Union National Bank v. Manhattan Life Insurance

Watkixs, J., filed a dissenting opinion. On tlie Rehearing the opinion of the court was delivered by Blav chard, J. The opinion of the court was delivered by Breaux, J. This was an action upon a policy of life insurance foi $20,000 issued on the 30th day of January, 1893, by the Manhattan Life Insurance Company of New York upon the application of Charles II. Schaefer. The insured named himself as the beneficiary. The policy was assigned to the Union National Bank. The agent of the company was advised of the fact, that the application was made for the benefit of the bank, and to send tlie policy to — 38 — the bank immediately after its receipt. The bank paid all the premiums. The premiums annually were $1,118.00. Three years’ premiums were paid. Charles IT. Schaefer died on the seventh day of January, 189G, apparently in good health until a few minutes prior to his death. The policy sets forth, that it was issued in consideration of the application, and the statements and covenants therein, and that if any statement made in the application be in any respect untrue, the policy was to be void, and all payments of premiums forfeited; save after three years it was to be incontestable for any misstatement in the application. The application concluded: “Warranted that the above statements and answers are full, complete and true in every particular, and they are offered as a consideration for the insurance applied for.” lie had, in 1S91, made application to the New York Life Insurance Company for a policy of life insurance on his life for $10,000. He was fifty-two years of 'age at the time, and applied for insurance at the rate of premium applicable to one fifty-one years of age and, substantially, to have his policy dated back for that purpose. This application was not granted, and the policy applied for, was not issued. It is in evidence, that the laws of the State of New York do not prohibit the dating- back of a policy, and that the rules and charter of one of the large companies, at least, have no provisions to the contrary. The defendant Manhattan Life Insurance Company contended, that a breach of warrnty had boon committed by the insured. The evidence discloses, that the medical directors have a common agency to which the names of persons whose applications have been declined by the respective companies (including the defendant company), are communicated, and that the Medical Board of the New York Life Insurance Company communicated to the common agency the name of Charles Henry Schaefer, as a declined applicant for insurance in that company. He was rejected, it was asserted, because of his request to have the policy dated back one year less than his age. It also appers, that on the 1st of April, 1895, the resident physician of the Manhattan Life Insurance Company applied to the New York Life Insurance Company’s Medical Director, regarding the cause for — 39 — which Charles Henry Schaefer was rejected in May, 1891, and that an answer was given informing' him of the cause. The case was tried by a jury. The verdict was for plaintiff. From the verdict and the judgment of the court, defendant appealed. The insured here knew, or it was incumbent upon him to know that he had applied for insurance in another company. lie had been examined for insurance by a physician of the company, and had signed an application in whiqh he had sought-, legitimately enough on his part, to be rated at less than his actual age; it may be, after all, that it would have been legal and binding if the company had chosen to allow the extraordinary request to lessen the amount of his premiums, by charging him, as related to premiums, with one year less than really was liis age, i. e.; by charging him premiums as if he had been fifty-one years of age, although he was fifty-two years of age. The nature of the request, and the refusal were such as to impress upon his memory that he had applied for insurance. Only a few years after, he chose to apply for insurance in another company. In his application he declared that he had never beeen rejected. We find it impossible to conclude, that this declaration was made in accordance with the facts, for in reality it was not. It is equally as true, that he was bound under the terms of the contract to make only correct answers. But it is contended by plaintiff’s counsel, that the proposition made by the insured regarding his age had no consequences; that the company to which he had applied (the New York Life Insurance Company) saw fit to decline the application; that he, the insured, had the' very best grounds to believe that he was absolutely without physical infirmity, and that the refusal to accede to his proposal, had nothing to do with the state of his health; that the insured acted in good faith, and that his memory should not be subjected to the stigma of his having spoken in falsehood. We have no desire to stigmatize the meniory of the deceased. He, it may be after all, had forgotten the statement contained in his application; it may be, that he had signed it without first having read it. The record does not disclose, that he could have had the least motive for any concealment growing out of the application which had been made by him to insure his life in 1891. He had been pronounced a first-class risk by the Medical Board representing the New York Life Insurance Company in 1891. — 40 — It is not for us to reform the contract and make it bend because of these just recited facts. The insured should not have signed the application at all with such a binding condition, in a matter not material, or should have signed only after having read it carefully, ancll after having satisfied himself that he could safely answer. The parties made material a fact that would otherwise be immaterial. Though there was no downright misrepresentation with the view of gaining an advantage, or to commit fraud, for the insured was ins all respects a safe risk, nonetheless, under the terms of the contract,, the statements should have been strictly and literally true. Weil vs. New York Life Insurance Company, 47th Ann. 1405. The second division of the case contains a question of estoppel growing out of the defendant’s knowledge of the insured’s prior application. We grant, to the defendant, that there was originally a breach of the agreement. The plaintiff, in our judgment is not absolutely concluded by this breach. It may well challenge defendant’s right to have the contract declared void and to have "the amount paid by it fox-premiums forfeited. Plaintiff may, in our view, lightly hold it, defendant, estopped by its knowledge and silence from urging the breach of agreement. There is a persuasive reason for concluding that through the common agency to which we have alluded in our statement of facts, defendant knew that the insured had made an application to another company prior to his application for one of its policies. Silence, and the continued collection of pi-emiums after knowledge of this fact, was hardly equitable conduct toward plaintiff, who was not a party to the original act of insurance. Quietly collecting the premiums from an assignee, who was unquestionably in good faith and knew nothing of the untrue statement of the insured in his application for insurance, must, in our view,be considered more effective as an estoppel and waiver, than if such an issue were to arise between the parties to the contract. Able counsel for the defendant earnestly controvert the position, that the defendant knew of the untruthful statement charged. If we should grant that the knowledge of the common agency of the Companies in New York was not conclusive proof of notice to the defendant, there is other evidence upon the subject. — 41 — We have seen that on the first of April, 1895, the resident physician of the defendant company made special inquiry, touching the prior application of the insured, to which the Medical Director of the New York Life Insurance Company replied on the 3rd of April, of that year, giving the desired information. At least from that time there was a duty and a fitting occasion to speak. The officers of the company must have known prior to that time. They had the application of Mr. Schaefer made to them for insurance, in their possession. They had access to all informtion of the “common insurance agency” in New York, where registry of all rejected applications was kept. The presumption is, that the medical directors made reference to the agency to ascertain the facts of the case. The purpose of the agency was, to furnish such evidence, and the natural inference is, that the officers concerned had knowledge of the statement and of the preceding application by which it was contradicteed. The applications are referred to the Medical Directors of the company, and they in turn have access to the Central Agency of all the companies. The evidence gives rise to a prima facie presumption of knowledge on the subject, sufficient to shift the burden of proof. The defendant company made no attempt to prove by the testimony of any of its officers, that they did not know of the first application. “The .capacity of the party to give evidence may affect the burden of proof.” Best on Evidence, par. 274. The same principle regarding the propriety of proof shifting after prima facie evidence was applied in Peetz, Widow, vs. Railroad Co., 42 Ann., 546; Day vs. Railway Co., 35th Ann., 694. This, in our view, brings knowledge of the fact to the company. From that standpoint the defendant is es-topped from insisting upon a forfeiture of the premium and the avoidance of the policy. Similar issues regarding estoppel were presented in Insurance Co. vs. Nicholls, 24 S. W., 911, in which the plea of estoppel was sustained and the policy was declared not forfeited. In that case, the court instructed the jury, in the charge: if the defendant had notice that any part of the answer was false, or that it knew that application had been made to defendant itself at a time previous, the defendant was estopped from setting up misrepresentation of the assured as a defense. On appeal, the charge was announced legal. The defendant contends that it is not bound by the knowledge of those to whom knowledge is traced in this ease; that a corporation of — 42 — itself eaif not have knowledge. It is, however, bound by the knowledge of its officers and agents who have charge of the particular business in regard to which knowledge is alleged. There was a delay of nine months in the case here for decision between the date that the medical examiner of the defendant company received direct information from the Few York Life Insurance Company of the first application, and the date of the death of the insured. During that time, it was, we feel confident, the duty of the defendant company to inform the assignee of the policy (the plaintiff) of the misstatement now complained of by the defendant. Having failed in this duty, we find it convincing, that the policy in the hands cf a third party as holder is not void. The defendant knew that plaintiff was the assignee from the first, and had paid all the premiums. It does seem to us, that the defendant, in justice to one of the holders of its policies, was bound to inform plaintiff of the breach of the contract, and that it should have raised the point within a reasonable time. There is no evidence before the court of the course usually, pursued by the defendant company in such cases. There is evidence of the manner of proceeding of another company, (like the defendant, one of the most prominent companies) in such cases. It invariably sets up inquiry with the view of rectifying or annulling the contract. We have no reason to conclude from the evidence, that the defendant has heretofore acted differently. Had the plaintiff been timely informed, it might have avoided risk of loss or questions of the legality of the contract, by taking1 out other insurance. It put faith in its policy, subject to question because of a breach of which tlio insurer had knowledge. The least intimation (of the breach) to plaintiff would have been enough to prevent recovery. In its absence we must determine that defendant is bound. The contract of insurance in this case stipulated, that it could not be changed or waived, save by written agreement. There was no intention, as we construe, iu inserting this provision to free it absolutely and forever from all the possible effects of an estoppel. There was no attempt made to alter the contract in any respect, or to change or waive any of its terms and conditions. The whole contract remains unchanged, but the view is taken by us, that the policy having matured by the death of the insured, and defendant not having imparted the knowledge to the plaintiff, it should have imparted within the long period of time that elapsed, the attitude of the defendant toward the — 43 — holder of the policy is one which we think operates as an estoppel. The stipulation not to change or waive the terms of the policy as written therein, did not have the force and effect of forever freeing the defendant. from all possibility thereafter of being estopped. It could, under the rules applying to estoppel, waive the waiver of the assurer, or at any rate, waive the possibility of urging -the point against a policy holder who was a third person. We have arrived at the conclusion, that defendant has not sustained its defense, that, the verdict was correct, and that the judgment, should .be affirmed. It is affirmed.