Gilbert v. Inter-Ocean Casualty Co.

BICKLEY, Justice. Appellee held policies of the Mutual Life Insurance Company of New ’ York which included disability benefits due to total and permanent disability to follow a gainful occupation. For convenience, we will hereafter refer to these as the Mutual policy. She thereafter applied for and received from appellant a policy which indemnified against the effects resulting in bodily injury or death. This policy provided for payment of specific sums in casé of loss by accident of one or both hands, feet, or eyes. It. provided indemnity for loss from partial disability, and from loss of time due to sickness and also for loss due to total disability to perform “any and every, duty pertaining to the insured’s business, or occupation” for twelve months and for a longer period if “the insured shall be wholly and continuously disabled by bodily injuries from engaging in any occupation or employment for wage or profit.” The definite overlapping of coverage arises from the language of the two policies quoted and italicized. The insured became totally disabled from following any gainful occupation and' made claim for and received under the Mutual policy $50 per month. She asked $100 per month of appellant, which was paid for a while and then refused because it is claimed that in her application for the insurance she made a false statement material to the acceptance of the risk or the hazard assumed by the company; .that this false statement amounts to a warranty and voids the policy. The application - contained the following question: “Are you now carrying or have you applied for any other accident or health insurance? If so, state fully. (Name of Company, Association or Society, and amounts carried in each must be stated.)” The answer was, "No.” Appellant further defends that in any event it is not liable for the full amount of $100 per month because of the provisions of section 17 of the policy commonly referred to as the standard proration clause, as follows: “If the insured shall carry with another Company, corporation, association or society other insurance covering the same loss without giving written notice to the Company, then in that case the Company shall be liable only for such portion of the indemnity as the said indemnity bears to the total amount of like indemnity in all policies covering such loss, and for the return of such part of the premium paid as shall exceed the pro rata for the indemnity thus determined.” Appellant also claimed that it had paid to appellee more than she was entitled to and sought recovery thereof. Plaintiff sued appellant and obtained the verdict of a jury in her favor. Afterwards, motion by defendant for judgment notwithstanding the verdict was denied and judgment was entered against appellant. In addition to the proposition heretofore mentioned, appellant asks us to review the errors assigned as follows: “Appellant’s Third Assignment of Error. * * * The court erred in refusing appellant permission to introduce three policies issued by the Mutual Life Insurance Company of New York to appellee in evidence for the purpose of showing that appellant would not have issued to appellee the policy sued on had it known of the existence of the three policies issued by the Mutual Life Insurance Company of New York, as under the evidence in this case the jury was entitled to pass upon such issue. “Appellant’s Fourth Assignment of Error. * * * The court erred in re'fusing to allow the witness, G. A. M. Willson, who was State Manager of appellant for New Mexico at the time the.policy-sued on in this case was issued to appellee to testify that if he had known of the ■existence of the three policies issued by the Mutual Life Insurance Company of New York he would not have allowed appellant to issue the policy sued upon in this case in the amount for which it was issued, as the undisputed evidence' in this case showed that appellant did not know of the existence of the said three policies which appellee held with the Mutual Life Insurance Company of New York at the time she obtained the policy from appellant, sued upon in this .case.” The case is of first impression here and the decisions cited from other jurisdictions are of little help. First we take' up section 17 of the' standard provisions of the policy heretofore quoted. It does hot say that if the insured shall ■carry other policies designated or named accident or health policies proration shall be allowed. The names of the- policies are not determinative of the character of the coverage. We must disregard form and seek an understanding of the substance. The language is clear and unambiguous. If Tnsured carries “other insurance covering the same loss” without notice to appellant,' the proration clause is operative. It make’s no difference whether the “other insurance” existed at the time appellant's policy was issued or subsequently. Un■questionably the policies of the Mutual Life Insurance Company involved and that issued by appellant are characterized by marked differentiating features, yet they are alike in some particulars. They overlap in two places at least. . Both cover death resulting from accident; in case of total permanent disability resulting in inability of insured to engage in any gainful occupation or employment for wage or profit, disability benefits may be recovered under each. Under the policy issued by appellant there are coverages not in the mutual policy. It takes death by accident or the existence of a certain condition of total permanent disability to bring into operation both policies. Viewed prospectively from the standpoint of the policies above, if the provisions of each conceivably, nevertheless remotely, could cover loss due to total permanent disability as therein defined, then they each covered the same loss and absent notice to appellant the appellee would be required to accept proration. The matter may also be viewed retrospectively after the event. Under the facts crystallized by the event, it appears that insured claims that both policies do cover the same loss. There can be no vitality to the proration clause and the insurance company is not concerned unless and until insured asserts a right to recover under both policies for the same loss. It seems inconsistent for insured to claim indemnity under each policy for the same loss and in the same breath say that they do not cover the same loss. We think clause 17 was designed as a dragnet thrown out whereby regardless of existing insurance and regardless of the correctness of answers in application relative thereto, and even though such answers under the facts do not void the policy if it is disclosed that the insured had existing insurance or afterwards acquired same which in fact does cover the loss, indemnity for which insured asserts, and no notice has been given, the insurer may avail itself of the limitation of liability which it has reserved in the contract of insurance. We hold that the trial court was right in viewing this, point as a law question only, but that he reached an erroneous conclusion. Appellant’s proposition that appellee’s negative answer to the question contained in the application “Are you carrying or have you applied for any other accident or health insurance?” bars her recovery must be decided upon considerations of both law and fact. It is so presented. Here the good faith of insured in making the answer is a factor and the materiality of the statement implied is also an element. The trial judge having concluded that the policies did not cover the same loss quite naturally concluded that the insured had answered correctly that she did not carry any other accident and health insurance. In so concluding, the trial judge was doubtless influenced by the so-called “dominant feature test.” That is, in making a comparison of policies of insurance to determine whether applicant correctly appraised the form of insurance-provided in the-different policies the dominant features of each may be considered as characterizing them as one sort or the other. This test is a fair one when testing the intention and good faith of the applicant in making her answer and applied would doubtless absolve her from a charge of fraud or intent to deceive by her answer. But appellant did not in the lower court and does not here urge the falsity of the statement in the willful sense. But as we said in our discussion of the first point, we are not to make our decision upon consideration of name and label alone. The question is not “Do you own any accident or health policies ?” It is: “Are you carrying * * * any other accident or health insurance?” Section 71-152, N.M.Stat.Anno.Comp. 1929, defines various forms of insurance. Subsections (1) and (2) are as follows: “(1) Life insurance: Upon the lives of persons, including disability benefits, and every insurance appertaining thereto, and to grant, purchase, or dispose of annuities and endowments. “(2) Disability: Against disability resulting from bodily injury or sickness, or death resulting from bodily injury in any form, and every insurance appertaining thereto, including quarantine and identification.” These definitions are in part for the purpose of aiding in application of the regulatory provisions contained in the same chapter. Apparently under the provisions of said section a licensed company may transact the form of insurance mentioned in (2) or the forms specified in both subsections (1) and (2). But we apprehend that because the disability insurance may be included in as a part of, or supplemental to a contract of life insurance, its nature, form, or characteristic has not thereby been changed. The very loss suffered by appellee and for which she claims indemnity under the Mutual policy results from bodily injury or sickness. The statutory definition of disability insurance is a good definition of accident insurance. Cooley’s Briefs on Insurance defines accident insurance: “Insuring against loss or damage due to accidental injury to the person insured and resulting in disability or death.” Under the Mutual policy, if insured is totally and permanently disabled as a result of accidental injury or ill health, she is entitled to recover disability benefits. How can it be soundly argued that this is not accident or health insurance? Having concluded that appellee made a false answer to the question as the word “false” is understood as meaning “erroneous,” this is by no means to say that because thereof she is barred of recovery on the policy sued on. Whether she is barred involves considerations of law and fact. Our Legislature has indicated a public policy that insurance policies of this nature shall contain substantially a provision that all statements made by the insured shall in the absence of fraud be deemed representations and not warranties. Section 71-161, N.M.S.Anno.Comp.1929. Whether this provision is strictly applicable to the form of insurance transacted in the policy issued by appellant we do not decide, but in any event appellant has complied with the spirit of it because section 12 of the application is in part as follows: “Do you agree * * * that the falsity of any statement herein shall bar the right to recovery if such statement is made with intent to deceive or is material either to the acceptance of the risk or the hazard assumed by the Company.” (Italics ours.) This language does not import a warranty .that the statement if merely erroneous as an appraisal of the extent of coverage contained in other existing insurance is material. Without declaring any rule on the subject, it seems that to constitute the statement implied in the erroneous answer a false statement made with intent to deceive or a false statement material to the acceptance of the risk, etc., some proof is required. At least that is the way the matter was presented in the trial court and here. From the transcript before us, it does not appear that applicant answered the question last quoted. See Krisberg v. Inter-Ocean Casualty Co., 39 N.M. 107, 41 P.(2d) 519. However, the absence of an answer to the question if in fact it was not answered becomes unimportant because as we read the pleadings it seems that defendant assumed that it was answered and plaintiff’s reply acquiesced therein. No evidence was offered by appellant to show that the statement was made fraudulently or with intent to deceive. The burden rested on appellant to show that the statement was material. This burden the appellant sought to discharge by the offer of the evidence referred to in assignments of error 3 and 4 heretofore quoted. The tenders were refused. Herein the trial court committed errors. In the course of our argument it has developed that the likelihood of a situation arising when the coverage of the Mutual policy would overlap that of the policy sued on would appear to be remote, nevertheless we could not say as a matter of law that such remote possibility would not have been regarded by appellant as material to the acceptance of the risk by the company. The judgment is reversed with instructions for a new trial upon an issue framed involving the effect of the questions and answers presented in paragraphs 8 and 12 of the application upon the question of liability of the appellant, and after such determination the rendition of judgment in accordance therewith and with regard to the principles herein expressed, and it is so ordered. HUDSPETH, C. J., and SADLER, J., concur.