211 F. 31 (5th Cir. 1914), Mutual Life Ins. Co. of New York v. Hilton-Green

Citation:211 F. 31
Case Date:January 17, 1914
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit

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211 F. 31 (5th Cir. 1914)




United States Court of Appeals, Fifth Circuit.

January 17, 1914

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This was an action to recover upon four policies of life insurance, issued by the plaintiff in error (defendant in the trial court) at one and the same time to the intestate. The suit was instituted in the Circuit Court of the First Judicial Circuit of Florida, and removed to the District Court of the United States for the Northern District of Florida. It was twice tried in that court, each trial resulting in a verdict for the plaintiff for the amount of the four policies with interest and attorneys' fees.

The first judgment was reversed by this court because the policies sued on were erroneously held by the District Judge on the first trial to be Alabama contracts, which, under the statute of that state, made them noncontestable for any cause after two annual premiums had been paid. No other question was decided on the former appeal. The opinion of the court appears in 202 F. 113, 120 C.C.A. 267.

Upon the second trial, to review the judgment in which the present writ of error is taken, the court below held that the Florida law governed the policies, and other questions only are now presented for decision. They arise entirely out of false statements alleged to have been made or ratified by the insured in the application for the policies and in the reports of the two medical examiners of the defendant, and which the defendant contended avoided the policies. The alleged false answers related to the insured's present and past health history; as to previous illnesses, surgical operations, consultations with physicians, hospital treatment, etc.; also, that he had been examined by the defendant's medical examiners, and that the examiners had correctly recorded his answers; and that he had never applied for other insurance and been rejected or his application not passed upon favorably. The alleged false statements were made the subjects of numerous special pleas by the defendant, to which the plaintiff replied by taking issue thereon and also by alleging knowledge of the falsity of the statements relied upon, on the part of the defendant, through its agents and examiners who were instrumental in writing the policies for it. No questions with relation to the pleadings are assigned as error. The errors relied upon relate altogether to exceptions to the court's

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oral charge, and to the refusal of certain charges requested by the defendant. There are 23 errors assigned and relied upon for a reversal, all of which have been examined by us. We feel that clearness of presentation will be accomplished rather by a general statement of our views respecting them than by a detailed consideration of each assignment.

George W. P. Whip, Emmett Wilson, and Philip D. Beall, all of Pensacola, Fla., for plaintiff in error.

W. A. Blount, A. C. Blount, Jr., and F. B. Carter, all of Pensacola, Fla., for defendants in error.

Before PARDEE and SHELBY, Circuit Judges, and GRUBB, District Judge.

GRUBB, District Judge (after stating the facts as above).

The main questions considered on the trial in the court below, and about which the errors insisted upon here relate, were: (1) Whether the alleged false statements must have been fraudulently made by the insured, in order to be availed of by the insurer; (2) whether they must have been material to the risk to have that effect; (3) whether they or any of them were, in fact, material to the risk; (4) whether knowledge of the falsity of the statements made by the insured on which defendant relies, if proven, would be the knowledge of the defendant and estop it from asserting the invalidity of the policies for that reason; and (5) whether the defendant's agents or medical examiners are shown to have had such knowledge.

1. Each of the policies was alike in form and in its conditions and provisions. Each contained this stipulation:

'All statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties.'

When the language of a policy by its terms excludes warranties, it would seem that it leaves false representations made by the insured with substantially the status that they would have with relation to the offense of obtaining money by false pretenses. In order to avoid a contract of insurance, because a party to it was induced to enter into it by the false representations of the other party to it, it must be made to appear that the representations were untrue; that they were known to be untrue by the party making them; that they were material inducements to the party, to whom they were made, to enter into the contract; and that the party to whom they were made relied upon their truth, which implies that he was unaware of their falsity.

In the case of AEtna Life Ins. Co. v. Outlaw, 194 F. 862, 114 C.C.A. 608, the Circuit Court of Appeals for the Fourth Circuit said of a policy containing a like stipulation:

'It was decided by the Circuit Court of Appeals of the Eighth Circuit, in the case of Rice v. Fidelity & Deposit Company of Maryland, 103 F. 427, 43 C.C.A. 270, that: 'In insurance a representation is a statement by the applicant to the insurer regarding a fact material to the proposed insurance; and it must be not only false, but fraudulent, to defeat the policy. A warranty, in the law of insurance, is a binding agreement that the facts stated by the applicant are true. It is a part of the contract, a condition precedent to recovery upon it, and its falsity in any particular is fatal to an action upon the policy.' Accepting this as the definition of a representation, it follows that, in order for a representation, under the terms of this policy, to serve as a

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defense, it must have been knowingly false, and therefore fraudulent. Unless so knowingly false and fraudulent, it could not be availed of by the insurance company as a defense.'

In the case of Pelican v. Mutual Life Insurance Co., 44 Mont. 277, 119 P. 778, the court said:

'An application for a policy provided that all statements made by the insured should, in the absence of fraud, be deemed representations and not warranties, and that no such statement of the insured should avoid or be used in defense to a claim under the policy, unless contained in the written application, etc. It also recited that all of the answers to the medical examiner were true and were offered as inducements to the issue of the policy. Held, that answers to questions in the application as to insured's prior health history were representations and not warranties, and the falsity thereof would not avoid the policy unless fraudulent, under Rev. Codes, 5043, providing that the language of the policy must be construed most strongly against insurer.'

Section 5043, Revised Code, referred to in the citation, and declaring that the language of the policy must be construed most strongly against the pleader, being merely declaratory of the rule of construction as to insurance policies in the absence of statute, does not diminish the weight of this authority.

In the case of Penn Mutual Co. v. Trust Co., 73 F. 653, 19 C.C.A. 316, 38 L.R.A. 33, 70, Circuit Judge Taft held that where a representation was by a statute required to be made 'in bad faith,' to be available to the insurance company, nothing short of an actual intent to mislead or deceive would suffice; that a misstatement, honestly made, through inadvertence or even gross forgetfulness and carelessness, was not enough.

We are of the opinion that, under the language of these policies, they could be avoided because of false representations made by the insured, only if such representations were fraudulently made, i.e., with knowledge, actual or imputed, upon the assured's part, of their falsity when he made them.

2. We also think that the false representations relied upon to avoid the policies must have been material to the risk, tending to influence the insurer to write the policies, when, if their falsity had been known to it, it might not have done so. The peculiar stipulation of the policies themselves excludes the idea that the representations made by the insured were to be considered warranties, unless they were fraudulently made. If not to be construed as warranties, then, in order to avoid the policies, they must have been material to the risk.

In the case of AEtna Life Ins. Co. v. Outlaw, 194 F. 862, 863, 114 C.C.A. 608, 609, the Circuit Court of Appeals for the Fourth Circuit said:

'The distinction between a warranty and a representation in an application for an insurance policy has by a number of decisions been stated to be that, if the statements are warranted, they must be true in every particular, whether material or immaterial; whereas, if the statements are representations, incorrectness in an immaterial matter will not avoid the policy, although, if incorrect in a material matter, the policy will be avoided.'

We hold that, under the language of the policies involved in this suit, the defendant, to avoid the policies for false representations, must

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establish their falsity, materiality, and the knowledge of the insured, actual or imputed, of their falsity.

3. So far as the alleged false representations related to the insured's previous and present condition of health, as to whether he had suffered from indigestion or from a weak and diseased heart, and whether he was then in good health, we think that the issues were properly left as questions of fact to the jury, both as to the falsity and as to the materiality of these representations. So we think the materiality of the omission of the insured to mention the history...

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