Combs v. Equitable Life Ins. Co. of Iowa

• Decision Date: 10 June 1941
• Docket Number: No. 4761.,4761.
• Citation: 120 F.2d 432
• Parties: COMBS v. EQUITABLE LIFE INS. CO. OF IOWA.
• Court: U.S. Court of Appeals — Fourth Circuit

120 F.2d 432 (1941)

COMBS v. EQUITABLE LIFE INS. CO. OF IOWA.

No. 4761.

Circuit Court of Appeals, Fourth Circuit.

June 10, 1941.

F. H. Combs, of Grundy, Va., and Horace Sutherland, of Galax, Va., for appellant.

John L. Walker, of Roanoke, Va. (Leonard G. Muse and Woods, Chitwood, Coxe, Rogers & Muse, all of Roanoke, Va., on the brief), for appellee.

Before SOPER, DOBIE, and NORTHCOTT, Circuit Judges.

SOPER, Circuit Judge.

This case comes before the court on the appeal of the plaintiff in the District Court from a judgment for the defendant in an action on a policy of life insurance upon the life of Dewey O. Combs. On April 5, 1938, the insured, a senior at the Virginia Polytechnic Institute at Blacksburg, Virginia, signed an application for a policy of insurance with the defendant company in the amount of $5,000. The same day he was examined by a medical examiner of the company. In answer to a question in the application Combs stated that he had never suffered from any ailment or disease of the heart and lungs. Upon the basis of this information and the usual medical examination, the application was approved and forwarded to the home office.

The application contained, amongst others, the following provisions:

"I agree: (1) that if the entire first premium stipulated in the policy contract issued for the insurance hereby applied for is paid to the company or its agent at the time of making this application and such settlement is shown herein and the receipt therefor which is attached to this application is delivered to me by the agent, then if the company after investigation and medical examination, shall be satisfied that at the time of said medical examination, I was insurable and entitled under the company's rules and standards to the insurance on the plan and for the amount applied for, the insurance shall take effect as of the date of said medical examination; (2) that if the entire first premium stipulated in the policy contract issued for the insurance hereby applied for is not paid to the company or its agent at the time of making this application, or if the policy contract be issued other than as applied for, either by an adjustment in the amount, plan, or premium, the company shall incur no liability under the policy issued until said policy is delivered to me and the entire first premium therefor is actually paid while I am in good health, and then only if I have not consulted or been treated by any physician since the date of the medical examination for this policy, and if so delivered, said policy shall be deemed to have taken effect as of its date of issue."

Combs did not pay the first premium at the time he made the application, and it is admitted that the policy did not become effective before delivery.

The company approved the application and sent a policy dated April 9, 1938, with the application attached as part thereof, to the soliciting agent; and the agent delivered the documents to Combs on April 22, 1938, who then paid the first premium. In the meantime, on April 14, 1938, Combs visited Catawba Sanitorium, Virginia, where he consulted a chest specialist. The doctor made a thorough examination and found that Combs was suffering and for a long period had suffered from moderately severe chronic bronchiectasis, a disease of the lungs which is incurable if, as in Combs' case, both lungs are affected. This malady, though not of itself fatal, renders the patient more susceptible to bronchial pneumonia. The doctor at the sanitorium urged Combs to secure work in a warm dry climate after his graduation in June. He wrote a letter to a doctor in Blacksburg containing a detailed report of his findings and conclusions, and sent a copy to Combs to remind him of the advice that had been given to him. Combs' condition was the same on April 14, when he was examined at the sanitorium, as it had been on April 5, when he made application for the insurance. He was suffering from the same disease on both dates.

At the time of the delivery of the policy the soliciting agent knew that Combs had had the examination at the sanitorium, but the agent did not know the result of the examination because he had been told by Combs that the doctors did not find anything wrong with him. If the company had been told that Combs had bronchiectasis, it would not have issued the policy.

There is nothing in the record to show that Combs knew that he was suffering from bronchiectasis when he applied for the policy and was examined by the company's doctor. He subsequently went to the Catawba Sanitorium because one of his professors suspected that he had tuberculosis. When Combs received the report from the sanitorium he was elated to find that he did not have tuberculosis. But the professor was not satisfied, and persuaded Combs early in May to go to the University of Virginia Hospital at Charlottesville where he was examined by two doctors who verified the earlier diagnosis. On May 22, 1938, Combs died of bronchial pneumonia and bronchiectasis. After his death the defendant refused payment on the policy and tendered a refund of the premium to the plaintiff, the beneficiary named therein, but this settlement was refused and the present action was brought.

The company defended on the ground that the policy never became effective for the reasons (1) that Combs was not in good health when the policy was delivered to him and the first premium was paid, and (2) that Combs had consulted a physician between the date of the medical examination by the company's doctor and the delivery of the policy. To meet this defense the plaintiff contended (1) that the good health and interim consultation provisions of the application did not prevent the policy from becoming effective because there was no change in the state of Combs' health between the making of the application and the delivery of the policy; and (2) that these provisions of the contract were waived by the defendant by the delivery of the policy by the soliciting agent with knowledge of Combs' medical examination at the Catawba Sanitorium.

The District Judge, before whom the case was tried without a jury, found the facts as above set out and ruled against the plaintiff on both points. He held that under the Virginia law the good health and interim consultation provisions were conditions precedent to the insurance contract, and that the insured had failed to fulfill them. The judge also ruled that there was no waiver of these conditions (1) because the company's representative did not have full knowledge of the facts, and (2) because such a waiver was beyond the scope of the authority of the soliciting agent. Judgment was therefore given for the defendant. D.C., 34 F.Supp. 1002.

There are many cases in which a good health clause in a life insurance contract, similar to that in the policy in suit, is construed literally to mean what it says, that liability is not incurred by the insurer unless the applicant for insurance is in good health upon the delivery of the policy; and if bad health at that time is shown in a subsequent suit upon the policy, this interpretation is given, even though the applicant believed himself to be in good health at the time of his application and the company satisfied itself by medical examination that he was insurable, and no subsequent change in his condition took place prior to the delivery of the policy. The reason for the rule is that the liability of the insurer has been limited by the terms of the contract, and both parties are bound thereby.¹

On the other hand, there is a respectable body of authority for the rule that if there has been no fraud or misrepresentation on the part of the applicant, and he has been subjected to a medical examination by the company and has been accepted as a satisfactory risk, the good health clause must be interpreted to refer only to changes in health occurring between the examination and delivery of the policy. The theory of these cases seems to be that by making the examination and passing the applicant, the company has waived all future contentions as to his health at or prior to the time of the examination, and he is justified in assuming, in the absence of fraud or misrepresentation on his part, that he has obtained a valid policy of insurance upon his life.²

In the pending case we are bound by the Virginia decisions. Erie Railroad Co. v. Tompkins, 1937, 304 U.S. 64, 58 S. Ct. 817, 82 L.Ed. 1188, 114 A.L.R. 1487. There is no Virginia decision directly in point; but the decisions of the Supreme Court of the state in respect to the general rule to be followed in the interpretation of insurance policies, and the meaning to be given to the specific phrases, "good health" and "consulting a physician", indicate the construction that should be given to the policy in suit. In Kennard v. Travelers' Protective Ass'n, 1931, 157 Va. 153, 157, 159, 160 S.E. 38, the following appears:

"* * * Policies of insurance in cases of doubt or ambiguity are to be construed liberally in favor of the assured, but they must be construed in accordance with their terms as are other contracts. Courts should not make uncertain that which is certain, and they cannot make contracts for the parties. Phoenix Ins. Co. v. Shulman Co., 125 Va. 281, 99 S.E. 602; Combs v. Hunt, 140 Va. 627, 125 S.E. 661 37 A.L.R. 621; Bawden v. American Cent. Ins. Co. 153 Va. 416, 150 S.E. 257. `The province of construction lies wholly within the domain of ambiguity.' Hamilton v. Rathbone, 175 U.S. 414, 20 S.Ct. 155, 158, 44 L.Ed. 219. When a provision is too plain to be misunderstood, there is nothing to construe. Norfolk Motor Exchange v. Grubb, 152 Va. 471, 147 S.E. 214, 63 A.L.R. 310." 157 Va. 157, 160 S.E. 39.

"`Policies of insurance, as other contracts, should be construed "according to the ordinary sense and meaning of the terms employed, and, if they are clear and unambiguous, their terms are to be taken in the plain, ordinary, and popular...