Scott v. National Reserve Life Ins. Co.

• Decision Date: 11 April 1936
• Docket Number: 32739.
• Parties: SCOTT v. NATIONAL RESERVE LIFE INS. CO. [*]
• Court: Kansas Supreme Court

56 P.2d 76

143 Kan. 678

SCOTT v. NATIONAL RESERVE LIFE INS. CO. ^[*]

No. 32739.

Supreme Court of Kansas

April 11, 1936

Syllabus by the Court.

Whether answer to question in application for life policy, whether applicant had ever been examined by any life insurance company without policy having been issued, was fraudulent held for jury.

The evidence given in support of the allegations of the defendant life insurance company that the answer of the applicant to the question of having ever been examined by any life insurance company without a policy having been issued, being false and fraudulent, considered, and held that there was sufficient evidence of fraud in connection therewith to require the submission of the same to the jury.

Appeal from District Court, Crawford County; Leland M. Resler Judge.

Action by Daisy I. Scott against the National Reserve Life Insurance Company, wherein defendant filed a cross-petition. From a judgment for plaintiff on directed verdict and an order refusing a new trial, defendant appeals.

Reversed and remanded, with instructions.

HARVEY J., dissenting.

George F. Beezley, of Girard, and Robert Stone, James A. McClure Robert L. Webb, Beryl R. Johnson, and Ralph W. Oman, all of Topeka, for appellant.

P. E. Nulton and R. L. Letton, both of Pittsburg, for appellee.

HUTCHISON Justice.

This is an action by the beneficiary in a life insurance policy against the insurance company which issued the policy on the life of her husband, now deceased.

The petition alleges the usual points for recovery upon such a policy, and the answer and cross-petition admit the allegations of the petition in effect, and then allege the tender of the returned premium to the plaintiff and her refusal to accept it and that the insured at the time he made application for the insurance and at the time it was issued and delivered to him knew that he had made application to another life insurance company for insurance, and that such application had been refused, and also knew that he was not in good health and free from disease and injury at the time of his application to the defendant company, and in spite of such knowledge on his part made false and fraudulent answers on his application for insurance, and the defendant did not know these answers to be false and fraudulent, and would not have issued the policy and delivered it if it had been so informed, and that the answers were made with the intent to defraud the defendant, and defendant tendered into court the amount of the premium.

Defendant in its cross-petition set up two questions in the application which it alleges were falsely and fraudulently answered by the insured with the intention of defrauding the defendant insurance company, and defendant prayed that the policy be surrendered, rescinded, and set aside. To this the plaintiff replied, admitting the tender of the returned premium and admitting the answers to the questions 6A and 10, as set up in the cross-petition, but denied each, every, and all of the allegations of the answer and cross-petition, and specifically denied that the insured made fraudulent answers and representations, but alleged that the defendant was fully apprised and informed of all the facts material to the inducement and procurement of the contract at the time he, the insured, made the application.

The trial court held that the burden of proving the fraud alleged in the answer and cross-petition was upon the defendant. The defendant introduced its evidence. At the close of the evidence of the defendant, the plaintiff moved the court to direct the jury to render a verdict in favor of the plaintiff. The defendant also moved for an order directing the jury to render a verdict in favor of the defendant. The court sustained the motion of the plaintiff and overruled the motion of the defendant. A directed verdict was rendered in favor of plaintiff for the face of the policy, with interest. There were several errors alleged in the introduction of testimony, and the defendant moved for a new trial, which was overruled, from all of which rulings the defendant appeals.

Before considering the facts and testimony in the case, we may briefly refer to the legal distinctions that are discussed in the briefs as between fraud and misrepresentations. A mere misstatement of the actual truth unintentionally made and in good faith may not amount to fraud. It was said in Mutual Life Ins. Co. v. Wiswell, 56 Kan. 765, 44 P. 996, 35 L.R.A. 258, that a mere misstatement, unless willful and fraudulent, will not avoid the policy, in the absence of a warranty of the truth of the statement. The following statement from 14 R.C.L. 1021 is helpful in making a proper discrimination: "A misrepresentation in insurance is a statement of something as a fact which is untrue, and which the assured states, knowing it to be untrue, with an intent to deceive, or which he states positively as true, without knowing it to be true, and which has a tendency to mislead, such fact in either case being material to the risk. *** To render the policy voidable a false representation must relate to a material matter, and must have been relied on by the insurer. A fair test of the materiality of a fact is found in the answer to the question whether reasonably careful and intelligent men would have regarded the fact, communicated at the time of affecting the insurance, as substantially increasing the chances of the loss insured against so as to bring about a rejection of the risk or charging an increased premium."

Many of the decisions cited have to do with warranties, which are not in any way involved in this case, because the contract between the applicant and the insurance company provides that: "This policy, and the application herefor constitute the entire contract between the parties hereto. All statements made by the Insured as the basis for the contract shall, in the absence of fraud, be deemed representations and not warranties. ***"

The question of good faith is also discussed, which of course is proper in the determination of the existence of fraud; likewise innocence and lack of knowledge. Another feature discussed is the knowledge of the agent being that of the company and the sufficiency of information to put it upon inquiry.

Another feature of the application is mentioned and deserves consideration. It is in the nature of an agreement made as a part of the application in which the applicant said over his signature that "the statements and answers are full, complete and true, and are offered by me as the basis for the proposed contract for insurance." "I hereby certify that I have examined and accept the provisions of the policy applied for, and said Company shall not be held responsible for Agent's statements at variance therewith." Immediately following the answers to the questions the insured stated: "I hereby certify that I have read and find correctly recorded as made by me each of the above statements and answers and I renew and affirm the declaration as to such statements and answers made by me in Part I of this application."

There is no conflict of evidence, and the sole question is, Does the testimony given establish fraud; the burden of proof that it did establish fraud being assumed by the defendant? This is limited in the allegations of the defendant to the answers given to two questions, 6A and 10. These questions and answers thereto are as follows:

"6A. Has any life insurance company ever examined you either on an application for insurance or for any other reason, without issuing a policy? (If so, state name of company and give particulars.) A. No."

"10. Are you now in good health, free from diseases and injury? A. Yes."

As to the answer to the first question, it is conceded to be incorrect. But, of course, being incorrect or untruthful will not make it fraudulent. A fraud must never be presumed. The plaintiff insists that the deceased, Dr. Scott, gave "a full, complete and true answer" to this question to the appellant's agent, E. G. McCalester, and to show plaintiff's reason therefor we quote the following from plaintiff's brief, pages 23 and 24: "Mr. McCalester testified that he went over this application with the insured prior to its being executed, that Dr. Scott told him that he had previously made an application to and had been examined by the Mutual Benefit Life Insurance Company of New Jersey. Mr. McCalester testified that the insured told him that no policy of insurance was issued by the Mutual Benefit Life Insurance Company on that application. This we submit was a true and correct statement by the insured to the appellant's agent of the facts sought to be determined by this question. These statements made by the insured were responsive to the question and gave to the appellant, by and through its agent, E. G. McCalester, whose agency and authority has not in any stage of the proceedings been questioned, all the information demanded by the question. At the time of this conversation between McCalester and the insured, the insured asked McCalester his opinion as to the proper answer to that question in view of the facts just detailed and McCalester in spite of those facts advised the insured to answer Question 6A ,...