Paulhamus v. Security Life & Annuity Co.

ARCHBALD, District Judge. This is an action to recover the amount claimed to be due on a policy of insurance taken out on his own life by C. E. Paulhamus with the defendant company in favor of the plaintiff, his wife, for $3,000. The jury at the suggestion of the court returned a special verdict, on which the case is now to be disposed of; both parties moving for judgment. The defendants rely, to defeat the” policy, on certain statements, material to the risk, which appear in the report of the medical examiner, which were not true, although warranted by the insured to be so. The plaintiff contends that the defendants are not entitled to rely on-the medical examiner’s-report, because it formed a part of the application and was not attached to the policy as required by the Pennsylvania statute. This is a Pennsylvania contract, and is governed in consequence by the law of the state as laid down by the decisions. McClain v. Provident Sav- — 561 — Life Assur. Soc., 110 Fed. 80, 49 C. C. A. 31. And the statements of the insured, having been warranted to be true, if they are material to the risk and not true in fact, the policy is invalid, unless the defendants, for the reason given, are barred from resorting to them. This result is not saved by section 1 of the Pennsylvania act of June 23, 1885 (P. L. 134), which provides that: “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 policy of insurance issued upon the faith of such application, unless such misrepresentation or untrue statement relate to some matter materia! to the risk.” This act was passed to modify the rigor of the law, by which a representation or statement, whether material or not, and though made in good faith, if warranted to be true, avoided the policy, if not true in fact. But it leaves it still in force, where the representation or statement which is warranted is material and untrue, without regard to the ignorance or good faith of the party who warrants it. March v. Life Ins. Co., 186 Pa. 629, 40 Atl. 1100, 65 Am. St. Rep. 887; Lutz v. Life Ins. Co., 186 Pa. 527, 40 Atl. 1104; Penn Mutual Life Ins. Co. v. Mechanics’ Sav. Bank, 72 Fed. 413, 19 C. C. A. 286, 38 L. R. A. 33. There are four answers to questions in the medical examiner’s report, which the jury have found to be material and at the same time untrue, which are relied on by the defendants to defeat the policy. The first of these was as to whether the insured had ever had hernia or been ruptured, to which he said, “No.” The second was as to whether he had ever had cancer; or any tumor, abscess, or enlarged gland, which he answered in the same way. The third was whether he had had any illness, disease, or injury, other than those which he had previously mentioned, to which he replied, “None, except mild diseases of childhood.” And the fourth whether he had ever been under treatment at any hospital, which he likewise negatived. The fact is, as found by the jury, that in November, 1899, some six years before the policy was issued, he had been operated upon at the Williamsport City Hospital for hernia and undescended testicle; it being disclosed by the operation, in which the testicle was removed, that it was very much enlarged and badly diseased, having the appearance of being in a cancerous condition, although not so in reality, and that, after remaining at the hospital, he was allowed to go home, but returned again in about three weeks, complaining of pain in his left side, where, on examination, hard lumps were found, but no further operation was undertaken. The jury have found that all the answers were made in good faith, which relieves the insured from any imputation that they were not. The charge of untruthfulness is also obviated, as to two of them, at least, by correct answers given to other questions directed to the same subject. Thus, in the application attached to the policy, in response to the inquiry whether he had had any serious illness or disease, except those incident to childhood, he stated that he had had an operation five years before for hernia, which was — 562 — a distinct affirmation of that fact, notwithstanding what he may have had to say about it afterwards, in reply to the somewhat ambiguous inquiry: “Have you hernia [that is, do you have it now], or have you ever been ruptured?” So, also, in the first part of the medical examiner’s report, in response to the question, “How long since you wefe attended by a physician or consulted one professionally and for what disease?” he answered, “Five years, surgical case, operation for undescended testicle,” which also gave notice of that particular feature of his ailment and the operation which he had undergone for it. It is true that he does not state that the operation was at a hospital, so as to correct or qualify his subsequent declaration that he had never been treated in one, thus possibly somewhat minimizing it. And it may be that, in the bare statement that he had been operated upon for the trouble specified, its serious character, and the badly diseased condition disclosed by it are similarly not indicated. But he gave the names of the physicians who attended him, by which this could have been followed up, and he certainly told enough to put the company upon inquiry. It is not to be expected that the answers of an applicant for insurance will be more than suggestive, particularly those made to and set down by a physician, who is supposed to be able to correct and interpret them; and the jury have found, in the present instance, that they were full and complete, as well as made in good faith, showing how they regarded them. It may be that in some respects they are inaccurate and open to criticism; but that they are misleading, or that the company, was induced by them to accept a risk which they otherwise would not, is hardly to be credited. It is, therefore, difficult to see, taking them all in all, what real ground of complaint there is, or upon what basis it can be justly claimed that the policy should be forfeited. But, assuming that, as the case stands, the answers are not all that could be desired, and are in fact contradictory and incomplete, if not, indeed, untruthful, amounting to a breach of warranty avoiding the policy, as charged by the defendants, it is contended by the plaintiff that the company is not in a poáition to take advantage of this; the misstatements of which complaint is made and on which a forfeiture is predicated being found among those taken down by the medical examiner, which, being a part of the application, as it is claimed, should have been attached to the policy in compliance with the local statute in order to give the company the benefit of them. The statute which is thus invoked is Act Pa. May 11, 1881, § 1 (P. L. 20), which provides that: “All life and fire insurance policies upon tlie lives or property of persons within this commonwealth, whether issued by companies organized, under the laws of this state, or by foreign companies doing business therein, which contain any reference to the application of the insured, or .the constitution, bylaws or other rules of the company, either as forming part of the policy or contract between the parties thereto, or having any bearing on said contract, shall contain or have attached to said policies, correct copies of the application, as signed by the applicant, and the by-laws referred to; and unless so attached and accompanying the policy no such application, constitution or by-laws shall be received in evidence, in any controversy between the par — 563 — ties to, or interested in, the said policy, nor shall such application or by-laws be considered a part of the policy or contract between such parties.” The question whether the act applies in the way contended for de - pends upon the circumstances. By the terms of the policy in controversy the statements and agreements in the application therefor are made a part of the contract, and it is also agreed in the paper signed by the insured, which is claimed by the company to be the real application in the case, that the statements and answers which there appear, and also those made to the company’s medical examiner, “are warranted to be full, complete, and true, and are offered to the company as a consideration for the contract, which shall not take effect until this application has been accepted by the company at the executive office in Philadelphia, Pa., and the first premium has been paid,” etc.; it being further declared in the same connection that: “The agreements made in this application and contract applied for, taken together, shall constitute the entire contract between the parties.” The act of 1881 has been frequently before the courts, and, while there is no reported case which exactly corresponds with the one in hand, there are some which approach it closely, if, indeed, they do not in effect rule it. Thus, in Morris v. State Mutual Assur. Co., 183 Pa. 563, 39 Atl. 53, the medical examiner’s report was not attached to the policy as a part of the application, and objection having been made to the right of the company to put it in evidence, in consequence, or to show the falsity of certain of its statements, it was rejected by the trial court, and the application attached to the policy, which had been offered by the plaintiff and inadvertently admitted, was also stricken out as not being complete without it, all of which was affirmed on error. It is true that the medical examiner’s report in that case, differing from what we have here, was on the same sheet of paper as the application proper, which it followed; the questions in both being also consecutively numbered. The whole paper, furthermore, bore the same date, and was indorsed on the outside as the application of the insured; and, in order to take advantage of certain statements of the insured which appeared in the medical examiner’s report, it was in effect conceded by the company in the affidavit of defense to be a part of the application. It was with regard to what so appeared, no doubt, that it was said by the Supreme Court: “The whole paper is clearly the application, and was properly so construed.” In Baldi v. Metropolitan Ins. Co., 18 Pa. Super. Ct. 599, the paper in question was also a single sheet, divided into three parts, which were severally designated as: “(A) Application to the Metropolitan Life Insurance Company.” “(B) Statements made to the Medical Examiner,” and “(C) Medical Examination and Report.” The two parts, A and B, were signed by the insured, but not the part C, opposite to the caption of which were also the words, “No part of the declaration .of the applicant.” The court below held that C, equally with A and B, was a part of the application, and was there — 564 — fore bound to have been copied into or attached to the policy, in order to be available to the company. In reversing this, on error taken, it was said: “Considerable stress is laid upon tbe fact that the clause of the policy relative to the answers and statements contained in the printed and written application is not expressly limited to the answers and statements contained in A and B. This is true; but it does not answer the question for decision, namely, what is the application? This question is to be determined by an inspection of the paper itself. Examining it more critically, we find that part A was signed on January 19, 1895, by the applicant, and contains this clause: ‘It is hereby declared and warranted by the undersigned that the answers and statements contained in the foregoing application and those made to the medical examiner, as recorded in parts A and B of this sheet, together with this declaration, shall be the basis and become part of the contract of insurance with the Metropolitan Life Insurance Company; .that they are full and true, and are correctly recorded; and that no information or statement not contained in this application’ (evidently referring to part A) ‘and in the statements made to the medical examiner’ (evidently referring to part B) ‘received or acquired at any time by any person shall be binding upon the company, or shall modify or alter the declarations and warranties made therein.’ Referring, now, to part B, we find that it is headed, ‘Statements Made to the Medical Examiner by Francis Rizzo, M. D., in Connection with Application on Reverse of This Sheet’ It is thus made a part of the application. Construing these two parts as a connected whole, we find conclusive evidence as to what answers and statements were intended to be made warranties and part of the contract. They are the answers and statements recorded in parts A and B. These were signed by the applicant. Part C was not. The latter bears date two days after A and B were signed, .and for aught that appears in this case may never have been seen by the applicant. The medical examiner was not his agent, but was selected by the company. His declarations, although indorsed on the paper itself, could not be offered in evidence against the plaintiff, in the absence of extrinsic evidence that they were authorized or assented to by him. To remove all doubt upon this point it was expressly noted at the head of part O that it was ‘no part of the declaration of the applicant.’ This operated to the benefit of the insurer, as well as the insured. By no process of reasoning can it be held that the latter warranted the truth of the answers and statements of the medical examiner contained in part C. It seems to us equally clear that the former [the insurer], in its effort to comply with the provisions of the act of 1881, was justified in treating part O as not part of the application.” This case bears on the one in hand, not so much in what it decides as in what it recognizes. All that it expressly rules is that the part designated as C was not carried into the application, although on the same sheet with it, so as to be required to be copied in or attached to the policy. The rest, no doubt, is obiter, but of a convincing character. It accepts without question that, under practically the same circumstances as we have here, the statements made to the medical examiner are equally a part of the application with that which is in terms so designated, both, by direct reference, being made the basis of the contract of insurance and the statements contained in them being included in the same warranty. The only possible distinction to be observed is that in that case both bore the same date and were on the same sheet of paper, where here they are a day apart and physically separate. In Fisher v. Life Association, 188 Pa. 1, 41 Atl. 467, it does not appear whether the two papers were separate; but the statements made to the medical examiner were declared by the caption to be supplemental to and a part of the application, and, having been omitted from — 565 — the policy, the application, which there appeared, was rejected as incomplete, and so inadmissible. In Nugent v. Greenfield Life Association, 172 Mass. 278, 52 N. E. 440, under a similar statute, the statements made to the medical examiner by the insured and signed by him were recognized, the same as in the Baldi Case, as forming- a part of the application, while the report of the medical examiner to the company was not; the two papers so accepted as forming the application being physically separate, the same as here. So in Dimick v. Metropolitan Life Ins. Co., 69 N. J. Law, 384, 55 Atl. 291, 62 L. R. A. 774, and Holden v. Same, 11 App. Div. 426, 42 N. Y. Supp. 310, the policy having made the answers and statements contained in the application a part of the contract and declared them to be warranties, and the question arising as to what constituted the application, it was held that the statements made to the company's medical examiner, signed by the applicant, and, with the answers in the application proper, declared to he the basis of the contract, the company having been guided thereby in accepting the risk and issuing the policy, were to he taken as forming a part of the application, and so binding upon the insured by virtue of his warranty. And if this is the case as respects the insured, it is difficult to see why it should not equally be the case, the positions being- reversed, as respects the company. ' Assuming, however, for the sake of argument, that there is nothing in the cases cited which directly rules the one in hand, independent of authority, if that be wanting, it is clear upon principle that the statements made by the insured to the medical examiner formed a part of the application within the meaning of the statute. The evident purpose of the requirement that a copy of the application shall be contained in or attached to the policy is to disclose to the insured the representations and .statements with which he is charged, affecting the risk, on which the company has relied in accepting his application and issuing a policy, and which will have to be met in any controversy over it. It is important, therefore, as it certainly was intended, that, entering into and forming a part of the contract by» virtue of his warranty and the terms pi the policy, as his statements in that connection do, everything of which this can be predicated shall be there set forth. “It is well known,” says Mitchell, J., in Lennox v. Insurance Co., 165 Pa. 575, 30 Atl. 940, “that the evil aimed at in this legislation was the custom of insurance companies to put in their blank forms of application long and intricate questions or statements to be answered by tlic applicant, usually in very small type, and the relevancy or materiality not always apparent to the inexperienced, and therefore liable to become traps to catch even the innocent unwary. The general intent was to keep -these statements before the eyes of the insured, so that he might know his contract and, if it contained errors, have them rectified before it became too late.” ■ In the case at bar, by the terms of the policy the application is made a part of the contract, and the statements and agreements therein contained are declared to enter into the consideration. It is also — 566 — agreed by the applicant at the foot of the first part of the application that the statements and answers which he there makes, as well as those made to the company’s medical examiner, are warranted to be full, complete, and true, and are offered to the company as a consideration for the contract of insurance applied for. The statements made by the applicant himself direct, as well as those made to and set down by the company’s medical examiner, are thus linked together, and go before the company as the basis of the policy to be issued. If they were on different halves of the same sheet, and bore the same date, it would be practically impossible to distinguish the case from that of Morris v. Insurance Co., 183 Pa, 563, 39 Atl. 52; the further circumstance that the two were run together there by a serial numbering of the questions being immaterial. But the difference here in date is but a day, one being dated December 11th and the other December 12th, making them substantially the same; and the fact that they are physically detached and appear on two separate • pieces of paper is of little consequence when the purpose and use to be made of them are considered. Both are signed by the applicant, thus to that extent fulfilling the requirement of the statute; and both by the terms of the warranty are made a part of the contract jp. case' the application is accepted and a policy issued. Both being thus put on a par, and being of equal importance to the insured, as well as to the company, it does violence to them to separate them, and to assert that one of them is the application of the insured and the other forms no part of it. It is of some significance, also, that in the directions given by the company on the margin of the medical examiner’s report it is said, “For any additional information which you may wish to convey concerning the applicant, give full details on the reverse side of this application,” and that, on the reverse of the same sheet, under the head of “Family^ Physician’s Certificate,” the first question is; “How long have you known the party whose life is proposed for insurance in the foregoing application ?” — the company thus unmistakably indicating on the face of the paper the idea which they had of it. But without dwelling upon that, and independently of it, the statements ma.de by the insured to the medical examiner, as well as those which he himself set down, both being signed by him and warranted to be true, and both by his direct authority and sanction thus going in to the company as the basis of the ifisurance applied for, are to be taken as together constituting the application on which the risk was accepted and the policy issued, and were therefore required by the' statute to be indorsed on or attached to it, the one as much as the other; which not having been done,- the company is not entitled to take advantage of anything which appears in either- of them. It is said, however, that the medical examiner’s report was offered in • evidence by the plaintiff, and that, having been brought into the case in that way, the defendants are entitled to make use of it for any relevant purpose. But the case is now before the court on a motion for judgment on the verdict, and we are not concerned, therefore, with how the medical examiner’s report got in, but only with the legal effect to be given to it under the facts reported. If any inquiry, moreover, of this kind, were open to be entered upon, a re — 567 — sort to the record would show that this report was only offered after the court, against the objection of the plaintiff, had required the incomplete application attached to the policy to be offered along with that instrument, thereby opening the door for the evidence which followed with regard to the untruthfulness of certain statements contained in it, to counteract which the plaintiff was compelled to put in the medical examiner’s report, which the defendants at once took advantage of, all of which, however, before the case closed, the plaintiff moved to strike out as irrelevant and inadmissible, which should have been granted, according to the view now taken. Upon any such inquiry, therefore, the advantage would not lie with the defendants, and, on the contrary, it would merely serve to show that, had the case been tried by the court as it should have been, it would have stopped with the prima facie case made out by the policy, the proofs of death, and the evidence of nonpayment, upon which a verdict would have had to be directed for the plaintiff. But, as already stated, the jury having found the material facts, the only question at this time is the judgment to be entered on them. The mere circumstance that the medical examiner’s report is returned among them does not determine the use that can be made of or the effect that can he given to it; the competency of it, as a matter of law, to affect the policy, having been by no means thereby conceded. Prov. Sav. Life Assur. Soc. v. Beyer, 67 S. W. 827, 23 Ky. Law Rep. 2460; Pitcairn v. Hiss, 125 Fed. 110, 61 C. C. A. 657. This is to be decided by all the facts found by the jury, and it appearing therefrom that, in disregard of the statute, a copy of the medical examiner’s report, forming a part of the application, was not attached to the policy, the statements of the insured therein contained are not to be considered as entering into the contract of insurance, nor can they or those of the so-called application, indorsed on the policy, be resorted to by the company to make out the breach of warranty which is relied on. Judgment is therefore directed to be entered on the verdict in favor of the plaintiff in the sum of $3,211.89, with interest from January 36, 1908, and costs.