Galphin v. Pioneer Life Insurance

The opinion of the Court was delivered by Mr. Justice StabeEr. *472 This is an action to recover disability benefits under an insurance policy issued to the plaintiff by the defendant company. The, policy was for $5,000.00 and contained a disability clause providing for the payment to the plaintiff of $10 per month for each $1,000 of insurance in case of his total and permanent disability. The complaint is in the usual form. The plaintiff, after setting out the above-mentioned facts, alleged that, subsequently to the issuance of the policy, he became totally and permanently disabled as contemplated by its provisions; that thereafter he made demand upon the company for the payment of the monthly benefits of $50.00, but that payment was refused. The defendant pleaded a general denial, and, in addition, set up several special defenses. It was alleged that the policy contained the express provision that it should not become of force unless it was delivered to the plaintiff and the first premium paid by the insured while in good health; that this' provision was violated, in that the premium was paid and the policy delivered while the insured was in bad health, he having suffered a stroke of paralysis theretofore. It was further pleaded that before the policy was left in the possession of the plaintiff, the time for its delivery having elapsed, the company required the insured to furnish a health certificate as to his physical condition; that he did at that time make such certificate, in which he stated that he had had no sickness, except biliousness, since making the original application for the insurance; that this statement was false, in that the insured had theretofore suffered a stroke of paralysis and had been confined to his bed for a considerable time under the care of a physician; and that such misrepresentation was a fraud upon the defendant and relieved it from all liability under the terms of the policy. It was also alleged that the policy was surrendered and canceled on March 8, 1927, by mutual agreement of the parties, in consideration of the return to the plaintiff of all premiums paid *473 by him, amounting to $297.74; and that the plaintiff executed a release, surrendered the policy, and accepted and retained the refunded premiums as consideration therefor. The case was tried in the Court of Common Pleas for Greenwood County before Judge Rice and a jury. Motions for a nonsuit and for a directed verdict were made and refused. A verdict was found for the plaintiff, and, from judgment entered thereon, the defendant appeals. There are a number of exceptions, but the assignments of error may be considered under three general heads: (1) Error in admission of testimony; (2) error in the Court’s charge to the jury; and-(3) error in refusing defendant’s motion for a directed verdict. We will consider these in order. The testimony shows that the insured was a well-known citi.zen of the Town of Ninety Six, and apparently was on the best of terms with the company’s agent, De Vore, who persuaded him, he says, to drop his insurance in the Pacific Mutual Company and to take insurance with the defendant. On May 28, 1925, respondent made application to the defendant for a policy of insurance in the sum of $5,000.00. On July 20, he amended his application by requesting that an additional policy in the sum of $3,000.00 be issued on the same plan; and the company isued both policies. There is no contest about the $3,000.00 policy, and it is not involved in this appeal. The $5,000.00 policy, dated July 15, 1925, contained the following provision as to the payment of premiums: “This policy shall not take effect until the first premium shall have been paid while the insured is in good health.” As to disability benefits, it provided: “If, before attaining the age of sixty years and while this policy is in full force and there is no default in payment of premiums thereunder, the insured shall become totally and permanently disabled by bodily injury or disease so that he is and will be permanently continuously and wholly prevented thereby from perform *474 ing any work or performing the duties of any occupation for renumeration or profit, then upon receipt of due proof while this policy is in full force, that such total disability exists and has existed continuously for a period of not less than thirteen weeks, the company will waive payment of further premiums falling due hereunder during the term of such disability, and will pay to the insured during the term of such disability following the first thirteen weeks a monthly; income of ten dollars for each one thousand dollars of face amount of this policy. The first payment of such monthly income shall be made as of the date of receipt of such proof. The continuous existence of total disability for a period of thirteen consecutive weeks will be regarded by the company as presumptive evidence of the permanence of such disability.” The plaintiff testified that when the policy was delivered to him in July, he did not actually pay the premium in cash, but had an agreement with the agent of the company to keep the policy in good standing until the insured started to gin in the fall, at which time he would pay, it appearing that the plaintiff was engaged in the business of ginning cotton. The appellant complains that the admission of this testimony was error, for the reason that it tended to vary the terms of the written contract, which provided that the policy should not go into effect until the initial premium was actually paid; and for the further reason that the parol agreement was void under the statute of frauds (Civ. Code 1922, § 5517), in that it was for the purchase of a contract of insurance for the value of more than $50.00. The exceptions raising these questions are without merit. The provision in the policy relied on by the appellant was written into it by the company for its own benefit, and the condition named may be waived by it or its agent. 37 C. J., 406. As held by the Court in Williams v. Insurance Company, 112 S. C., 436, 100 S. E., 157, 160: “Payment may be effected by many mediums; and the parties *475 may forego that^part of the contract which prescribes prepayment by waiver of it.” There was evidence that the policy was delivered in July by the local agent, and that credit was extended the insured for payment of the initial premium. As the agent had authority to deliver the policy and collect the premium, he possessed the implied authority to vary the mode and time of payment. With regard to the contention that the agreement violated the statute of frauds, it is only necessary to say that, if the policy was delivered at the time of the alleged oral agreement — and the respondent so testified and the jury so found — such delivery removed the transaction from the operation of the statute. When the plaintiff introduced the policy in evidence, he did not offer the paper called the • supplemental application, claimed by appellant to have been made by the insured on September 14. The appellant complains that the Court erred in not requiring him to do so, for the reason that such application was a part .of the policy. Even if we should concede — as we do not, under the conflicting evidence as to the delivery of the policy — that this paper was a part of the policy, failure to introduce it at the time the policy was offered did no harm to the defendant, as it was later received in evidence and the plaintiff was cross-examined concerning it. The plaintiff was also questipned about what happened at the time the representatives of the company saw him in March, 1927, for the purpose of having him sign a release and surrender the policy. He testified that the policy was read to him in part, and that he was told that it was not good, and that, unless he surrendered it, the company would take legal action to procure it, and that the representatives of the company would not make a favorable report as to the disability benefits under the $3,000.00 policy. The appellant’s contention is that this testimony of Galphin was directed to an attack on the release as being fraud. *476 ulent or procured by overpersuasion, and that it was not subject to such attack without some allegation of support. It appears to be a well-established practice, however, that the plaintiff is not required to anticipate the defense of a release which he knows is outstanding, but which he deems invalid; he may plead his cause of action without reference to it in the complaint. The defendant may set up the release in its answer as a defense and may then exercise its right to move the Court for an order to require the plaintiff to reply to that portion of the answer; but, should it fail to procure such order, the plaintiff would have the right to offer evidence in denial or avoidance of the release, although he has filed no reply. See Levister v. Railway Company, 56 S. C., 508, 35 S. E., 207; McDowell v. Railway Company, 113 S. C., 399, 102 S. E., 639, 34 Cyc., 1068-1094. It is admitted that a release of liability for tort may be attacked collaterally; but the appellant argues that, where the relationship between the parties is contractual, the rule does not apply. We can see no reason, however, why it should not apply equally in one case as in the other. The release itself is a contract, and the attack is against such contract in both cases. But even if there was error as contended by the appellant, it appears to have been harmless, for the reason that the plaintiff had, before the bringing of his suit, repudiated the release and tendered a return of the refunded premiums, which were the consideration for its execution. We think, however, that the procedure followed in the case was proper, and that evidence was admissible as tending to show that the release had been obtained from the insured without a full knowledge or understanding on his part of his rights in the premises. When Dr. Woods was on the stand, the Court, over objection of the defendant, admitted in evidence a letter which the doctor had written the insurance company on March 3, 1927, stating his opinion of Galphin’s *477 condition at that time. The appellant complains that this was error, for the reason that Dr. Woods was then testifying, “and it was improper to show the plaintiff’s physical and mental condition by the contents of this letter, and it was hearsay.” We do not think there is any merit in the contention. Dr. Woods was the physician of the insurance company at Ninety Six, and had also attended the insured and had observed his condition very closely. The letter in question was written by him to the company after the insured had applied for the disability benefits under the policy; and, as held by the trial Judge, it was competent on the ground that it was notice to the company of the mental and physical condition of the insured. In addition, if there was error, it was harmless, for the reason that the witness testified that his opinion of Galphin’s condition was still the same as stated in his letter. The appellant excepts also to certain portions of the Court’s charge. The jury was instructed that it was not disputed that the insured was in bad health on September 14, and, if the policy was delivered to him on that date, then it was void, unless the agent knew of his sickness, in which case his knowledge would be imputed to the company. The appellant complains that this was error, for the reason that “knowledge of the agent of the fact that the plaintiff had at that time suffered a stroke of paralysis would not be imputed to the company in that it would be a fraud upon the company for the benefit of the insured of which he ought not to be allowed to take advantage.” In disposing of the exception raising this question, we call attention to the recent case of Ayers v. Insurance Company, 148 S. C., 355, 146 S. E., 147, and authorities cited in the opinion. The principle is well established that the insurer is bound by the acts of its agent acting within the scope of his authority, even though the agent is actuated by a fraudulent intent; and that the rights of the insured are not affected thereby unless he participated in the fraud. In the case *478 at bar, there was no testimony that the insured was a party to a fraud in the delivery of the policy on September 14, if it was delivered on that date, which was a question in dispute. Under the issues made by the evidence, the charge was a correct statement of the law applicable. Exceptions 11, 12, 13, 14, and 16 have been disposed of by what we have already said. The instructions complained of by these exceptions were correct statements of the principles of law applicable and governing, and were as favorable to the defendant as it had a right to expect or demand. The following charge is also made an assignment of error: “Their next defense is as to the cancellation of the policy. Did Galphin at the time that he signed this cancellation and accepted the premiums with interest' — and there is no dispute that the premiums were paid to him with interest — did he have mind enough to realize what he was doing? If he didn’t .have mind enough to realize what he was doing, and if he was giving up valuable rights, then this release or cancellation couldn’t stand against him.” Under the issues of fact made by the testimony, this was a correct charge of the law applicable. The appellant is in error in asserting that there was no testimony tending to support the respondent’s claim as to his lack of mental capacity at the time the release was executed. Not only his own testimony, but the testimony of the physician who had examined and attended him, tended to establish the contention that he did not know just what his rights were at that time; and the Court properly submitted the question to the jury under appropriate instructions. When the charge is considered as a whole, as it should be, we find no error in any of the instructions as complained of. The grounds of alleged error in overruling the motion for a directed verdict may be thus summarized: (1) That there was no legal delivery of the policy to the insured; (2) that the action was based on a contract which had been canceled; (3) that there was no competent testimony to show that the *479 cancellation was procured by fraud or deceit; (4) that the testimony shows that the disability complained of was suffered prior to the delivery of the policy and the payment of the first premium; (5) that the application for reinstatement of the policy was made after the insured had suffered a stroke of paralysis, and all negotiations had prior thereto were merged therein; and (6) there was no competent testimony that the insured did not know what he was doing when he executed the release. It will be observed that in our consideration .of alleged error in the admission of evidence and in the Court’s charge, we necessarily examined and passed upon some of the testimony in the case. Our further examination of it convinces us that the Court could not have directed a verdict for the defendant, for the reason that the plaintiff offered testimony tending to support his contentions on all material points. For instance, the appellant contends that the date of the delivery of the policy was September 14, after the insured had been stricken with paralysis; the respondent testified positively that the policy was delivered to him in July, while he was in good health. Also, while the agent of the company claimed that no agreement had been made between him and the insured as to an extension of credit for the payment of the initial premium the respondent testified positively that such an arrangement was made. With regard to the health certificate, while the claim of the appellant was to the effect that the insured knew what he was doing at the time he made it, the respondent testified that if he did sign such a certificate his mind at the time was in such condition that he did not know what he was doing. There was also testimony of the two physicians tending to show that respondent’s mind at the time was bad, and that he was unfit for business. With regard to the execution of the release on March 8, 1927, after the respondent had made application for disability benefits under the policy, there was testimony offered for the appellant to *480 the effect that at the time the respondent appeared to be normal. But the respondent testified that he knew nothing about the release; that, while his name signed to the paper appeared to have been written by him, still his mind was in such condition at the time it is claimed the release was executed that he had no recollection of signing it; and that, if he did sign it, he was not aware of what he was doing. There was also testimony tending to corroborate this statement of the insured given by one of the physicians who had attended him. It is thus seen that the evidence was in sharp conflict on all material questions, and the Court would have committed error had he not submitted the case to the jury. All exceptions are overruled, and the judgment of the Circuit Court is affirmed. Mr. Citiee Justice Watts and Messrs. Justices BeEase and Carter concur.