CHARLESTON.

#### Cloh Shamblen *v.*Modern Woodmen of America

(No. 6107)

Submitted February 21, 1928.

Decided February 28, 1928.

1. *Insurance*— Fraternal *Society Held Not Estopped to Contest Life Policy Because of Subordinate Agent’s Knowledge of Actual Conditions Misrepresented in Application.*

Application for insurance states that inasmuch as the “Head Officers” of the insurer act upon the written statements and answers in the application in determining whether a policy shall issue, no information had or given to any one other than its head officers shall be binding on it -or in any way affect its rights. H§ld: The insurer is not estopped to contest the policy on the ground of misrepresentation in the application, merely because a subordinate agent had knowledge of actual conditions, (p. 253.)

(Mutual Benefit Insurance, 29 Cyc. p. 187.)

2. *Same*— If *Insiired’s Answers*to.■ *Questions in Application, Made Part of Life Policy, Are Warranted True, Their Materiality is Not Issuable; if Answers, Even in Good Faith, to Questions in Application for Life Policy, Warranted to be True, Are False,, Policy is Forfeited; Misrepresentation in Application as to Having Been Treated for Influenza Held to Prevent Recovery Under Fraternal Life Policy (Code, c. 55-A,*§ *8).*

Point 7 in the syllabus of *Schuxartzbach*v. *Protective Union,*
      *25325 W. Ya. 623, relative to the effect of false -warranties in an application for insurance, applied, (p. 258.)

(Insurance, 32 C. J. § 493 ; Life Insurance, 37 C. J. § 177; Mutual Benefit Insurance, 29 Cyc. pp. 87, 90.)

(Note: Parenthetical references by Editors, C. J. — Cyc. Not part of syllabi.)

Woods, Judge, absent.

Error to Circuit Court, Jackson County.

Action by Cloh Shamblen against Modern Woodmen of America. Judgment for plaintiff, and defendant brings error.

*Reversed and remanded.*

*Geo. G. Perrin,*and *Price, Smith <& Spillman*and *J. M. Woods,*for plaintiff in error.

*Lewis II. Miller*and *Walter F. Boggess,*for defendant in error..

Hatchee, Judge:

In this action plaintiff seeks to recover $3,000.00, as the beneficiary named in a benefit certificate issued by defendant to her husband Roy Shamblen.

The defendant is a fraternal beneficiary society. The certificate in question is dated January 30, 1926, and was issued to Shamblen as a member of a local camp of defendant at Hurricane," West Virginia. In answer to questions in the application upon which the certificate was issued, it is stated that both Shamblen and Ms wife resided in Hurricane; that his business was that of a traveling salesman, and that he performed no work or duties incident to any other occupation; that the application was for original membership; and that he had not within five years prior thereto been treated by a physician for influenza or consulted with and been treated by a physician in regard to “personal ailments”. Shamblen died May 7, 1926, from miliary tuberculosis.

The proof shows that both Shamblen and his wife resided at Ripley; that he was town sergeant of Ripley; that he had been a member of defendant’s camp at Ripley from April 1920 to November 1924, when he was suspended for nonpayment of dues; and that within two years prior to the ap*254plication in question be bad suffered a severe attack of influenza during wbicb be bad been treated by a physician.

Tbe answers were written by Roy Hylbert after discussing them with Sbamblen. Hylbert was a “Deputy Head Consul” of tbe defendant with authority to organize new camps in seven counties of this State, for wbicb be received compensation. At tbe time tbe application was prepared, Hylbert was attempting to organize a camp at Hurricane. He solicited Sbamblen to become one of tbe charter members there in order to make up tbe necessary quota. He knew that some of tbe answers in tbe application were not. true and in fact suggested their falsity himself-. He read tbe answers to Sbam-blen after they were written, however, and Sbamblen ‘ ‘ acquiesced in them”. Hylbert attempted an explanation of each misleading statement except tbe answer relative to influenza to wbicb be did not refer.

Tbe application contains tbe following covenant:

> ‘11 have verified each of the' foregoing answers and statements, from 1 to 30, both inclusive, and declare and warrant that they are full, complete, and literally true, and I agree that tbe exact literal' truth of each shall be a condition precedent to any binding contract issued upon tbe faith of said answers and statements. I further agree that said answers and statements, together with this declaration and warranty, shall form tbe basis of tbe contract between me and Modern Woodmen of America, and are offered by me as a consideration for the contract applied for, and are hereby made and shall be deemed a part of any Benefit certificate that may be issued on this application; that this application may bo referred to in said Benefit certificate as tbe basis thereof, and that they shall be construed together as one instrument; that inasmuch as only tbe Head Officers of the Society have authority to determine whether or not a Benefit certificate shall issue on this application, and as they act upon tbe written statements, answers, warranties, and agreements herein made, no statements, promises, knowledge, or information bad, made, or given by or to tbe person soliciting, taking, or writing this application, or by or to any *255person, shall b,e binding on tbe Society or in any manner affect its rights, unless such statements, promises, knowledge, or information be reduced to writing and presented to the Head Officers of the Society at or before the time' a Benefit certificate shall be issued hereon; and I further agree that if any answer or statement in this application is not literally true, or if I shall fail to comply with and conform to any and all of the By-laws of the said Modern Woodmen of America, whether now in force or hereafter adopted, that my Benefit certificate shall be void.”

The following conditions were made part of the Benefit certificate:

> *“2.*That the application for Beneficial membership 'in this Society made by the said member, a copy of which is printed and written hereon or is hereto attached, and in either case made a part hereof, is true in all respects, and that the literal truth of such application, and each and every part thereof, shall be held to be a strict warranty and to form the only basis of the liability' of this Society to such member and to his beneficiary or beneficiaries, the same as if fully set forth in said Benefit certificate, and that if said application be not literally true in each .and every part thereof, then said within Benefit certificate is, and shall be, as to said member, his beneficiary or beneficiaries, absolutely null and void. ’ ’

> "4. It is agreed by the member holding said Benefit certificate that the said certificate, the Charter or Articles of Association, the By-laws of the Society, and the application for membership signed by the applicant, with all present and subsequent amendments to each thereof, shall constitute the agreement between the Society. and the member. * * *

> “8. No officer of this Society, nor any local Camp, or officer, or member thereof, is authorized or permitted to waive any of the provisions of the By-laws of this Society which relate to the contract between the member and the Society, whether the *256same are now in force or hereafter enacted. Neither shall any knowledge or information obtained by, nor notice to any local Camp, or officer or member thereof, or by or to any other person, be held or'construed'to be knowledge of, or notice to the Society, or the officers thereof, until after said information or notice be presented in writing to the Head Clerk of the Society.”

One of the by-laws of the defendant provides:

> “Sec. 44. No Waiver of Any By-law. — -No officer of this Society, nor any local camp, or officer or member thereof, is authorized or permitted to waive any of the provisions of the By-laws of this. Society which relate to the contract between the member and the Society, whether the same be now in force or hereafter enacted. Neither shall any knowledge or information obtained by, nor notice to any local Camp or officer or member thereof, or by or to any other person, be held or construed to be knowledge of or notice to the Head Camp, or the officers thereof, until after said information or notice be presented in writing to the Head Clerk of the Society.”

The society says that the answers in the application are by the contract of insurance made warranties; that the validity of the contract depended upon the literal truth of these answers, and that because of their falsity the policy is forfeited. • The beneficiary replies that as the agent of defendant suggested the false statements, her husband had the right to rely upon his suggestion, and that Hylbert’s act in making out the application incorrectly when he understood all of the facts is chargeable to the company. She relies upon such cases as *Deitz*v. *Insurance Company,*31 W. Va. 851; *Medley*v. *Insurance Company,*55 W. Va. 342; *Woodmen*v. *Lawson,*(Va.) 65 S. E. 509. These cases have little, if any, bearing on the present case. The beneficiary has failed to take notice of the evolution of insurance policies. The earlier policies contained no reference to the authority of the soliciting agent. An initial attempt to prevent the insured from relying on authority which the agent did not have, was made by placing a *257limitation thereon in the policies. The cases above referred, to held that this limitation was unavailing, because the insured had no notice thereof until the-receipt of the policy, which was after the insurance contract was made. Beneficial companies then made another attempt to check' reliance of applicants on subordinate agents, by enacting by-laws to the effect that no minor official should have the power to waive any provision in the by-laws or the policy. Courts held such by-laws ineffectual as notice on the theory that a mere applicant was not presumed to know the by-laws of an association; that he should not be bound thereby until after he became a member; that he did not become a member until delivery of the policy, and that the notice he then acquired also came subsequent to the formation of the insurance contract. For the same reason it was held that a limitation of the agent’s authority in the by-laws applied only to contractual waivers as distinguished from “those conditions which relate to the inception of the contract.” This theory is elaborately developed in *Medley*v. *Insurance Company, supra, Woodmen*v. *Lawson, supra,*and the cases therein cited. In pursuance thereof these cases continued the doctrine that if the applicant had no knowledge at the timé the application was made of any limitation on the authority of the agent, the information of the agent was chargeable to the insurance company.

The instant case presents a further step in the making of the insurance contract, which was doubtless designed to obviate the very criticism of the above cases. Here the limitation on the agent’s authority is placed not only in the by-laws of the society and in the benefit certificate, but also in the body of the application itself. Consequently, the theory that an applicant is not bound by *subsequent notice,*which supports the above eases, has no application here. Shamblen was given notice of the agent’s limitation at the very inception of the contract. In fact he agreed in his application that no knowledge or information had or given to the person writing the application should be binding on the society unless presented to the head officers of the society. If authority be needed for the competency of such an agreement, see *Aetna Life In*
      *258
      *surance Company*v. *Moore,*231 U. S. 543; and for tbe right of tbe society to contest tbe policy despite knowledge of its agent of misrepresentation in tbe application, see *Prudential Insurance Company*v. *Moore,*231 U. S. 560; *Maryland Casualty Company*v. *Campbell,*255 Fed. 437 (440); May on Insurance (4tb Ed.) sec. 137.

Tbe evidence does not sbow wbetber Sbamblen read tbe application. A failure to read it, however, cannot affect tbe duty to do so, as tbe agreement above referred to is contained in a paragraph immediately above bis signature to which bis attention was directed by tbe following admonition in large letters, “APPLICANT WILL PLEASE NOTE THIS CLAUSE”. “Tbe fact that tbe plaintiff may not have read tbe printed conditions of bis policy, and rebed, in ignorance of them, upon tbe implied or assumed powers of tbe agent, cannot help him. It was bis business to know what bis contract of insurance was, and there can be no difference in this respect between an insurance policy and any other contract. In tbe absence of fraud in tbe making of tbe same, and none is claimed in this ease, tbe insured must be held to a knowledge of tbe conditions of bis policy, as be would be in tbe case of any other contract or agreement.” *Cleaver*v. *Insurance Company,*65 Mich. 527 (532-3); *Smith*v. *Insurance Company,*60 Vt. 682 (695); Joyce on Insurance, *supra,*sec. 1974.

Tbe brief, of tbe beneficiary makes special reference to tbe case of *Parker*v. *Insurance Company,*79 W. Va. 576, which held that tbe company was estopped by tbe information of its agent. There, however, no notice whatever was given of a limitation on tbe agent’s authority. Consequently, that case does not parallel this one.

Tbe application is made a part of tbe insurance contract ■not only by tbe agreement of both parties thereto, but by section 8, Chapter 55A, Code. Tbe answers are warranted to be true both in tbe application and in tbe pobcy. As already shown, some of tbe answers constituting affirmative warranties, are false. “If tbe affirmative warranty is false, it avoids tbe contract.” *Maupin*v. *Insurance Company,*53 W. Va. 557 (560); 32 C. J., sec. 493, p. 1273. “If tbe answers of tbe insured to tbe questions propounded to him on tbe applica*259tion, which are made a part of the policy, are by the policy warranted to be true, this removes their materiality from the consideration of the jury; and if any of the answers are false in fact, the policy is thereby forfeited, though the answers were made in perfect good faith.” *Schwarzbach*v. *Protective Union,*25 W. Va. 622. *Marshall*v. *Insurance Ass’n.,*79 W. Va. 121; *Myers*v. *Insurance Company,*83 W. Va. 390; 37 C. J. sec. 177, p. 454-5; 14 R. C. L. 1030; Joyce on Insurance (2d ed.) Vol. 3, sec. 1970. The misrepresentation as to influenza is alone sufficient to avoid the policy. *Harris*v. *Insurance Company,*86 W. Va. 638.

The judgment of the circuit court is reversed and the case remanded.

*Reversed and remanded.*