Conservative Life Insurance Co. v. Hutchinson

• Decision Date: 07 June 1932
• Citation: 244 Ky. 746
• Parties: Conservative Life Insurance Company v. Hutchinson.
• Court: United States State Supreme Court — District of Kentucky

244 Ky. 746

Conservative Life Insurance Company v. Hutchinson.

Court of Appeals of Kentucky.

Decided June 7, 1932.

1. Insurance. — Answer to question whether applicant for insurance was now engaged, or had intention of engaging, in liquor business, held not representation or promissory warranty as to future.

2. Insurance. — Evidence held insufficient to require finding as matter of law of falsity of insured's answers to questions in application.

The evidence introduced to show falsity of insured's answers as to excessive use of alcoholic drinks and whether

he was engaged in liquor business was evidence of his reputation for using, handling, and manufacturing liquor and evidence of sale to him of large quantity of sugar and that he had odor of whisky on his breath, while only evidence of his poor health at time of signing application was that he had previously weighed 15 to 25 pounds more and that he subsequently died of heart trouble.

3. Contracts. — Meeting of minds is essential to rescind contract by mutual consent.

4. Insurance. — Validity of cancellation of policy by agreement may be impeached for misrepresentation, fraud, or mental incapacity.

5. Contracts. Test of mental capacity necessary to sustain cancellation of contract is whether party possesses sufficient mind to reasonably understand nature and effect of act.

6. Insurance. — Issue of insured's mental incapacity to agree to cancellation of life policy held question for jury under evidence.

There was evidence that insured at the time of surrendering the policy in return for premium paid was suffering from heart disease and was conscious of his physical infirmity. It further appeared that insured had been sick during previous winter, and would wander in his conversation, appeared flighty, and had quit attending to any sort of business, and attending physician expressed opinion that insured was not mentally capable of entering into a contract.

7. Trial. — In action on life policy in which defense was cancellation, and plaintiff claimed insured was incompetent at time of cancellation, failure to transfer case to equity held not error.

8. Jury. — Whether person whose contract is sought to be avoided was non compos mentis at date of contract is legal issue properly triable by jury.

9. Appeal and Error. — Plaintiff's testimony in action on policy that insured was in bed when agents came to see him about cancellation, though incompetent, held not prejudicial, especially where one of visitors testified to like effect.

Appeal from Boyd Circuit Court.

WAUGH & HOWERTON for appellant.

ADAMSON & SPARKS, H.O. WILLIAMS and ARMOND R. IMES for appellee.

OPINION OF THE COURT BY STANLEY, COMMISSIONER.

Affirming.

The appellant, Conservative Life Insurance Company, defended this suit on two policies issued on the life of John L. Hutchinson, upon the grounds that he had made false and material answers to certain questions in his application and medical examination, and that the policies had been surrendered and canceled by agreement. There was a verdict for the plaintiff in the sum of $4,000, the amount of the policies, and this appeal follows.

The question asked in the application, the answer to which is claimed to be false, was: "Are you engaged now, or have you any intention of engaging directly or indirectly in the manufacture, sale or handling of malt or spirituous liquors? (Give full particulars)." This was answered: "No." In the medical examination the question was asked: "Have you ever used alcoholic drinks to excess or intoxication?" The answer was: "No." Another question was: "Are you in good health, free from all disease, complaint or injury?" The answer was: "Yes."

It is to be observed that the first question called for information as to whether the applicant was at the time he made the answers engaged in the handling of liquors and as to his present intention with respect thereto. It cannot be construed as a representation or promissory warranty that he would not in the future engage in that business. The second question called for information as to his use of intoxicants to excess in the past. The evidence consisted in the main of testimony that the insured's general reputation in the neighborhood in regard to using, handling, and manufacturing intoxicating liquor was bad. A witness stated that in the spring of 1928, six months after the policy was issued, he had sold Hutchinson two hundred pounds of sugar, and he then talked as if he had been buying it in quantities at other places. He was not drunk, but had the odor of whisky on his breath. In the fall of the year 1927, the witness had waited on the roadside while another man went into Hutchinson's house and came out with whisky. Cross-examination elicited a statement that two neighbors had said Hutchinson was a drunkard and had killed himself drinking whisky. The materiality of the answers in the application and medical examination was proved. There was no evidence introduced by the plaintiff to refute the evidence outlined, but two intimate friends of many years, on cross-examination, stated they had never seen him take a drink, and another that Hutchinson's face was not flushed as to indicate heavy drinking. Dr. Holbrook, the medical examiner, testified no symptom of an excessive use of liquor was disclosed in the examination which was of a nature to have revealed such if there had been any in the subject.

Is the evidence sufficient to authorize a directed verdict that the answers made were false? We think not. Compare Columbia Life Insurance Company v. Tousey, 152 Ky. 447, 153 S.W. 767; AEtna Life Insurance Company v. McCullagh, 185 Ky. 665, 215 S.W. 821. In prosecutions under the criminal law, the statute authorizes testimony to be heard as to the general reputation of the defendant in respect to engaging in the business of handling illicit liquors; and it is to be treated as substantive evidence; but such proof alone is not sufficient to convict. Section 2554a-15, Statutes; Lakes v. Commonwealth, 200 Ky. 266, 254 S.W. 908. It is not necessary to say that in a civil suit the charge that one was at a given time engaged in that business and entertained an intention to do so in the future could be thus proved (see 14 R.C.L. 1079), for the issue was submitted and the jury found the evidence not sufficient to sustain the allegations.

Appellant confesses that the only proof it was able to adduce that Hutchinson was not in good health when he signed the application is that he had previously weighed fifteen to twenty-five pounds more than he did at the time, and the inference to be drawn from the fact that within less than a year he had died of heart trouble. This issue, too, was submitted to the jury.

It was admitted that about three months before the insured's death he had surrendered the policies sued on, accepted a return of the premiums, and executed a release from liability. The beneficiary sought to avoid this transaction upon the grounds that the insured was mentally incompetent to agree to a cancellation of the policies and that their surrender had been obtained through undue influence. The verdict sustained the pleas. The argument that the company was entitled to a peremptory instruction or a new trial because the verdict is not sustained by the evidence requires its review.

It appears that the insurance company was not satisfied with some of the risks it had assumed through the local agent who had written the...