Pacific Mut. Life Ins. Co. of California v. Johnson

• Decision Date: 20 December 1934
• Docket Number: No. 7474.,7474.
• Citation: 74 F.2d 367
• Parties: PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. JOHNSON.
• Court: U.S. Court of Appeals — Fifth Circuit

74 F.2d 367 (1934)

PACIFIC MUT. LIFE INS. CO. OF CALIFORNIA v. JOHNSON.

No. 7474.

Circuit Court of Appeals, Fifth Circuit.

December 20, 1934.

Adair Rembert and George S. Wright, both of Dallas, Tex., for appellant.

M. B. Harrell, of Greenville, Tex., for appellee.

Before FOSTER, SIBLEY, and HUTCHESON, Circuit Judges.

HUTCHESON, Circuit Judge.

The suit was in equity to charge an insured as trustee of, and to recover back the indemnity appellant had paid on, a contract of accident insurance; also to cancel and annul the contract. The claim was that in his application for the policy and in that for settlement under it for the loss of an eye the insured had falsely and fraudulently represented that he had not had medical or surgical advice or treatment within seven years, and that his health, sight, and hearing were not impaired in any way, whereas he had had medical advice and treatment for his eyes and his sight was impaired.

The defendant denied that he had fraudulently and with intent to deceive made any statements that were false. He further pleaded that in fact and in law, and particularly under the statutes of Texas, the statements plaintiff relies on for recovery were not with regard to matters which were material to and affected the risk assumed, or contributed to the contingency or event on which the policy became due and payable. These are the facts.

Appellee, an active business man in the forties, who was not then wearing glasses, and who had had no trouble with his eyes except as the result of a sinus attack some years before, on April 5, 1933, applied for and obtained a "Pacific Mutual Life and Limb Accident Insurance Policy" providing, among other indemnities, $5,000 for the loss of an eye. In answer to the questions in the application, "Is your health, sight and hearing impaired in any way?" "Are you maimed or deformed, if so, give details?" he answered, "No," and to the question, "What medical or surgical advice or treatment have you had during the past seven years?" "None." On April 19 a ladder on which the insured was standing slipped out from under him, throwing him against a piece of projecting timber which entered and destroyed his right eye. In making a claim for it, defendant stated: "Prior to this accident I did not wear glasses, and I had never had any trouble with my eyes. I have never had any disease of any kind which affected my eyes in any way. However, since my accident I have been told that my left eye is none too strong. I had never noticed this."

Appellant, discovering after it had paid the claim that the insured had at one time had defective vision in, and had been treated for a frontal sinus condition affecting, his right eye, brought this suit to recover the payment back. At the trial, an eye specialist living in Buffalo, Mo., where Johnson had once resided testified to having prescribed glasses for one or two of Johnson's children, and that in 1926 Johnson had come to him complaining of pain over the eye from a frontal sinus condition. "At that time he had a lowered vision in his right eye, and I treated him for the sinus. I did not give him glasses at that time. He came to see me about February 6, 1929, complaining of this frontal sinus, and the vision in his right eye was down much lower than it was in 1926 so I made a thorough examination of his eyes and fitted glasses. At that time the vision for the right eye was 20/400, which means that he can only see at a distance of twenty feet the size letter he should really see at 400 feet. The normal eye reading should be 20-20. The vision of his right eye was 1/20. There was also an inflamed condition of the choroid and retina and there was some atrophy. I gave him glasses to relieve the strain on the good eye; the other eye was 20-30 plus, which would be considered good vision. I advised Mr. Johnson to keep his glasses on, and to come back. He has not been back since that time." On cross-examination he testified that an eye atrophied from a sinus condition never comes completely back, but that he could not say that the condition would not get considerably better. The doctor who removed the eye after the injury testified that he had not noticed any atrophy of the nerve, or anything seriously wrong with the eye at that time, except the traumatic condition for which it was removed. The assured denied the treatment in 1926. He admitted that he had been treated and fitted with glasses in 1929, but said that he had not found it necessary to wear the glasses and had not worn them. His wife and his associates testified to his having excellent sight; that he was a hunter who could shoot from either shoulder, a baseball player, and generally active in pursuits requiring good sight.

Appellant offered the testimony of officers of the insurance company that had they known of this condition they would not have written the policy. The District Judge thought the statements false, but held that they constituted no defense to the suit under the Texas statutes¹ as construed by the Texas courts, because not material to or affecting the risk assumed, since it plainly appeared that the facts falsely stated in no manner contributed to the contingency or event on which the policy became due and payable. Appellant, not at all disputing the correctness of this fact finding, as indeed it could not, insists that the District Judge misconstrued the Texas statutes as limiting the defense of false statements in the application to cases where they are shown to have been in regard to a matter which has contributed to the injury or event causing the policy to become a claim. It argues that the statutes recognize such statements as a defense also when they are material to and affect the risk assumed though they do not contribute to it. It says that speaking generally, "the risk may be said to be the perils or contingencies against which the assured is protected." Physicians' Defense Co. v. Cooper (C. C. A.) 199 F. 576, 579, 47 L. R. A. (N. S.) 290. That the risk assumed here was the perils or contingencies of the accidental loss by violent and external means of life, limb, or sight. That it stands established, by the testimony of its officers, that they considered the statements material to the risk, and, as a matter of common knowledge, that the existence in 1929 of the sinus condition and treatment for it, and the defective vision testified to, were material to the risk assumed.

Appellee replies that conceding appellant's construction of the statutes to be correct, that is, that false statements in the application are a defense to a policy if material to the risks assumed in writing it, though they did not contribute to the actual event, there is no showing made here that appellee's statements were falsely made, with intent to deceive or that they were material to the risk. He says that the question, "Is your health, sight or hearing impaired in any way?" must be taken as of the date of the inquiry, and as inquiring with regard to a real, a sensible interference with the insured's getting about as ordinary men...