Mutual Life Insurance v. Wager

Sutherland, J. Previous to the delivery of the policy of insurance in this case, to the defendant Wager, Frisbie, whose life was insured for Wager, made and signed a declaration that he had not been afflicted with, (among other things,) “ spitting of blood,” and was not then afflicted with any disorder which tends to the shortening of life. The defendant also signed a declaration, that Frisbie had not been afflicted with “ spitting of blood,” and that he was not then afflicted with any disorder which tends to the shortening of life, to his knowledge. The policy itself referred to this declaration made by Wager, and provided, that if the same should be found in any respect untrue, then the policy should be null and void. — 364 — The policy is not set out at large in the case; and it does not appear, nor is it alleged, that the declaration made and signed by Frisbie, was, by any stipulation or provision of the policy, incorporated in it, and made a warranty. Without reference to the declaration made by Wager, made a part of the policy by the proviso, m an action on the policy by Wager, to recover the sum insured, Frisbie, in making his representations as to health, &c. would have been deemed the agent of Wager; and the question would have been, whether he (Frisbie) had misrepresented, or had omitted to communicate any material fact within his knowledge, as to his health. The question would not have been a question of fraud; but only, 1st, whether there had been any misrepresentation or concealment; and 2d, whether the fact misrepresented or concealed was material. A false representation will avoid the policy, if the actual risk was greater than it would have been had the representation been true. In such action it would not have been necessary for the insurers to show that the misrepresentation or concealment was intentional or fraudulent. Had the misrepresentation or concealment of a material fact occurred from a mistake as to the materiality of the fact misrepresented or concealed, the policy would nevertheless have been void. (Vose v. Eagle Life Ins. Co., 6 Cushing, 42. Swete v. Fairlie, 6 Car. & Payne, 1. Wall v. Howard Ins. Co., 14 Barb. 383. Burritt v. Saratoga Mutual Fire Ins. Co., 5 Hill, 188. Fitzherbert v. Mather, 1 T. R. 12. Bufe v. Turner, 6 Taunton, 338. Alston v. Mechanics’ Mutual Ins. Co., 4 Hill, 329.) Of course, if a misrepresentation of a material fact by Frisbie had been fraudulently made, the policy would then also have been void—not because Frisbie would have been deemed the agent of Wager in committing the fraud, but because he was his agent in making the false affirmation as to a fact material to the risk, without reference to Frisbie’s fraud. Fraud implies knowledge; and Frisbie could not be deemed the agent of Wager in committing the fraud, without proof of knowl — 365 — edge or preconcert on the part of Wager. One may be civilly legally responsible for the fraudulent pretenses or acts of his agent, without being morally guilty of his fraud. In such action on the policy, looking at the whole case—-at the representations of Wager, made a part of the policy itself by its proviso, and therefore having the force and effect of a warranty, and also at the representation of Frisbie—the first question would have been, whether the words “ to my knowledge,” interlined by Wager in bis declaration, qualify only the representation immediately preceding, that Frisbie was not then afflicted with any disease which tends to the shortening of life; or extend to and qualify, also, the representation that he had not been afflicted with spitting of blood. In such action on the policy, looking at the representations of Wager, contained in the declaration signed by him, and made a part of the policy by the virtual insertion of that declaration in the policy; as well as at the independent representations of Frisbie, presumed not to have been made a part of the policy itself; the representations of Wager, by thus being made a part of the policy, acquired the force and effect of a warranty, and the materiality of the representations ceased to be a question; and the only question, irrespective of the words “to my knowledge,” inserted by Wager, would have been, whether they were true or false. If the insertion of these qualifying words in his declaration, and the virtual insertion of them in the policy, would have forbidden the legal inference that the unqualified representations of Frisbie were made by him as the agent of Wager, and would thus have compelled the insurers to prove that Wager knew the representations of Frisbie were false; in other words to prove fraud on the part of Wager, such proof of fraud would have been required by this peculiar contract, and not by the general principles of law applicable to these contracts of insurance. If, in an action by Wager on this policy for the amount insured, the company would have been compelled to prove that the representations as to Frisbie’s health were false to the — 366 — knowledge of Wager when made, such proof would have heen required, because they accepted Wager’s declaration ivith these qualifying words, and made it a part of their contract of insurance. When, therefore, Judge Mitchell charged the jury that “in a suit by the defendant against the company (on the policy) Frisbie might be considered the agent of the defendant, so that whatever Frisbie knew, of himself, would be deemed as known by the defendant,” he was strictly correct; unless the insertion of the words “ to my knowledge,” in the defendant’s declaration, made this case an exception; and then such hypothetical portion of his charge represented the rights of the company more favorably than these qualifying words permitted. But the judge further charged, that “ that rule would not apply under the pleadings in this case, and in the nature of this action. The defendant is not affected by Frisbie’s knowledge of any fact, if the defendant had no knowledge of the same factthat “ In a suit by the insured against the company the burden of proof would fall upon the insured, but as the company (in this suit) sues on a charge of fraud and misrepresentation, after paying the insurance as for a fair loss, the burden of proof is changed and thrown upon them that, “ If he (Frisbie) had (at any time on or before the date of the policy) either ‘ spitting of blood,’ within the meaning of the policy, or any disease which tends to shorten life, and the defendant knew it when the policy was effected, then the plaintiffs are entitled to recover all the money paid by them, together with interest. If Frisbie had none of these diseases, or if he had either of them and the defendant did not know it, the plaintiffs cannot recover.” How it appears to me that this part of the charge of the learned judge was worded with remarkable correctness and caution. It not being claimed, and there being no direct evidence to show, that although Wager originally, when the policy was made, did not know that Frisbie had been or was afflicted with “ spitting of blood,” yet that subsequently and — 367 — before he received the money of the company, he had been informed of that fact; the plaintiffs in their complaint and on the trial putting their charge of fraud and misrepresentation, against Wager, on the ground that the knowledge of Frisbie when he signed his declaration was the knowledge of Wager; and there being no evidence of any other or independent false pretense, act or device of Wager after the loss, by means of which he obtained the money; or of a misrepresentation by him of any circumstance attending the loss calculated to mislead the company and to prevent inquiry; the charge substantially was, that the plaintiffs could not recover in this suit, luithout proof of fraud on the part of Wager in the malting of the original contract of insurance; in other words, that the plaintiffs could not in this suit recover back the money paid by them, on the ground, merely, that the declaration of Frisbie that he had not been afflicted with “ spitting of blood,” &c. was false, and that they were ignorant of it when they paid the money. A distinction must be taken between the misrepresentation or ignorance of a fact attending the loss upon which the money was paid and the contract executed, and the misrepresentation or ignorance of an original fad which induced to the malting of the contract. The contract of insurance is an executory contract, executed by the payment of the sum insured on a loss. If there was fraud in the original contract, not known when the loss was paid; or if the loss was paid in ignorance of some circumstance attending the loss, which if known would have enabled the insurers to resist the claim, the money may be recovered back; but if they knew, when they paid the loss, or “ upon inquiry might have informed themselves, of the grounds upon which they might have resisted the claim, they cannot afterwards recover it back; for it would open the door to infinite litigation.” (Bibbie v. Lumley, 2 East, 469. Angell on Life and Fire Ins. § 409.) Ignorance of a fact which, if known, would have prevented — 368 — the execution of an executory contract, and ignorance of a fact which if known would have prevented its being carried into effect, are very different things. The law does not intend to extend to a party more than one opportunity fairly to litigate his rights. If he intends to plead ignorance merely of a fact, which if known would have prevented his making the contract originally, he must do it when called upon to carry the contract into effect, if upon inquiry he could have informed himself of such fact. To permit him, after its full execution by the payment of money, to recover back the. money on the ground of ignorance, merely, of such fact, would, in effect, be to permit him to try the same question twice, on the same evidence; or to repent, and revoke a voluntary act. The payment with the knowledge, or with the means of knowledge, of such fact, .must, be deemed a voluntary payment, and the party to be estopped from alleging ignorance of such fact. It would not be safe to say that in every case where the loss had been paid in ignorance of a material circumstance attending the loss, without any concealment or misrepresentation on the part of the party claiming, it could be recovered back on that ground alone; but the distinction between ignorance of a fact which if known would have prevented the execution of the contract originally, and ignorance of a fact which, if known, (assuming the contract to be valid,) would have prevented its fulfillment or the payment of the loss, exists; and is, I think, founded in reason and good sense. If the policy in this case, in its insurance clause, had excepted death by consumption, and the money had been paid on information and under the belief of the plaintiff's or mutually of the parties, that Frisbie had died of scarlet fever, it is very clear the money ought to be paid back—-for it would have been paid under a mistalce of facts. But the claim here is to recover the money back because the contract itself, under which it was claimed the money had become due and payable, was made under a mistake of facts. The plaintiffs — 369 — claim that they have a right to reject the charge of fraud in the original complaint, as surplusage, and to recover the money hack on the ground that the original contract, when they paid the loss, was voidable by them, because it was' entered into originally under a mistake of facts. The time for them to have avoided their contract was before its execution, if they had the means of doing so. They cannot avoid it after its execution, on the ground of mere mistake. How can we say that the plaintiffs would not have paid the loss, had they known when they paid it, that Frisbie had been afflicted with “ spitting of blood” before they insured his life. They might have misjudged as to the materiality of that circumstance—they might have mistaken their own rights under the contract—they might have waived any defense they had on that ground. In this suit it must be taken for granted that they did so. They are presumed to know the law, and as to the facts, they paid the money with the same knowledge, or with the means of the same knowledge, that they had when they commenced this action. They are barred by their own act from maintaining this suit on any ground merely affecting the validity of the original contract, known, or which upon inquiry might have been known, when they paid the loss, and which would have been a defense to an action on the policy; except fraud. In this action, they must be deemed, by the payment, to have settled, or waived, all questions of law or of fact as to the validity of the original contract, except fraud, which they had the means of raising when they paid the loss. I think, therefore, that the charge of Judge Mitchell, as to the plaintiffs’ claim of recovery on the ground of the false representations of Frisbie as to his health, was right. The complaint alleges, that Wager represented, when he claimed the money, that Frisbie had died of a disease of the lungs of recent origin. He did die of consumption; and I should have supposed that this representation as to the cause of his death,, if made, would have induced an inquiry into — 370 — the truth of Frisbie’s original representation that he never had been afflicted with “ spitting of blood/’ &c. [New York General Term, May 3, 1858. Davies, Sutherland and Ingraham, Justices.] The charge of the judge as to the right of the plaintiffs to recover on the ground of a want of an insurable interest in the life of Frisbie, was, I think, also right.- The above reasoning, in the main, applies also to that part of his charge. Besides, if the policy was void or voidable on this ground, it was void as a mere wager policy; as being prohibited by statute. Why, after the money has been actually paid, should it be recovered back on that ground ? The statute which forbids the contract, does not give this right of recovery as a penalt3r. A false representation by Wager as to his interest could not be a fraud on the plaintiffs, for their risk and the premium was the same whether Wager had any interest or not. It is unnecessary, however, to pursue this suggestion, or to see what authority could be found for it in the books. I put my opinion, that upon the whole case, the charge of the judge was right, and the case upon the law and the evidence fairly put by him to the jury, and that a new trial should be denied with costs, upon the other ground. Davies, P. J., concurred.