Empire Life Ins. Co. v. Gee

• Decision Date: 21 April 1911
• Citation: 171 Ala. 435,55 So. 166
• Parties: EMPIRE LIFE INS. CO. v. GEE.
• Court: Alabama Supreme Court

55 So. 166

171 Ala. 435

EMPIRE LIFE INS. CO. v. GEE.

Supreme Court of Alabama

April 21, 1911

Appeal from Circuit Court, Dallas County; B. M. Miller, Judge.

Action by Susan B. Gee against the Empire Life Insurance Company. From a judgment for plaintiff, defendant appeals. Reversed and remanded.

Mallory & Mallory, for appellant.

Pettus Jeffries, Pettus & Fuller, for appellee.

SAYRE J.

Parties are still disagreed as to the meaning and effect of sections 4572 and 4579 of the Code, and think some meaning they may have ought to control the decision of this case. In Mutual Life Ins. Co. v. Allen, 166 Ala. 159, 51 So 877, section 4579 was accepted as meaning that all such agreements between the parties to contracts of insurance as are not plainly expressed in the policy do not bind the parties, though so much of the contract as is so expressed remains unaffected by the part not so expressed. In the more recent case of Satterfield v. Fidelity Mutual Life Ins Co., 55 So. 200, it was held that the contents of papers, incorporated by reference as a part of the policy and attached thereto, were expressed in the policy, within the meaning of this section.

These constructions--and we adhere to them--make the policy, including documents adopted by reference and attached, the sole expositor of the contract between the parties. The principle seems to be the same as that of the statute which requires contracts for the sale of land to be in writing. New Era Life Ass'n v. Musser, 120 Pa. 384, 14 A. 155. The insurer may not therefore sustain a plea that the insured has breached the contract by giving in evidence the warranties of an application for the policy, not incorporated in the body of the policy, or not so attached as to serve the purpose of the statute. The effect of the statute is to help out inattentions and misapprehensions on the part of persons insured by putting them in possession of the entire evidence of their contracts. In some of the states the statutes forbid the introduction in evidence of applications not attached to policies; but in the statute of this state there is no inhibition against the proof of representations made in the application to the extent they may be relevant and material to a plea of fraud in the procurement of the policy, and, in the absence of language clearly mandatory to that effect, we would not be inclined to adopt a construction of the statute which in some, though rare, cases would amount to a practical foreclosure against insurance companies of all remedy for fraud. Albro v. Manhattan Life Ins. Co. (C. C.) 119 F. 635. Fraud vitiates everything, and it is not ordinarily the policy of the law to put difficulties in the way of proving it.

Where fraudulent representations are pleaded in defense to an action on a policy of insurance, it must be shown that false statements have been made with intent to deceive, that they related to matters intrinsically material to the risk, and that the insurer relied on them. This rule has not been changed by statute or decision.

Where, on the other hand, a breach of warranty--that is, a breach of a stipulation of the completed contract--was pleaded under the law as it was prior to the enactment of section 4572 of the Code, that was material which was made so by agreement of the parties, whether intrinsically so or not. Whatever the assured warranted to be true he, by necessary implication, agreed to be material, and its falsity barred him of any recovery on the contract. Alabama Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 2 So. 125, 59 Am. Rep. 816.

The difference in doctrine between warranties and representations was founded upon the principle that warranties were always a part of the completed contract, while representations preceded, were collateral to, and not necessarily parts of, the contract. 2 Cooley's Briefs, 1128. Now section 4572 provides: "No written or oral representations, or warranty therein made, in the negotiation of a contract or policy of life insurance, or in the application therefor or proof of loss thereunder, shall defeat or avoid the policy, or prevent its attaching, unless such misrepresentation is made with actual intent to deceive, or unless the matter misrepresented increase the risk of loss." Except for the insertion of the words "or warranty made therein," this is substantially a copy of statutes of earlier date in Massachusetts and Minnesota. The purpose of statutes of this kind is to prevent the unfair practice adopted by some companies of multiplying statements to be made by the insured, to which, by the wording of the policy, the technical character of warranties is given, and to relieve against the hardships arising from the strict enforcement of the common law as to warranties. White v. Provident Savings Society, 163 Mass. 108, 39 N.E. 771, 27 L. R. A. 398; 3 Cooley's Briefs, 1984.

Construing their own statute, the Supreme Judicial Court of Massachusetts, in the case just cited, held that it was the intention of the Legislature "to change this rule (in respect to the effect of warranties) to some extent, and to enact in place of it one which should hold the contract valid, unless the misstatement, if made in the negotiation of the contract, was made with an actual intent to deceive, or unless the misstatement was of a matter which actually increased the risk of loss; and this with reference to statements which may be said by the parties to be warranties, as well as those which were only representations. Such was already the law as to statements not technical warranties. As to mere representations, the statute may well be held to be only declaratory, but as to warranties it made a new rule. In the opinion of a majority of the court, it speaks in terms, neither of warranties nor of representations, technically so called, but deals with all misrepresentations made in negotiating the contract or policy. Misstatements of fact, whether the statement is said to be by the parties a warranty or a representation, are equally misrepresentations, and are placed in each case upon the same footing by the statute which applies to them, if the statements are called warranties by the parties, no less than if they are mere representations." To a like effect are Price v. Standard Insurance Co., 90 Minn. 264, 95 N.W. 1118, and Hermany v. Life Ass'n, 151 Pa. 17, 24 A. 1064.

Perhaps our own statute does not say what it means as clearly as it might. But by...