Boucouvalas v. John Hancock Mut. Life Ins. Co.

• Decision Date: 04 April 1939
• Parties: BOUCOUVALAS v. JOHN HANCOCK MUT. LIFE INS. CO.
• Court: New Hampshire Supreme Court

5 A.2d 721

BOUCOUVALAS

v. JOHN HANCOCK MUT. LIFE INS. CO.

Supreme Court of New Hampshire. Hillsborough.

April 4, 1939.

Transferred from Superior Court, Hillsborough County; Lorimer, Judge.

Assumpsit by Apostolos Boucouvalas against the John Hancock Mutual Life Insurance Company on a policy insuring the life of plaintiff's cousin. Verdict for plaintiff. Case transferred on defendant's exceptions to the denial of its motions for a nonsuit and for a directed verdict.

Judgment for defendant.

Assumpsit, on a policy insuring the life of the plaintiff's cousin. Trial by jury and verdict for the plaintiff.

The policy, which is a non-medical one, provides that it shall not take effect unless upon its date the insured is in sound health, and the undisputed testimony discloses that upon that date the insured was not in a state of health which could reasonably be described as sound and that he was not then an insurable risk. It also conclusively appears that during the year prior to the date of the policy the insured had twice been admitted to a hospital for treatment of the disease from which he died a few months after the policy was issued.

The plaintiff introduced evidence tending to show that the policy was not procured through any fraud on his part or on the part of the insured, but that the defendant was induced to issue it by reason t>f the fraud of its own soliciting agent who, having been fully informed by the insured of his ill health and hospitalization, nevertheless wrote false answers in the application so as to make it appear to the defendant that the health of the insured was good and that he had never received hospital treatment. It also appeared that the insured, who was unable to read, write or speak the English language, was induced to sign the application without having it read back to him by reason of the assurance of the agent that he had truthfully reported the answers given by the insured.

All premiums due upon the policy have been paid, but the defendant, upon discovering after the death of the insured that the representations made in the application were false, refused to pay the face of the policy and tendered back the premium.

The defendant's exceptions to the denial of its motions for a nonsuit and for a directed verdict, as well as some others, were transferred by Lorimer, J.

Arthur B. Hayden, Ralph A. Ashton, and Osgood & Osgood, all of Manchester, for plaintiff.

Wyman, Starr, Booth, Wadleigh & Langdell, of Manchester (Robert P. Booth, of Manchester, orally), for defendant.

WOODBURY, Justice.

The facts recited above disclose a situation parallel to the one considered by this court in the case of Bilodeau v. Insurance Co., 84 N.H. 405, 151 A. 481, and the plaintiff contends that he is entitled to judgment under the rule announced in that case. The defendant admits that the facts in the case last cited and in the one at bar are substantially similar, but contends that this court adopted an erroneous view of the law not only in the Bilodeau case but also in the case of Domocaris v. Insurance Co., 81 N.H. 177, 123 A. 220, 221, upon which it is based, and urges that we now overrule both of those decisions.

In the Domocaris case the liability of the defendant was predicated upon the statute, (Laws 1907, c. 109, § 1, now P.L. c. 277, § 6), which provides that any person who solicits an application for insurance upon the life of another shall be regarded as the agent of the insurer and not as the agent of the insured. After quoting the above statute at length the opinion proceeds as follows: "It is clear that when the agent was engaged in writing in the application false answers * * * he was the agent of the defendant. In performing these acts which were within the scope of his employment, he was the representative of the company. His act was its act, and his knowledge was its knowledge. The policy was written by the defendant with full knowledge of the physical condition of the insured, and it is a valid contract untouched by the fraud of the plaintiff or the insured, upon which the defendant is liable."

This rule was criticised in the later case of Bilodeau v. Insurance Co., supra, upon the ground that it constituted a departure "from common-law doctrines of agency" and upon the ground that it produced the effect of making "the insured better off than if no fraud had been committed so as to substitute a penalty for compensation." [84 N.H. 405, 151 A. 482.] Nevertheless in this later case the rule of the earlier one was followed for the reason that after the decision in the earlier case was announced the statute relating to life insurance agents had been reenacted without change in the Public Laws of 1925, and that this reenactment "carried with it this construction under the well and long-established rules that the re-enactment of a statute without change adopts its prior judicial interpretation."

In the case of Karp v. Insurance Co., 86 N.H. 124, 126, 164 A. 219, 220, it was said with reference to the rule of the Domocaris case that "its utility as an instrument for the accomplishment of substantial justice is extremely dubious," and this criticism was reiterated in Levesque v. Insurance Co., 88 N.H. 41, 44, 183 A. 870.

The above strictures on the rule are well founded. In the Domocaris case it was apparently assumed that the statute which made the agent who solicited the insurance the agent of the company also made the company chargeable with its agent's knowledge of uninsurability of the applicant. Such is not in fact the case. This statute, unlike the one relating to soliciting agents for fire insurance companies (Pub. Laws c. 276, § 5), does not provide that the insurer shall be charged with its agent's knowledge of facts relating to the risk "as if they were stated in the application." With respect to life insurance the legislature saw fit to go no further than to provide that the agent who solicits the policy shall be regarded as the agent of the insurer; it left the decision of the question of the scope and extent of the agency relationship which it created to the common law. The question presented, then, is not one of statutory construction at all but it is one of determining the common-law rule relating to the chargeability of a principal with the knowledge of his agent.

This rule is stated in Brookhouse v. Union Publishing Company, 73 N.H. 368, 374, 62 A. 219, 222, 2 L.R.A., N.S., 993, 111 Am.St.Rep. 623, 6 Ann.Cas. 675, citing Allen v. Railroad Company, 150 Mass. 200, 22 N.E. 917, 5 L.R.A. 716, 15 Am.St.Rep. 185, in the following language: "It is true that a principal is ordinarily chargeable with the knowledge acquired by his agent in executing the agency, and is subject td the liabilities which such knowledge imposes. But there is a well-established exception to this rule, by which the principal is not charged with the knowledge of his agent when the latter is engaged in 'committing an independent, fraudulent act on his own account, and the facts to be imputed relate to this fraudulent act.'" In the Brookhouse case many others are cited in support of this rule, among them Clark v. Marshall, 62 N.H. 498, 500.

Two years later, in the case of Warren v. Hayes, 74 N.H. 355, 356, 357, 68 A. 193, 194, this court said that "the principal is not charged with his agent's knowledge in respect to a particular transaction, unless the latter's acts in respect to it were within the scope of his employment," and in this case the rule is summarized in the statement that "The test, therefore, to determine whether an agent's knowledge is to be imputed to his principal is to inquire whether or not the agent was acting for the principal when he did that in respect to which it is sought to charge the principal with his knowledge." See, also, Dearborn v. Fuller, 79 N.H. 217, 107 A. 607; Ellsmore v. Director General, 80 N.H. 100, 114 A. 25; Castonguay v. Acme Knitting Mach. & Needle Company, 83 N.H. 1, 136 A. 702; Henry v. Allen, 151 N.Y. 1, 45 N.E. 355, 36 L.R.A. 658.

Applying the foregoing rule to the facts in the case at bar it is evident that the defendant is not chargeable with its agent's knowledge of the poor health and hospital record of the insured. In soliciting the application for the policy of life insurance the agent was without doubt acting within the scope of his employment, but in falsely reporting...