Prahm v. Prudential Ins. Co. of Am.

• Decision Date: 06 March 1922
• Docket Number: No. 84.,84.
• Parties: PRAHM v. PRUDENTIAL INS. CO. OF AMERICA.
• Court: New Jersey Supreme Court

116 A. 798

PRAHM

v. PRUDENTIAL INS. CO. OF AMERICA.

No. 84.

Court of Errors and Appeals of New Jersey.

March 6, 1922.

(Syllabus by the Court.)

Appeal from Circuit Court, Hudson County.

Action by Maria Prahm against the Prudential Insurance Company of America. Judgment for the defendant, and the plaintiff appeals. Reversed, and venire de novo awarded.

Lewis B. Eastmead, of West Hoboken, for appellant.

Randolph Perkins, of Jersey City (John F. Drewen, Jr., of Jersey City, on the brief), for respondent.

TRENCHARD, J. This is an appeal from a judgment entered upon a verdict directed for the defendant below.

The plaintiff is the mother and beneficiary of Otto Prahm, whose life the defendant company insured for $1,000 on June 18, 1920, and accepted the first annual premium.

The policy says that it was issued in consideration of the attached application, "which is hereby made a part of this contract," and further provides that "all statements * * * made by the insured shall, in the absence of fraud, be deemed representations and not warranties," as required by our Insurance Law (P. L. 1907, p. 133, § 1 [4]).

The insured died September 15, 1920, aged 19 years and 11 months, and the defendant company refused to pay the plaintiff, the beneficiary, because it maintained that certain representations in the application were false and fraudulent, and it was upon that ground that the verdict for the defendant was directed.

The plaintiff, in this her appeal, first contends that the defendant's answer, setting up that certain representations made by the insured in his application were false and fraudulent, should have been stricken out because it disclosed no defense to the action in view of the fact that the insured was an infant which was known by the company.

But we think that contention is unsound in law. True, it finds support in the case of O'Rourke v. John Hancock Mut. Life Ins. Co., 23 R. I. 457, 50 Atl. 834, 57 L. R. A. 496, 91 Am. St. Rep. 643; but the rule of that case was disapproved in Metropolitan Life Ins. Co. v. Brubaker, 78 Kan. 146, 96 Pac. 62, 18 L. R. A. (N. S.) 362, 130 Am. St. Rep. 356, 16 Ann. Cas. 267, and certainly is not the law of this state.

The rule of law of this state is that where, as in the instant case, a policy of insurance is taken out by a minor above the age of 15 years, on his own life and for his benefit or the benefit of his mother, and he dies before reaching majority, a false and fraudulent representation made by the insured in the application upon which the policy is based, respecting a matter of fact material to the risk, constitutes a defense to an action upon the policy begun by the beneficiary named therein.

Our Insurance Law (P. L. 1907, p. 138, § 11; C. S. p. 2872, § 104) provides that—

"In respect of insurance heretofore or hereafter issued upon the life of any person not of the full age of twenty-one years, but of the age of fifteen years or upwards, for the benefit of such minor, or for the benefit of the father, mother, husband, wife, child, brother or sister of such minor, the assured shall not, by reason only of such minority, be deemed incompetent to contract for such insurance, or for the surrender of such insurance, or to give a valid discharge for any benefit accruing, or for money payable under the contract."

That statute puts infants over 15 years of age substantially on an adult basis in respect of life insurance of the character in question. That the Legislature so intended is apparent from the provisions of the statute. It removes the incompetency of minors in respect to contracts of insurance made for the benefit of themselves or near relatives, in the case of minors above the age of 15 years. By making the infants, within the terms of the statute, competent to contract not only for their own benefit, but for the benefit of others, the Legislature to that extent removed the disparity between infants and adults, and it follows that the company has the same right as the infants to disaffirm the contract for fraud. The rights of the beneficiary being dependent upon the validity of the contract, any false and fraudulent statement in the application rendering the policy void as to the insured will defeat it also as to the beneficiary. The argument that false and fraudulent representations by an infant do not bind him or the beneficiary because he cannot be held on his contracts, expecially when his infancy is known, is not only fallacious, but it is beside the mark. The false and fraudulent representation is not the contractual act, but an act designed to impose a contract upon a party by fraud.

Our conclusion, therefore, is that the learned trial judge rightly refused to strike out the defendant's answer.

We come now to the next point made by the plaintiff (appellant), which is that the trial judge erred in directing a verdict for the defendant company.

It was directed upon the ground of misrepresentation by the insured in the application upon which the...