Central Accident Insurance v. Spence

Hr. Jtjstioe Brown delivered the opinion of the court. It is by no means clear to us that the contention of the appellant. in this case concerning the lack of any preponderance of evidence in favor of the plaintiff, is not will made. The burden was certainly on her to establish the death of Robert Spence by accident. The disposition by us of the other matters involved in the appeal will probably compel the submission of the case to another jury, and we therefore forbear to discuss the evidence. We do not place our decision upon any view taken by us of the evidence, but upon what we deem erroneous rulings on the pleadings. It is unnecessary to pass on the question whether or not any alleged error in the matter of pleadings is open to appellant’s objection, other than sustaining the plaintiff’s demurrer to the defendant’s additional fourth plea, for all the substantial questions arising on the rulings are involved in that. The only contention of the appellant in defending this case, except that the proof does not show the death of Robert Spence to have been the result of accident, is that Robert Spence in making the application for the policy sued on inaccurately stated his age, placing it at too small a figure; that when said policy was issued and when the renewals thereof were made, the company did not know of this misstatement, which it discovered after the death of the assured; and that immediately on learning it, the company gave notice to the appellee that it had ascertained the fact of such misstatement and tendered to her the amount of all premiums and sums paid by Spence on said policy and renewals, with interest at five per cent, per annum from the date of each payment. It asserts these matters of defense in the additional fourth plea, and also avers that the aforesaid statement of age by said Spence was and is material to the risk assumed by defendant under the policy, and that the understatement thereof increased the risk and hazard of the defendant thereunder, without consideration or additional compensation therefor. To sustain the demurrer to this plea, therefore, the court below must have held as a matter of law that a misrepresentation of his age by Spence in his application, such as was alleged by the plea, was immaterial to the risk, and therefore that any evidence offered to prove the last paragraph of the plea would not be material or competent, and also must have held that the proof of all the other allegations of the plea would furnish no defense to the action. This view we think erroneous. First. We hold the statement concerning his age made by the assured in his application to be under the terms of this application and policy a warranty, and that it is not open to the plaintiff to raise the question whether or not it was material to the risk. Secondly. We hold that, although the policy is not one with a self-operating clause for its own cancellation and a forfeiture of the premiums paid in case a warranted statement is untrue, yet it could be disaffirmed for such a breach of warranty even after the death of the assured, provided the company exercised its right to do so within a reasonable time after obtaining knowledge of such breach, by tendering to the beneficiary of the policy the premiums paid. These two propositions are, of course, sufficient to render the plea under discussion good, but we further hold, thirdly, that if assured’s statement alleged to be untrue was not a warranty, it was, as a matter of law, a material representation, the age of the assured being, in a policy of insurance of this kind, as in an ordinary life policy, always a material matter; and fourthly, that if said statement was a material representation, then its falsity gave to the company the same right of disaffirmation as if it had been a false warranty. Fifthly, we hold that even if, as a matter of law, the statement is not to be considered a material representation, it certainly cannot be considered, as a matter of law, an immaterial representation. The question of its materiality should in that case have been left under this plea to the jury. The last proposition we do not care to discuss. To reason on it by analogy would open a wide field, and as we hold that in any event the statement of age in an application for a policy like this is material, as a matter of law, and that to rule that it is immaterial is error, even where no evidence to the contrary is offered, it would be an unnecessary discussion of an academic question to attempt to establish the proposition that such a statement of age is not, as a matter of law, immaterial. The first position taken—that the statement of Spence in the application as to his age was a warranty, and that as such its materiality is not open to question—is justified by the nature and connection of the policy and of the application, their language, and authorities of controlling force with us in relation to such language. The policy declares that the insurance is made in consideration of the warranties and agreements in the application, and on the same sheet inserts a copy of the application, which by his actual signature, or at least by the acceptance of the policy with a stipulation to that effect plainly printed across it, the assured accepts as a-true copy of the original. This application begins: “I hereby apply for an accident policy to be based upon the following statement of facts, all of which I hereby warrant to be true.” The application closes with the clause: “I hereby agree that this application and warranty, together with the premium paid by me, shall be the basis of the contract between the Company and me, and I accept the policy which said Company shall issue upon the application subject to all the conditions, provisions and classifications contained in such policy or referred to therein, which I understand cannot be altered, changed or waived by any agent of said Company before or after the issuing thereof.” That under these circumstances this statement of age was a warranter, and that, if a warranty, its materiality is not open to question, but has been foreclosed by the agreement of the parties, is the approved doctrine of the authorities. The application is in effect made a part of the policy, and when an application is so made and the statements therein contained are warranted to be true, they are warranties, and it is of no consequence whether they were or were not material to the risk. Continental Life Ins. Co. v. Rogers, 119 Ill. 474, p. 482; Thomas v. Fame Ins. Co., 108 Ill. 91; Treat v. Merchants’ Life Association, 198 Ill. 431; Connecticut Mutual Life Ins. Co. v. Young, 77 Ill. App. 440; Ætna Life Ins. Co. v. King, 84 Ill. App. 171; Metropolitan Life Ins. Co. v. Zeigler, 69 Ill. App. 447; Peterson v. Manhattan Life Ins. Co., 115 Ill. App. 421; Vose v. Eagle Life & H. Ins. Co., 6 Cush. 42; Jeffries v. Life Ins. Co., 89 U. S. 47; Johnson v. Maine & N. B. Ins. Co., 83 Me. 182; Foote v. Ætna Life Ins. Co., 61 N. Y. 571; Ætna L. Ins. Co. v. France, 91 U. S. 510; Anderson v. Fitzgerald, 4 House of Lords Cases, 483; Dwight v. Germania Life Ins. Co., 103 N. Y. 341; Cushman v. U. S. Life Ins. Co., 63 N. Y. 404; Cobb v. Covenant Mutual Benefit Assoc., 153 Mass. 176; McCallum v. Mutual Life Ins. Co., 55 Hun, 103; Baumgart v. Modern Woodmen of America, 85 Wis. 546; Bacon on Mutual Benefit & Life Ins. Co., sec. 194-197, and sections before and after; May on Life Ins., sec. 156; Bliss on Insurance, section 34. The second proposition of law affecting this case as above stated, that this policy could be disaffirmed for a false statement warranted, to be true, by the action of the company in tendering the beneficiary the premiums paid within a reasonable time after ascertainment by said company of the fact of the misstatement, is in effect a modification of the strict law on the subject, and in our view an under—rather than an overstatement of the true rule. That if a warranty which enters into the consideration of the policy is false, them the beneficiary under the policy cannot recover, is the prevailing doctrine on the subject, sustained by the authorities before cited. The contract is void ab initio. But it would, as the court says in Dickerson v. Northwestern Life Ins. Co., 200 Ill. 270, at page 276, “be inconsistent to claim that the policy ivas never in force and at the same time to retain the premiums paid as the consideration for a risk which had never been assumed.” Consequently it would seem that in an action in assumpsit for money had and received, the premiums paid could be recovered back, and in an action on the policy with the common counts subjoined to a special count on the policy their amount could be recovered with costs. Whether the effect of failure to tender such premiums back and to notify the beneficiary of the claimed invalidity of the policy could be carried farther than this, or whether “ to rescind a contract ” and “ to declare it void ab initio,” are not very different and mutually exclusi.ve actions, it is not necessary here to decide. As the writer in the American & English Encyclopedia-of Law, quoted by appellant’s counsel, says: “ Insurance policies usually contain an express provision that the contract of insurance shall be deemed null and void if the facts warranted to be true are untrue, and stipulate that in that event the sums that have been paid as premiums thereunder shall be forfeited to the insurance company.” It is logically the forfeiture of the premiums only—not the invalidity of the policjT—which rests for its assertion on this clause; but it might be urged that if after obtaining knowledge of the falsity of the warranted statement, the company forbore any action or notice, and especially if it received other premiums from the assured, it must be considered as having waived the falsity of the statement and the consequent invalidity of the policy, and on the other hand affirmed it and rendered it valid. In this view such expressions as “ a right to rescind the contract,” “an actual rescission of the contract,” and “ seeks to rescind and declare the contract void ah initio,” quoted by counsel as applicable in cases where no self-operating clause of forfeiture is found in the policy, acquire a logical meaning which they otherwise would lack. But the admission is made by appellant in argument that in order to have the benefit of the untruthful warranted statement in the present case, the company was bound to declare that it claimed such benefit on the discovery of the untruthfulness, and to tender back what it had received, and it is unnecessary to inquire whether any more favorable statement of the law to appellant in this regard would be justifiable. It has pleaded such claim and tender in the plea adjudged bad. We think that Dickerson v. Northwestern Mutual Life Insurance. Company, 200 Ill. 270, is in point and sustains appellant’s contention in this regard. ' Our third proposition, that the age of the applicant for the policy sued on was a material matter, and therefore its misstatement in the application a material misrepresentation as a matter of law, is supported by authority, analogy and reason. In Dolan v. Mutual Reserve Fund Life Association, 173 Mass. 197, the Supreme Judicial Court of Massachusetts so held as to a misstatement of age in an application for life insurance, and the opinion in Aetna Life Ins. Co. v. France, et al., 91 U. S. 510, shows that the judge of the Circuit Court so held as to a discrepancy of five years. It would not seem, however, that this proposition needed authority. That after an early age every year or fraction of a year adds to the nearness and danger of death, no one can deny, and that in the application for ordinary life insurance, even though the policy "were one “ for a short term,” or “an endowment policy,” which the learned Massachusetts judge delivering the opinion in the Dolan case thought might be exceptions to the rule laid down by him, a statement concerning the age of the applicant is material, seems to us self-evident. But it may be said that death resulting from accident is no more likely to happen to one sixty-four years old than to one sixty-two. We think this is unsound. The greatest healer in the world is the vis medioatrix of youth. Old men are less active and alert than younger ones, and therefore both in liability to accidents and in chance of recovery from their effects are at a disadvantage. This makes age material to the risk, and if it is, there is no point at which the line can be drawn and an understatement of it said to be immaterial. The argument of appellee, in which she attempts to reduce appellant’s contention to an absurdity by saying that under it the application must state to the exact day the age of appellant, is specious. If the statement of age, for example, had been “over sixti'-,” it would not have been untrue, and if the company took it and did not insist on a more specific statement, it would have been sufficient. But “age, 62 years,” has a well-recognized meaning. It is that the applicant is living between the sixty-second and sixty-third anniversaries of his birth. If he did not know that to be the fact, he should have said so and given his age as nearly as he could. The fourth proposition hereinbefore made, that a misrepresentation material to the risk gives to the company the same right of disaffirmation as a false warranty, is an elementary doctrine of the law of insurance. As Joyed on Insurance, section 1894, expresses it: “A false representation in regard to material matters will avoid the contract, even though not embraced in the contract, and therefore not a part thereof.” Among the cases in which, in connection with the differences between warranties and representations, the like effect of a false warranty and of a false but material representation, is pointed out with great clearness, are: Anderson v. Fitzgerald, 4 House of Lords Cases, 483; Mutual Benefit Life Ins. Co. v. Miller, 39 Ind. 475; Roth v. City Ins. Co., 6 McLean, 324; Nicoll v. American Ins. Co., 3 Woodbury & Minot, 529; Farmers’ Ins. Co. v. Snyder, 16 Wend. 481; Jennings v. The Chenango County Mutual L. Ins. Co., 2 Denio, 75. As we place our decision entirely upon the error of the court below in sustaining the demurrer to the defendant’s, additional fourth plea, it is unnecessary to notice the points made by appellee as to the bill of exceptions, as to the action of the court in refusing to take the case from the jury, to grant a new trial, or to arrest the judgment, or as to any pleadings except the fourth additional plea. As to that plea, the appellee objects that the statement of the age in the application is not alleged by the plea to be a warrranty, and, as a matter of fact, was not a warranty. The plea refers to the declaration in which the policy and application are set out, avers the execution of the application by Spence, and that the statement of age in it was false. This is sufficient. As counsel say, “calling a statement a warranty does not make it one,” and conversely, neglecting to call it so does not prevent it from being one, and a court must so regard it, if, when set out, it appears to meet the test. That the statement involved was shown to be a warranty by the declaration referred to in the plea, we have already indicated that we think the authorities oblige us to decide. Counsel for appellee further say, that even if the statement complained of was a breach of warranty or a material misrepresentation, yet as the contract of insurance fails to provide that a breach of warranty or a material misrepresentation will make it void, it is not a defense to plead it. We have hereinbefore pointed out that this, in our view, involves a misconception of the effect of the usual clause of forfeiture. Nor is it in point to discuss the rule of damages in a case of a breach of warranty in the case of a sale of warranted goods. “Warranties” and “material representations” in the law of insurance have a technical meaning, easily to be distinguished from their use in other branches of the law of contracts, and little light on this case can be derived from the law of “warranty,” unless it is the law of “warranty” in an application for insurance. Counsel further urge that the policynnust in any case be “rescinded” on account of the misstatement, before the misstatement can be used as a defense, and that such rescission is impossible after a loss has occurred. He claims also that no such rescission can be made by tender of premiums to the beneficiary, with whom the contract was" not made. The suggestion is not without point, for the repayment to the beneficiary is not placing the insured or his estate in statu quo, as a rescission in a strict sense requires. But, as we have already indicated, we do not hold that a disaffirmance and repudiation of the contract because of the misstatement is in a true sense a “rescission,” although the word “ rescinds ” is used in appellant’s notice set up in the plea. The part of the plea subsequent to the allegation of the misstatement is rendered necessary—if it be necessary and not surplusage—only by the inequity of retaining premiums “ paid as a consideration for a risk which had never been assumed.” As the beneficiary brought suit, the plea, while setting up the misstatement as avoiding, not rescinding, the contract, purges the defendant from the implication of injustice in retaining premiums it had never earned, by showing an offer of them to the beneficiary; and further shows that it cannot be charged with affirming, by receiving those premiums, a contract void when it was made. If this is superfluous, it does not render the plea bad. We think that the demurrer should not have been sustained. We reverse the judgment and remand the cause, with directions to the Superior Court to overrule the plaintiff’s demurrer to the fourth additional plea of the defendant .and thereafter to take such proper proceedings in the cause as may not be inconsistent with this opinion. Reversed and remanded with directions.