Mutual Life Ins. Co. of New York v. Mullen
| Citation | 69 A. 385,107 Md. 457 |
| Parties | MUTUAL LIFE INS. CO. OF NEW YORK v. MULLEN et al. |
| Decision Date | 31 March 1908 |
| Court | Maryland Court of Appeals |
Appeal from Circuit Court, Allegany County; M. L. Keedy, Judge.
Action by Thomas M. Mullen and another as executors of Catherine T Mullen against the Mutual Life Insurance Company of New York. From a judgment for plaintiffs, defendant appeals. Reversed without new trial.
I. R Dickey and Randolph Barton, Jr., for appellant.
Benjamin A. Richmond, for appellees.
This case was submitted to the jury in the court below upon certain granted prayers which are set out in the record, and a verdict for $1,050 returned for the plaintiffs, upon which judgment was entered. The insurance company brings this appeal, alleging, as its chief contention, error on the part of the lower court in granting the first and second prayers of the plaintiffs, and in refusing to grant certain prayers offered on behalf of the defendant company.
Several important questions concerning the law of life insurance are involved in the appeal which we will now proceed to consider. Before the act of 1894, p. 1059, c. 662, it was always a matter of great importance in considering a case like this to determine at the outset whether the answers and statements of the applicant as contained in his application for insurance were warranties or mere representations. If the former, the policy was avoided, unless such statements and answers were literally true, whether they related to matters material to the risk or not. Monahan v. Ins. Co., 103 Md. 156, 63 A. 211, 5 L. R. A. (N. S.) 759; Md. Casualty Co. v. Gehrmann; 96 Md. 648, 54 A. 678; Bankers' Life Ins. Co. v. Miller, 100 Md. 1, 59 A. 116. If the latter, the policy was not avoided, unless the answers and statements were false in relation to some matters material to the risk. Bankers' Life Ins. Co. v. Miller, supra. By the aid of warranties, and the innocent mistakes of the insured, it often happened that the insurer was able to escape liability on a ground of the purest technicality. For the purpose of relaxing the harsh rule of the common law which required warranties to be literally true without regard to their materiality to the risk, the act of 1894, p. 1059, c. 662, was passed. That act, which is a literal copy of the Pennsylvania statute, and similar to the statutes of some other states on the same subject, is as follows: "Whenever the application for a policy of life insurance contains a clause of warranty of the truth of the answers therein contained, no misrepresentation or untrue statement in such application 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." Code Pub. Gen. Laws, 1904, art. 23, § 196. In construing the Pennsylvania statute which as we have said is identical with our own, the Supreme Court of that state says: March v. Life Ins. Co., 186 Pa. 641, 40 A. 110, 65 Am. St. Rep. 887. In other words, the statute was passed to prevent the defeat of the ends of justice by mere technicality. It is remedial in character, and should be given such liberal and reasonable interpretation as will insure judicial investigation in the ordinary way of the question whether any particular statement in the application was untrue, and, if untrue, whether it was material to the risk. If the statement is found to be untrue and material, the penalty of the forfeiture of the policy will usually follow as of course, whether the answer be made in good faith or in bad faith. Penn Mutual v. Savs. Bank, 72 F. 413, 19 C. C.
A. 286, 73 F. 653, 19 C. C. A. 316, 38 L. R. A. 56.
As the application in this case contains a clause of warranty of the truth of the answers therein contained, and as the application is referred to in, and made a part of, the policy, the statute by its very terms is applicable, unless other circumstances render it inapplicable. And the appellant contends that this act is not applicable to the case at bar for two reasons: First. Because the contract of insurance expressly provides that it shall be subject to the charter of the company, and of the laws of the state of New York, and, as there is no evidence of a similar statute to our own in force in that state, this court will presume that the common law prevails there, and that consequently this contract must be construed according to the rules of the common law. Citing Ficklin's Case, 74 Md. 172, 21 A. 680, 23 A. 197. Second. Because as the defendant company is a mutual one, as is alleged, the contract of insurance must be construed in accordance with the laws of the state where the company was created, and agreeably to its charter, in order to preserve the scheme of mutuality as was done in Brashears' Case, 89 Md. 624, 43 A. 866, 73 Am. St. Rep. 244.
In answer to the first reason assigned, we refer to the case of Keatley v. Travelers' Ins. Co., 187 Pa. 197, 40 A. 808, where it was attempted to evade the provisions of the Pennsylvania act by reciting in the policy that it should be construed by the laws of Connecticut. The court in that case held that such an agreement was against public policy, and that the contract must be governed by the laws of Pennsylvania, where the contract was made. A similar rule was adopted in Massachusetts in the case of Dolan v. Mutual Reserve, 173 Mass. 197, 53 N.E. 398, the court saying: The same rule was applied in the Fidelity Mutual Life Ass'n v. Jeffords, 107 F. 402, 46 C. C. A. 377, 53 L. R. A. 193, and in Fletcher v. New York Life Ins. Co. (C. C.) 13 F. 526. In a suit in the United States Circuit Court, Sixth Circuit, on a policy of insurance issued by a Pennsylvania corporation to a person in Maryland, full effect is given to the Maryland statute. Fidelity Mutual Life Ass'n v. Miller, 92 F. 63, 34 C. C. A. 211. See, also, Equitable Ins. Co. v. Pettus, 140 U.S. 226, 11 S.Ct. 822, 35 L.Ed. 497. We think, therefore, that while it is perfectly true that, in the absence of proof to the contrary, the common law is presumed to be in full force, and to be the same as the common law of the forum, in all those states which were originally colonies of England (8 Cyc. 387, B); and although in Ficklin's Case, supra, this court gave the benefit of the remedial statute of Pennsylvania, before its adoption by the Legislature of this state, to one of our citizens suing in the courts of this state upon a contract made here by a Pennsylvania corporation, yet we deem it against public policy to permit a contract of insurance made here since the passage of the act of 1894 with a citizen of this state, to be governed by the harsh rules of the common law which, by legal presumption merely, is supposed to obtain in the state of New York by whose laws it is sought to have this contract construed. When a corporation undertakes to do business beyond the territorial limits of the state creating it, it does so merely by comity, and the state which it enters for the purpose of transacting business therein has the power to require such corporation to carry on its business there subject to its statutes, and this court will not allow the parties to such contracts as this, by any stipulations contained therein to contravene the salutary provisions of this statute intended for the protection of our own citizens against common-law warranties. New York Life v. Cravens, 178 U.S. 389, 20 S.Ct. 962, 44 L.Ed. 1116.
In answer to the second reason assigned, we have only to say that in the Brashears' Case, supra, the insurer was the Royal Arcanum, a purely mutual benefit association, which is not controlled in this respect by the ordinary rules of life insurance (Penn Mutual v. Savings Bank, 72 F. 413, 19 C. C. A. 286, 73 F. 653, 19 C. C. A. 316, 38 L. R. A. 58); and, besides, in this case we have no knowledge that the appellant is in fact a mutual company, except the inference to be drawn from the single word "Mutual" contained in its corporate name. We think it is perfectly clear, therefore, that as the first premium on the policy was paid in this state by a citizen of this state, and the policy delivered here, that it is a Maryland contract, and to be governed by Maryland laws.
The act of 1894, p. 1059, c. 662, being applicable to this case, as we think it clearly is, the burden of proving the untruth of the insured's statements and answers in his application and also, if untrue, that they relate to some matters material to the risk, or that they were not made in good faith, was upon the defendant, if it relied upon fraud or misrepresentation on the part of the insured as a defense to the action. Brashears' Case, 89 Md. 633, 43 A. 866; 73 Am. St. Rep. 244; May on Ins. § 183. Ordinarily the question of the truth of the answers vel non, as well as the question of their materiality and good faith, is to be submitted to the jury with proper instructions (25 Cyc. 950; Levie v. Metropolitan Co., 163 Mass. 118, 39 N.E. 792); but as the evidence in such cases is adduced as matter in avoidance of the inception of the contract, whenever any one of these facts is established by clear and uncontradicted evidence,...
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