Opinion
Hearing Granted by Supreme Court May 24, 1928.
Appeals from Superior Court, San Diego County; W. P. Cary, Judge.
Actions, consolidated for trial, by G. M. Boyer, as administrator of the estate of Dora Mockabee Rose, deceased, against the United States Fidelity & Guaranty Company. Judgments for plaintiff, and defendant appeals. Reversed and remanded, with directions. COUNSEL
Joe Crider, Jr., of Los Angeles, and H. W. B. Smith, of San Francisco, for appellant.
L. N. Turrentine, of San Diego, and Perry F. Backus, of Los Angeles, for respondent.
OPINION
WOOD, Justice pro tem.
Defendant issued to Dora M. Rose an accident insurance policy on August 16, 1920, in the principal sum of $15,000. Dr. C. E. Calm was named as beneficiary in the policy. On August 19, 1920, Charles Emil Calm, the same Calm named as beneficiary in the Rose policy, applied for and obtained from the defendant an accident policy in the principal sum of $15,000; the beneficiary being Dora M. Rose. At the expiration of one year from the receipt of her policy, Dora M. Rose, by rider attached thereto, changed the beneficiary to her estate. On May 22, 1923, Dora M. Rose and Dr. C. E. Calm were killed in an automobile accident; Dora M. Rose surviving Dr. Calm by two hours. The administrator of the estate of Dora M. Rose filed two actions to recover the policies. By stipulation, the actions were tried together before the court without a jury, and the same evidence was received in both cases. Appeals by defendant in both actions are now before us. The determination of the cases depends upon the construction to be given to the written applications for the policies signed by the insured in view of the stipulated facts and uncontradicted testimony. At the head of each of the applications, we find these words:
"I hereby apply to the United States Fidelity & Guaranty Company for a policy to be based upon the following representation of facts: I understand and agree that the right to recovery under any policy which may be issued upon the basis of this application shall be barred in the event that any one of the following statements, material either to the acceptance of the risk or the hazard assumed by the company is false, or in the event that any one of the following statements is false and made with intent to deceive. I agree that this application shall not be binding upon the company until accepted either by the secretary at the home office or by an agent duly authorized to issue policies."
Then follow fifteen items, all in narrative form except the eighth. In these items the applicants set forth personal data such as is usually found in applications for insurance policies, the first giving the name of the insured, the second, the residence, etc. Item 8 of the Rose application is as follows:
"Policy to be paid in case of death by accident under its provisions to Dr. C. E. Calm. Resident California Club. Relationship Brother. Age, 55."
After the fifteenth item, the date appears, followed by the signature of the applicant. In the application signed by Dr. Calm three days later, the same words are found, except for the variations occasioned by supplying the personal data of the applicant. In item 8, Dr. Calm named Dora M. Rose as the beneficiary, and gave the relationship as that of sister. It was stipulated at the trial that Dr. Calm and Dora M. Rose were not brother and sister. By the testimony of Ruby Aikman, the driver of the automobile at the time of the accident, it was shown that the witness knew Dr. Calm and Dora M. Rose for some time before either of them made application to the defendant; that they introduced themselves to her, and represented to her that they were friends and not brother and sister. It was further shown that, at the time the applications were presented to defendant, Dr. Calm was a married man. The administrator of the estate of Dora M. Rose promptly furnished defendant with written proof of the accidental deaths; whereupon defendant investigated the facts and learned that Dr. C. E. Calm and Dora M. Rose were not brother and sister. Defendant then tendered to the administrator the amount of the premiums paid, and served written notice that the policies were void. The tender was refused.
At the trial, defendant produced two witnesses, Warren Griffith and George A. Calkins, who qualified as experts in matters of insurance, and testified that, according to the usage and custom of insurance companies, in August, 1920, applications for insurance would not be accepted if made under the circumstances shown in evidence. They further testified that they were of the opinion that the statements contained in the applications to the effect that Dr. Calm was a brother of Dora M. Rose were material to the acceptance of the risk and to the hazard assumed by the defendant. At the close of the evidence, that part of their testimony giving their opinion on the subject of the materiality of the statements was stricken out by the court upon motion of plaintiff. The court did not err in so doing. 25 Cyc. 937. In Penn Mutual Life Ins. Co. v. Mechanic’s Savings Bank & Trust Co. (C. C. A.) 72 F. 413, 38 L. R. A. 33, 70, it is said:
"The great weight of authority in this country, however, is against the view that an insurance expert may be asked his own opinion whether the undisclosed or misrepresented facts were material to the risk. *** The better authorities, however, seem to sustain the rule that the insurance experts may testify concerning the usage of insurance companies generally in charging higher rates of premium or in rejecting risks, when made aware of the fact claimed to be material."
Insurance policies are governed by the same general rules which pertain to all contracts. There must be a meeting of the minds. Subject to the rule that their provisions must not be against public policy or in contravention of specific provisions of law, parties to the contract may make such agreements as they see fit, and the courts will enforce the terms mutually agreed upon. The policy and the application therefor constitute the contract. In McKenzie v. Scottish U. & N. Ins. Co., 112 Cal. 556, 44 P. 924, the court said:
"Parties may contract as they please. When a condition precedent is adopted by them in their contract, the courts will not inquire as to its wisdom or folly. *** In Wood v. Hartford Ins. Co., 13 Conn. 533, 35 Am. Dec. 92, a leading case on the subject of warranty, Sherman, J., said: ‘If a house be insured against fire, and the language of the policy is "warranted, during the policy, to be covered with thatch," the insurer will be discharged if, during the insurance, the house be covered with wood or metal, although his risk is diminished; for a warranty excludes all argument in regard to its reasonableness, or the probable intent of the parties."’
In Jeffries v. Life Ins. Co., 22 Wall, 47, 22 L.Ed. 833, this language is found:
"It is the distinct agreement of the parties, that the company shall not be deceived to its injury or to its benefit. The right of an individual or a corporation to make an unwise bargain is as complete as that to make a wise bargain. The right to make contracts carries with it the right to determine what is prudent and wise, what is unwise and imprudent, and upon that point the judgment of the individual is subject to that of no other tribunal."
In her application for the policy, Dora M. Rose agreed that recovery would be barred "if any one of the following statements *** is false and made with intent to deceive." If the words "Relationship Brother" constitutes a "statement," and were made "with intent to deceive," plaintiff cannot, in view of the rule just set forth and the stipulation of the parties, prevail in the action. It is not necessary to decide whether the words amount to a warranty or representation, since the contract uses the word "statement." The entire application consists of fifteen items, preceded by the agreement hereinabove set forth and followed by the signature of the applicant. Item 8 appears in the midst of the others, all of which contain statements of fact. If it were in narrative form, there could be no doubt but that a statement was made. For instance, if the language used were "the relationship is that of brother," it could not possibly be contended that a statement was not made. Manifestly the two words "Relationship Brother" were used for the sake of brevity. Plaintiff has attached to his brief an exact copy of the application. It appears therefrom that the word "Relationship" is printed and the word "Brother" is in typewriting. By filling in the space following the word "Relationship" as she did, the applicant doubtless meant to state to defendant that Dr. Calm bore the relation of brother to her. It was clearly the intention of the defendant to obtain, and of the applicant to impart, information on the subject of the relationship between the insured and the beneficiary. Considering the application as a whole, we are of the opinion that the applicant intended that all of the matter set forth over her signature was given to the defendant as information and as such was to be treated as statements.
Next is presented the question whether the statement concerning the relationship of the beneficiary was made "with intent to deceive." Plaintiff argues that, in order to bar a recovery, there must be shown an intent to injure defendant. It was not so provided in the contract, and as has been seen, the court can enforce such agreements only as were made by the parties. If the parties had agreed that the intent referred to in the application was an intent to deceive the company to its injury, it would have been a simple matter to add to the application appropriate language to that effect after the word "deceive." Such language, embracing a different idea and an additional condition, cannot be supplied by the court. Doubtless the parties meant to agree that, if the false statement were made knowingly and intentionally, the recovery would be barred. If, on the other hand, the statement were made inadvertently, it would not bar recovery, even though false, because there would be no intent to deceive. An example of such a false statement could be found in an error on the point of the age or the residence of the beneficiary. Erroneous statements by Dora M. Rose in her application that Dr. Calm was 54 rather than 55 years of age, and that he lived at a club other than the California Club, would doubtless be false statements, but not necessarily made with intent to deceive. They might be mistakes resulting from incorrect information on the part of the applicant. The statement on her part, however, that Dr. Calm, a married man and only a friend, bore the relation of brother to her could not possibly have been a mere mistake. There could be no inadvertence here. She must have intentionally stated as true that which she knew to be untrue. Section 1709 of the Civil Code provides:
"One who willfully deceives another with intent to induce him to alter his position to his injury or risk, is liable. ***"
Here the position of defendant was altered to its risk, and this was brought about by the false statement of the applicant, which must have been intentionally and willfully made. Plaintiff cannot escape the result of the provision of the application by claiming that the false statement was not material, if indeed it be held that the statement in question was immaterial, since the contract provided that a false statement would void the policy in either of two events, if the false statement should be material to the acceptance of the risk, or, if made with intent to deceive. By the plain agreement of the parties, the materiality of the false statement is of no consequence if it was made with the intent to deceive. It is a matter of common knowledge that one may not obtain an insurance policy upon the life of another in whom the applicant has no insurable interest. It is not so generally known, however, that the rule is otherwise where the applicant obtains the policy on his own life. 14 Cal.Jur. 468; 14 R. C. L. 920. It can be well argued that the applicant in the case at bar made the false statement in question in the fear that the application would be refused if the truth were known. Such action on her part would certainly be taken with intent to deceive. Our conclusion on this point will necessitate a reversal of the judgment, notwithstanding the finding of the trial court:
"That the description of the beneficiary Dr. C. E. Calm as a brother of the insured, Dora M. Rose, when he was not a brother was not a statement material either to the acceptance of the risk or to the hazard assumed by the defendant, or a false statement made with intent to deceive the defendant."
It is the duty of the court to construe written instruments as a matter of law. The facts, which are extremely simple, were established by stipulation or by undisputed testimony. There was nothing for the trial judge to do as a trier of fact. His duty was to draw a legal conclusion from the instrument before him and the stipulation as to the relationship between the insured and the beneficiary. That a false statement was made with intent to deceive is the only reasonable conclusion that can be drawn therefrom. What has been said with reference to the application for the Rose policy applies with equal force to the application of Dr. Calm.
Counsel for defendant contends that a reversal should be ordered on the further ground that the false statement was material to the acceptance of the risk or to the hazard assumed. He points to the testimony of the expert witnesses that, according to the usage and custom of insurance companies, an application would be rejected if the company should discover that a false statement as to relationship had been made. He argues that, since no evidence in conflict appears, the finding on the subject of materiality is not sustained. The witness Calkins testified:
"Well, the question would immediately come into my mind, which would influence me as to the issuance of that policy, that the character of a person who would deliberately lie to me on an important matter of that kind, that there might be certain relationships that would increase the hazard-and to make you understand it, if I can put it that way a little more clearly just what I mean-there is possibilities, strong possibilities, under these conditions, those certain ones, perhaps relations are not what they should be, and the character of such a person is not just as clearly good as it should be, it would be. I would judge, from making such statements to me, there might be third and fourth parties come in there that might cause a hazard there that I would not look on favorably for the issuance of the policy; do you get what I mean?
"Q. What would such a hazard be, for example, have you got any concrete idea of what such a hazard would be? A. Well, I know of such hazards that have been carried out in life more than once, where a jealous wife or husband or relative have appeared on the scene and there has been trouble."
Section 2565 of the Civil Code provides:
"Materiality is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due, in forming his estimate of the disadvantages of the proposed contract, or in making his inquiries."
The authorities on this angle of the case are not harmonious. Defendant cites the case of Gaines v. Fidelity & Casualty Co. of New York, 93 N.Y.App.Div. 524, 87 N.Y.S. 821, in support of its contention, while plaintiff cites Lampkin v. Travelers’ Ins. Co., 11 Colo.App. 249, 52 P. 1040, which appears to support his view. There is also a lack of entire harmony in regard to the respective functions of court and jury in determining the materiality of statements in applications for insurance policies. The prevailing rule seems to be, however, that the materiality of such statements is a question for the jury, subject to the qualification that the evidence may be so "clear and uncontradicted" that the materiality is a matter of law. Everett v. Standard Accident Ins. Co., 45 Cal.App. 332, 187 P. 996; Union Indemnity Co. v. Dodd (C. C. A.) 21 F.2d 709, decided September 24, 1927. We do not consider it necessary for us to pass upon the questions involved in defendant’s contention concerning the asserted materiality of the false statements, since the judgments must be reversed on the ground that the statements were made with intent to deceive.
It cannot be successfully argued that the situation of the parties was changed by the act of Dora M. Rose in changing beneficiaries a year after the policy was issued. Section 2612 of the Civil Code is as follows:
"A breach of warranty, without fraud, merely exonerates an insurer from the time that it occurs, or where it is broken in its inception prevents the policy from attaching to the risk."
In Wolverine Brass Works v. Pacific Coast Casualty Co., 26 Cal.App. 183, 146 P. 184, it is said:
"The above-mentioned warranties being false, the policy issued in reliance upon them was in our opinion, void ab initio."
One who has practiced deceit upon an insurance company by making a false statement and thus has induced the issuance of a void policy cannot thereafter, by merely changing the beneficiary, compel the company to accept her as a risk and give life to the void policy.
A new trial will not be necessary. By section 956a of the Code of Civil Procedure (added by St. 1927, p. 583) we are authorized to amend the findings of the trial court. It is ordered that the following be stricken from finding XV of the findings of fact in the action on the policy of Dora M. Rose, No. 41611 of the superior court:
"That the description of said Dr. C. E. Calm as her brother was not material to the acceptance of the risk and to the hazard assumed by the defendant, and that it was not material to the acceptance of the risk or to the hazard assumed by the defendant; that the fact that said beneficiary was described as the brother of the insured did not increase the risk and hazard, or risk or hazard assumed by defendant; that defendant did not rely upon the description in said application concerning the relationship of the beneficiary to the insured; and that the said beneficiary was not described as a brother of the insured with the intent to deceive the defendant, and that defendant was not thereby deceived or injured."
It is further ordered that the following be stricken from the findings of fact in the action on the policy of C. E. Calm, No. 41612 of the superior court:
"That said Charles Emil Calm did not deceive or defraud defendant in any manner or particular in obtaining said contract or policy of insurance" in finding XVI, and "that the description of said Dora M. Rose, as his sister, was not material to the acceptance of the risk and to the hazard assumed by the defendant, and that it was not material to the acceptance of the risk or to the hazard assumed by the defendant; that the fact that said beneficiary was described as the sister of the insured did not increase the risk and hazard, or risk or hazard assumed by defendant; that defendant did not rely upon the description in said application concerning the relationship of the beneficiary to the insured, and that the said beneficiary was not described as a sister of the insured with the intent to deceive the defendant, and that defendant was not thereby deceived or injured" in finding XVII.
The judgments are reversed. It is further ordered that the cause be remanded to the superior court, with directions to render judgment for the defendant in both actions upon the respective findings of fact as herein amended and upon the payment into court for the plaintiff of the sum of $720, the total amount of the premiums received by defendant on the two policies.
I concur: CONREY, P. J.
I concur in the judgment: HOUSER, J.