Reagan v. Union Mut. Life Ins. Co.

• Decision Date: 01 December 1905
• Citation: 189 Mass. 555,76 N.E. 217
• Parties: REAGAN v. UNION MUT. LIFE INS. CO.
• Court: United States State Supreme Judicial Court of Massachusetts Supreme Court

189 Mass. 555

76 N.E. 217

REAGAN v. UNION MUT. LIFE INS. CO.

Supreme Judicial Court of Massachusetts, Bristol.

December 1, 1905

COUNSEL

James M. Morton, Jr., and R. A. Dean, for plaintiff.

Phillips & Fuller, for defendant.

OPINION

KNOWLTON, C.J.

This is an action of contract on a policy of life insurance issued to the plaintiff's intestate. The defendant answered that the policy was obtained by fraud of the insured. The policy contains a clause as follows: 'Incontestable. This policy is incontestable from date of issue for any cause, except nonpayment of premiums.' After having introduced proofs of her intestate's death, and other evidence that made a prima facie case, the plaintiff rested; her counsel stating as her contention, 'that no question of health or fraud such as is set up in the answer, is open to the defendant under this incontestable policy.' The defendant then offered to prove that the insured made material false and fraudulent representations prior to the issuing of the policy, which would be sufficient to avoid it for fraud which were made orally to the medical exeminer for the purpose of having him incorporate them in his report to the company, and which he did so incorporate; that the insured was an insurance agent, and made these misrepresentations for the purpose of securing this form of insurance at the time and place stated in the policy; and that the policy was issued in reliance thereon, and would not otherwise have been issued. The judge ruled that the evidence was not admissible under the policy, and directed a verdict for the plaintiff. He then reported the case, stating that the only question raised is whether the evidence of such fraud is admissible in defense under such a policy.

This is not like the numerous cases in which the policy provides that it shall be incontestable for fraud after the expiration of a specified time, which is not unreasonably short. It has often been held that a provision of that kind is valid because it is in the nature of a limitation of the time within which the defendant may avoid the policy for this cause. Such a provision is reasonable and proper, as it gives the insured a guaranty against possible expensive litigation to defeat his claim after the lapse of many years, and at the same time gives the company time and an opportunity for investigation to ascertain whether the contract should remain in force. It is not against public policy as tending to put fraud on a par with honesty. Wright v. Mutual Benefit Life Association, 118 N.Y. 237, 23 N.E. 186, 6 L. R. A. 731, 16 Am. St. Rep. 749; Vetter v. Mass. Natl. Life Ass'n, 29 A.D. 72, 51 N.Y.S. 393; Clement v. New York Life Insurance Company, 101 Tenn. 22, 46 S.W. 561, 42 L. R. A. 247, 70 Am. St. Rep. 650; Goodwin v. Prudential Life Insurance Company, 97 Iowa, 234, 66 N.W. 157, 32 L. R. A. 473, 59 Am. St. Rep. 411; Kline v. National Benefit Association, 111 Ind. 462, 11 N.E. 620, 60 Am. Rep. 703; Murray v. State Mutual Life Insurance Company, 22 R.I. 524, 48 A. 800, 53 L. R. A. 742; Royal Circle v. Achterrath, 204 Ill. 549, 68 N.E. 492, 63 L. R. A. 452, 98 Am. St. Rep. 224. But this clause purports to make the policy incontestable for any cause from the date of issue. We must assume that the defendant issued the policy on the faith of the fraudulent representations, without discovering the fraud, or, so far as appears, having any opportunity to discover it before the contract was made. It is true that it might have declined to issue a policy until it should take time to investigate the matters represented. If it had postponed making the contract for a considerable time, and had investigated the subjects to which the representations related, and had then issued a policy, inserting in it a provision that, having made an examination of the material matters stated by the insured, it was so far convinced of the truth of his statements that it would waive its right afterwards to set up fraud as a defense to the claim, a different question would have been presented. It might then appear that the contract was not induced by reliance upon fraudulent representations, but by an investigation which the defendant conducted, on which it relied. There is nothing to show that the policy was not issued immediately upon the receipt by the company of the report containing the false statement. The company was not bound to postpone the making of the contract. It had a right to enter into it, relying upon the report which was founded on the false representations.

We think the question intended to be presented by the report of the judge is the same as if the plaintiff's intestate had gone into the home office of the defendant and had made material representations as inducements to the issuing of a policy, and the defendant's manager had said: 'I will give you a policy, relying on your representations. I do not know whether th...