Baltimore Life Insurance Company, a Corporation of State v. Floyd

• Decision Date: 15 June 1915
• Court: United States State Supreme Court of Delaware
• Parties: BALTIMORE LIFE INSURANCE COMPANY, a corporation of the State of Maryland, defendant below, plaintiff in error, v. WILLIAM FLOYD, plaintiff below, defendant in error

94 A. 515

28 Del. 431

BALTIMORE LIFE INSURANCE COMPANY, a corporation of the State of Maryland, defendant below, plaintiff in error, v. WILLIAM FLOYD, plaintiff below, defendant in error

Supreme Court of Delaware

June 15, 1915

Supreme Court, June Term, 1915.

ERROR (No. 6, January Term, 1915) to Superior Court for New Castle County. Case below (No. 6, January Term, 1914), ante 201, 91 A. 653.

Action by William Floyd to recover from the Baltimore Life Insurance Company, upon a certificate or policy of insurance issued by it to Albert Hamlin on June 3, 1912, by which in consideration of the payment of certain weekly dues as the same became due and payable, it agreed that the sum of two hundred and forty-four dollars, contingent upon the death of the said Hamlin, should be paid to William Floyd, the defendant in error and plaintiff below, subject to the agreements and conditions printed on the back of the policy. Floyd the plaintiff below had a verdict and a writ of error was taken by the defendant company. Judgment affirmed.

In the application which was duly signed by the insured appears the following statement printed at the head of the paper and immediately preceding the questions and answers:

"The undersigned doth hereby declare, that the representations and answers made below, and in the examination on the other side are strictly correct and true in every particular, and doth now agree that they shall form the basis, and become part and parcel of the policy should one be issued; and also that any untrue answers will render this policy null and void."

Following said statement are these words:

"Each and every answer must be true.

"[Signed] Albert Hamlin.

"Or the policy will be void.

"Not to be made until every answer to the questions below is recorded and found correct by the applicant."

In the application is the following question and answer:

"Name and relationship to whom insurance is to be paid, William Floyd; relationship, uncle."

In the policy appears the following language:

"The company promises, subject to the conditions hereinafter set forth, to pay to the person designated as the beneficiary * * * the sum of money stipulated in the said schedule."

"This policy is issued and accepted upon the condition that the 'Conditions and Agreements' printed or written by the company upon the back of this policy, are accepted by the assured as a part of this contract, and to all intents shall be construed as if they were above recited at length upon the face hereof."

The policy also provides as follows:

"Conditions and agreements upon which this contract is made, as referred to in the within policy, each of which is hereby acknowledged a condition precedent to said contract."

Then follow thirteen conditions and agreements, No. 6 of which reads in part as follows:

"If within two years from the date hereof, whether the insured die or not, the falsity of any statement made by the insured in the application herefor be discovered by the company and notice thereof be given to the insured or the beneficiary this policy shall be void, and the company shall pay to the insured, if living, or to the beneficiary, if the insured be dead, all premiums paid upon this policy; and upon such payment, or tender, the company shall be relieved of all further liability hereunder."

The assignments of error are as follows:

"First The court below erred in refusing to allow the following question to be answered in the examination of Lewis Speakman: 'Q. Has the Baltimore Life Insurance Company, the defendant in this case, any rule about the issuing of policies on the lives of uncles or cousins?'

"Second: That the court below erred in refusing to instruct the jury to find a verdict for the defendant below, plaintiff in error.

"Third: That the court below erred in instructing the jury, as follows:

"'The first question is, whether the contract of insurance between the insured and the insurer is vitiated by an alleged misrepresentation by the insured in his application for insurance as to the relationship of the beneficiary to himself. We are of the opinion, and charge you, that if such a misrepresentation was made, it was not such a misrepresentation or misstatement of facts that was material to the risk, and therefore does not void the contract. For this reason, we refuse the prayer of the defendant to give you binding instructions to return a verdict in its favor.'

"Fourth: That the court below erred in instructing the jury as follows:

"'If you find that the contract of insurance sued upon was procured and entered into by Hamlin, the insured, and the premiums were paid by Hamlin, the insured; either personally or through his agent, and the circumstances otherwise indicate a bona fide nonspeculative transaction, the contract cannot then be held a gambling contract, and your verdict should be for the plaintiff for the amount of his claim and interest, whether the plaintiff, as beneficiary, had or had not an insurable interest in the life insured for him.'"

The judgement is affirmed.

Andrew C. Gray (of Ward, Gray and Neary) for plaintiff in error.

Lilburne Chandler for defendant in error.

CURTIS Chancellor, PENNEWILL, C. J., and BOYCE and CONRAD, J. J., sitting.

OPINION

PENNEWILL, C. J., after stating the facts as above, delivered the opinion of the court:

The plaintiff in error on June 3, 1912, issued to one Albert Hamlin, a certain certificate or policy of insurance, by which, in consideration of the payment of certain weekly dues as the same became due and payable, it agreed that the sum of two hundred and forty-four dollars, contingent upon the death of the said Hamlin, should be paid to William Floyd, the defendant in error and plaintiff below, subject to the agreements and conditions printed on the back of the policy.

William Floyd, the beneficiary named in the policy recovered judgment below in an action brought upon the policy, and a writ of error was taken by the defendant company.

It is conceded by counsel for appellant:

"That the weight of authority in this country supports the rule, that where there is no moral fraud, a mere representation in the application, though false, does not avoid the policy, unless such representation be intrinsically material."

But counsel contends:

"It is equally well settled, that, independent of legislation, where it is stipulated in the policy that any misrepresentations will render the policy void, such statements, though not intrinsically material to the risk, are made so by express agreement of the parties; in other words, the question of materiality in such cases is irrelevant."

It is not clear from his brief whether appellant's counsel regards the statement in question as a warranty, or a representation not intrinsically material but made material by agreement of the parties. It is difficult in this case, as it has been in many others, to tell whether the statement in controversy is the one or the other. According to all the authorities a warranty is an agreement constituting a part of the contract, while a representation is a statement incidental or collateral thereto. To state the distinction in a somewhat different way: A representation differs from a warranty, and from a condition expressed in the policy, in that the former is a part of the proceedings that propose the contract, and the latter is a part of the contract when completed.

There is probably no better or clearer definition of a warranty, and the distinction between a warranty and a representation to be found, than that given in the case of Ala. Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 So. 125, 59 Am. Rep. 816:

A warranty is a part of the contract, and whether material or not must be strictly complied with, while a representation is collateral or preliminary to the contract and though false does not avoid the contract unless actually material, or clearly intended to be made material by the parties.

The appellant contends that the statement of the insured respecting the relationship of his beneficiary, is either a warranty, or a representation made material by the agreement of the parties that the truthfulness of all answers in the application should be a condition precedent to the fulfillment of the contract.

The conditions and agreements printed on the back of the policy are expressly made a part of the contract, and one of those conditions is that, if within two years the falsity of any statement made by the insured in the application be discovered by the company, the policy should be void.

It would seem, therefore, that all the statements made in the application might be regarded as warranties unless it appears that such was not the intention of the parties. According to the undisputed testimony the untruthfulness of the statement in relation to the beneficiaries' relationship was discovered by the company within two years, and therefore the policy would be void unless it appears from the policy or the negotiations leading up to the contract that the particular statement in question was not regarded by the parties as a warranty. And if the statements made by the insured in his application were not warranties, but representations, the statement in question which was intrinsically immaterial, was not made material by any general agreement or condition indorsed on the policy if it appears that it was not their intention that it should be regarded as material.

However confusing may be the text-books and the decisions respecting warranties and representations in insurance policies, there is one principle of law that applies to those as well as all other contracts, and that is: The intention of the parties when ascertained, must control. So that,...