New York Life Ins. Co. v. Chapman

• Decision Date: 04 March 1943
• Docket Number: No. 12413.,12413.
• Citation: 132 F.2d 688
• Parties: NEW YORK LIFE INS. CO. v. CHAPMAN.
• Court: U.S. Court of Appeals — Eighth Circuit

132 F.2d 688 (1943)

NEW YORK LIFE INS. CO. v. CHAPMAN.

No. 12413.

Circuit Court of Appeals, Eighth Circuit.

January 14, 1943.

Rehearing Denied March 4, 1943.

Orville Richardson, of St. Louis, Mo. (James C. Jones, Jr., and Jones, Hocker, Gladney & Grand, all of St. Louis, Mo., and F. H. Pease, of New York City, on the brief), for appellant.

Robert A. Roessel, of St. Louis, Mo. (Raymond M. Freed, of St. Louis, Mo., on the brief), for appellee.

Before GARDNER, WOODROUGH, and THOMAS, Circuit Judges.

THOMAS, Circuit Judge.

This is a civil suit brought by the New York Life Insurance Company to cancel a policy of life insurance on the life of Abel W. Chapman. Cancellation was demanded on the ground that the policy did "not go into force" under the terms of the contract because the insured had consulted and been treated by a physician between the time of the medical examination and the delivery of the policy. The defendant, Mae G. Chapman, is the beneficiary named in the policy. The insured having died before the commencement of the suit, she set up in her answer a counterclaim at law on the policy. The case was tried to a jury. At the close of the evidence, pursuant to a stipulation of the parties, the jury was discharged and both causes of action were submitted to and determined by the court. After filing findings of fact and conclusions of law an order was entered dismissing plaintiff's petition and rendering judgment for the defendant upon her counterclaim. The plaintiff appeals.

The essential facts are not in dispute. Chapman, the insured, was a traveling salesman residing at Belleville, Illinois, with his wife, the defendant-beneficiary. On February 17, 1940, he called upon William J. Cusick at the office of the New York Life Insurance Company in St. Louis, Missouri. While there Chapman signed an application for a policy of life insurance in the amount of $10,000, and was examined by a physician. In response to a question in the application Chapman answered that he had suffered a severe attack of indigestion in May, 1939, which had not recurred, and that he had been treated by Dr. W. H. Walton of Belleville, Illinois. The insurance company made inquiry of Dr. Walton and was informed that the insured had recovered from the attack.

Prior to the delivery of the policy Chapman became ill and about March 12, 1940, called upon Dr. Walton, his physician at Belleville, by whom he was directed to submit to an X-ray examination of his stomach and related organs. The examination required Chapman's presence at a hospital for the entire day of March 16, 1940. He was not advised of the nature of his ailment on that day, but was told to return for a further checkup on March 18th.

During the week of March 12, 1940, Cusick, the agent, telephoned to the Chapman residence and reported that he had the policy and desired to call for the purpose of delivering it. Mrs. Chapman informed him over the telephone that Mr. Chapman had been ill and suggested that the call be postponed. Cusick called at the insured's residence in Belleville, Illinois, on March 17, 1940, to deliver the policy. He was again informed that Chapman had been treated by Dr. Walton during the week; that he was to return for a further checkup on the next day; and that he hoped to return to his work on the 19th.

When Cusick called on March 17, 1940, he handed the policy to Chapman, who examined it and found it acceptable, except that by its terms the premium was payable annually. He therefore requested permission to pay the premium monthly. Cusick advised him that this could be done and informed him of the amount of monthly premium payments. Chapman gave Cusick a check for one monthly payment in the amount of $34.70, and Cusick gave Chapman a receipt for the policy in order that it might be returned to the company to be changed to provide for monthly payments of the premium and to be made effective as of March 17, 1940. The testimony on all these matters is undisputed. Cusick was was not called as a witness.

The receipt which Cusick gave Chapman on March 17, 1940, for the policy reads:

"March 17, 1940

"Received of A. W. Chapman policy #17558729 in order to change to monthly rate basis and redate policy as of today

"Wm. J. Cusick Agent "New York Life Ins. Co."

The insurance company made these changes on March 20, 1940, and returned the policy by mail to the insured at Belleville, Illinois, where Chapman received it March 22 or 23, 1940. The identical material policy was not returned, but instead one bearing the same number and of the same character, except for the changes. Meanwhile when, pursuant to instructions, Chapman saw Dr. Walton on Monday, March 18, 1940, for a final checkup, the doctor informed him that he was afflicted with a duodenal ulcer and that he should follow a prescribed diet. He returned to work the following day. Thereafter he paid all the monthly premiums on the policy, except the last, and death occurred within the grace period at Springfield, Missouri, on August 9, 1940.

A copy of the application signed by the insured at St. Louis on February 17, 1940, was attached to the policy. The policy provided that the policy itself and the application should together constitute the contract. Among other things, the application stated:

"It is mutually agreed as follows: 1. That the insurance hereby applied for shall not go into force unless and until the policy is delivered to and received by the applicant and the first premium thereon paid in full during his lifetime, and then only if the applicant has not consulted or been treated by any physician or practitioner since his medical examination, * * *. 2. That the soliciting agent is not authorized to collect any premium for the insurance hereby applied for except the first premium thereon, * * *. 3. That only the President, a Vice-President, a Secretary or the Treasurer of the Company can make, modify or discharge contracts, or waive any of the Company's rights or requirements; that notice to or knowledge of the soliciting agent or the Medical Examiner is not notice to or knowledge of the Company, and that neither of them is authorized to accept risks or to pass upon insurability."

The insurance company contended in the district court, and renews the contention here, that (1) the policy is a New York contract and that the rights of the parties are controlled by the laws of that state; and (2) that the condition precedent in the application providing that the policy shall not go into force if the applicant had consulted a physician after the medical examination is valid and enforceable.

The lower court held that the policy is an Illinois contract and that the insured having informed Cusick, the agent, when the policy was delivered on March 17, 1940, that he had consulted a physician during the preceding week, the insurance company is charged with the knowledge of its agent and is estopped to assert that the policy did not become effective.

There is no question of actual fraud or bad faith on the part of the insured. He did not die of the stomach trouble concerning which he consulted a doctor, but of a heart stroke apparently unrelated to the ailment which he thought he had or to a duodenal ulcer. He fully disclosed to the company in his application information regarding the first attack of stomach trouble from which he had suffered, and the company investigated the matter; and he fully informed the agent Cusick, the only representative of the company with whom he came in contact, of the fact that he had consulted and been treated by his physician after the application was signed.

The first question for determination is whether the policy is a New York or an Illinois contract. It was conceded on oral argument that if the policy is a New York contract the beneficiary cannot, for the reasons assigned by the plaintiff, recover under the law of that state.

In the federal courts in diversity of citizenship cases the conflict of laws rules of the courts of the state in which the federal court sits control. Griffin v. McCoach, 313 U.S. 498, 503, 61 S.Ct. 1023, 85 L.Ed. 1481, 134 A.L.R. 1462; Order of United Commercial Travelers v. Meinsen, 8 Cir., 131 F.2d 176, 179. The Missouri courts hold, and the parties concede, that a contract of insurance is made in the state where the last act is done which is necessary to complete the contract and bind the insured and the insurer. Yeats v. Dodson, 345 Mo. 196, 127 S.W.2d 652, 656, 138 S.W.2d 1020; Cravens v. New York Life Ins. Co., 148 Mo. 583, 50 S.W. 519, 53 L.R.A. 305, 71 Am.St.Rep. 628; Hamilton v. Darley, 266 Ill. 542, 107 N.E. 798, 799.

The court held that the policy was delivered in Illinois on March 17, 1940, and became a binding contract, and was "then receipted for by the delivering agent for the purpose of forwarding it to the home office for the purpose of having changes made in the terms of the written contract, which were optional provisions in accord with the application...