Muhlbach v. Illinois Bankers Life Association

• Citation: 187 N.W. 787,108 Neb. 146
• Decision Date: 28 March 1922
• Docket Number: 21960
• Parties: FRED MUHLBACH, APPELLEE, v. ILLINOIS BANKERS LIFE ASSOCIATION, APPELLANT
• Court: Nebraska Supreme Court

187 N.W. 787

108 Neb. 146

FRED MUHLBACH, APPELLEE, v. ILLINOIS BANKERS LIFE ASSOCIATION, APPELLANT

No. 21960

Supreme Court of Nebraska

March 28, 1922

APPEAL from the district court for Douglas county: WILLIS G. SEARS JUDGE. Reversed.

REVERSED.

F. B Baylor and A. Moore Berry, for appellant.

Thomas Lynch, contra.

Heard before LETTON, DEAN and DAY, JJ., BLACKLEDGE and TEWELL District Judges.

OPINION

DAY, J.

Action to recover on a life insurance policy, brought by the beneficiary. Judgment for plaintiff. Defendant appeals.

On November 1, 1918, Nick Muhlbach, a young man not quite 21 years of age, made application to defendant company for a life insurance policy upon his life in the sum of $ 2,000, requesting therein that his father, the plaintiff, be named as beneficiary. The policy was issued November 19, 1918, and a few days later delivered to the insured. Early on the morning of January 21, 1919, the lifeless body of the insured, clad only in a union suit, was found lying at the base of a windmill about 200 yards distant from the house.

Two defenses were interposed: First, that the policy was obtained by fraud, in that the insured in answer to a question in his application stated that neither of his parents nor his sister had ever been afflicted with insanity, which answer was false and untrue, and known by the insured to be false and untrue at the time it was made; that the information sought to be elicited by the question was material to the risk, and that in issuing the policy the defendant company relied upon the answer given as being true. The second defense alleged that the insured came to his death by suicide, and under the terms of the policy under this contingency no liability existed. The circumstances leading up to his death were such that it was proper to leave to the determination of the jury the question whether he came to his death by suicide. The trial court submitted the issue of suicide to the jury in the form of a question to be answered yes or no, and reserved the issue of fraud for its own determination. The jury answered the question submitted to it in the negative. The court thereupon resolved the other issue against the defendant, and entered judgment on the verdict in favor of the plaintiff for the amount of the policy.

The principal contention of the defendant arises over the disposition of the issue of fraud. It is now urged that the court should have directed a verdict for the defendant upon the evidence in support of that issue, and, failing to do this, the court should have at least submitted that issue to the jury. The argument in support of the defendant's contention discusses the question from various angles, which will appear in the course of the opinion. The application signed by the insured contained a stipulation, in substance, that the answers made by him in the application, as well as in the medical examination, were warranted to be full, complete and true, and that any untrue answers as to his personal or family history would forfeit any policy which might be issued thereon. The untrue answer upon which the defendant relies to defeat the policy is found in the medical examination, the question and answer being as follows: "Q. Have you, either of your grandparents, parents, uncles, aunts, brothers or sisters, wife or children, been afflicted with consumption, insanity or mental derangement, scrofula, or any hereditary disease? A. No." The testimony of the examining physician shows that he read this question to the insured and wrote down the answer as given by him. That the information sought to be elicited by the question was material to the risk is shown by undisputed testimony. The officers of the defendant company testified that under no circumstances would the company issue a policy upon the life of a person where his family history shows that both parents have been afflicted with insanity. It was shown beyond doubt that the father, mother, and sister of the insured had been afflicted with insanity. Although it is suggested in the argument that the answer to the question was a warranty as distinguished from a representation, we do not understand the defendant to place much reliance upon that position. This court has on several occasions announced the rule to be applied in determining whether answers in an application for life insurance are warranties or representations. In Royal Neighbors of America v. Wallace, 64 Neb. 330, 89 N.W. 758, in referring to certain questions in the applications, the court said:

"Many of them are of such a character that no person, however honest his intentions, could answer them with any degree of assurance that each of his answers was literally true. To hold that such questions and answers amount to warranties would be to impute bad faith to the association in pretending to enter into a contract of insurance with the insured which could become binding upon it by the merest chance."

In determining whether an answer to a question in an application for life insurance is to be regarded as a warranty or a representation, the court will take into consideration the situation of the parties, the subject-matter, the language employed, and will construe a statement made as a warranty only when it clearly appears that such was the intention of the contracting parties. This court has had occasion to consider cases wherein the questions and answers were analogous to the one now before us, and has held that they were representations, and not warranties. AEtna Ins. Co. v. Simmons, 49 Neb. 811, 69 N.W. 125; Kettenbach v. Omaha Life Ass'n, 49 Neb. 842, 69 N.W. 135; Goff v. Supreme Lodge Royal Achates, 90 Neb. 578, 134 N.W. 239. Under the principle announced in the foregoing cases, we think it must be held, regardless of the stipulation signed by the insured, that the answer made by him was a representation.

The first argument advanced by the defendant in support of its position that the court should have directed a verdict in its favor is based upon the theory that where an untrue answer is made in an application for insurance relating to a matter material to the risk, and which is relied upon by the insurer in issuing the policy, such misrepresentation avoids the policy, regardless of the good or bad faith of the applicant in making the answer. A number of authorities are cited supporting this view from other jurisdictions, but this court has consistently held to a line of demarcation between classes of representations in applications for insurance. Where the question in the application 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 will avoid the policy. In Seal v. Farmers & Merchants Ins. Co., 59 Neb. 253, 80 N.W. 807, the application was for fire insurance, in which the insured falsely stated there were no liens upon the premises, and it was held the false statement...