Schmitt v. United States Fidelity & Guaranty Co.
| Decision Date | 05 November 1926 |
| Docket Number | No. 25631.,25631. |
| Parties | SCHMITT v. UNITED STATES FIDELITY & GUARANTY CO. |
| Court | Minnesota Supreme Court |
Appeal from District Court, Blue Earth County; W. L. Comstock, Judge.
Action by Aaron F. Schmitt against the United States Fidelity & Guaranty Company. From an order denying its motion for judgment notwithstanding a verdict for plaintiff or a new trial, defendant appeals. Affirmed.
Cobb, Wheelwright, Hoke & Benson and Tracy J. Peycke, all of Minneapolis, for appellant.
H. L. & J. W. Schmitt, of Mankato, H. W. Volk, of Minneapolis, and C. J. Laurisch, of Mankato, for respondent.
Plaintiff recovered a verdict in an action on two policies of health and accident insurance. Defendant has appealed from an order denying its motion for judgment, notwithstanding the verdict or a new trial.
Misrepresentations in the applications for the policies were pleaded as a defense. That the sickness for which plaintiff claimed indemnity was contracted prior to the beginning of the term of the policies, and that the policies were canceled, were pleaded as additional defenses. In reply, plaintiff alleged that, when the applications were taken, he truthfully gave all the information sought and that defendant issued the policies with knowledge of the facts disclosed. By supplemental answer, defendant alleged that it had tendered a return of all premiums paid, with interest thereon, and that the tender was refused. Plaintiff replied that on September 23, 1925, defendant denied liability; that the action was commenced on September 28th and the answer served on October 22d, and that on October 6th, by canceling the policies, defendant had waived all the defenses pleaded in the original answer. At the close of the evidence, both parties moved for a directed verdict. Both motions were denied.
The applications contain this provision:
"I understand and agree that the right to recovery under any policy which may be issued upon the basis of this application shall be barred in the event of any one of the following statements, material either to the acceptance of the risk or to the hazard assumed by the company is false or in the event that any one of the following statements is false and made with intent to deceive."
On this appeal plaintiff takes the position that his motion should have been granted because defendant waived the defense of fraud by canceling the policies and that, therefore, the court need not consider the points raised by defendant. That there can be no waiver unless there was an intentional relinquishment of known rights is not disputed. But it is argued that, knowing the policies had been obtained by fraud, defendant elected to treat the contract of insurance as in force and thereby waived the defense.
On September 23d, defendant wrote to plaintiff saying that it had made a careful investigation of plaintiff's claim for indemnity on account of illness and denied liability, "because we do not believe that the circumstances surrounding your present claim are within the contemplation of our policies and also for other good and sufficient reasons." It is contended that this letter establishes defendant's knowledge of the facts subsequently pleaded as a defense. We do not sustain the contention. Possibly, a jury might infer from the letter and defendant's conduct after writing it that defendant must have known of the misrepresentations when it canceled the policies, but plaintiff did not ask the court to submit the question to the jury and it was not submitted. It cannot be held, as a matter of law, that defendant had knowledge of the alleged misrepresentations when it gave the notice of cancellation.
In considering the argument in support of defendant's motion for judgment, we proceed on the assumption that the answers to the questions in the applications were incomplete and inaccurate, and that there were misrepresentations which were material and increased the risk of loss. We are, nevertheless, of the opinion that the motion was properly denied. The applications were procured by G. W. Harden, whom defendant had appointed as its agent with authority to transact its business of insurance in the state of Minnesota. They were signed in blank. Harden filled in the answers at the defendant's office in Minneapolis, where the applications were approved by some one in authority. The policies were then written and countersigned by Harden and delivered to plaintiff. Under the evidence, the jury might find that, when the applications were taken, plaintiff stated facts to Harden which he failed to mention in the answers he filled in, although plaintiff had requested him to do so, and that he also handed a written statement to Harden, designated as Exhibit G, to which Harden paid no attention when he filled in the answers to questions relative to health and accident insurance carried, indemnities paid, injuries and illnesses suffered, and policies canceled or lapsed. Harden's denial of this made it the duty of the jury to determine where the truth lay. Evidently, they believed plaintiff's testimony instead of Harden's. The evidence was sufficient to bring the case within the rules approved in Kausal v. Minn., etc., Ins. Ass'n., 31 Minn. 17, 16 N. W. 430, 47 Am. Rep. 776; Whitney v. National, etc., Ass'n, 57 Minn. 472, 59 N. W. 943; Otte v. Hartford Life Ins. Co., 88 Minn. 423, 93 N. W. 608, 97 Am. St. Rep. 532; Zimmerman v. Bankers' Casualty Co., 138 Minn. 442, 165 N. W. 271; Shaughnessy v. New York Life Ins. Co., 163 Minn. 134, 203 N. W. 600; and Mack v. Pac. Mut. Life Ins. Co. (Minn.) 208 N. W. 410.
But it is argued that this case must be differentiated from those cited because it appears that plaintiff did not give Harden a correct statement of all the facts called for by the questions. This is true, but Exhibit G begins with these words: "Statement of accident and health insurance for Geo. W. Harden — As I recall the facts — not certain as to exactness or completeness." Under the heading Indemnities Received: "I am not certain — too long ago," and again, "Do not remember amounts and am not certain as to completeness." Under the heading Policies Canceled: "As I remember, but I cannot be certain as to completeness." It thus appears that Harden knew that plaintiff was unable to answer the questions completely and did not vouch for the accuracy of his answers. Defendant is charged with notice of the facts thus communicated to Harden. In this situation, three courses were open to defendant. It might have declined to issue the policies, or have called for more definite information before issuing them, or it might accept the applications and issue the policies. By taking the third course, we think it lost the right to assert thereafter that plaintiff misstated the facts called for by the questions in the applications.
In 37 C. J. p. 466, the rule is thus stated:
"If the answer is qualified as made to the best of insured's knowledge, * * * the falsity of the answer will not avoid the policy unless insured knew that it was untrue and answered in bad faith."
In Rupert v. Sup. Ct. U. of F., 94 Minn. 293, 102 N. W. 715, it was held that an answer to a question concerning previous consultations of physicians which admits one examination and omits others, but does not purport to be a full and complete reply to all questions in that connection, if accepted in its incomplete form, is not affirmatively shown to have been false so as to prevent recovery on the policy.
In Ranta v. Sup. Tent, K. of M., 97 Minn. 454, 107 N. W. 156, the court said that an applicant who makes qualified answers to the questions in the application should be held to warrant only his bona fide belief in the truthfulness of his answers, and, unless there was bad faith or an intentional suppression of facts, the applicant should not be charged with the consequences of fraud or of innocent misrepresentations which materially affect the acceptance of the application or the risk of loss. See, also, Smith v. Prudential Ins. Co., 83 N. J. Law, 719, 85 A. 190, 43 L. R. A. (N. S.) 431, and note, in which the cases in other jurisdictions are reviewed, and note in L. R. A. 1917C, page 872.
Plaintiff is not chargeable with notice of the falsity of the answers merely because he accepted the policies with the incorrect applications attached thereto. Olsson v. Midland Ins. Co., 138 Minn. 424, 165 N. W. 474; Gruberski v. Bro. Am. Yeomen, 149 Minn. 49, 182 N. W. 716. Shaughnessy v. New York Life Ins. Co., supra, does not touch this point. There the insured signed an application which had been completely filled out in her presence, and it was held that her beneficiary could not avoid the effect of misrepresentations by a mere showing that the insured did not read the application. The effect of the acceptance and retention of the policy was not involved or referred to.
Many points are made in the attack on the denial of defendant's motion for a new trial. Before and after making the applications in question, plaintiff applied to other companies for policies of life or...
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