Union Life Insurance Co. v. Johnson

• Decision Date: 20 November 1939
• Docket Number: 4-5665
• Citation: 133 S.W.2d 841,199 Ark. 241
• Parties: UNION LIFE INSURANCE COMPANY v. JOHNSON
• Court: Arkansas Supreme Court

133 S.W.2d 841

199 Ark. 241

UNION LIFE INSURANCE COMPANY v. JOHNSON

4-5665

Supreme Court of Arkansas

November 20, 1939

Appeal fro White Circuit Court; E. M. Pipkin, Judge; affirmed.

Judgment affirmed.

E M. Arnold, for appellant.

J E. Lightle, Jr., and R. H. Lindsey, for appellee.

SMITH J. BAKER, J., dissents.

OPINION

SMITH, J.

Appellant insurance company issued a policy of insurance upon the life of Virginia Johnson, for the sum of $ 300, payable, upon her death, to her husband, Fred Johnson. The policy was issued upon an application therefor made by the beneficiary named therein on February 12, 1937. Premiums of thirty cents payable each week were regularly made, and totaled $ 20.10.

Upon the death of the insured in June, 1938, proof of death was made, but liability under the policy was denied upon the ground that the issuance of the policy had been induced by false and fraudulent answers as to the state of applicant's health. The application was, by the terms of the policy, made a part thereof. It provided that the contract of insurance should not be effective until the policy was delivered while the insured was in good health and of sound mind, and should be void if statements in the application upon these questions were false. The validity of this limitation upon liability is not questioned as a legal proposition. Progressive Life Ins. Co. v. Preston, 194 Ark. 84, 105 S.W.2d 549, and Progressive Life Ins. Co. v. Hulbert, 196 Ark. 352, 118 S.W.2d 268, are recent cases upholding this limitation upon liability. It is conceded that the answers to questions concerning the insured's health contained in the application for the insurance were untrue, in that she was not, at the time the application was made, in good health and of sound mind; but was, on the contrary, a patient in the State Hospital for Nervous Diseases. The proof of death disclosed this fact, and liability under the policy was denied.

A settlement was made and a written release was obtained, for which the sum of $ 25 was paid the beneficiary. The release was formally acknowledged before the clerk of the circuit court of the county in which the beneficiary resided. The policy provided that if the statements in the application were false, and the policy rendered void on that account, the insurer's liability should be limited to the return of the premiums paid. The consideration for the release exceeded the premiums.

This suit was brought to enforce payment of the policy, and was defended upon two grounds: (1) That there was no liability under the policy, and (2) If, so, that the liability had been compromised and settled. The trial resulted in a verdict and judgment for the plaintiff beneficiary for the sum of $ 275, with six per cent. interest thereon, from which judgment is this appeal.

False answers as to the insured's health and mental condition having been given in the application, it would ordinarily follow that the policy was void on that account. But the testimony on appellee's behalf was to the effect that appellant's soliciting agent was told that the insured was then a patient in the State Hospital. This fact was denied by the agent, who testified that appellee told him his wife was in good health, and did not tell him that she was then in the State Hospital. Witness wrote into the application the answers given by appellee. Several women were present when he filled out the application, and he supposed one of them was the applicant. He did not testify that he asked whether any of the women present was the applicant, and no one told him the applicant was present. He assumed, without inquiry, that the applicant was present, but no one made any statement to him which led to this false assumption. No one of the women was asked to sign the application. Appellee, himself, signed insured's name.

Appellee testified that he told the agent who took the application that his wife was in the hospital, and that he did not think the insurance company would write a, policy on her life, but the agent assured him that the policy could be written. Theodore Moore testified that he and his mother resided in the house with appellee, and that he was present when the agent came there and said he was selling insurance. The agent proposed to write insurance for witness and his mother, but they declined the offer. The agent asked appellee about taking out insurance on the life of his wife, but was told by appellee that his wife was in the hospital and had been there for about a year. Appellee stated that he did not think insurance would be written on the life of his wife, but the agent said he would try to get the insurance, and said he thought he could. The agent filled out the application, and appellee signed it.

These conflicting questions of fact were submitted to the jury under appropriate instructions, and have been concluded by the verdict of the jury.

Numerous decisions of this and other courts are cited as approving, in effect, the law as stated in § 601 of the chapter on Insurance in 32 C. J., page 1333. The recent case of Security Benefit Association v. Farmer, 193 Ark. 370, 99 S.W.2d 580, quotes with approval from that work as follows: "'Where the facts have been truthfully stated to its agent, but by his fraud, negligence, or mistake are misstated in the application, the company cannot, according to the generally accepted rule, after accepting the premium and issuing the policy, set up such misstatements in the application in avoidance of its liability, where the agent is acting within his real or apparent authority, and there is no fraud or collusion upon the part of insured. . . .'" The reasons for this rule are there stated. Many cases are cited in the note to the text quoted supporting this statement of the law. There appears also in this opinion by our court in the case just cited a quotation from 14 R. C. L., p. 1174, to the same effect. This case, with other similar decisions of this court, is cited in the very extensive note to the case of Metropolitan Life Ins. Co. v. Alterovitz, 214 Ind. 186, 14 N.E.2d 570, 117 A. L. R. 770.

The effect of the release would, ordinarily, be to bar the prosecution of this suit, as it was executed for a valuable consideration, and, upon its face, appears to be a settlement of a pending controversy as to the insurer's liability; but it was alleged, and the jury has found, under testimony supporting that allegation, that its execution was procured by fraud and duress.

It is conceded that, in negotiating the release, the agent of the insurer stated to appellee that the company was liable only for the return of the premiums paid. But this statement, although incorrect, did not constitute fraud. It was so held in the case of Security Life Ins. Co. v. Leeper, 171 Ark. 77, 284 S.W. 12, where the authorities upon the subject were reviewed by Chief Justice MCCULLOCH.

But it...