Koenig v. United Life Insurance

McAdam, J. The jury find on all the facts for. the plaintiff,- and the defendant moves for a new trial on the minutes. The insured in his application falsely stated that no proposal to insure his life had ever been postponed or declined, or had ever been made upon which a policy had not been received by him. The [532] question is whether this statement, having been incorporated into the policy and thus made a warranty, vitiates the contract. That such result would ordinarily follow there is no doubt. To avoid this the plaintiff called Harvey W. Hatch, who testified that at the time the application was made and the policy issued he was vice-president of the defendant; that the application was brought to him by one Mi'chelis, an insurance solicitor, who told him that the applicant had applied to the National Mutual for insurance; that he had been likewise so informed by Dr. Boyle, the fiefendr ant’s and the National Mutual Company’s examining physician; that Dr. Boyle also told him he had examined the applicant for that company, that he was a good risk, and they would take it from that company and give it to the defendant. It is claimed that in order to transfer the risk Dr. Boyle had to reject the applicant in the National Mutual Company and approve his application to the defendant, and that is just what the doctor did. When urged to answer whether Dr. Boyle had not told the witness about the rejection' in the National Mutual Company and its purpose, Mr. Hatch first answered no, and finally said that he had told all that he remembered. The application to and rejection by the National Mutual • Company furnish the chief ground upon which the defendant relies to establish the breach complained of. The jury found, that the' -defendant knew of such application and rejection, and took the risk, notwithstanding its knowledge of the facts. . The- conduct of Dr. Boyle in rejecting the- applicant as to the National Company on April 16, 1892, and recommending him to the defendant eighteen days afterward is reconcilable only with the theory that his purpose was to take the risk, which he considered safe, from the company and place it with the association, and this fact was undoubtedly made known to Mr. Hatch, the vice-president of the defendant, and through him to the association. . This is not a case of knowledge acquired by a solicitor or special agent of limited powers, but knowledge brought home to the cor-, poration itself through one of its high officials while in the discharge of its corporate functions. Ang. & Am. on Corp., § 305; Wade on Notice, §§ 672, 675; Bank v. Davis, 2 Hill, 451. Notice' of the fact that the insured had applied to the National Company put the' defendant upon inquiry, and when Dr. Bóyle • told Mr. Hatch of such former application, the next inquiry- in order would naturally be as to what had become of it, and the doctor, who' knew all about it, doubtless told Mr. Hatch just what [533] had been done. The applications to both insurers were filled up by Michelis, and they were identical. It 'is evident that the application in question was to take the place of the one to the National Company, treating the latter. as formal merely. The applicant apparently so regarded it, for it does not appear that he had any notice that his application had been rejected, or that he was to get any policy other than the one he received. Dr. Boyle filled up the “Answérs by Medical Examiner ” in both applications. He handled both, knew what each contained, and in the application to the National Company he certified that the applicant had asthma, and did not advise the issuing of a policy; while in the application to the defendant he said nothing about asthma, but advised the taking of the risk, and said it was a good-one for the age. The doctor was not selected by the applicant to make the examination; he was the regular medical examiner of the defendant and its agent. Grattan v. Ins. Co., 80 N. Y. 281. Can the. defendant under such circumstances enforce a forfeiture of the policy? “ The decided weight of authority is now in favor of the view that, where an agent. having authority to take or procure applications fills out the blanks, but does so incorrectly or incompletely, the company, and not the assured, must be the sufferer, either because in so doing the agent is held to be the agent of the company and the company is presumed to do all that he does, and knows all that he does, or because the company is estopped from availing itself of the act or neglect of its agent.” Bliss ón Life Ins., at p. 450. However this rule may be questioned where the agency is limited and notice thereof brought home to the assured,, it cannot be doubted where. the information, as in this case, was imparted to the vice-president of the defendant in the transaction of the corporate business. Mr. Richards in his work on Insurance (§ 68), in assigning reasons for waiver and estoppel in certain cases, says: “ The policy is prepared in the interest of insurers. The applicant must take it or nothing. * * * It would not be consonant with fair. dealing to permit an insurer in return for the premium to- deliver a pretended contract of insurance, while -knowing all the time, from the very threshold of the transaction, that a forfeiture is already incurred by reason of a violation of some printed condition, and that, therefore, the policy is of no more avail to the insured than a piece of waste paper.” If, therefore, at the time of closing the contract the insurers have knowledge of the [534] existence of a canse of .forfeiture which, would invalidate the policy from the time of its inception, they are held by accepting a pre-' inium or delivering the' policy, or by any other positive act amounting to an acknowledgment of its validity, to waive the forfeiture. Van Schoick v. Ins. Co., 68 N. Y. 434. Knowledge by or notice to the company of any inaccuracy or misstatement in the appli- • cation upon which a policy is issued after, such notice or knowledge binds the company and prevents it from availing itself of the inaccuracy in defense, some . of the cases regarding the facts as amounting to a waiver, and others as' working an estoppel in pais. May on Ins. §§ 143, 263; Hermans on Est., § 549; Big. on Est., § 526; Rowley v. Ins. Co., 36 N. Y. 550; Bennett v. Ins. Co., 106 id. 243; O’Brien v. Home Ben. Soc., 117 id. 310. The utmost good faith is the basis of insurance contracts. But the obligation does not rest solely on. the assured; it is- reciprocal. Forfeitures are not favored, and parties will be, in many instances, estopped from raising questions with that end in view when good faith and fair dealing require ap* plication of the equitable doctrine. When the policy is issued with full knowledge on'the, part of the underwriter of facts in direct conflict with the statement on the same subject, in the application, , it is reasonable to assume that there was no intention to insist upon the condition or claim a forfeiture under it. . McNally v. Ins. Co., 137 N. Y. 396; Carpenter v. Ins. Co., 135 id. 298.. Oon- '. ditions which enter into the validity of a contract of insurance at its inception may- be waived, and are waived if so intended, although they remain in the policy when delivered.. Berry v. Ins. Co., 132 N. Y. 58. Indeed, “when the facts are all known before any contract is made, a condition against, a state, of 'things known by all parties to exist cannot be deemed within their intention or purpose.” Forward v. Ins. Co., 142 N. Y. 383. To sustain a defense under such circumstances would be to hold, that there was a breach 60 instanti of the making of the contract, known to be so by the company, and to allow it “ to take the premium without taking the risk would be to encourage a fraud.”, Bidwell v. Ins. Co., 24 N. Y. 302, 304. Such a result would not be tolerated. In Thebaud v. Ins. Co., 84 Hun, 8, the court said: “In each of the cases of Van Schoick v. Niagara Fire Ins. Co., 68 N. Y. 434; Woodruff v. Imperial Ins. Co., 83 id. 133, and Short v. Home Ins. Co., 90 id. 18, oral evidence was received showing a situation in contravention of an express warranty contained in the [535] policy, and that the insurer had knowledge of such situation when the policy was issued. Evidence of this character was received, not for the purpose of contradicting the written agreement, but to demonstrate that the insurer had knowledge of the facts at the time the policy was issued, which it relied upon on the trial as constituting a breach of warranty. Upon such proof was predicated an estoppel, the object of the rule being to prevent fraud, and to render it impracticable for insurers to attempt acquisition, of premiums upon policies understood by them to be invalid when issued.’.’ In other words, it is competent to prove by parol the actual transaction in reply to defendant’s claim of breach of warranty and fraud, and this without reforming the contract or asking for equitable relief. Grattan v. Ins. Co., 80 N. Y. 281. The idea of taking the application from the National Company to the ■ defendant originated with the defendant’s agents; the transfer was made in its interest, and the fact that the assured assented should not, under the circumstances, be made the groundwork of a charge of fraud and falsehood. The motion for a new trial must, therefore, be denied. Motion denied.