Bloomington Mutual Life Benefit Ass'n v. Cummins

Mr. Presiding Justice Sample delivered the opinion of the Court. This suit, as shown by the foregoing statement of facts, was brought to recover assessable value of a certificate of membership in a Mutual Life Benefit Association. The defense interposed was, that the statements of the insured in the application in reference to matters of fact material to the risk were untrue, false and fraudulent; and that such statements were, under the terms of the contract of insurance, warranties. The court instructed the jury for the plaintiff, that such statements were in law representations and not warranties, and although untrue in fact, yet unless they were falsely made for the fraudulent purpose of procuring membership in the defendant association, such false statements would not of themselves vitiate the policy issued to the plaintiff in this case. The jury found for the plaintiff the full amount due under the policy or certificate, upon which the court rendered judgment, after overruling motion for new trial, and the giving of the above instruction together with the refusal to give other instructions on behalf of the defendant, holding such statements were in law, under the contract, warranties, are assigned on this record as error. That many of the answers in the application were material to the risk, is incontrovertible. That they were made a part of the contract of insurance, as warranted statements on the faith of which this certificate was issued,” is evidenced by the terms of the certificate itself, which is the basis of this action. It is therein further provided that if such statements “ are not in all respects true^ or in case of any fact relating to health, habits or circumstances being suppressed, then in either case this certificate shall be null and void and of no effect.” The application being made a part of the policy, the policy with all its terms and conditions constitutes the contract between the parties. Rockford Ins. Co. v. Nelson, 65 Ill. 415. The application alone is not the contract. Mutual Benefit Association v. Conway, 10 Ill. App. 348. It is true, the application in this case is made the basis of the contract, and provides, “ If any misrepresentations or fraudulent or untrue answers have been made, or any facts which should have been stated, have been suppressed, then in either event this agreement shall be null and void.” The answers in the application are made warranties by the express terms of the completed contract. Herein this case is to be distinguished in this respect from Winthrop’s case, 85 Ill. 537, for it is there said the insurance society did not intend that the statements should operate as a warranty. Many peculiar and unusual questions were required to be answered in the application in that case, and as is said, " If a warranty was required of the answers of some of the questions, it would be useless for persons to become members of the society.” In that case there is nothing to indicate the policy provided in terms, the answers should be warranties. In the Rogers case, 119 Ill. 474, the real question was whether it was incumbent on the plaintiff in a suit on an insurance policy to aver and prove the truth of the statements in the application, for the defendant did not attempt to prove they were untrue, and therefore, as the court held, they were not in issue. It is true the court considered to a certain extent the question of what statements were warranties, and said, " It is generally true that where the application is expressly declared to be a part of the policy, and the statements therein contained are warranted to be true, such statements will be deemed material whether they are so or not, and if shown to be false there can be no recovery on the policy, however innocently made, and notwithstanding their falsity may have had no agency in causing the loss or producing the death of the assured.” This doctrine seemed too harsh and therefore the court further say, “ If the answers, however, are simply representations, as contradistinguished from warranties, in the technical sense of these terms, then such of the answers not material to the risk, as were honestly made, in the belief they were true, would not be binding upon the assured, or present any obstacle to a recovery.” It is further indicated that the provisions of a policy relating to fraudulent statements, concealment and misrepresentations, to be made effective, must be held to apply to representations and not warranties. There is no provision in this policy as to fraudulent representation avoiding the same, other than may be said to be contained in certain language of the application, viz.: “ If any misrepresentations, fraudulent or untrue answers have been made * * * then this agreement shall be null and void.” This language indicates that as to certain answers there may be misrepresentations, as to others they may be fraudulent, and still as to others they may be simply untrue. It does not follow from the decision in 119 Ill. supra, that all the answers, which by the policy were made warranties, should, notwithstanding, be treated as representations in order to give effect to the provision in the application in regard to misrepresentations. The law not favoring forfeitures, the courts have seized on the term “ representation ” in policies of insurance or in applications, which are made a part of the policy, to construe answers as not being warranties, which relate to immaterial facts or to latent 'diseases of the applicant, of which he was not aware. To that extent certain answers in this case may be held to be representations, although by the terms of the policy made warranties. But as to those matters material to the risk, about which direct inquiry was made, and which by the application and the policy it is provided that if they are “ untrue ” the policy will be avoided, the answers may be held to be warranties; for it may be well assumed, in view of the language used, it was to such matters the warranty was to apply. The answers in such an application as this were held to be warranties in the case of Morgan v. this association, 32 Ill. App. 79. There is, however, not very much difference in the legal effect of material representations and warranties. A misrepresentation of a material fact, about which a specific inquiry has been made, has been held to exonerate the insurer. This rule is said to be peculiarly applicable when the application is by the policies made a part of the contract, and a warranty on the part of the assured. Thomas v. Fame Ins. Co., 108 Ill. 91-102. This is the law whether the answers are representations or are made warranties. Phenix M. L. Ins. Co. v. Raddier, 120 U. S. 183. The policy in the case in hand, as has been stated, makes the answers warranties, at least where material. A representation, strictly speaking, is said to be no part of the contract of insurance, but as inducement to it: Glendale Woolen Co. v. Protective Ins. Co., 21 Conn. 19; while a warranty enters into and forms a part of the contract itself. Campbell v. N. E. M. L. Ins. Co., 98 Mass. 389. The difference in their legal effect on the contract being, that the former is required to be only substantially true, while the latter must be literally true. Campbell case, supra. Whether a material representation has been substantially complied with or is substantially true, is a question of fact for the jurw Miller v. M. B. L. Ins. Co., 31 Iowa, 232. But it is not so as to a warranty. The warranty must be exactly fulfilled and literally true or the contract is avoided. 21 Conn. 19, supra. In neither case, however, is it for the jury to say the statement or representation, which is in writing and made a part of the contract of insurance, is immaterial, if it affects the risk. 31 Iowa, 232, supra. Nor that such representation was accidentally, honestly or dishonestly made. Armour v. T. Fire Ins. Co., 90 N. Y. 455. The same rule of law applies to the suppression of a material fact in an answer to a direct question, when such answer purports to be complete. 120 U. S. 183, supra. The rule of law is believed to be in regard to representations, as distinguished from warranties, that motive, or knowledge of material facts about which direct inquiry is made, is not issuable, but is as to immaterial facts. Germania Ins. Co. v. Rudwig, 80 Ky. 235; Ala. G. L. Ins. Co. v. Johnson, 80 Ala. 467. There may be some exceptions to this general rule, as in the case of lurking or constitutional tendency to certain diseases of the insured, which may even be manifest to the careful observer, and yet not be consciously recognized by the insured himself. It is natural for a man to desire to disbelieve that his body is afflicted with a constitutional taint, and therefore he does not readily give credence to manifestations that to others are apparent. Therefore, as to such matters, it is insisted in many well considered cases that the honesty and good faith of his answers, even to direct inquiry, is an issuable fact. Mouler v. American Life Ins. Co., 111 U. S. 335. If such tendencies are manifest at the time of the insurance, there seems to be no good reason why the insurance company shoud not protect itself by the physical examination of its medical examiner. If in such case, the examiner reports the insured as a fit subject for insurance, this is some evidence that the insured himself was not at the time aware of the character of his affliction, and the legal effect of his answers should be determined by the test of honesty and good faith. If, however, such constitutional taint is not determinable from an examination, but is by family history, the knowledge of which the company has a right to assume rests with the insured, then his answers to direct inquiry in relation to such matters as are material to the risk must be true. If untrue, without regard to actual knowledge or good faith, the policy will be avoided. The disease with which parents, brothers and sisters of the applicant died are clearly material to the risk, as affecting the prospects of life of the applicant. If he assumes to know he must answer the truth. If he does not know he can so state. But when- he does answer such direct inquiries in an unequivocable manner, the insurance company has a legal right to rely on them as being true. In this case the insured was asked: “ If parents are living, give age and condition of health; if dead, state diseases and age at death.” Answer. “ Father dead, age 60, cause of death, fever.” “ Mother dead, age 45, cause of death, fever.” “ Brothers, one dead, age 19, cause of death, inflammation of bowels.” “ Sisters, three dead, one, age 25, cause of death, slow fever; one, age 20, cause of death, bowel inflammation; one, age 19, cause of death, inflammation of bowels.” “ Do you believe yourself to be free from all diseases, hereditary or otherwise, tending to shorten life ? ” Answer, “ Yes.” " Give the name and address of your family physician.” Answer, “ Dr. Boyd Hurrican, * * * Ky.” The evidence of the family physician above named, of another family physician, and of the neighbors, show conclusively that the applicant’s family above named all died of consumption, at which time he was living in the family and must have known the cause of death, several of them having died within a few years of the time of making the application. It is proven by two witnesses, that he stated his family had died of consumption, and he would go the same way. The facts in the case of H. L. & A. Ins. Co. v. Gray et al., 91 Ill. 159, are very similar to those in this case. There the applicant stated his father and mother had died of fever, while, in fact, they had died of consumption, more than twenty years before the application. He stated further, that none of his family had been afflicted with such a disease. In that case, the court say: “ His answers assume that he had such knowledge and, therefore, precludes the right of appellees to allege his want of knowledge as an excuse for his answer.” The court further say, “ It is not reasonable to assume that the assured was ignorant of this fact, of the cause of his parents’ death, for he seems to have been living with or near his parents during the time they were afflicted. It is impossible to escape the conviction that the truth, here, was withheld, because its communication would have defeated the application for the policy, or materially increased the premiums for the risk. The instructions of the court below, and the theory upon Avhich appellee’s case rests, that false statements as to matters material to the risk would not vitiate the policy unless made for the fraudulent purpose of procuring the insurance, are erroneous, from either the point of view that the statements Avere warranties or material representations. The evidence does not warrant a recovery under the law, and therefore the judgment will be reversed and the cause remanded.