Shaner v. West Coast Life Ins. Co.

• Decision Date: 22 November 1934
• Docket Number: No. 1040.,1040.
• Citation: 73 F.2d 681
• Parties: SHANER v. WEST COAST LIFE INS. CO.
• Court: U.S. Court of Appeals — Tenth Circuit

73 F.2d 681 (1934)

SHANER v. WEST COAST LIFE INS. CO.

No. 1040.

Circuit Court of Appeals, Tenth Circuit.

November 22, 1934.

Philip Hornbein and Isaac Mellman, both of Denver, Colo., for appellant.

Walter W. Blood, of Denver, Colo. (G. C. Bartels, Arthur H. Laws and Paul P. Eagleton, all of Denver, Colo., on the brief), for appellee.

Before LEWIS, McDERMOTT, and BRATTON, Circuit Judges.

BRATTON, Circuit Judge.

This is an action in equity to cancel a life insurance policy in the sum of $10,000 with an accompanying total and permanent disability provision.

On May 27, 1931, the insured submitted a signed application for the insurance in which it was expressly covenanted and agreed that the several statements, agreements, and answers contained therein should be the basis and constitute a part of the consideration for the contract of insurance, and that the application and the policy should constitute the entire contract. It was stated therein that the insured had never suffered from a disease of the brain, nervous system, heart, blood vessels, lungs, stomach, intestines, liver, kidneys, or bladder; that he had never consulted a physician with respect to such a disease; that during the immediately preceding five years he had not consulted a physician nor been treated for any ailment; and that as far as he knew or believed he was then in good health. In addition, the instrument contained the following provisions:

"* * * (2) That no knowledge of any person and no statement made or given by or to any person shall bind the Company or in any manner affect its rights unless such knowledge and statement are set forth in writing in this application. (3) That if I pay the first premium at the time this application is signed, insurance shall date from the date of approval of this application at the Company's Home Office in San Francisco, provided I shall then be in the same condition of insurability as shown by this application; and provided further, that approval of this application shall be subject to the effecting of reinsurance if the Company shall determine to reinsure any portion of this risk; and in case I do not pay the premium at the date of signing this application, the policy issued hereunder shall not become effective until such policy shall have been delivered to and accepted by me and the first premium thereon shall have been paid and accepted by the Company, and unless during all such time I shall have continued in good health. * * *

"I hereby Certify that I have carefully read all statements and answers as written or printed herein and in the application for insurance; that each is written correctly as made by me and is full, complete and true."

The detailed statements were false in part. Insured was a patient at Beth Israel Hospital in Denver during August, 1929, and was diagnosed and treated there for Buerger's disease. That is a disease of slow development involving the arteries of the extremities. It causes the blood to clot, the arteries to occlude, and produces excruciating pain and coldness of the hands and feet. Gangrene frequently follows and necessitates amputation of the affected extremity. Insured was a patient at Colorado General Hospital in Denver from March to August, 1930, and again from June 2 to August 17, 1931. On each occasion he was diagnosed and treated for that disease. While there and on July 31, 1931, he underwent a perilumbar ganglionectomy which was intended to relieve his diseased condition. On two different occasions he furnished attending physicians a history indicating that he had had the disease since 1928. One foot was amputated before the trial, but the record fails to show the exact date.

Appropriately alleging that the statements and representations contained in the application were false and were fraudulently made with the intent and for the purpose of securing the insurance; that each of them was a material representation and warranty; that relying upon them and believing them to be true and without knowing the facts, the policy issued with the disability provision attached on June 9, 1931; that the falsity of such statements was not known until February 23, 1932; that on or about March 15, 1932, it rescinded such policy and tendered repayment of all premiums received and that the tender was refused — the company prayed that the policy be canceled and annulled.

By answer insured denied the falsity or materiality of his statements; denied that the company relied and acted upon them; denied that the company did not know the true facts until February 23, 1932; denied that repayment of the premiums had been tendered, and expressly alleged that the answers in question were made in the course of his medical examination; that he answered all such questions truthfully and to the best of his knowledge and belief; that the medical examiner made certain notations and writing upon the examination blank, but did not fully, completely, and truthfully write the answers given; that at the conclusion of the examination the examiner stated that the document contained the answers given and directed insured to sign it; that relying upon such statement, he signed the instrument without reading it and without knowing that it failed to state correctly his answers; that not relying upon his statements nor believing them to be true, the company requested insured to submit to another medical examination to be conducted by its examiner; that he did so on or about November 2, 1931, at which time he answered fully and truthfully all questions asked with respect to his ailments and treatment therefor during the preceding five years; that thereafter and on or about December 2, 1931, he paid a semiannual premium on such policy; and that by reason of these facts the company had waived and was estopped to assert fraud inhering in the application.

The trial court found that the statements and representations that insured had never suffered from any disease of the nervous system, heart, or blood vessels, had not consulted a physician or been treated for such disease and was then in good health, were false and were known to him to be false at the time they were made; that they were material representations and warranties and that the company relied and acted upon them; that the company exercised due diligence to discover the facts, but did not learn the falsity of such statements and representations until the latter part of December, 1931; that thereupon repayment of all premiums received was offered insured and refused without objection to its form or amount. A decree was entered that upon payment into the registry of the court of an amount equal to the total premiums and interest thereon, the policy be canceled and surrendered to the company. The case is here on appeal to review that action.

The policy contained the quite common provision that after one year from its effective date it should be incontestable except for nonpayment of premium. The bill was filed one day prior to the expiration of that period. Rescission and cancellation of an insurance contract because of fraudulent representations made to induce its execution where, on account of such an incontestable provision or for other reason there is no remedy at law, is one of the recognized functions of equity jurisprudence. Jefferson Standard Life Ins. Co. v. Keeton (C. C. A.) 292 F. 53; Jones v. Reliance Life Ins. Co. (C. C. A.) 11 F. (2d) 69; Brown v. Pacific Mut. Life Ins. Co. (C. C. A.) 62 F.(2d) 711; Jefferson Standard Life Ins. Co. v. McIntyre (C. C. A.) 294 F. 886; New York Life Ins. Co. v. McCarthy (C. C. A.) 22 F.(2d) 241; Equitable Life Assurance Society v. Schwartz (C. C. A.) 42 F.(2d) 646; Keystone Dairy Co. v. New York Life Ins. Co. (C. C. A.) 19 F.(2d) 68; New York Life Ins. Co. v. Seymour (C. C. A.) 45 F.(2d) 47, 73 A. L. R. 1523; Peake v. Lincoln Nat. Life Ins. Co. (C. C. A.) 15 F.(2d) 303; New York Life Ins. Co. v. Hurt (C. C. A.) 35 F.(2d) 92; Lincoln Nat. Life Ins. Co. v. Hammer (C. C. A.) 41 F.(2d) 12; New York Life Ins. Co. v. Miller (C. C. A.) 73 F.(2d) 350.

The finding of the trial court that insured made the false and fraudulent statements and representations contained in the application is challenged. It is said that there is no evidence from any witness to support it. The application contained the definite statement that insured had carefully read all the statements and answers written or printed therein; that each was written correctly as made by him and was full, complete, and true. He signed the application and submitted it to the company. It constituted a plain statement that he gave the answers and that they were true. He testified that he did not give them, but the court found otherwise. That conclusion may have been induced by a comparison of the handwriting of the answers with that of the signature. They may have been identical. The original instrument was submitted to the trial court, but is not before us. In addition, it appears from the uncontradicted testimony that at the time he submitted to the second medical examination late in October or early in November, 1931, he stated that his initial attack of Buerger's disease was a sudden one occurring in the preceding July and that he had fully recovered from it. That statement was plainly untrue, and he failed to disclose his previous hospital confinements or that Dr. Darley had treated him for that disease. The court was well warranted in finding from...