Co-operative Life Ass'n v. Leflore

Chalmers, J., delivered the opinion of the court. John D. Leflore, suing for himself and children, recovered judgment in the Circuit Court of Montgomery County against the Co-operative Life Association of Mississippi, upon a policy of insurance which had been by said corporation issued upon the life of his deceased wife. The rightfulness of the recovery depends principally upon the correctness or incorrectness of the action of the court below in giving and refusing instructions. It having been shown that Mrs. Leflore did not answer truly certain questions propounded to and answered by her, in her application for insurance, the court below instructed the jury that the beneficiaries under the policy were, nevertheless, entitled to recover, unless they believed that the misrepresentations by the insured were fraudulently made. Thus, by the first instruction granted for the plaintiffs below, the jury were informed that “ nothing short of fraud committed by Mrs. Leflore against the defendants in hex application will avoid the payment of the money on the policy ; ” and, by subsequent instructions, fraud was defined to consist in “ designedly or intentionally misstating any fact or facts within her knowledge.” In none of the instructions is it declared that a different rule will prevail, if the untrue statements were made as to matters material to the risk, and which the parties may be supposed to have had specially in view in making the contract ; but the broad doctrine is laid down, that nothing short of actual moral fraud upon the part of the applicant will avoid the policy, even though there have been false representations, not fraudulent, as to the most vital and important matters. It is at once evident that these charges cannot be sustained, unless there is something exceptional in the character of the policy sued on. Nothing is better settled, both in regard to insurance contracts and contracts of all sorts, than that an untrue statement by either party, as to a matter vital to the agreement, will avoid it, though there be no intentional fraud in the misrepresentation. Bliss on Insurance, § 52; May on Insurance, §§ 181, 182. The particular feature which it is insisted takes the case — 13 — out of the operation of this rule, is to be found in the second special proviso annexed to, or rather printed in, the body of the policy, which is in these words : “ If, however, any fraud should be committed against said association in the statements made in the application by the'insured, and upon the faith of which this policy is issued, then and in such case this policy shall be null and void, and all payments made thereon shall become forfeited to the association.” Under this clause, it is argued that nothing less than actual fraud in the application will avoid the policy ; and, in consonance with this view, the charges asked for by the plaintiff's, noted above, were given, and all those offered by the defendants, announcing a different doctrine, were refused. In testing the correctness of this ruling, it will be necessary to look carefully at the other parts of the policy, as well as at the written application for insurance, “ upon the faith of which,” as set forth in this proviso, the contract was entered into ; and to consider also the nature of the untrue statements shown to have been made by the applicant. The application was made out in the town of Carrolton, by the agent of the company, the applicant, and a local physician, acting as medical examiner for the association. It was by the agent forwarded to the head-quarters of the association at Winona, from -which place, four days afterwards, the policy was returned. The application contained twenty-five printed questions, to all of which the applicant made response in writing. Int. 10. “ Has the party had, or been afflicted since childhood with, any of the following complaints: . . . paralysis, disease of the liver or kidneys, or any serious disease ? ” Int. 11. “ Has the party ever met with any accidental or serious personal injury? ” Int. 12. “ Has the party ever been seriously ill ? If so, when, of what complaint, and who was the medical attendant? State his name and residence.” To each of these interrogatories the applicant answered “No.” It was satisfactorily proven that each of these answers was untrue in fact, however honest the witness might have been — 14 — in supposing that the accidents and diseases from which she had theretofore suffered were at the time immaterial. A few years before the date of this application she had suffered from an attack of paralysis, by which her features had been, for a short time, slightly distorted. About the same time she had been afflicted with an internal tumor, which, located in the lower part of the abdomen, was plainly perceptible to the external touch, and by which she had at one time been seriously alarmed. Two years before the date of the policy she had been dangerously ill in New Orleans, and had lain for two months under the medical treatment of Dr. Chop-pin, an eminent physician of that city. She was pregnant at the time; and her condition was rendered dangerous by the presence, also, of the disease known as albuminuria, which seems to be akin to diabetes, or, perhaps, to Bright’s disease of the kidneys; and, in order to save her life, the physician was compelled to produce an abortion. About eight months before the taking out of the policy, she had been in a railroad accident, in consequence of the injuries received in which she had been confined to her bed for five or six days, and to recover damages for which she brought suit against the railroad company a few months after the issuance of the policy of insurance. She died very suddenly, of apoplexy, about twelve months after the insurance was effected, in the city of New Orleans, where she had gone again to consult Dr. Choppin. If we concede that, at the time of making her application, her health was so good that she was momentarily oblivious of all these things, or thought them of no present or future importance, it is quite evident that the insurance company did not so regard them. For reasons satisfactory to itself, it required specific information upon these matters, and thereby indicated to the applicant, that, however lightly she might regard them, it considered them as vital to the matter in hand. An immense amount of labor and learning is displayed in the books in the consideration of what are, and what are not, material matters in contracts of insurance, a false statement in relation to which will avoid the policy; and it is impossible to — 15 — resist the conclusion, in perusing the cases, that the courts, in order to avoid supposed, hardships in this class of suits, have been disposed to adopt other rules than those applicable to ordinary contracts. For this difference we can recognize no sound principle. Contracts of insurance are neither mala prohibita nor mala in se, and, where entered into by persons sui juris, are to be regulated and determined by the same rules that govern ordinary agreements, with neither more nor less favor than is shown in other cases. As to the question of the materiality of the statements and conditions annexed to them, we prefer the simple rule laid down by the Supreme Court of the United States, in the late cases of Jeffries v. Life Ins. Co., 22 Wall. 37, and Ætna Life Ins. Co. v. France, 91 U. S. 510; namely, that the agreement of the parties, that the statements of the application are absolutely true, and that their falsity in any respect shall avoid the policy, removes the question of their, materiality from the consideration of the court or jury. That this is the true rule, we entertain no question. If parties have deliberately agreed that the validity of their contract shall depend upon the truth or falsehood of certain statements, neither court nor jury can say that the matters about which the false statement is made are too trivial to wort a forfeiture of its advantages. Bearing this in view, let-us turn to the application and the policy, for the purpose of ascertaining how far their provisions show an agreement that the one should control the other, and how far the stipulations of both explain the terms of the second proviso, under which it is claimed that nothing short of actual fraud can defeat a recovery. The application has these words at its head: “Particulars required from persons proposing to effect insurance on lives in this company, and forming the basis of the contract.” Then follow twenty-five questions. The last of these is in these words: — “ 25. Is the party aware that any untrue or fraudulent answers to the above queries, or any suppression of the facts in regard to the party’s health, will vitiate the policy, and forfeit all payment made thereon ? ” To this question Mrs. Leflore answered “ Yes.” — 16 — It will be noted that the declaration is, that untrue answers, or fraudulent answers, or suppression of facts in regard to health, will alike vitiate the policy. Following this comes a formal declaration, in these words: — “ I do hereby declare, that in the above proposal I have not withheld any material circumstance or information touching the past or present state of health or habits of life of myself, with which the officers and directors of the Co-operative Life Association of Mississippi should be made acquainted. And I do hereby agree that this declaration and the above proposal shall be the basis of the contract between myself and said company; and that, if any fraudulent or untrue allegation be contained therein, or in the proposal, or I should neglect or fail to pay, &o., all moneys which shall have been paid on account of such insurance shall be forfeited to said company, and the policy be void.” Turning now to the policy itself, we discover that it commences as follows : “ In consideration of the representations made to them in the application for this policy, and of the sum of twenty-five dollars,” &c. Then follows the usual language of such instruments ; and embraced in the body of this policy (not annexed to it in the shape of separate conditions, as is commonly done) comes the proviso, as follows: « provided always, and this policy is issued and accepted by the insured upon the following express conditions and agreements” (omitting the first). 2d. “If, however, any fraud should be committed against said association, in the statements made in the application by the insured, and upon the faith of which this policy is issued, then and in such case this policy shall be null and void, and all payments made thereon shall become forfeited to the association.” It is well settled that all stipulations and conditions contained in the body of an insurance policy are warranties to the absolute truth of which the parties have pledged themselves, and any deviation from which will defeat a recovery ; and that they are not mere representations or statements which will or will not have that effect, accordingly as the court and jury may regard them as material to the contract. Bliss on Life Insurance, § 55 ; May on Insurance,, § 183. — 17 — While it is not so conclusively settled that the same effect will follow, if the statements, instead of being embodied in the policy, are contained in any other paper written or signed by the party, which is so referred to in the policy, as to be made a part of it, the weight of authority favors this view. Bliss on Life Insurance, § 57, and authorities there cited. In order to conform literally to the language of the courts in the decisions made on this subject, it is usual to insert in the modern policies of insurance an express declaration that the application is made a part of the instrument; but we cannot deem that a literal stipulation to that effect is necessary. It is rare, indeed, that a special form of words is required in law to produce a particular effect in matters of contract, and it is familiar learning that no particular words are essential to create a warranty. It is not every reference in the policy that will make the paper referred to a part of it, but those only which either so declare, or are plainly intended to be the basis of the contract, and upon the faith of which it is expressly stipulated that the policy is issued. Miles v. Connecticut Mut. Life Ins. Co., 3 Gray, 580; Kelsey v. Universal Life Ins. Co., 35 Conn. 225. Looking to the application in this case, we find that the applicant agreed, in the most explicit and solemn manner, that the policy which she was to receive should be void if her statements were either untrue or fraudulent, or if she had been guilty of any concealments or suppressions. Turning to the policy, we find a recital that it is issued in consideration of the statements in the application, and a further declaration, that it is issued “ upon the faith of those statements.” In any ordinary contract between man and man, there could be no doubt that these recitals made the statements part and parcel of the agreement, and that their substantial truth was warranted by the party making them. Suppose, for illustration, that during the existence of slavery in this State a vendor had made a written proposition to sell a slave, accompanied by a statement as to his past and present health and history, couched in the words of the application for insurance in this case, and with the agreements and stipulations therein contained, and had received from a party at a distance an obliga — 18 — tion to pay a certain price, phrased, as far as might be, in the language of this policy, can we doubt for a moment, that, if the statements in the proposal were shown to be untrue, the obligation to purchase would be avoided ? We conclude that the responses in the application were so made part and parcel of the policy, that they became, if not technical warranties, at least representations as to the substantial truth of which the parties pledged themselves, regardless of their fancied materiality. It follows, therefore, that the declaration in the second proviso, that the instrument was to be void if any fraud had been practised in the application, must be construed to embrace legal or constructive fraud, as well as moral mala fides ; that it was used as a comprehensive word to embrace all statements untrue in fact, as well as those deliberately fraudulent. Any other construction nullifies the whole scope and obvious intent of the two instruments taken as a whole, and violates the maxim res magis valeat quam pereat. The application and the policy, constituting but parts of an entire contract, are to be read as one instrument, and such construction is to be adopted as renders them harmonious. This is accomplished by giving to the word “fraud” its legal meaning, by which will be embraced misstatements by which the company has been deceived, though not fraudulently intended by the applicant. To limit it to designed and intentional mala fides is to do violence both to the letter and the spirit of the other portions of the instrument. The court below erred in giving instructions for the plaintiffs, announcing a different rule, and in refusing those asked by the defendants, which were in accordance witli these views. We might, perhaps, have rested this case on the proposition, that the misstatements of which the applicant was guilty were manifestly as to matters material to the contract, and, therefore, according to all the authorities, avoided the policy. We have preferred, however, to consider the other questions, both because of the peculiarity of the second proviso, and because this is the first case in this State involving a question, than which there is none more vexed in modern jurisprudence. No man can read the history of the struggle between the — 19 — courts and the insurance companies on the question of what false statements, made by the applicant, will avoid the policy, as that history is developed in the adjudged cases, without perceiving a manifest disposition to apply to such agreements a rule far more rigid than that which governs ordinary contracts. However commendable the disposition to protect unsuspecting, and frequently ignorant, men from the evil consequences of agreements into which they have been entrapped by cunningly and obscurely worded conditions, so written or printed as to escape observation, there can be no justification for disregarding, in their behalf, fundamental principles of law, or relieving them from engagements as to which there is no pretence for charging fraud. If the insurance companies, conforming their policies to the requirements of each successive decision, have protected themselves against all possible loss b_f any misrepresentation, no matter how insignificant or unintentional, it would be most unseemly in the courts to seek, by new exactions, to nullify these advantages. It is neither the duty nor the right of courts to protect adults against the consequences of their agreements incautiously entered into. Their functions are exhausted when they construe and enforce them as written. Mrs. Leflore having stated that she “ had never met with any accidental or serious personal injury,” and it having been shown that in fact she had been in a railroad-car a few months before, which had been thrown from an embankment, and that she had thereby sustained some injury, it was proposed to follow this up, by proving that she instituted suit for damages against the railroad company; and for this purpose the record of the suit was offered in evidence, but was by the court excluded. Under the view taken by the court below, of the necessity resting upon the defendants to show bad faith upon the part of the insured, this ruling was manifestly erroneous. Upon the question whether she had omitted to speak of this accident, because deemed insignificant, or because she desired to conceal a knowledge of it from the company, the fact that she regarded the injury sustained as sufficient to justify a suit for damages, was a pregnant circumstance. It is undoubtedly true that the — 20 — unsworn pleadings of a party cannot be introduced against Mm as admissions of the statements therein contained, because they speak the language of the lawyer, and not of the client; but the defendants in this case had the right to show that the suit had been brought; and this could only be done by the record. It would have been proper for the court to instruct the jury that the language of the pleadings was not to be regarded as that of Mrs. Leflore; or it might, perhaps, have excluded them altogether, if the fact of the institution of the suit had been admitted, or been allowed to be shown by parol. After the reading of the deposition of Dr. Choppin, detailing the dangerous illness of the insured two years before the issuance of the policy, the medical examiner of the company, who had approved Mrs. Leflore’s application for insurance, was asked whether if he had been advised of such illness, he would have given said approval, or whether his company would have accepted the risk. The court refused to allow a response to the question. ( As to whether such an interrogatory is proper, and the response admissible, the authorities are quite conflicting. Against their admissibility are the following cases: Durrell v. Bederly, 1 Holt, N. P. 283; Jefferson Ins. Co. v. Cotheal, 7 Wend. 72; Mulry v. Mohawk Valley Ins. Co., 5 Gray, 541; Lyman v. State Mut. Fire Ins. Co., 14 Allen, 329; Rawls v. American Mut. Ins. Co., 27 N. Y. 282. In favor of their admissibility are the following: Berthon v. Loughman, 2 Stark. N. P. 258; Webber v. Eastern Railroad, 2 Met. 147; Kern v. South St. Louis Mut. Ins. Co., 40 Mo. 19; Hawes v. New England Ins. Co., 2 Curtis, C. C. 229; Hartman v. Keystone Ins. Co., 21 Penn. St. 466. Inasmuch as Ave have held that the statements made in the application were all material, and this interrogatory will therefore be of no practical importance on a second trial, we decline at present to decide upon its admissibility. There Avas proof introduced by the plaintiffs below, tending to sIioav that, in point of fact, Mrs. Leflore did truly inform the agent and the medical examiner of the company, at the time of — 21 — her application, in relation to some of the matters as to which she is charged with misrepresentations; that these gentlemen considered them as of no consequence, and themselves wrote the answers, which she afterwards read over and signed. No instruction was asked on this subject in the court below, nor is any point made upon it in this court. If it could be shown to the satisfaction of a jury that this state of facts existed as to all the matters in relation to which untrue statements are found in the application, it would present a question of great importance, which has attracted of late considerable attention in the courts, but upon which we express no opinion. The judgment is reversed and cause remanded.