March v. Metropolitan Life Insurance Co.

• Decision Date: 21 July 1898
• Docket Number: 19
• Parties: William H. March v. The Metropolitan Life Insurance Company, Appellant
• Court: Pennsylvania Supreme Court

40 A. 1100

186 Pa. 629

William H. March v. The Metropolitan Life Insurance Company, Appellant

No. 19

Supreme Court of Pennsylvania

July 21, 1898

Argued February 11, 1898

Appeal, No. 19, Jan. T., 1898, by defendant, from judgment of C.P. Delaware Co., Dec. T., 1897, No. 47, on verdict for plaintiff. Reversed.

Assumpsit on a policy of life insurance. Before CLAYTON, P.J.

The facts appear by the opinion of the Supreme Court.

The court charged as follows:

This is an action on a policy of insurance upon the life of the wife of the plaintiff. [It is sufficiently proved that she is dead, and, if there has been no false representations made which are material to the risk, the plaintiff is entitled to recover.] There is a distinction between a mere representation, made for the purpose of securing a policy and a warranty. A representation in the law of insurance is an incidental statement made by the insured with regard to some feature of the risk upon the faith of which the contract is entered into. It is no part of the contract, and need not be literally, though it must be substantially true. It differs from a warranty in that to avoid the policy in case of its falsity it must be a fact material to the risk and must be either wilfully false or grossly negligent in character. If there is a misstatement made, if there is a representation made that is really untrue, yet, if it was made in good faith it does not void the policy, although it may be material to the risk, unless the representation is so grossly negligent that the jury, or, under the evidence, the court would hold that the insured ought to have known the truth of his statement. Now, as I understand this policy by its terms, it makes all the representations warranties. The policy states that it is agreed, that it is hereby declared agreed to be a warranty, or by the undersigned that the answers and statements contained in the foregoing application, and those made to the medical examiner as regard any of the parts A and B of this sheet, together with this declaration, shall be the basis, and taken to be a part of the contract of insurance with the Metropolitan Life Insurance Company, and that they are full and true, and are accordingly regarded, and that no information or statement not contained in this application received or acquired at any time by another person shall be binding upon the company or shall modify or alter the declaration and warranties made in this application. That is what is called a warranty. . . .

If it is a warranty it makes no difference whether it is true or false, it is warranted to be true and, although the party making it believes it to be true, if it is false, it makes no difference, the warranty avoids the policy if it is false whether material or not. Now the effect of that law was so unjust that our legislature changed it, and they have materially altered the common law as to the effect of a warranty in a policy of insurance. By the Act of Assembly of June 23, 1885, P.L. 134, it is declared "whenever an application for policy of life insurance contains a clause of warranty of the truth of the answers therein contained, no misrepresentation or untrue statement in such applications made in good faith by the applicant, shall effect a forfeiture or be a ground of defense in any suit brought upon any policy of insurance issued upon the faith of such application, unless such misrepresentation or untrue statement relate to some matter material to the risk." Without that act of assembly they would have worked a forfeiture whether they were known to be true or not true. By this act of assembly these warranties will not avoid the policy unless the false statement or misrepresentation, if made in good faith, is material to the risk; and that is the only difference between the common-law warranty in a policy of insurance and the warranty as it is now and as it exists under our act of assembly. I therefore charge you, gentlemen of the jury, that every question contained in this application and answered by the insured, if the answer was made in good faith, whether it was true or not, will not work a forfeiture of this policy of insurance unless the statement is made upon some subject which is material to the risk, and if it is, then it will have the effect of avoiding the policy. [This policy also declares that no suit shall be brought in any court except in the courts of New York. I charge you, gentlemen, that this being a foreign insurance company, it has no right to do any business in the state of Pennsylvania, under a heavy penalty, without first complying with an act of assembly which requires it not only to designate a person who shall be authorized to receive the service of process for it, but it is also required to file an agreement that process may be served anywhere in this state upon that agent, and that that is a waiver upon the part of the company of its right to insist upon this suit being brought in New York.]

[Now having brushed away those technicalities, we will come down to the real issue in the case, and there is but one real issue contained in it; that is, if any false representation or warranty has been made, were they material to the risk? That is the question, as I understand it, although I announce this with some doubt, because my first impression was that the materiality, where the facts are undisputed, would be for the court, but as I understand the decision of the Supreme Court, as read by the counsel in the case, the question of materiality is for the jury. Of course you will not find against the evidence, if that is all one way, and where you are satisfied from the evidence that the fact stated was material, that is to say, that if that representation had not been made this policy would not have been issued; if you find there were false representations made and they were material to the risk, then under the act of assembly I am bound to charge you that whether the insured knew it or not, if they were material, they are warranties and she is bound by them and if they are false and material there can be no recovery. The great question, therefore, for the jury to consider is the materiality of these statements.] [Now, it is held by the counsel for the defendant, that the first material question asked the insured, and which was answered in a negative was "Are you insured in any other company?" And the representation, as it is written in answer to that question is, "no." The defendant alleges that that was a material misrepresentation, and it will be for you to say whether it was, and you will decide whether it was, under all the surrounding circumstances. It might be material in one sense and it might be immaterial in another. If the company, when they asked that question, received the answer, "yes," it might have induced them, if the insurance was not completed, to believe that the person had already been examined, and then it was a good risk. Now they want the information for some reason, and if the answer had been "yes" instead of "no," it may be that it would have been favorable to the insured, that is to say, they might reasonably suppose if the applicant had passed an examination in some other company that it could not hurt them. If some other company had to pay the premium, and if the other had passed her, then we may. But that is only one view of it. Another view of it might be that if she had said "no," they might then say, "well, we must be more particular in regard to this applicant and we must make a closer examination." I say that may be. It may be that if she said "yes," and gave the name of the company, though I believe, that in giving the answer to that question the name of the company is not required, they might go to the company and make some inquiries relative to it, or if that was answered "yes" it might be followed before they issued the policy by the inquiry "what other company did you insure in, how much was the policy, and are you over insured." So, under the surrounding circumstances of the case it will be for you to say whether it is material to the risk, that is to say, whether that answer had anything to do with inducing these people to give her a policy of insurance. So much for that. I will leave that, therefore, to you to say whether that was a material representation, because there is a great number of questions which are asked here, and I suppose they take it for granted that they were all material, but it will be for the jury to say whether they are or not, under all the circumstances of the case.] Now as to the second question, which was, "Are you now insured?" Then comes the question, "If so, in what company or association?" And then, "For what amount?" "How much has been granted during the past year; enumerate each, and if insured in this company state the policy and number?" Now then the answer to that is "None." It seems, however, that she had an insurance in two other companies, but the allegation is that they were not valid because they were not made by her, and that she did not know they were made. It appears that they were made by her husband, and the allegation is that in this insurance no medical examination was required; on the other hand, it is alleged that a medical examination was required in one. You have the evidence, and the whole thing will be for you, for if she was over-insured, that might be a reason to decline to insure her, because, if there was an over-insurance, there would be an interest for the beneficiary in terminating the life of the insured, and it makes the risk greater if there is an enormous insurance; it might indicate that there was danger that the insured might be permitted to die for the purpose of the beneficiary securing the policy, and insurance...