Bowles v. Mutual Ben. Health & Accident Ass'n

• Decision Date: 04 October 1938
• Docket Number: No. 4274.,4274.
• Parties: BOWLES v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.
• Court: U.S. Court of Appeals — Fourth Circuit

119 ALR 756, 99 F.2d 44 (1938)

BOWLES v. MUTUAL BEN. HEALTH & ACCIDENT ASS'N.

No. 4274.

Circuit Court of Appeals, Fourth Circuit.

October 4, 1938.

Frank W. Rogers, of Roanoke, Va. (A. R. Bowles, Jr., of Richmond, Va., and Woods, Chitwood, Coxe, Rogers & Muse, of Roanoke, Va., on the brief), for appellant.

Randolph G. Whittle and Martin P. Burks, III, both of Roanoke, Va. (Funkhouser & Whittle, of Roanoke, Va., on the brief), for appellee.

Before PARKER and NORTHCOTT, Circuit Judges, and CHESNUT, District Judge.

PARKER, Circuit Judge.

This is an appeal by plaintiff from an adverse judgment in an action on a health and accident insurance policy. The policy was issued February 22, 1932 and insured the plaintiff, a physician specializing in eye, ear, nose and throat work, against loss of life, limb, sight or time resulting from bodily injuries sustained through purely accidental means. On June 22, 1932, while the policy was in force a foreign body struck and broke the windshield of an automobile that plaintiff was operating, causing glass or some other substance to penetrate his right eye, destroying all useful vision in that eye and resulting in such injury to the left eye that plaintiff has become totally disabled from engaging in any occupation. Liability under the policy was denied on the ground: (1) That plaintiff in applying for the policy had misrepresented his average monthly earnings in replying to a question contained in the application; (2) that plaintiff had falsely represented in the application that he had no other application for insurance pending at that time; and (3) that plaintiff had failed to disclose in accordance with the requirements of the policy the obtaining of additional insurance, two policies from the Equitable Life Insurance Co. of Iowa on February 23, 1932, one from the Metropolitan Ins. Co. on March 4, 1932, and one from the Commercial Casualty Insurance Co. on June 18, 1932.

The case was heard by the judge below on an agreed statement of facts; and he found with plaintiff on the first and second of the contentions of defendant above stated, but held that the policy was avoided by reason of the failure of the plaintiff to notify defendant of the issuance of the Equitable and Commercial Casualty policies. As to the Metropolitan policy, he held that the acceptance by the defendant of premium on the policy in suit with knowledge of the existence of the Metropolitan policy constituted a waiver of the requirement of notice with regard thereto.

We think that the judge was unquestionably correct in holding with plaintiff on the first point. The inquiry in the application was, "What are your average monthly earnings?" The answer was "$1,000." It is stipulated that during the year 1931 plaintiff's fees as charged amounted to $14,000; that he collected $8,991.75 and that he returned net income after payment of office expenses including use of automobile of $5,374. We agree with the trial judge that, if the company was inquiring as to net income it should have framed its question accordingly; but we do not find it necessary to decide whether under the circumstances of the case the answer could be considered a substantially false representation. That the company did not so regard it is shown by the fact that it accepted the September premium on the policy although it had been informed in the first accident report on June 28th that plaintiff's total collections for the preceding year were only $8,991.75. If it could be held that there was a material misrepresentation with respect to this matter, it was waived when premium on the policy was accepted with knowledge of the facts. Phoenix Mut. Life Ins. Co. v. Raddin, 120 U.S. 183, 7 S.Ct. 500, 30 L.Ed. 644; New York Life Ins. Co. v. Dumler, 5 Cir., 282 F. 969; Aetna Life Ins. Co. v. Frierson, 6 Cir., 114 F. 56, 63; Virginia Fire & M. Ins. Co. v. Lennon, 140 Va. 766, 125 S.E. 801, 38 A.L.R. 186; Foreman v. German Alliance Ins. Ass'n, 104 Va. 694, 52 S.E. 337, 3 L.R.A.,N.S., 444, 113 Am. St.Rep. 1071; 14 R.C.L. 1190; 32 C.J. 1348.

On the contention with respect to pending applications for insurance, it appears that insured simply failed to answer a question in the application addressed to this subject, and that the company issued the policy sued on without requiring that it be answered. Under such circumstances, the fact that insured had an application for other insurance pending at the time is immaterial. By issuing the policy without requiring an answer to the question, the company waived answer to the inquiry and elected to treat it as immaterial. Phoenix Mut. Life Ins. Co. v. Raddin, supra.

Likewise as to the failure to notify the company with regard to taking out the Metropolitan policy. Since the company was notified of the existence of this policy on July 6th or 8th, and since it accepted from the plaintiff a renewal premium on the policy in suit on September 1st following, it clearly waived any breach of condition so far as notice of this policy was concerned. Couch, Encyclopedia of Ins. Law, vol. 5, sec. 1065; Phoenix Mut. Life Ins. Co. v. Raddin, supra.

In the view which we take of the case, therefore, it is narrowed to two questions: (1) Whether the policies issued by the Equitable Life Insurance Co. of Iowa constituted "additional insurance" within the meaning of clause 18 of the policy in suit requiring notice to defendant; and (2) whether failure to give notice of the obtaining of the accident and health policy from the Commercial Casualty Ins. Co., which was accepted four days before the accident, resulted in avoiding the policy. The facts out of which these questions arise are as follows:

The policy in suit is a simple accident and health policy, providing an indemnity of $5,000 for loss of life or loss of both eyes, both hands, both feet or one hand and one foot, an indemnity of $1,500 for loss of one hand, one foot or one eye, a total disability benefit of $150 per month from date of accident, a partial disability benefit of $60 per month for a period of three months and for medical expense of not exceeding $37.50 in non-disabling injuries. It contains a provision that strict compliance with all the provisions and agreements of the policy is a condition precedent to recovery, and requires notice of additional insurance under the following provision:

"18. Do you hereby apply to the Mutual Benefit Health & Accident Association for a policy to be based upon the foregoing statements of facts, and do you understand and agree that the falsity of any statement in this application shall bar the right to recover if such false statement is made with intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the Association, and do you agree to notify the Association, promptly of any change in your occupation, or if you take additional insurance, and do you hereby authorize any physician or other person who has intended or may attend you to disclose any information thus acquired?"

The policy provided for renewal upon payment in advance of quarterly premiums and, through a "non-cancellable endorsement", provided against cancellation during any current quarterly term.

At the time that plaintiff applied for this policy he had recently gone through bankruptcy and was renewing his insurance coverage. He had an application pending with the Equitable Life Insurance Company of Iowa for two life insurance policies aggregating $15,000, which were issued February 12, 1932 and became effective February 23d, one day after the issuance of the policy sued on but a few days prior to its acceptance by plaintiff. They provided double indemnity in case of accidental death and contained provisions for the payment of $150 per month to the insured in case of total and permanent disability. No notice was given defendant by plaintiff of the taking of this insurance, and defendant did not learn of it until some time after the renewal of the policy in suit by the payment and acceptance of quarterly premiums on June 1st and September 1st. It is stipulated that the defendant understood the term "additional insurance" as used in the quoted portion of the application to include life policies containing disability provisions, but that there was a difference of opinion among insurance men generally with respect to the matter, the fact as stipulated with respect to this difference of opinion being as follows:

"There is a difference of opinion among insurance men generally as to whether disability insurance such as provided by the riders attached to the plaintiff's Equitable Life policies should be considered embraced within the meaning of the term `accident or health insurance'. Some companies do and some companies do not count it in determining the amount of sickness or accident indemnity they will write for an applicant. Some companies ask in their application blanks specific questions as to whether the applicant has life insurance with disability benefits and the amount thereof."

In May 1932 plaintiff applied to the Commercial Casualty Company for an accident and health policy. This policy was delivered to plaintiff for examination on May 28th and it was accepted by him and the premium paid on June 18th. It appears that prior to accepting this policy and paying the premium on it, plaintiff intended to accept it and to drop the policy in suit. But the stipulation states that as a matter of fact the quarterly premium was paid on the policy in suit on June 1, 1932 and the plaintiff accepted the Commercial Casualty policy which had been, left with him for examination and paid the premium on it on June 18th. Defendant learned of the existence of the Commercial Casualty policy on September 8, 1932 through an accident report made by plaintiff. Notwithstanding this knowledge, defendant wrote plaintiff on October 20th that his claim was being investigated, and not until October 31st did it deny liability under the...