Sawyer v. Equitable Acc. Ins. Co.

• Decision Date: 25 March 1890
• Parties: SAWYER et al. v. EQUITABLE ACCIDENT INS. CO. OF CINCINNATI.
• Court: U.S. District Court — Eastern District of Wisconsin

42 F. 30

SAWYER et al. v. EQUITABLE ACCIDENT INS. CO. OF CINCINNATI.

United States Circuit Court, E.D. Wisconsin.

March 25, 1890

Weisbrod Thompson & Harshaw, for plaintiffs.

Gary &amp Forward, for defendant.

JENKINS J.

The action is upon an accident policy of insurance issued by the defendant upon the life of Julius H. Kiel, the plaintiffs' testator, for the sum of $10,000. One of the defenses to the action, and the only one necessary to consider at this time, is that, in the application upon which the policy was based, the assured stated as a fact which he warranted to be true, but which was in fact false, that his weekly income was not less than $100. At the trial the jury returned a general verdict for the plaintiffs, and, in answer to two special question submitted, found that at the time of the application, and for a year prior thereto, the weekly income of Julius H. Kiel did not exceed $50; but that the statement in the application respecting his weekly income was not contained in the application when signed, nor inserted therein at any time with the knowledge or consent of the assured. Upon this verdict, both parties now move the court for judgment; the defendant coupling therewith a motion for a new trial.

The facts established by the verdict, so far as they are essential to the proper determination of the question involved, may be thus summarized: The assured, a resident Of oshkosh, on the 18th of April, 1888, at Milwaukee, applied to W. H. Craft, the Wisconsin state agent of the defendant, for accident insurance to the amount of $10,000. He was a stranger to Craft, who required references. He informed Craft that he was president and treasurer of the Ingalls, White Rapids & Northern Railroad, a logging railroad in the norther woods, and referred Craft to the office of the Wisconsin Central Railroad. Craft said to him that the agency could not write a policy in excess of $5,000, but he would take his application, and, if the references proved satisfactory would forward the application to the company with a recommendation that the policy issue. Thereupon Craft's son, in his presence and in the presence of the assured, propounded the questions and wrote the answers in the blank application, so far as the blanks were filled at the time. The application was then signed by Kiel, who left with Craft his check for $50, the required premium, with the understanding that the policy when issued should be forwarded to him at Oshkosh, or, if the application should be rejected, the check was to be returned. At no time was Kiel interrogated as to his income, nor did he make any statement respecting it. Craft, upon inquiry, satisfied himself respecting the desirability of the risk, and, in the absence of Kiel, and without his knowledge or consent, upon the margin of the application, added to the occupation stated by Kiel the word 'capitalist,' and in the space in the prescribed blank, which had not been filled, erased the printed words 'wages,' and inserted in writing 'income not less than $100.00,' so that the statement would read, 'my weekly income not less than $100.00,' and thereupon forwarded the application to the defendant with a letter strongly recommending the acceptance of the risk. The policy was issued and set to Craft, who in turn forwarded it to Mr. Kiel by mail, and used the check left with him for the premium. The application was a printed blank furnished by the defendant company to its agents, and contained the usual warranty that the statement of facts therein contained, and upon which they policy was to be based, was true. The company was not informed of the action of Craft in respect to his alteration of the signed application until the last trial of the action, when it timely tendered and paid into court, to the use of the plaintiffs, the amount of premium, with accrued interest to the date of such tender and payment. The alterations were manifestly in the handwriting of Craft, the agent, with which the company must be assumed to have been familiar, and exhibit a marked contrast to the handwriting of the sone who filled the blank, with the exceptions stated. The printed instructions to agents required them, in case of application for insurance in excess of $5,000, to apply to the home office, giving full answers to each question in the application, and stating the salary or weekly wages of applicant. Mr. Craft, at the trial, insisted that, in insuring professional men, merchants, and those having no fixed income, it was the custom to ignore that question, or to insert such an amount as the agent though reasonable; but he could not say that any of the general officers of the company had ever so instructed him. The rule of the company at that time was that weekly indemnity from all sources should not exceed weekly wages, and the amount of death benefit, when coupled with weekly benefit, was adjusted upon the basis of weekly indemnity. Mr. Kiel had during the fall previous invested in a logging railroad and logging business that was largely incumbered. The incorporation owning it at the time of this application was insolvent, and on the verge of bankruptcy, to the knowledge of Mr. Kiel. Within a few weeks thereafter the railroad and business passed into the hands of a receiver. Mr. Kiel had some considerable real estate, yielding income, but was indebted to an amount in excess of all his property, and was at the time of this application, to his knowledge, practically insolvent, although still in receipt of rentals. His death occurred soon after, as found by the jury, from accidental drowning. The policy of insurance professes to be issued in consideration of the representations, agreements, and warranties made in the application, and contains an agreement by the assured that such declarations are warranted to be true in all respects; and said application is referred to and made part of the contract, although no copy of the application accompanies the policy. It is also conditioned in the policy that, if any statements in the application are false, the policy shall be void.

The question presented is whether the company is bound when its agent wrongfully changes the application after it is signed, and before its transmission to his principal; the insured being guiltless of participation in the wrong. It was held in Insurance Co. v. Wilkinson, 13 Wall. 222, that insurance companies acting through agents at a distance from the home office were bound by their acts within the general scope of the business intrusted to them, and that parties dealing with them are not bound by any limitation of authority not brought to their knowledge; that, when such agents prepare the application, and insert therein an untrue statement not given by the applicant, the company is bound, although the application be signed by the assured. The decision of that case was affirmed in Insurance Co. v. Mahone, 21 Wall. 152, where it was ruled that the proposals and answers prepared by the company's agent must be regarded as the act of the company, which they cannot be permitted to set up as a warranty by the assured when truthful answers were given to, but other and untruthful answers were substituted by, the agent. The court further held that it was of no consequence that the answers as written by the agent were read to and signed by the applicant; that, having answered truly, the applicant had the right to assume that the answers he did make were accepted as meaning, for the purpose of obtaining a policy, what the agent stated them in writing to be. These cases were followed and approved in Insurance Co. v. Baker, 94 U.S 610. There the agent of the company undertook to construe and interpret the answers of the applicant, and inserted in the application his construction and interpretation of the answers, but not the answers themselves. It was held that the statement, although signed by the applicant, was one prepared by the company, for which it was responsible, and could not be asserted to defeat the policy.

The counsel for the defendant strenuously contests the correctness of the rule thus laid down. They claim it to be in antagonism to settled principles of law: that the signer is conclusively presumed to know the contents of...