Summary
In Preferred Life, a prospective insured applied for a life insurance policy while suffering from a heart condition, which would have precluded the policy from being issued.
Summary of this case from State Life Insurance Company v. O'BrienOpinion
No. 31239.
May 28, 1934.
1. INSURANCE.
Where applicant was physician, and knew that medical examiner knew that he was not insurable risk, and that, if correct answers were given, policy would not be issued, and medical examiner made false answers in application and applicant anticipated that examiner would act in applicant's interest against insurer, examiner held not agent of insurer so as to render insurer liable on policy, regardless of examiner's misrepresentations.
2. INSURANCE.
Medical examiner cannot be agent of insurer for purpose of defrauding insurer.
APPEAL from Circuit Court of Calhoun County.
Stovall Stovall, of Okolona, and Hill, Hill, Whiting, Thomas Rives, of Montgomery, Alabama, for appellant.
The appellant being a fraternal benefit society, its rights and duties and those of appellee are governed by article 14, chapter 127, Mississippi Code of 1930, entitled "Fraternal Societies."
Knights of Maccabees of the World v. Coleman, 128 Miss. 854, 91 So. 561; Columbian Mutual Life Assurance Society v. Harrington, 104 So. 297.
Knowledge of the physical condition of an applicant for insurance with a fraternal benefit society known to the medical examiner and not transmitted to the principal does not constitute a waiver of any misrepresentations by the applicant, or estop the company from pleading same in an action on the policy, because the common-law rule is restricted by section 5249, Code of 1930.
New York Life Ins. Co. v. Smith, 129 Miss. 544, 91 So. 456.
It is a generally accepted rule that a misrepresentation of a material fact by an applicant in his application for life insurance where the policy to be issued is based on the truthfulness of the statements made therein will avoid the policy based thereon.
Williams v. N.Y. Life Ins. Co., 96 So. 97; Keeton v. Jefferson Standard Life Ins. Co., 5 F.2d 183; Mutual Life Ins. Co. of N Y v. L. Hilton-Green, Ex. Estate of C.L. Wiggins, dec., 60 L.Ed. 1202; Aetna Life Ins. Co. v. Moore, 231 U.S. 543, 58 L.Ed. 356.
It is a valid stipulation in an application and policy of insurance that its provisions could not be varied by notice nor representations not brought home to the actual knowledge of the company's principal officers and that no waiver was authorized by any other agent.
N.Y. Life Ins. Co. v. Odom, 56 So. 379; John Hancock Mutual Life Ins. Co. v. Luzio, 176 N.E. 446.
Insurer is not bound by statements contained in an application when not only the agent but the insured knows they are untrue, and are calculated to deceive, and that the application is to be forwarded to the insurer to be acted on by it.
Mutual Life Ins. Co. of N.Y. v. L. Hilton-Green, Ex. Estate of C.L. Wiggins, dec., 60 L.Ed. 1202; N.Y. Life Ins. Co. v. Fletcher, 29 L.Ed. 934; John Hancock Mutual Life Ins. Co. v. Luzio, 176 N.E. 446; Aetna Life Ins. Co. v. Moore, 231 U.S. 543, 58 L.Ed. 356; Bankers Life Co. v. Dixon, 24 F.2d 241; Keeton v. Jefferson Standard Life Ins. Co., 5 F.2d 183; American Central Life Ins. Co. v. First National Bank of Interprise, 90 So. 294; Mutual Life Ins. Co. of N.Y. v. Powell, 217 Fed. 565.
The rule charging the principal with his agent's knowledge is established for the protection of those who deal with the agent in good faith. If, therefore, the third person acts in collusion with the agent to defraud the principal, the latter will not be chargeable with any information which the agent receives pertaining to the transaction.
2 C.J., par. 550, page 871; Continental Mutual Life Association v. Parham, 80 Tex. 518, 16 S.W. 316; Elliot v. Knights of Modern Maccabees, 46 Wn. 320, 89 P. 929; Benedict v. Arnous, 154 N.Y. 715, 728, 49 N.E. 326.
Patterson Patterson, of Calhoun City, for appellee.
The appellant's rights and privileges as well as the rights and privileges of the appellee are governed by article 14, chapter 127, Mississippi Code of 1930.
The presumption of knowledge of the by-laws of a fraternal beneficiary society does not arise against an applicant for membership, he being at the time of the application a stranger to the by-laws.
Modern Woodmen of America v. Head, 96 So. 219; American Equitable Assurance Co. v. Powderly Coal Lbr. Co., 142 So. 37.
Medical examiner of a life insurance company is the agent of the company, although he is paid by the insured for the examination, and notwithstanding a recital in the application or policy that he shall be regarded as the agent of insured.
37 C.J. 378; 14 R.C.L. 1167, sec. 347 and page 1161, sec. 343.
Knowledge of medical examiner is knowledge of insurer.
N.Y. Life Ins. Co. v. Smith, 129 Miss. 544, 91 So. 456; Ogletree case, 77 Miss. 7, 25 So. 869; Grand Lodge of K.P. v. James, 100 Miss. 467, 56 So. 458.
A corporation, society or individual cannot repeal the law of estoppel.
Fraternal Aid Union v. Whitehead, 125 Miss. 153, 87 So. 453, 88 So. 274.
In order to establish fraud the evidence must be clear and satisfactory.
12 R.C.L., pages 436 and 437, sec. 183; National Life Accident Ins. Co. v. Baker, 147 So. 427.
In absence of insured's knowledge that agent did not write into application information which insured gave agent, insured had a right to assume agent acted honestly with principal.
American Life Ins. Co. v. Buntyn, 148 So. 617.
Fraud must always be distinctly proved.
Tuteur v. Chase et al., 66 Miss. 476, 6 So. 241.
The insured, Dr. F.E. Thompson, at the time of the application for the policy of insurance involved in this case, was suffering from chronic dilation of the heart due to valvular obstruction. He was well aware of this fact and that the disease was of such character that he was liable to die of it at any time, and he did die of the disease a short time after the issuance of the policy. Only the day before the application he had been thoroughly examined by a physician, expert on this disorder, and had been informed of its exact nature and imminent danger. But in part 1 of his application for the insurance he stated over his signature that he was in good health and free from any and all diseases, ailments, or afflictions; and in part 2 of the application he stated, in apparent response to the question whether he had ever suffered from any injury, ailment, or disease, that he had suffered from influenza four days, results cured; and in part 3, being the medical examiner's report, it was stated that there was no evidence of any disease of the heart.
It was shown by the testimony that part 1 of the application was filled out by the soliciting agent of the insurance society, without any questions being asked by the agent, the agent having no knowledge or information to the contrary of the answers as written by the agent, and that parts 2 and 3 were filled out by the local medical examiner without any questions being asked by the medical examiner, but that the medical examiner knew that the answers as filled out by him were untrue. The medical examiner had treated the insured, knew of this heart trouble and of its extent, and that the disease was such as to render the applicant ineligible to an honest policy of insurance. The medical examiner admitted as a witness that he knew the answers filled in by him were untrue, knew of the disease and of its nature and effect, but excused himself by saying that he intended to write the insurance society a private and confidential report giving the real facts, but forgot to do so.
Our books are full of cases where the insured has in good faith made correct answers and representations to the agent of the insurance company and the agent has written out the answers in such way that the answers appear as false representations, and we have held that the insured may rely on the agent to write out the answers correctly, and the insured is not, in such a case, bound by the incorrect answers when he signs the application without reading it over. And there are likewise numbers of cases holding that, where, in good faith, the insured has attempted to answer questions of the medical examiner, the company is bound to all the knowledge which the medical examiner actually has in respect to the facts covered by the answers, whether the answers are correct or not. And so long as the predicate of good faith and want of fraud on the part of the insured are present as an essential element, all these cases are sound in law and in morals. But the essential stated predicate is not present in this case.
The applicant was an experienced physician; he had been an examiner in life insurance applications; he knew that he was not entitled to insurance, and he knew that the medical examiner, here involved, knew that he was not an insurable risk — there was no reasonable latitude for a difference of opinion on that subject. He knew, and he knew that the medical examiner knew, that, if correct answers were given, the policy being applied for would not be issued. It follows inescapably that he anticipated and expected that the medical examiner would fill out the application with false answers as he did; in other words, that the medical examiner would act in his interest, and against that of the insurance society. To hold that in such a case the medical examiner is the agent of the insurer would be to overrun the reasons which support the general rule that the medical examiner is the agent of the insurer, and would open wide the door for the most monstrous frauds and swindles upon insurance companies.
We follow the reasoning applied in such cases as New York Life Ins. Co. v. Fletcher, 117 U.S. 519, 6 S.Ct. 837, 29 L.Ed. 934, and Mutual Life Ins. Co. of New York v. Powell (C.C.A.), 217 F. 565, that a medical examiner cannot be an agent of the insurer for the designed purpose of defrauding the insurance society or company. An applicant cannot use a medical examiner as a means or instrumentality, an accomplice, to consummate a swindle upon an insurance company to which fraud both the insured and the medical examiner are effectual parties, and then successfully stand upon the claim that the examiner was the agent of the company. In such a case the examiner is acting for, and is the creature of, the applicant, and not of the company.
Reversed and dismissed.