answer, nor call attention to the fact that his signatures were intended as an acceptance or assent to that clause; that when the policy was delivered to him, he neither read it nor the copy of the application attached to it; that the agent who delivered it informed him that it was

Page 117 U. S. 523

all right and he was insured, and he gave no further attention to the matter; that the annual premiums, as they fell due, were paid to said agent, who received them with full knowledge of all the facts, and that therefore the company was estopped from pretending that any of the answers as written rendered the policy void. The company demurred to this reply as constituting in law no cause of action, and no reply to the facts set forth in the answer, but the demurrer was overruled.

On the trial, it was proved by the company that the assured was a resident of St. Louis, and that Dr. Brokaw had been his regular physician for ten years, and had treated him some years before his death for diabetes, of which disease he died. It was also proved that on the day he made application to the defendant, he also applied to the Penn Mutual Life Insurance Company, of Pennsylvania, for insurance on his life, and stated that he had had diabetes in 1875, and that Dr. Brokaw was his physician. That company refused to issue a life policy, but granted a fifteen-year endowment policy at a largely increased premium. It was also proved that diabetes is commonly known as a disease of the kidneys, though primarily a disease of nutrition, and not necessarily affecting their structure in its early stages; that it is a very serious disease and of doubtful curability; that the policy was issued solely upon the written application, and that no other application, statement, or representation was received from the applicant.

The law of Missouri provides that

"No misrepresentation made in obtaining or securing a policy of insurance on the life of lives of any person or persons shall be deemed material or render the policy void unless the matter misrepresented shall have actually contributed to the contingency or event on which the policy is to become due and payable, and whether it so contributed in any case shall be a question for the jury."

Rev.Stat.Missouri § 5976, and that in suits brought upon life policies,

"No defense based upon misrepresentation in obtaining or securing the same shall be valid unless the defendant shall at or before the trial, deposit in court, for the benefit

Page 117 U. S. 524

of the plaintiffs the premiums received on such policies."

Id., § 5977.

Under this last section, the defendant tendered in court to the plaintiff $888.26, the premiums received, with interest to the date of trial, but the plaintiff declined to receive the amount in full payment.

On the part of the plaintiff, a witness was allowed, against the objection of the defendant, to testify to statements, made by the assured and the agent at the time of the application, tending to establish some of the matters alleged in reply to the answer. He could not give the specific words used, but he remembered that in one part of the conversation Alford stood up at the time he was asked as to his having had kidney disease, and pointed through the window and said:

"My medical examiner has an office across the way; you can go there and find out from him. I have been afflicted in the kidneys, but he says I am well, and I feel well now."

He also testified that at one time he heard the assured say to the agent: "Your company ought not to insure me; you know I have been afflicted with kidney disease," and that the agent replied: "Just give me your application, and I will see if I can get it through." The witness was also permitted to testify that he did not think the paper was read over to the assured. He did not hear it read, nor did he remember the questions asked, except the specific one as to the kidneys, and he remembered that because the assured stood up and pointed across the street. There was no evidence that the application was not read by the assured before he signed it or that there was any imposition practiced upon him, or that, after receiving the policy, he applied to correct his answers, which, as written down, are conceded to be false.

Upon the conclusion of the testimony, the defendant requested the court to charge the jury, among other things, substantially as follows:

1. That it is competent for any party, corporation, or individual, employing an agent in the negotiation of a contract, whether of insurance or otherwise, to limit his powers, provided

Page 117 U. S. 525

the limitation is brought home to the knowledge of the other contracting party; otherwise the principal will be bound by the apparent as well as the actual powers of the agent, and as, in this case, the limitation was made a part of the contract between the parties, it was binding upon them.

2. That the stipulation between the parties limiting the powers of the soliciting agent and providing that the contract should be based upon the written application was binding upon the parties, and it was therefore immaterial what may have been said by or to the agent at the time of making the application, which was not reduced to writing and presented to the officers of the company at the home office in New York.

3. That whether the statements and answers contained in the application of the assured were made by him or not, yet when he afterwards received the policy, with a copy of the application attached and a memorandum endorsed thereon, calling his attention to the copy thus attached, with a request that any errors in the application be reported to the company for correction, it was his duty to report any answers incorrectly written down, and thus enable the company to correct them, and that by his failure to do so, he must be presumed to have accepted the policy upon the faith of the answers and to have acquiesced and agreed that it should remain as the basis of the contract of insurance. But the court refused to give any of these instructions, and the defendant excepted. It recognized, however, in its charge the competency of the company to limit the powers of the agent and the binding force of the limitation if brought home to the other contracting party, and instructed the jury that there was such limitation in the present case; that the company was not bound by any representations to or by the assured unless they were put in writing and submitted to the company; that therefore what was contained in the application must be regarded as constituting the basis of the contract unless it could be avoided for fraud; that if the jury found that at the time of making the application he told the agent that he had had diabetes and referred him to his physician concerning it, and that such agent committed a fraud upon the assured by inserting false answers in the application,

Page 117 U. S. 526

and by suppressing the answers actually given, and by concealing from the assured what he had written in the application, and thereby induced him to sign it without knowing what it contained, then the plaintiff was not estopped to recover. The court also charged that if the assured ascertained, before the contract was consummated -- that is, before the policy was delivered to him and the first premium paid -- that the agent had committed a fraud upon him and upon the company, it was his duty to stop and decline to go any further with the transaction; but if he did not discover this before the policy was delivered and the first premium paid, he was not called upon afterwards to take any steps for the cancellation of the contract. To this the defendant excepted. The plaintiff obtained a verdict for the full amount of the insurance money, with interest, upon which judgment was rendered.

Page 117 U. S. 528

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