Sovereign Camp, W.O.W. v. Young

• Decision Date: 19 January 1939
• Docket Number: 6 Div. 436.
• Citation: 186 So. 453,237 Ala. 288
• Parties: SOVEREIGN CAMP, W. O. W., v YOUNG.
• Court: Alabama Supreme Court

186 So. 453

237 Ala. 288

SOVEREIGN CAMP, W. O. W., v YOUNG.

6 Div. 436.

Supreme Court of Alabama

January 19, 1939

Rehearing Denied Feb. 16, 1939.

Appeal from Circuit Court, Marion County; R. L. Blanton, Judge.

Action on a policy of life insurance by Elpha Young against the Sovereign Camp of the Woodmen of the World. From a judgment for plaintiff, defendant appeals. Transferred from Court of Appeals under Code 1923, § 7324.

Reversed and remanded.

Ernest Fite, of Hamilton and Arthur Fite, of Jasper, for appellant.

William Stell, of Russellville, and C. E. Mitchell and Fred Jones both of Hamilton, for appellee.

GARDNER Justice.

Plaintiff is the named beneficiary in a benefit certificate of insurance on the life of Lee B. Young, her debtor and brother-in-law.

Among the defenses interposed was the falsity of the statement of the insured in his application for insurance, that he had never been rejected for life insurance by any society association or company, and that he had never failed to receive a contract for life insurance for the full amount and kind applied for.

The certificate sued upon was duly issued in November 1935. Insured died February 24, 1936 of arteriosclerosis, a disease which the attending physician states has "hereditary tendency as many close relatives have gone that way." The certificate here sued upon contains recitals, in conformity with section 8452, Code of 1923 (defendant is a fraternal organization), that the constitution, laws and by-laws of the order and all amendments thereto, as well as the application for membership, the statement of the applicant to the medical examiner and the certificate itself should constitute the agreement between the parties, and pertinent provisions of the constitution and laws of defendant order were offered in evidence. They are in large part reproduced in Sovereign Camp, W. O. W. v Thompson, 234 Ala. 216, 174 So. 761, and no necessity appears for their reproduction here.

Suffice it to say, upon the question hereinafter to be considered, it appears without dispute that insured had, in his application, answered in the negative the questions as to the matter of rejection for life insurance, as above indicated, and that this answer was false. He had, undisputedly, only some few months before (April, 1935) applied for life insurance in the American National Insurance Company of Galveston, Texas, and had been rejected. This was a complete defense as disclosed by the following from 4 Cooley's Briefs on Insurance, 2d ed., page 3228: "Among the questions invariably asked of the applicant for life insurance is whether he had ever applied to any other company for insurance and been rejected. The purpose of the question is perhaps two-fold--to discover whether the risk has ever been regarded as unsafe by other insurers, and to show the applicant's anxiety for insurance. Whether the applicant has ever applied to other companies for insurance and been rejected is, therefore, regarded as material to the risk, and a statement in this regard whether made as a warranty or as a representation, will, if false, avoid the policy."

The authorities fully support the text. Among those which we have examined are the following: Ætna Life Ins. Co. v. Moore, 231 U.S. 543, 34 S.Ct. 186, 58 L.Ed. 356; Greber v. Equitable Life Assur. Society, 43 Ariz. 1, 28 P.2d 817; Mutual Life Ins. Co. v. Dibrell, 137 Tenn. 528, 194 S.W. 581, L.R.A.1917E, 554; Mutual Life Ins. Co. v. Denton, 93 Fla. 276, 112 So. 53; Steele v. Sov. Camp, W. O. W., 115 Kan.

159, 222 P. 76; Hardy v. Phoenix Mutual Life Ins. Co., 167 N.C. 22, 83 S.E. 5; Ferris v. Home Life Assur. Co., 118 Mich. 485, 76 N.W. 1041; Goodbar v. Western & Southern Life Ins. Co., 89 W.Va. 221, 108 S.E. 896; Ebner v. Ohio State Life Ins. Co., 69 Ind.App. 32, 121 N.E. 315; Applebaum v. Empire State Life Assur. Society, 311 Pa. 221, 166 A. 768; Masonic Life Assur. v. Robinson, 149 Ky. 80, 147 S.W. 882, 41 L.R.A.,N.S., 505. Of these authorities, perhaps that of greatest interest here is Mutual Life Ins. Co. v. Dibrell, supra, wherein the Tennessee court notes the fact that their statute is identical with the statute of Alabama and other states therein named.

The opinion had reference to what is now section 8364, Code of 1923, but the language of section 8507, Code of 1923, which relates to fraternal organizations, is the same, that is, the words here important, "or unless the matter misrepresented increase the risk of loss," are identical with those of section 8364. The observations, therefore, of the Tennessee court are of peculiar interest and we feel justified in taking the following extracts from that opinion [page 582]:

"The materiality of such questions and answers is made plain by any one of several considerations:

"(a) If there were a disclosure that there had been an examination, followed by nonissue of policy, the company would thereby be put on guard and would make its own inquiries and physical examination more thorough; or it might see fit to decline outright a risk that another company had refused to take.

"(b) If the answer were false, the company was, in all reasonable contemplation deprived of the opportunity sought by it for a discovery as to whether or not the risk had been regarded as unsafe by other insurers. The judgment of the medical staffs of other companies might be deemed of value to the company applied to, but the avenue of approach thereto was at least measurably closed by the false answer.

"(c) A further purpose of the clause was to elicit the applicant's anxiety for insurance, if any.

"We think it manifest that all of these considerations have a fair relation to the 'risk of loss' assumed by the insuring company in the issuance of the policy. As sources of information are revealed, and investigation is pursued, the degree of risk of loss decreases.

"It cannot be that the matter misrepresented should necessarily relate to the hazard of loss by the death of the insured. Such a construction might prevent the company's rescinding the contract because of a misrepresentation that actually induced the contract, in an action begun promptly after the making of the application and the issuance of the policy. What will not avail to 'void the policy,' under the statute, it seems equally will not 'prevent its attaching,' as a contract. We cannot adopt the harsh and radical construction that the Legislature meant to deprive the insurer of the right to rescind the policy contract for inducing fraud.

"The phrase 'increases the risk of loss' is, in our view, the same as that appearing in numerous other statutes, 'increases the risk,' and both alike include the risk of loss involved in the issuance of the policy."

A full and clear discussion of the question from every angle is found in the Dibrell Case, supra, but we consider further quotation therefrom unnecessary. It is in harmony with practically all the authorities, both state and federal so far as our investigation has gone, and is likewise in accord with expressions of our own Court on related questions, as for instance in New York Life Ins. Co. v. Horton, 235 Ala. 626, 180 So. 277, speaking of the applicant's false answer concerning "Hodgkin's disease," held such a disease as increased the risk of loss as a matter of law, the Court observed [page 282]: "Insurance companies are entitled to candid and truthful answers, and when such candor is withheld and involves matters material to the risk, no just complaint can be raised, when, in after investigations, the falsity is discovered and the policies issued in reliance upon the truthfulness of the statements, are avoided."

And it is in harmony also with the observations of this Court in Sovereign Camp, W. O. W. v. Thompson, 234 Ala. 216, 174 So. 761, as to the questions of misrepresentations as to health "were material facts that increased the risk that affected, or was calculated to affect, the conduct of the defendant in the issue and delivery of the policy." [Page 763.]

The Florida court in Mutual Life Ins. Co. v. Denton, supra, 112 So. 54, after observing that "an applicant for life insurance should exercise toward the company to which he applies for it the same degree of good faith which the company is required to exercise toward him and which he rightly expects," concludes with the following: "It would seem to be unnecessary to cite authorities in support of the proposition that the disclosure sought by the question was as to a material fact necessary to be ascertained to enable the company adequately to estimate the nature of the risk in the event it should, in view of all the facts, issue the policy, and that an untrue answer would vitiate the policy."

The Court of Appeals of our State in First National Life Ins Co. v. Maxey, 25 Ala.App. 289, 145 So. 589, gives expression of a view in harmony with these decisions, though the question seems not to have heretofore been presented to this Court. But we find ourselves in full accord with these authorities and conclude that the false answer in his application to the inquiry as to a...