Gillan v. Equitable Life Assur. Soc.

• Decision Date: 23 July 1943
• Docket Number: 31397.
• Citation: 10 N.W.2d 693,143 Neb. 647
• Parties: GILLAN v. EQUITABLE LIFE ASSUR. SOC.
• Court: Nebraska Supreme Court

10 N.W.2d 693

143 Neb. 647

GILLAN v. EQUITABLE LIFE ASSUR. SOC.

No. 31397.

Supreme Court of Nebraska

July 23, 1943

Syllabus by the Court.

1. In the absence of statute the chief distinction between a warranty and a representation in insurance law is that the former is the assertion by the assured of some fact, on the literal truth of which the validity of the policy depends without regard to the materiality of such fact; while a representation is also the assertion by the assured of a fact, but the validity of the policy does not depend upon the literal truth of such assertion.

2. By statute it is provided that all statements made by an insured shall, in the absence of fraud, be deemed representations and not warranties.

3. In the absence of statute a warranty by an insured which is false and fraudulent renders the policy of insurance void at the option of the insurer when the falsity of the warranty comes to its attention.

4. By statute no oral or written representation or warranty made in the negotiation or a contract or policy of insurance by the insured, or in his behalf, shall be deemed material or defeat or avoid the policy or prevent its attaching unless such misrepresentation or warranty deceived the company to its injury.

5. Where a question in an application for insurance calls for an answer peculiarly within the knowledge of the applicant, an untrue answer relating to a matter material to the risk and relied upon by the insurer if timely advantage is taken thereof by the insurer, will avoid the policy.

6. In an action at law on an insurance policy an assured may not, by parol evidence impeach his written statements in the application in those cases where the application has become a part of the contract, by stipulation and in accordance with statute, and a copy thereof attached to the policy at the time of delivery.

7. The rule of law that parol evidence is admissible in an action at law on the policy of insurance to prove that answers in the application were not those of the insured, and that the insured made true answers which were incorrectly recorded without the knowledge of the insured is overruled.

8. Where a certain theory on any issue is relied upon by the parties to the trial as the proper one, it will be adhered to on appeal whether it is correct or not.

Brown Crossman, West, Barton & Fitch, of Omaha, and Sloans Keenan and Corbitt, of Geneva, for appellant.

Waring & Waring, of Geneva, and Perry, Van Pelt & Marti, of Lincoln, for appellee.

Heard before SIMMONS, C. J., and PAINE, CARTER, MESSMORE, YEAGER, CHAPPELL, and WENKE, JJ.

YEAGER, Justice.

This action is now before this court on rehearing. An opinion previously adopted is reported in 142 Neb. 497, 6 N.W.2d 782, 785. In the light of the view now taken a further statement appears to be required.

The action is at law and was commenced in the county court of Fillmore county, Nebraska. It was by Bertha E. Gillan, plaintiff against The Equitable Life Assurance Society, defendant, and was to recover disability benefits of $50 a month for the months of March, April and May, 1941, on an insurance policy. The policy was a 20-payment life contract with a disability benefit provision for which an additional premium was paid. In the county court judgment was for the plaintiff from which the defendant appealed to the district court. There was a trial to a jury in the district court which resulted in a verdict and judgment for the plaintiff. From this judgment the defendant has brought the case to this court on appeal.

In her petition the plaintiff pleaded substantially that in January, 1929, the defendant issued to her a convertible term life insurance policy for $5,000, convertible within five years, in the consideration of quarterly premiums in the amount of $21.85 and that the policy contained a provision for the payment of $50 a month in the case of total and permanent disability with a provision that premiums should be waived in case of such disability. The policy lapsed for nonpayment of premium in 1929 but was reinstated in the same year. In 1934 the policy was converted to a 20-payment life policy and the converted life policy contained the same provision for disability benefits as the original contract. She alleged that she became totally and permanently disabled in 1930 and that the defendant paid the monthly benefits from the date of disability to March, 1941, when it ceased to pay. She prayed for a judgment for $150 which was for monthly benefits for three months after the defendant ceased to make payments.

In an answer to the petition, it was alleged substantially that the plaintiff procured the policy by fraud; that the application therefor which required that plaintiff submit to a medical examination and make response to questions to be propounded and which she was required to sign, contained false statements of fact material to the risk; that she was required to appear before a medical examiner of the defendant and state the name of every physician or practitioner whom she had consulted or who had treated her during the past five years and to answer the question: "Have you ever had or been treated for any disease or disturbance of the stomach, liver, intestines, kidney, bladder, or genito-unirary organs?" That the inquiries were made by the medical examiner and to the first inquiry she answered that she had consulted none. To the second she answered in the negative and the answers so made were entered on the application by the examiner and signed by plaintiff, which answers plaintiff agreed in the following words should become a part of the contract: "the foregoing answers shall also become part of any policy contract that may be issued on the strength thereof." That the answers were false in that prior to 1918 plaintiff had a disturbance or disease of the right kidney, which was anchored by a surgical operation, also that she had submitted to an operation for the removal of the right fallopian tube and an ovary, and further in May, 1928, she had submitted to an operation for the removal of her uterus.

It is further alleged that included in the quarterly premium of $21.85 was a premium of $2.90 for the disability feature of the policy.

It is further alleged that relying on the false representations of the plaintiff the defendant approved her application for disability benefits and paid her $50 a month from May 9, 1930, to March 9, 1941, or a total of $6,550, when it ceased to make payments for the reason that at that time it discovered the falsity of the statements made by plaintiff in her application.

By way of cross-petition the defendant sought to recover a judgment for $6,550, that being the amount claimed to have been paid because of the false and fraudulent representations of the plaintiff.

For reply the plaintiff denied that she made any false statements and alleged that she answered truthfully all questions propounded to her but that without her knowledge the untruthful answers were written in by the examiner and that she appended her signature without reading the answers and knew not their content.

Preliminary to a discussion of the issues thus presented by the pleadings it seems proper to state that this action in no wise affects the life insurance policy. By the specific terms of the policy it became incontestable as to life insurance after one year from the date of issue. Incontestability by likewise specific provision did not extend to the disability provision. If there was fraud it affects only the disability provision.

As pointed out in the former opinion the principal issue of fact arose on the traversed plea of the defendant that the insurer was induced by false material statements of plaintiff to enter into the contract and that otherwise the risk for disability benefits would not have been assumed. The opinion passes directly from this observation to the burden of proof and states as a rule of law the following: "On this issue the burden was on defendant to prove that the statements were untrue, that they were made knowingly with the fraudulent intent to mislead and deceive insurer, that they were material to the risks and that the insurer relied on them." As authority for the rule Pollard v. Royal Highlanders, 128 Neb. 790, 260 N.W. 399, 401, is cited. This was premature if not definitely erroneous. If this rule is applicable it must be so because the statements were representations as distinguished from warranties. The statement in Pollard v. Royal Highlanders, supra, is the following: "The law is also well settled in this state that, in order to defeat a recovery because of representations made to the insurer alleged to be false, the insurer must prove that the representations are untrue, and were made by the assured knowingly with the fraudulent intent to mislead and deceive, that they were material to the risk, and were relied on by the defendant."

There can be no question that the court, in announcing this definitive principle, intended that it should apply to representations alone since in the paragraph immediately preceding, the distinction between representations and warranties is clearly drawn. It was there stated: "The chief distinction between a warranty and a representation in insurance law is that the former is the assertion by the assured of some fact, on the literal truth of which the validity of the policy depends, without regard to the materiality of such fact; while a representation is also the assertion by the assured of a fact, but the validity of the policy does not depend upon the literal truth of said assertion."

This rule then may not be applied unless and until it is ascertained that the answers claimed to have been made by plaintiff were representations and...