Life Benefit v. Elfring

• Decision Date: 17 December 1942
• Docket Number: 8542.
• Parties: LIFE BENEFIT, Inc., v. ELFRING.
• Court: South Dakota Supreme Court

7 N.W.2d 133

69 S.D. 85

LIFE BENEFIT, Inc., v. ELFRING.

No. 8542.

Supreme Court of South Dakota

December 17, 1942

Max Royhl and George E. Longstaff, both of Huron for appellant.

Edward P. Gribbin, of Watertown, for respondent.

SMITH, Judge.

The assignments of error challenge the validity of a policy insuring the life of Vernoica Elfring on the grounds of breach of warranty and fraud. The trial court sustained the policy and entered judgment for the beneficiary thereof for the amount of the insurance.

The period within which the company could have contested the policy for breach of warranty, untainted by fraud, had elapsed prior to the death of the insured. The statutes which control the operations of the company, a mutual assessment life insurance corporation, among other things provide: "Every such corporation or association shall provide by its by-laws that every life policy or certificate issued by it shall be incontestable except for fraud, or nonpayment of dues or assessments, after it shall have been in force during the life time of the insured for two years from its date provided that the policy or certificate may provide for restrictions of liability by reason of travel, occupation, change of residence and suicide. These restrictions, except such as refer to military and naval service in time of war, must be applicable only to cases where the act of the insured provided against occurs within two years after the issuance of the policy." This language was in force at the time the policy was delivered as Section 4, Chapter 133, Laws of 1935 and with slight revision appears as SDC 31.1911. The bylaws of the company and the policy delivered were drafted in compliance with the quoted provision of statute. The policy was dated on April 20, 1938 and the insured died more than two years thereafter on May 3, 1941. The provision is valid 29 Am.Jur. § 881, and after the prescribed period has elapsed the validity of a legal policy cannot be disputed on any other than the excepted ground of fraud. 1 Appleman Insurance Law and Practice, § 331. A fraudulent warranty falls within the exception, and the right to contest the validity of the policy for such fraud continues after the statutory period has elapsed. See Combs v. Burbank Mutual Life & Benefit Ass'n., 140 Cal.App. 139, 35 P.2d 132.

The undisputed facts, which according to the company impel an inference of fraud, are these: The insured, a woman in the middle forties, was examined by physicians in 1937 resulting in the discovery of a lump in one of her breasts. The diagnosis was cancer. In November of 1937 the breast was removed and the diagnosis was confirmed by laboratory tests. The doctors testified that they did not communicate the diagnosis to her. No other testimony was offered tending to disprove her knowledge of the fact. Subsequent to the operation, according to the testimony of the beneficiary husband, she seemed in good health. In April following the November operation she made application in writing for the policy in issue. Her answers to specific questions were written down by a soliciting agent of the company. The completed application was signed by the insured and became a part of the policy. In a signed receipt for the policy she stated that the answers contained in the application were correct. The cause of her death, which as indicated occurred in May, 1941, was diagnosed as cancer of the liver. This diagnosis was not confirmed by laboratory tests. Medical testimony related the disorder of the liver to that of the breast. The questions and answers upon which the company predicates its contentions are as follows:

"10. Do you now have or have you had? Tuberculosis, Cancer, Fainting Spells, Dizziness, Mental Disorders, Diseases of Brain or Nervous System, Convulsions, Apoplexy, Paralysis, Epilepsy, Rheumatism, Neuritis, Brights Disease, Skin Disease, Diabetes, Pleurisy, Hay Fever, Asthma, Rectal Fistula, Goiter, Pneumonia, Tumor, Venereal disease, Heart Disease, Appendicitis, Ulcer of stomach or intestines, Liver trouble, Gall Stones, Hernia, Anemia, High blood pressure, Impairment of Sight or Hearing, Deformities, or any other serious illness or ailment? No."

"11. Have you ever consulted or been treated for any ailment not included in your above answers? No."

"12. Have you ever had a surgical operation? abscess lanced."

"15. Have you consulted a physician or practitioner or been in poor health during the past five years? Yes."

"20. If answer is YES to any of the above questions explain fully or attach explanation (Dates, Doctors, Causes, and Results) Nov. 26, 1936 Dr. Bartron operation successful very good"

Actual fraud, which renders a contract voidable, SDC 10.0302 is defined by our statutes, SDC 10.0307, as "any of the following acts committed by a party to the contract, or with his connivance, with intent to deceive another party thereto or to induce him to enter into the contract:

"(1) The suggestion as a fact of that which is not true by one who does not believe it to be true;

"(2) The positive assertion, in a manner not warranted by the information of the person making it, of that which is not true, though he believe it to be true;

"(3) The suppression of that which is true by one having knowledge or belief of the fact;

"(4) A promise made without any intention of performing it; or

"(5) Any other act fitted to deceive."

If it be established that the consent of one party to a contract would not have been given except for the fraud of the other party, the resulting contract may be avoided. SDC 10.0303, 10.0304, 31.0506, 31.0508, 31.0512, 31.0517, and 31.0518. Obviously, because the period of unlimited contestability had elapsed, we are not now concerned with the effect of innocent or unintentional concealments or misrepresentation. Our search is for conscious fault.

As we proceed with an analysis of the exhibited conduct of the insured certain matters may be put to one side as either requiring no discussion or because we do not elect to rest our ultimate conclusion thereon. It is self-evident that the insured understood the purpose of the questions propounded and that she intended by her answers to induce the company to enter into a contract of insurance. Her signed application states: "I hereby apply for a Life Benefit, Inc., life insurance policy, to be based upon the statement of facts contained herein which are true and correct, full and complete, and are material and made by me, in behalf of myself and my beneficiary, to obtain the policy applied for; said statement of facts made herein are warranties for all purpose." It is also established beyond question that the company would not have consented to the contract if it had known the fact. Cf. SDC 31.0508. These points need not be labored. Even though the probability is great that at the time the questions were answered the...