Columbian Nat. Life Ins. Co. v. Harrison

• Decision Date: 20 May 1926
• Docket Number: No. 4148.,4148.
• Citation: 12 F.2d 986
• Parties: COLUMBIAN NAT. LIFE INS. CO. v. HARRISON et al.
• Court: U.S. Court of Appeals — Sixth Circuit

12 F.2d 986 (1926)

COLUMBIAN NAT. LIFE INS. CO. v. HARRISON et al.

No. 4148.

Circuit Court of Appeals, Sixth Circuit.

May 20, 1926.

COPYRIGHT MATERIAL OMITTED

John B. Keeble and A. W. Stockell, Jr., both of Nashville, Tenn. (Keeble & Seay, of Nashville, Tenn., on the brief), for plaintiff in error.

T. T. McCarley and Nathan Cohn, both of Nashville, Tenn. (J. G. Stephenson, of Nashville, Tenn., on the brief), for defendants in error.

Before DENISON, MACK, and DONAHUE, Circuit Judges.

DENISON, Circuit Judge (after stating the facts as above).

The record does not show diverse citizenship, although it probably exists. This should be made to appear properly to the court below; in default, the cases, after remand, should be dismissed for that reason. Realty Holding Co. v. Donaldson, 268 U. S. 398, 400, 45 S. Ct. 521, 69 L. Ed. 1014. The penalty claimed under the smaller policy may be added to the policy loss to make the necessary $3,000. Nathan v. Rock Springs Distilling Co. (C. C. A. 6) 10 F.(2d) 268, January 7, 1926. These Tennessee statutes, as construed by the Supreme court of the state, enter into and form a part of the insurance contracts, and this court will follow their directions and their local interpretation. Sims v. American Cent. Ins. Co. (C. C. A. 6) 296 F. 115.

In the suit on the health and accident policy, No. 124331, a verdict for the defendant should have been directed on account of the Mutual Benefit rejection.¹ It seems clear that, as to the materiality of the false answer in this particular, the case upon this policy stands upon the same basis as if on a life insurance policy. The reasons which make such representations material to the risk of life insurance apply with full force to health insurance, and though this was a health and accident policy, and the recovery sought is solely under the accident provision, we see no way by which, from this point of approach, the policy may be valid for accident and invalid for health. The two liability covenants are not separable; they are purchased by one consideration, which is not in any way apportionable. Hence, if the false answer avoided the health insurance, it necessarily avoided the accident insurance.

The Supreme Court of Tennessee, in Mutual Life Ins. Co. v. Dibrell, 137 Tenn. 532, 194 S. W. 581, L. R. A. 1917E, 554, has considered the effect of this statute, and has decided that a false denial of a previous rejection for life insurance is ipso facto material to the risk and avoids the later life policy. It may not be clear whether this is so far a construction of the statute, rather than a conclusion as to a general rule of insurance law, that we are bound to follow the decision; but that is immaterial, because the federal rule is clearly to the same effect. Ætna Life Ins. Co. v. Moore, 231 U. S. 543, 34 S. Ct. 186, 58 L. Ed. 356; Prudential Life Ins. Co. v. Moore, 231 U. S. 560, 34 S. Ct. 191, 58 L. Ed. 367; Mutual Life Ins. Co. v. Hilton-Green, 241 U. S. 613, 36 S. Ct. 676, 60 L. Ed. 1202; New York Life Ins. Co. v. Goerlich (C. C. A. 6) 11 F.(2d) 838, March 12, 1926.

Harrison's only responses to this defense are that he never had been informed of the rejection, and that he did not make the statements which the agent then acting for the Ætna wrote down. His knowledge of the rejection is not important. Even if the effect of answer 14, denying any application "concerning which I have not been notified," were to be escaped for lack of perfect correspondence to the similar question in the Ætna blank, yet, under the Dibrell Case, his answer 13, denying any previous rejection, was a representation which increased the risk of loss, and therefore equivalent to a warranty, and his good faith would not avail. Had Harrison claimed that he told the agents about the Mutual Benefit transaction, and that they had either interpreted the facts as justifying the negative answers or had deliberately inserted false answers, and if the applications had been in separate papers by way of preliminary inducement to the issuing of the policies, or had it appeared (or, on the new trial, should it appear) that Harrison did not, in fact, give these negative answers in the Ætna application, we should have to consider the argument of estoppel now made for Harrison and based upon Union Mutual Life Insurance Co. v. Wilkinson, 13 Wall. 222, 20 L. Ed. 617; but see Ætna-Moore Case, at page 559 (34 S. Ct. 186), and also the other cases cited above, and Lumber Underwriters v. Rife, 237 U. S. 605, 35 S. Ct. 717, 59 L. Ed. 1140, as to the present force of this estoppel rule upon a case where the application is copied into and becomes part of the policy as issued. So, also, if these agents had, in any way which turned out to be material, deceived him as to the contents of the application, we would come to the same question of estoppel. In so far as the difference in the blanks indicated that their statement that they had merely copied the answers in the Ætna application was untrue, it was in respects which we do not find to be now important.

We are not satisfied that policy No. 138-515, which is an accident policy only, stands upon the same ground. The Tennessee decision in the Dibrell Case, is not necessarily applicable to an accident policy; we are cited to no decision which is directly helpful, and we find none; and we must go to the reasons for that case and for the federal cases cited to the same effect. We think the basic reasons which have led the courts to declare this materiality as a matter of law are two. The first is that the false answer conceals a door leading to a room in which the company would have searched. This reason of itself might not (though we express no opinion) be sufficient to support the conclusion; though in many cases, and perhaps in the typical or characteristic cases, the search would reveal a good original ground for rejection. The second, and, as we see it, the stronger, reason is that the general rules and motives governing all life insurance companies in rejecting life risks are so similar, if not so wholly common, that the very fact of rejection raises a substantial inference of noninsurability, or, at least, that there is a natural presumption that a company will not now insure one who has been rejected until it has satisfied itself that the rejection was not upon a ground which ought to be now controlling.

If these considerations are at the basis of the rule of the legal materiality of a previous rejection in the ordinary life case, they do not satisfactorily support the same rule when applied to an earlier application for life insurance and a later application for accident insurance. It is quite evident that the reasons for the earlier...