New York Life Ins. v. Baker

THAYER. Circuit Judge, after stating the case as above, delivered the of the court. It is contended in behalf of the insurance company that because of the statements made to its medical examiner by Ward L. Baker, the insured, to the effect that he had not been confined to his house hv illness since childhood, and had no physician, and had not con sailed a physician, the policy sued upon never took effect as a contract, but [650] was at the outset, and so remained, utterly void and of no effect. As a corollary from this proposition, it is strenuously insisted that the doctrine of estoppel or waiver, which was invoked by the plaintiff below, has no application to the case, and that the defendant company may insist upon the invalidity of the contract, notwithstanding the fact that it treated- the policy as a subsisting obligation for months after the company was advised of the facts which rendered the policy void, and in the meantime not only retained the premium which had been paid, but put the plaintiff to some trouble and expense in taking out letters of guardianship, on the pretense that such action on her part was necessary to complete the proofs of loss, and duly comply with the provisions of the policy. Before considering the propositions last stated, it will be well to say that the case, as presented by the record, does not impress us with the belief that the deceased, Ward L. Baker, intentionally perpetrated a fraud on the insurer. It will be observed that the question immediately preceding the one in which he was asked, “When were you last confined to your house by illness?” required the insured to give full particulars of any serious illness he had had since childhood. In view of the juxtaposition of these questions, it would be very natural for any one to infer that by the term “illness,” as used in both questions, some serious illness was intended. Therefore it is entirely probable that when the insured stated, in effect, that he had not been confined to his house by illness since childhood, he meant that he had not been so confined by any serious illness, and did not then regard the sickness which had confined him to his house for two or three days in March, 189.3, as of a serious character. The answers made by the insured to the two other questions of which complaint is made are also susceptible of a reasonable explanation, consistent with the utmost good faith on the part of the insured. It is most probable, we think, that the insured construed the first of these questions to mean who was his regular family physician, and that he answered, with substantial accuracy, that he had none. It is also a reasonable inference that he construed the other question, which was asked in the same connection, to mean what other physician besides his regular family physician he had consulted for any illness or ailment that was of a serious nature, and that he answered truthfully, according to his understanding of the question, that he had consulted no one; being of the opinion at the time that the ailment for which he had consulted Dr. Bailey a few times in the month of March, 1893, was not of a serious character. This view of the case, that the deceased had practically recovered from the illness 'with which he was afflicted in March, before the policy in suit was taken out, and that he did not regard it as of any importance, or intend to deceive the insurer, is very much strengthened by the fact that the defendant company’s medical examiner on June 24, 1893, certified, after a personal examination of the insured, that he was a “first-class risk,” and by the further fact that he was approved for insurance in the Ancient Order of United Workmen on June 6,1893, by the same Dr. Bailey who had attended- or prescribed for him in March, 1893, when he was supposed -to be afflicted with the grippe. [651] It is not necessary, however, to decide on the present occasion, and we do not decide, that the interrogatories and answers ought to be construed in the manner above indicated, and that in view of such construction the findings made by the trial court fail to show that any false statements were made by the insured. For the purposes of this decision, it may be conceded that two statements made by the insured in his application — the one, that he had not been confined to his house by illness since childhood, and the other, that he had not consulted a physician — were technically untrue. Nevertheless, we hold that the conduct of the defendant company after it had discovered in what respects these two statements were untrue amounted to a waiver of its right to refuse payment on that ground. We fully agree with the view of the learned trial judge that the falsity of the statements complained of did not render the policy void, in the sense that an illegal contract, or one that cannot be performed, is void. The falsity of the statements complained of merely rendered the contract voidable at the election of the insurer. The policy itself contained a provision that it should be incontestable after it had been in force for one whole year, if it should become a death claim, and That the company would not contest its payment, provided the conditions of the policy as to the payment of premiums had been observed. This provision was an express declaration by the company that the policy, though originally vitiated by fraud or untrue statements, should nevertheless become valid after the lapse of one year; and it is entirely inconsistent with the claim now preferred by the defendant company, that a false statement contained in the application was so far fatal that the contract never could become binding or operative. Moreover, the policy in suit contains no stipulation, such, as is sometimes found in such policies, to the effect that a false statement made by the insured in his application should render the contract void.' We conclude, therefore, that although the statements contained in the application were warranties, in such sense that the materiality of the statements cannot be contested, yet the falsity of a statement did not render the policy void ab initio, and that it was competent for the defendant company to waive a known broach of warranty, and insist upon a performance of the contract by the insured, or to estop itself by its conduct from faking advantage of a known breach of warranty in a suit upon the policy. Selby v. Insurance Co., 67 Fed. 490; Frost v. Insurance Co., 5 Denio, 154; May, Ins. § 497. We are also of opinion that the trial court reached a correct conclusion in holding fhat the conduct of the defendant company amounted To a waiver of the defense pleaded in its answer, and estopped .if from availing itself of such defense. As early as the month of March, 1894, it became aware of all the facts which rendered the policy voidable at its election; but, notwithstanding such knowledge, it continued to treat the same as a subsisting obligation for more than seven months thereafter, and in the meantime dealt with the plaintiff below upon that basis. At the instance of the defendant company the plaintiff was induced to take out letters of guardianship to complete the proofs of loss, which doubtless put her to consider [652] able trouble and expense. At a later period tlie defendant entered into negotiations with a view of inducing her to settle tbe claim for less than the face of the policy, and it was during the course of such negotiations that the claim was first advanced that the policy was void. In the meantime the premium was retained, and no offer was made to repay it until March, 1895, — a year after the company acquired full knowledge of its alleged right to rescind. We think that the acts in question amounted both to a waiver and an estoppel in pais. Good faith and fair dealing required tlie company to be more prompt in asserting its right to treat the policy as void, and in taking the necessary steps to rescind the contract. Moreover, after it became aware that the policy was invalid, it was not entitled to exact from the plaintiff a technical compliance with the provisions of the policy relative to proofs of loss, which would involve her in trouble and expense, unless, on its part, it had resolved to pay the loss when such proofs were supplied. To this effect are the authorities: Titus v. Insurance Co., 81 N. Y. 410, 419; Insurance Co. v. Norton, 96 U. S. 234, 241; Gray v. Association, 111 Ind. 531, 11 N. E. 477; Hollis v. Insurance Co., 65 Iowa, 454, 459, 21 N. W. 774; Society v. Hiett’s Adm’r, 19 U. S. App. 173, 185, 7 C. C. A. 359, and 58 Fed. 541; Webster v. Insurance Co., 36 Wis. 67; Marthinson v. Insurance Co., 64 Mich. 372, 31 N. W. 291. The judgment of the circuit court is therefore affirmed.