Grand Fraternity v. Keatley

Conrad, J., delivering the opinion of the court: This is an action in covenant, brought by Mary C. Keatley, the plaintiff, against the Grand Fraternity, a corporation of the State of Pennsylvania, the defendant, to recover the sum of two thousand dollars, on a death benefit certificate of membership, alleged to have been issued by the defendant, on the eighteenth day of March, A. D. 1909, to William J. Keatley, husband of the plaintiff, in his lifetime, payable upon satisfactory proofs of the death of the member to Mary C. Keatley, the plaintiff. The application made by the deceased contained the following provision: “And as this application is made to, and any certificate or certificates issued herein will be issued by the Grand Fraternity at its general offices in the City of Philadelphia, I do hereby agree that this application and the certificate or certificates issued hereon, and the said charter, constitution, statutes, by-laws, rules and regulations of the Grand Fraternity, shall always be construed under and according to the laws of the State of Pennsylvania.” [1] At common law it is well settled that false answers to questions in an application for insurance vitiate the contract, the answers being taken as literal warranties. The answer being proven false is itself sufficient to void the contract, even though the answer was made in good faith and regardless of the materiality either of the question or answer to the risk. In Pennsylvania an effort has been made to modify the common-law rule by a statute passed June 23, 1885, which reads as follows: “Whenever the application for a policy of life insurance contains a clause of warranty of the truth of the answers therein contained, no misrepresentation or untrue statement in such application made in good faith by the applicant, shall effect a forfeiture or be a ground of defense in any suit brought upon any — 317 — policy of insurance issued upon the faith of such application, unless such misrepresentation or untrue statement relate to some matter material to the risk.” [2] In the case now before us the real question is to ascertain what construction has been put upon the foregoing statute by the courts of Pennsylvania, and to follow as fully as we can, the decisions of those courts. In so doing we have encountered decisions that seem to be contradictory and which it is difficult to reconcile. In Mengel v. Northwestern Life Ins. Co., 176 Pa. 280, 35 Atl. 197 (1896), the insured in his application swore that he had always been temperate, and that the only consultation by a physician was about a year before for light influenza. The evidence produced at the trial showed that for five years prior to the applicant ’s death a physician had attended the applicant more than once for vomiting and nausea, the effects of overdrinking, the last attendance being within four months prior to the application. On writ of error the Supreme Court held that the undisputed facts showed such breach of a material warranty as to require the court to direct a verdict for the defendant, and reversed the judgment of the court below. In March v. Metropolitan Life Ins. Co., 186 Pa. 629, 40 Atl. 1100, 65 Am. St. Rep. 887 (1898), the Mengel case was upheld, and the court after a full review of all prior cases on the subject, held that it was never intended by the act of 1885, nor did that act assume, to change the law in cases where the matter stated was palpably and manifestly material to the risk, or where it was absolutely and visibly false in fact. It being shown in the March case by uncontradicted evidence that the answers of the insured were absolutely false as to having no serious ailments, and as to attendance by a physician, the Supreme Court held that it was the duty of the trial court to direct a verdict in favor of the insurance company. In Lutz v. Metropolitan Ins. Co., 186 Pa. 529, 40 Atl. 1104 (1898), the March case was cited with approval and upheld. In the Lutz case the insured had averred in his application that he had never had spitting of blood, that he was never sick, that he — 318 — had never been confined to the house by sickness, and that one month before his application he had been attended by a physician for a cold that was cured, and that he had not been attended by any other physician. The appeal court said: “It was clearly proved on the "trial by evidence altogether uncontradicted and undisputed that every one of the foregoing answers was absolutely false. * * * As a matter of course, there could not be any doubt that previous spitting of blood, or illness, or confinement to the house by reason of illness, or medical service, or the attendance of the physicians, or having consumption, were subjects of the most serious and material character, and they have always been so held by the court.” It was, therefore, error for the court below to submit the materiality of the answers to the jury, and ordered the judgment below, in favor of the plaintiff, reversed. In Murphy v. Prudential Ins. Co., 205 Pa. 447, 453, 55 Atl. 19, 23 (1903), in an exhaustive opinion by Mestrezat, Justice, the Supreme Court commend and uphold the ruling of the court in the Mengel, March and Lutz cases, and the question as to when the materiality of the risk should be submitted to the jury, and when the materiality must be declared by the court, was learnedly discussed by the court in its opinion, and its conclusions would seem to settle the question in Pennsylvania. The following quotation is taken from the court’s opinion in the Murphy case: “We have held it to be error to submit the case to the jury where the uncontroverted evidence shows that the insured made false answers to questions as to when insured was last attended by a physician and for what cause, how long since he had consulted a physician and for what disease, and as to whether he had ever been sick, had any serious illness, had ever consulted a physician, had ever had spitting of blood, did not have consumption, was insured in any other company, had applied for insurance in any other company and been rejected, had always been temperate, had had any medical attendance within the year prior to the application, and if so, state disease and give name of physician. It has always been held that the court must declare as material a false statement to a request that the insured give full particulars — 319 — of any illness he might have had, and also an untrue statement that no life insurance company had declined or postponed an acceptance of a proposal to insure applicant’s life. In each instance it was held to be the duty of the court to pronounce the answer material to the risk. “Under the interpretation placed upon the act of 1885 by the numerous decisions of this court, it is clear that the statements or answers made by the insured in the case, alleged by the defendant to be false, relate to matters material to the risk. The statements were made in reply to questions asked for the evident purpose of ascertaining the true condition of the applicant’s health at the time of the delivery of the policy and prior thereto. The acceptance or rejection of the risk, as well as the rate of the premium, would depend on the information elicited by the questions. If the applicant was in bad health, it needs no argument to show that the risk to the company would have been increased, and would, therefore, have been rejected or a greater premium would have been demanded. The answers to the other questions were equally material to the defendant company. A truthful response to any of the questions was a prerequisite to intelligent and safe action by the defendant in passing upon the application of the insured.” [3] The questions and answers relied upon by the defendant below to avoid the certificate were: First. To the question, “When and for what complaint did you last consult a physician?” the deceased answered, “Not since childhood,—mumps. ’ ’ Second. To the question, “Has your weight recently increased or diminished?” the answer given by deceased was, “No.” Third. To the question, “Have you ever been subject to or had piles, bladder, gravel or kidney disease?” the deceased answered, “No.” In refutation of the above answers, the defendant below called three physicians to prove that they had attended the insured. Dr. Millard F. Cochran testified that some six or seven years prior to the death of the insured he attended him for piles; — 320 — that he operated upon and cured him, the treatment extending over a period of a week or ten days. Dr. Irving L. Chipman testified that Keatley came to his office on June 1, 1908 (about nine months before signing application for insurance in defend ant company), and in reply to the doctor’s inquiries gblve him a full description of his complaint, which the doctor diagnosed as diabetes mellitis. Dr. Chipman further testified that Keatley came to his office twice a week for the four succeeding weeks, that' he believed that Keatley had diabetes and prescribed for him for that disease, and that he made several examinations of his urine, which showed large deposits of sugar; the doctor being clearly of the opinion that Keatley was suffering with diabetes. He so informed Keatley. Dr. Alfred- L. Kelley testified that in the fall of 1908, within six months of the signing of the application, Keatley called at his office and he prescribed for him for a slight distress in the stomach, an immaterial ailment, and only one call was made and one prescription given. The testimony of these three physicians, unbroken on cross-examination, clear and positive as to facts, proves the absolute falsity of the statement made by Keatley in his application for insurance in defendant company, wherein he stated, averring it to be true, that he had not consulted a physician since childhood; his last and only disease being mumps. Keatley in his application also averred that he had not been subject to or had piles, bladder, gravel, or kidney disease. The testimony of Dr. Chipman positively and unmistakably shows that he attended Keatley eight times in a month within a year, before his application, for diabetes, a disease of the kidneys. While the ailment for which Dr. Kelley treated Keatley was trifling and unimportant, the testimony of Dr. Kelley is conclusive that he was the third physician who was consulted by Keatley within a comparatively few years of his application to defendant company, thereby proving false the averment of Keatley that he had not consulted a physician since childhood. The courts have always sought to guard with zealous care the bona fides of a contract. In a contract of insurance there should be the utmost good faith between the applicant and the insurer, and, as before — 321 — stated, under the common law the rule has been universally settled that false answers upon the part of an applicant will void or vitiate the contract. In the case at bar the testimony is most clear and convincing that Keatley in his application made statements that were positively untrue. The evidence of Doctors Corkran, Chipman and Kelley was straightforward, and their testimony establishes in a way that cannot be gotten rid of the fact that Keatley had been attended by three physicians within six or seven years of the time of making the application. The company was entitled to true answers to its inquiries. Upon those answers its contract was based. The company necessarily relied upon the answers to ascertain the prior condition of the applicant’s health. It is most important and material that the company should be informed as to what diseases the applicant had previously been attended for by physicians in order that an intelligent conclusion could be reached as to the desirability of the applicant as a risk. If the defendant company had been informed that within a year before the application was made Keatley had been examined by a physician and told that he had diabetes, it would undoubtedly have resulted in his application for insurance being summarily refused. If the defendant company had been informed that three physicians, within six years, had attended Keatley, does any one doubt that it would have put the defendant on guard and led to the making of a further investigation as to the general health of the applicant? The defendant company was entitled to this information, and the applicant was in all fairness and good faith bound to give truthful answers to the inquiries contained in the application. His failure to do this was such a matter of wrongdoing that he thereby put himself in a position that precludes his beneficiary from recovering on the certificate. By the analysis made by this court of the Pennsylvania cases upon the Pennsylvania statute, that controls this contract, we are constrained to hold that the answers of the insured in his application, commented on above, were warranties, and that the misrepresentations or untrue statements made by Keatley therein respecting consultation of physicians were clearly and unmistak — 322 — ably matters material to the risk, and should have been so declared by the court below; therefore, judgment reversed, but the defend- , ant, having by its plea of tender admitted its indebtedness to the plaintiff in the amount of one hundred and ninety dollars and thirty-six cents, representing dues or premiums paid by the deceased to the defendant, and costs of the cause then incurred, the court below, on motion of the plaintiff, shall enter judgment for the plaintiff for that amount, and against the plaintiff for all costs incurred subsequent to the filing of said plea, including the costs in this court. Whereupon counsel for the defendant in error applied for a rehearing on the ground that the court in reaching its opinion had misapprehended some of the evidence as well as the bearing of the decisions of the Supreme Court of the State of Pennsylvania upon the statute of that state relative to the materiality of risk. The motion for a rehearing was granted and upon that motion argument was heard on April 21, 1913, and at the June Term following the court announced its decision. Conrad, J., delivering the opinion of the court: The argument at the rehearing disclosed nothing that convinced the court that in its former determination it had misapprehended the evidence or misinterpreted the law applicable to this case. Let a decree be prepared in accordance with the opinion of the court.