Aetna Life Ins. Co. v. McCullagh

• Decision Date: 11 November 1919
• Citation: 185 Ky. 664,215 S.W. 821
• Parties: ÆTNA LIFE INS. CO. v. MCCULLAGH.
• Court: Kentucky Court of Appeals

215 S.W. 821

185 Ky. 664

ÆTNA LIFE INS. CO. v. MCCULLAGH.

Court of Appeals of Kentucky.

November 11, 1919

Appeal from Circuit Court, Henderson County.

Action by James H. McCullagh against the Ætna Life Insurance Company. Judgment for plaintiff, and defendant appeals. Affirmed.

Yeaman & Yeaman, of Henderson, for appellant.

John C Worsham and Dorsey & Dorsey, all of Henderson, for appellee.

SETTLE J.

This is an appeal from a judgment of $1,275, entered upon a verdict for that amount recovered by appellee against appellant in the court below in an action on a policy of insurance, No. B G 23629, issued to him by appellant December 20, 1916 whereby, in consideration of $12.50, then paid its agents Stanley & Banks, by him, it undertook to insure the appellee, for a term of six months from the date mentioned, against loss resulting directly and independently of all other causes from bodily injuries effected solely through external, violent and accidental means. Part 1 of the policy provided for the payment of the principal sum of insurance, or fractional parts thereof, for injuries resulting in the loss of life, or of certain members of the insured's body. Part 2 provided:

"If such injuries do not result in any of the losses provided for in part 1, but alone totally disable the insured, that is from date of accident continuously and wholly prevent him from prosecuting any and every kind of business pertaining to his occupation, the company will pay the sum of 25 and no/100 dollars per week so long as he shall live and suffer such disability."

December 22, 1916, two days after the policy was issued and delivered, the appellee had an accidental fall, causing severe injuries to his leg and knee, which necessarily resulted in a surgical operation. He was totally disabled by the fall, and such disability continued a period of 51 weeks and down to the bringing of the action. Although appellee made proper proofs of loss and demand upon appellant for payment of the amount due, it denied liability, which led to the institution of this action.

The appellant by its answer resisted the recovery sought on the grounds that the policy was issued on an application made to it by appellee, in which appellee made false answers to several of the questions therein asked him, with the purpose to deceive appellant; that the answers were material to the risk, and that the policy would not have been issued, if the true facts had been made known to appellant by appellee. The alleged false answers were: (1) That appellee stated that no application of his for a life, health, or accident policy had ever been declined, nor had such a policy issued to him ever been canceled or a renewal thereof refused, when in fact a policy issued to him had been canceled. (2) That he had never received indemnity for any injury or illness except as stated, which amount of indemnity stated was false. (3) That his habits were temperate, when in fact he was, and for many years had been, addicted to the excessive and intemperate use of alcoholic stimulants, and was often so greatly under the influence of such stimulants as to be in a state of semiunconciousness. (4) That he had not received medical attention within the past five years, except for small local disorders, last serious illness being in childhood, when, in fact, at the time the application was made, and for a long time prior thereto, plaintiff's leg and knee, for which indemnity was claimed, had been diseased and infirm, for which he had received medical and surgical attention.

All averments of the answer setting up the alleged facts relied on by appellant in avoidance of liability on the policy were specifically denied by the appellee's reply, which, in addition, alleged that the answers made by appellee to the questions asked in the application for the policy of insurance in question were all written by appellant's agent, Banks, and from his knowledge of the facts, as well as that of appellee, and that none of the answers was false, or made with the purpose of deceiving the appellant. The reply also set forth what was said and done both by appellee and Banks at the time the application was written, and, in substance, alleged that whatever errors of fact were contained in its statements were mere mistakes, in no sense material to the risk; that appellee's answers to all questions asked in the application or policy were made upon Banks' advice and written by him; that his knowledge of the facts stated in such answers, and as to their truth or falsity, was equal to appellee's knowledge of them; and that such knowledge on the part of Banks as appellant's agent constituted knowledge thereof on the part of appellant, which estops it to disavow the acts of Banks as its agent, and prevents it from escaping liability on the policy, which estoppel was formally pleaded in the reply, and, together with all other affirmative matter of the reply, was controverted by the appellant's rejoinder.

Kentucky Statutes, § 639, declares:

"All statements or descriptions in any application for a policy of insurance shall be deemed and held representations, and not warranties; nor shall any misrepresentations, unless material or fraudulent, prevent a recovery on the policy."

It will be found that the following definition of the word "representation," as used in the law of insurance, does not differ materially from those given in the textbooks:

A representation is an oral or written statement, which precedes the contract of insurance and becomes a part thereof, if so stipulated, made by the assured or his authorized agent to the insurer or its authorized agent, and relates to facts necessary to enable the insurer to determine whether it will accept the risk and at what premium. A representation is material when it communicates any fact important to the nature of the risk, that may be reasonably supposed to influence the judgment of the insurer in undertaking the risk or calculating the premium.

Of the many excellent definitions of a "misrepresentation" contained in the textbooks on the law of insurance, we regard the following the clearest in expression and meaning:

"A misrepresentation, according to the law of insurance, is the statement of something as a fact which is untrue, and which the assured states, knowing it to be untrue, and with intent to deceive, or which he states positively as true, not knowing it to be true, and which has a tendency to mislead; such fact being in every case material to the risk." 2 Cooley's Briefs on Insurance, 1158.

With the above definitions of the terms under consideration in mind, and keeping in view the rule that the burden is on the appellant to establish the defense that certain answers contained in appellee's application for the policy of insurance sued on were false and material, let us more particularly consider the character of those answers and the evidence regarding the making of the application.

Appellant's contention that appellee falsely stated in the application that no application of his for a life, health, or accident policy had ever been declined, nor that such a policy issued to him had ever been canceled or a renewal refused, is unsupported by the evidence found in the record. On the contrary, the evidence shows, both appellee and appellant's agent, Banks, so testifying without contradiction, that the only policy issued to appellee that was canceled was one of accident insurance issued by the Royal Indemnity Insurance Company and placed with its agents, Stanley & Banks, for delivery to appellee, who refused to accept it of the agents and himself ordered its cancellation because of a "rider" sent to the agents by the company after the issuance of the policy, with direction to attach it thereto, which would have excluded any claim for damages by appellee for injury to a leg formerly slightly injured in an accident. It is therefore apparent from the evidence that the statement complained of was substantially true. Appellee's application for a policy had not been rejected, nor a policy held by him canceled. The cancellation was of a policy by his own order, following his rejection of it before its delivery to him, because of the rider attached to it after its issuance, all of which facts were well known to appellant's agent, Banks, at the time he wrote in the application of the policy in this case the answers of appellee to the questions referred to.

We are also satisfied from the evidence that appellee's answers in the application to questions regarding past indemnities received by him from another insurance company for previous accidental injuries sustained, though short of the whole truth, were not materially false or made to deceive. His own testimony and that of appellant's agent, Banks, the former corroborating the latter, furnish the only information found in the record as to this matter. Regarding this answer Banks said: "To the best of my recollection, Mr. McCullagh said, 'Well, you know I received one or two payments from an old Travelers' policy.' I said, 'Yes, I think I do; do you remember the exact dates and exact amounts?' He said, 'No, I don't.' He said, 'Will your records show?' And I says, 'No'; and he says, 'I think it was about $50;' and so I wrote it down, 'About $50.' "

It was shown by the testimony of Ahern, an agent of the Travelers' Insurance Company, introduced by appellant that appellee had previously received as indemnity for former injuries $55.35 in June, 1913, on account of a sprain of the wrist in playing tennis; $33.93 in March, 1913, for an injury to the right knee, sustained by slipping on icy steps; and $44.60 in May, 1913, for a twisted tendon in the right knee, sustained while playing tennis. So he had received for...