Petty v. Pacific Mutual Life Insurance

WiNBORNE, J. The question is: Where an insurance policy for less than $5,000, issued after medical examination, has lapsed and has been reinstated upon false written representation of insured, and without medical examination, can the policy, as reinstated, be canceled without allegation and proof of fraud in the making of such representation? We think so. All contracts of insurance on lives in this State shall be deemed to be made therein and subject to the laws of the State. O. S., 6287-6288. It is provided in C. S., 6289: “All statements or descriptions in any application for a policy of insurance, or in the policy, shall be deemed repre *160 sentations and not warranties, and a representation, unless material or fraudulent, will not prevent a recovery on the policy.” In the instant case the decision turns upon the written answer to the second question in the certificate of health which the insured signed and delivered to the defendant for the purpose of procuring and as a condition precedent to a reinstatement of the lapsed policy in accordance with the provisions therein set forth. The jury has found that the answer is untrue. Under the fact situation, is it material, and if so, is it a bar to reinstatement of the policy? It is settled law in North Carolina that answers to specific questions like the one asked in the instant case, where there had been medical examination, are material as a matter of law. Bryant v. Ins. Co., 147 N. C., 181, 60 S. E., 983; Alexander v. Ins. Co., 150 N. C., 536, 64 S. E., 432; Schas v. Ins. Co., 166 N. C., 55, 81 S. E., 1014; Hardy v. Ins. Co., 167 N. C., 22, 83 S. E., 5; Ins. Co. v. Woolen Mills, 172 N. C., 534, 90 S. E., 574; Ins. Co. v. Box Co., 185 N. C., 543, 117 S. E., 785. Speaking to the question in the case of Ins. Co. v. Woolen Mills, supra, Mr. Justice Brown writes: “The materiality of the representations is not open to dispute. It does not depend upon inferences drawn from facts and circumstances to be proved, in which event the question is one for the jury. A different rule prevails where the representations are in the form of written answers made to written questions. In such ease the questions and answers are deemed to be material by the acts of the parties to the contract. McEwen v. Life Ins. Co., 139 Pac., 242. It is not necessary that the misrepresentation should be intentional.” Again, in the same case, at p. 539, it is said: “Nothing herein contravenes the well settled doctrine that where a question is asked which must be necessarily answered by an opinion, the mistake of the applicant in answering such question, made honestly and in good faith, will not avoid the policy. This is not so, however, where the questions asked relate to facts within the knowledge of the applicant and not within the knowledge of the company, and where the questions and answers are material. In such case the applicant must answer truthfully. The purpose of such questions is twofold: First, to elicit information, which the company regards important; second, to give the sources from which the company may obtain further information. The parties themselves have made these questions and answers material. Their materiality depends not only upon their own purport, but upon the fact that the contracting parties have agreed that the written application containing these questions and answers is the basis upon which the contract of insurance shall be made or refused.” In Alexander v. Ins. Co., supra, it is stated: “The company was imposed upon (whether fraudulently or not is immaterial) by such repre *161 sentation, and induced to enter into the contract. In sucb cases, it has been said by the highest Court that ‘assuming that both parties acted in good faith, justice would require that the contract be canceled and premiums returned.’ Ins. Co. v. Fletcher, 117 U. S., 519.” In Ins. Co. v. Box Co., supra, it is stated: “The statute itself and the general principles applicable are to the effect that fraud is not always essential, and that the contract will be avoided if statements are made and accepted as inducements to the contract which are false and material.” However, it is contended by the plaintiff that, in view of the fact that the policy was reinstated without requiring a medical examination, “the policy shall not be rendered void nor shall the payment be resisted on account of any misrepresentation as to the physical condition of the applicant, except in cases of fraud.” 0. S., 6460. This section of the statute is inapplicable here for that same relates to the making of the contract on which policy is issued, and not to reinstatement of policy, 'without medical examination. In the instant case there was medical examination prior to the issuance of the policy. The reinstatement of the policy under the provisions thereof with reference thereto had the effect only of continuing in force the original contract of insurance. The authorities seem to support this view. We find in 32 C. J., p. 1357, see. 646, “A reinstatement of the policy, after default in the payment of the premiums, by performance of conditions specified in the policy continues in force the original policy and does not create a new one.” In Mutual Life Ins. Co. v. Lovejoy, 253 Ala., 452, 83 S. E., 591, it is said: “The reinstatement of the policy or contract of insurance did not have the effect of creating a new contract of insurance, dating from the time of the renewal. It had the effect only of continuing in force the original contract of insurance which would, under its terms, have terminated and become void if it had not been reinstated in the manner and within the time provided in the original contract.” In the case of Clark v. Ins. Co., 146 N. E., 43, a Massachusetts case, speaking to the question of misrepresentation in application for reinstatement of policy after lapse because of failure to pay premium, the Court pertinently says: “In an application for reinstatement such as the one before us the parties are bound by the terms of the contract. They agreed that all the answers were material to the risk, and were true. If the insured consulted a physician, or was treated by one or had been prescribed for by a physician since the date of the policy and before the date of the application, . . . his answers were not true. . . . Having failed to comply with the conditions precedent mentioned in the application the policy was not revived, and the plaintiff *162 cannot recover,” citing Reidy v. John Hancock Mut. Life Ins. Co., 245 Mass., 373, 139 N. E., 538. The right to reinstate was a part of the original contract. The representation in the certificate of health was required as a condition precedent to reinstatement. It was material as a matter of law. A truthful answer was required. The jury, upon competent evidence and under correct instruction, having found the representation untrue, the policy was not in law reinstated. In the trial we find No error. ClakksoN, ScheNCK, and DeviN, JJ., dissent.