Illinois Bankers' Life Association v. Theodore

• Decision Date: 14 July 1934
• Docket Number: Civil 3370
• Citation: 34 P.2d 423,44 Ariz. 160
• Parties: ILLINOIS BANKERS' LIFE ASSOCIATION, a Corporation, Appellant, v. ANNA THEODORE, Executrix of the Last Will and Testament of the Estate of HARRY B. LAGOS, Deceased, Appellee
• Court: Arizona Supreme Court

34 P.2d 423

44 Ariz. 160

ILLINOIS BANKERS' LIFE ASSOCIATION, a Corporation, Appellant, v. ANNA THEODORE, Executrix of the Last Will and Testament of the Estate of HARRY B. LAGOS, Deceased, Appellee

Civil No. 3370

Supreme Court of Arizona

July 14, 1934

APPEAL from a judgment of the Superior Court of the County of Maricopa. Joseph S. Jenckes, Judge. Judgment reversed and case remanded for new trial.

Messrs Armstrong, Kramer, Morrison & Roche, for Appellant.

Mr. V L. Hash, for Appellee.

OPINION

LOCKWOOD, J.

This is an action by Anna Theodore, hereinafter called plaintiff as executrix of the last will and testament of Harry B. Lagos, hereinafter called deceased, against Illinois Bankers' Life Association, a corporation, hereinafter called defendant, for the recovery of $2,500 on account of a certain life insurance policy written by defendant, as insurer, upon the life of deceased. Defendant pleaded in abatement of the action that the plaintiff in her individual capacity was a necessary party by reason of a certain assignment made to her by the deceased in his lifetime and delivered to and accepted by the defendant, and defended on the merits on the ground that the policy never took effect because it was not delivered to deceased while he was in good health, and that its issuance and delivery were procured by false and untrue material statements and representations made by deceased to the medical examiner of defendant. The case was tried to a jury, which rendered a verdict in favor of plaintiff for the full amount of the policy, and from such judgment this appeal was taken.

The undisputed facts in the case are as follows: Deceased, on the 13th day of November, 1929, made a written application to defendant for the issuance of the policy in question. This application contained, among other things, the following provisions:

"I hereby agree that the answers hereon (Part I) and all those I make to the Medical Examiner of the Association (Part II) in continuance of this Application are full, complete and true, and shall be the basis of, and a part of the consideration for, the policy for which application is hereby made.

"I agree that the insurance herein applied for shall not take effect until the first premium is actually paid and the policy is issued and delivered to me during my good health. I agree to submit to an examination by the Association's regular appointed medical examiner at his earliest convenience."

In part II of the application appear the following questions and answers:

"13. Are you now in good health and free from disease or injury? Yes."

"20. Have you ever changed your place of residence for the purpose of benefiting your health? If so, state particulars. No."

"28.Have you ever had any diseases of the following named organs, or any of the following named diseases or symptoms? (Do not use ditto marks) Appendicitis, no; Abscess, no; Apoplexy, no; Asthma, no; Bronchitis, no; Cancer, or other tumors, no; Chronic diarrhea, no; Consumption, no; Delirium tremens, no; Difficult, excessive or scanty urination, no; Discharge from Ear, no; Disease of Bladder, no; Dizziness or vertigo, no; Dropsy, no; Indigestion, no; Enlarged veins, no; Fits, no; Gall stones, no; General debility, no; Habitual headaches, no; Heart disease, no; Jaundice, no; Kidney disease, no; La Grippe, no; Affection of liver, no; Neuralgia, no; Paralysis, no; Piles or fistula, no; Pleurisy, no; Pneumonia, no; Rheumatism, no; Spitting blood or other hemorrhage, no; Stricture, no; Skin, no; Sunstroke, no; Syphilis, no; Swelling of limbs, or face, no;, Urinary organs, no; or any other disease or injury, no." (Italics ours.)

After these questions and answers appeared the following:

"I represent on behalf of myself and of any person who shall have or claim any interest in any policy issued hereunder, each of the above answers to be full, complete and true, and that I am temperate, and to the best of my knowledge and belief in sound physical condition and a proper subject for life insurance."

And the application was signed by deceased and the policy issued thereon in the due course of business, as of November 19, 1929. Thereafter, and on May 8, 1930, deceased, by a written instrument, assigned his interest in the policy to Anna Theodore, being the same Anna Theodore who is plaintiff in the present case as executrix, and this assignment was sent by her to defendant and by it accepted.

On May 22, 1931, deceased died of pulmonary tuberculosis, the contributing cause being given in the death certificate as abscess of the lungs.

On June 1st Theodore made claim to the proceeds of the policy in a proof of death, stating that the capacity in which she made the claim was both by assignment and by the last will of the deceased, under the terms of which she was the sole legatee of deceased. There are other matters which are disputed, and we shall refer to them from time to time as seems necessary in the course of this opinion.

The plea in abatement was presented to the court on the theory of defendant that, since the policy had been formally assigned to Theodore as an individual, and she was a married woman at the time, by such assignment its proceeds became community personal property of herself and husband, and that she therefore could not dispose of it. It was urged by defendant that since only the husband under our statutes can dispose of community personalty, a recovery by plaintiff in her capacity as administratrix and legatee would not bar a second recovery by her husband on the same policy.

The evidence is in conflict in regard to whether or not the assignment was actually in force or not at the time deceased died; but since the case must be reversed on other grounds, we content ourselves by saying that if defendant requests it the trial court will doubtless order both Anna Theodore in her individual capacity and her husband to be made parties to the action, so that under no circumstances could defendant be required to pay more than one judgment.

We consider next the legal propositions raised through defendant's assignments of error on the merits of the case, in their logical and not numerical order. Proposition No. 4, as stated by defendant, reads as follows:

"In order for untrue statements in an application for life insurance and to the medical examiner to constitute a good defense to an action on the policy issued pursuant thereto, it need not be proved that they were in bad faith, or with intent to deceive, or were wilful, or fraudulent, but only that they were material."

Defendant claims that deceased's answers to the italicized portions of 13, 20 and 28 were false, and it is argued by it under this proposition that the only important difference between a warranty and a representation in an application for life insurance is that a warranty false in fact makes the policy voidable at the option of the insurer, regardless of whether or not the fact warranted was a material inducement for the issuance of the policy, while a representation false in fact makes it voidable in case the facts represented were a material inducement to the insurer to issue the policy. It is plaintiff's contention, on the other hand, that in order that a false representation, as distinct from a warranty, should make a policy voidable, it must have been made willfully, fraudulently and in bad faith and with the intent to deceive the insurer, and that even gross negligence on the part of the insured in the making of a representation will not have such effect, unless it was made with intent to deceive.

Similar questions have been before the courts repeatedly, and the decisions represent practically every point of view from that taken by defendant to its antithesis insisted upon by plaintiff. We could find support in some jurisdictions for almost any position we might think proper, and the issue has never been specifically determined in Arizona. We are therefore at liberty to consider the logic and reasons supporting the various points of view, and to adopt that which seems most calculated under modern conditions to do justice to both parties. After a careful investigation and comparison of all of the cases cited both by plaintiff and defendant, and considerable independent investigation of our own, we think the better rule and the reasons thereof are well laid down in the cases of Moulor v. American Life Ins. Co., 111 U.S. 335, 4 S.Ct. 466, 470, 28 L.Ed. 447, and Schwarzbach v. Ohio Valley Protective Union, 25 W.Va. 622, 52 Am. Rep. 227. The reasoning in both cases is so cogent and convincing that we feel we cannot improve thereon, and therefore quote from the Moulor case as follows:

"But it is contended that if the answers of the assured are to be deemed representations only, the policy was, nevertheless forfeited, if those representations were untrue in respect of any matters material to the risk. the argument is that if the insured was, at the time of his application, or had been at any former period of his life, seriously or in an appreciable sense, afflicted with scrofula, asthma, or consumption, his answer, without qualification, that he had never been so afflicted, being untrue, avoided the policy, without reference to any knowledge or belief he had upon the subject. The soundness of this proposition could not be disputed if, as assumed, the knowledge or good faith of the insured, as to the existence of such diseases, was, under the terms of the contract in suit, of no consequence whatever in determining the liability of the company. But is that assumption authorized by a proper interpretation of the two instruments constituting the contract? We think not.

"Looking into the application, upon the faith of which the policy was issued and...