Source: https://supreme.justia.com/cases/federal/us/231/543/
Timestamp: 2019-04-24 22:10:27+00:00

Document:
The character of the covenants of a contract for life insurance depends upon the law of the state where made. The Code of Georgia expressly provides that the application must be made in good faith and that the representations are covenanted by the applicant as true, and any variations changing the character of the risk will void the policy.
The law of Georgia as determined by its highest court, prior to the adoption of the Code, was that insurer and insured may make their own contract and determine what representations are material.
The highest court of Georgia has decided that mere immaterial matters, although declared to be warranties, do not void a policy even though the policy declares them to be such, and that, under the Code, the parties themselves could not contract to make immaterial matter material.
In order for an insurance company, defending on the ground of false statements in the application, to have a verdict directed, it must establish that the representations were material to the risk and were untrue.
of the medical adviser, and with the knowledge that the company to whom the application was made was about to reject it.
Applicant for insurance are competent to make agreement in the policy that no person other than the executive officer of the company can vary its terms, and such an agreement is binding when made.
A decision of the highest court of a state on a principle of general jurisprudence is not controlling upon this Court. Kuhn v. Fairmont Coal Co., 215 U. S. 349.
Where to cases are consolidated by the court below because it appears reasonable to do so under § 921, Rev.Stat., and this Court doubts the reasonableness of the consolidation, it need not pass upon that subject definitely if, as in this case, a new trial is ordered on other grounds.
The facts, which involve the validity of a verdict and judgment on a policy of life insurance, are stated in the opinion.
Action on a life insurance policy for $6,000, issued upon the life of John A. Salgue, the intestate of respondent. It was tried to a jury, resulting in a verdict and judgment for respondent. The judgment was affirmed on writ of error to the circuit court of appeals by a per curiam opinion. This certiorari was then granted.
The questions in the case are based on certain statements made by Salgue, which, it is contended by petitioner (herein called the insurance company), became a part of the policy and constituted warranties.
upon the application for this policy, which application is copied herein and made a part of this contract, and in further consideration of the annual premium . . . hereby insures the life of John A. Salgue . . ."
"This policy is issued and accepted subject to the conditions, provisions, and benefits printed on the reverse of this page, which are hereby referred to and made a part hereof. . . ."
"Conditions, provisions, and benefits which are made a part of this policy:"
"Section 1. This policy shall not take effect until the first premium hereon shall have been actually paid during the lifetime and good health of the insured. . . ."
"Section 7. All agreements by said company are signed by one of its executive officers. No agent or other person not an executive officer can alter or waive any of the conditions of this policy, or make any agreement binding upon said company."
the amount of premium as stated therein has been received by said company, or its authorized agent, during my lifetime and good health, and a receipt given therefor, signed by an executive officer of said company, and I further agree that no statement or declaration made to any agent, examiner, or other person, and not contained in this application, shall be taken or considered as having been made to or brought to the notice or knowledge of said company, or as charging it with any liability by reason thereof, and I understand that all policies and agreements made by the said Aetna Life Insurance Company are signed by one or more of its executive officers, and that no other person can grant insurance or make any agreement binding upon said company."
"14. What are the names and residences of all the physicians whom you have personally employed or consulted during the last five years?"
"Answer: 'Dr. James T. Ross, Macon, Georgia.'"
"16. Has any proposal or application to insure your life been made to any company, association, or agent on which a policy of insurance is now pending? Or has any such proposal or application ever been made for which insurance has not been granted, or on which a policy or certificate of insurance was not issued in full amount, and of the same kind as applied for? If so, state particulars and the names of all such companies, associations, or agents."
"19. Has any physician expressed an unfavorable opinion upon your life with reference to life insurance?"
date, duration, and severity of illness. . . . Disease of the heart?"
"23. Are you subject to dyspepsia, dysentery, or diarrhoea?"
"24. Have you had during the last seven years and disease or severe sickness? If so, state the particulars of each case and the names of the attending physicians."
There was discussion between Salgue and the examining physician in regard to the condition of Salgue's heart. His first statement was that he did not have heart disease, though he had been told he had. The physician explained to him the symptoms of the disease, and he replied that he did not have any of them and never had been treated for heart trouble. He had, he further said, consulted two doctors, Little and Winchester, and one of them told him he had heart disease "and scared him so." The other told him that he did not have any signs of it. And the recollection of the physician was that Salgue referred to Dr. Ross as having treated him for something several years previously. At the end of the discussion, the physician put down the answer "No." He also reported that Salgue's respiration was "full, easy, and free. O.K.," and that "auscultation" did not "indicate enlargement or disease of the heart of any kind."
There was testimony to the effect that about June 15, 1905, and prior to the application to the Aetna, Salgue applied to the local agent of the Penn Mutual Insurance Company at Macon for a policy of $6,000. The company's medical examiner refused to pass him, telling him that he had heart disease, and advising him to see his family physician, Dr. McAfee. Salgue consulted Dr. McAfee, and was informed by him that he had heart disease.
favor; (2) the denial of requests for special instructions. We may confine our consideration to the special requests.
There was controversy as to whether Salgue had heart disease. We have seen the various opinions of the examining physicians. Salgue was a strong man physically, and his strength was illustrated by instances. At one of his examinations, he easily picked up and removed a large box of melons without any effect on his heart action. An effort of strength on another occasion was immediately detrimental, causing an aneurism which progressively developed and produced a rupture of the blood vessel and his death. By the advice of his physician, he had quit work and had gone to a resort called Indian Springs. He remained there about ten days, and on his way home died suddenly on the cars.
or any other person, and not contained in the application, shall be taken or construed as having been made to or brought to the knowledge of the company, or as charging it with any liability by reason thereof, was binding on Salgue. So also the limitations on the powers of the agents and of what may have been said to them or by them. And further, that, if the answers in the application were incorrect, it was Salgue's duty to report them as incorrect to the company, and, failing to do so, he was presumed to have accepted his policy upon the faith of them. It was therefore immaterial what may have been said by or to the agent or to the medical examiner which was not reduced to writing and presented to the officers of the company at the home office.
"To make them distinctly applicable to your duty, you are instructed that you must determine from all the facts, first, did Salgue make a misrepresentation or concealment of a fact of which he had knowledge? If he did not, the defense on this point must fail. Second, if he did, was such misrepresentation or concealment so material that it would have influenced one or both of the defendants not to issue the policy of insurance upon the respective applications? And third, in connection with this, your inquiry will be, if such material misrepresentation or concealment as would have caused the defendants or either of them to withhold insurance was made, was it by Salgue willfully or fraudulently done? In the absence of willful or fraudulent misrepresentation or concealment of a material fact, the policy stands good and the insurance company must pay what it promised to pay by its policy when it accepted the premium of the applicant."
that he was "in good health;" that the statements made by him were "full, correct, and true;" and that he had no knowledge of "any disease, infirmity, or circumstance" which might "render insurance on his life more hazardous than if such disease, infirmity, or circumstance had never existed." He also agreed that "the declarations and warranties" therein made, and the answers to the questions, "should be the basis and form part of the contract (or policy)" between him and the company, "and that, if the same be in any respect untrue," the policy should be "void."
"Application, good faith. -- Every application for insurance must be made in the utmost good faith, and the representations contained in such application are considered as covenanted to be true by the applicant. Any variation by which the nature or extent or character of the risk is changed will void the policy. *"
how explicit the policy is, and this Court, in Jeffries v. Economical Life Insurance Company, 22 Wall. 47, and Aetna Life Insurance Company v. France, 91 U. S. 510, held that the parties to the contract may make the inquiries and answers material, and that therefore their materiality is not open to be tried by a jury.
These cases recognize the right of the insurer and the insured to make their own contract and determine for themselves what representations shall be material.
How far has this simple rule and the right of the parties been changed by the Georgia Code? In German-American Life Association v. Farley, 102 Ga. 720, 733, it was decided to be the established law of that state that mere immaterial matters, though incorporated in an application for insurance and declared to be warranties, do not avoid the policy, and that this was so imperatively the law of the state under the provisions of the Code that the parties could not contract to make immaterial matter material. The court, however, said: "Of course, what is in any degree material should be allowed its due effect; but the absolutely immaterial should count for nothing."
"a policy cannot now be avoided upon the ground of the falsity of the representation, though warranted, unless the representation be material and the variations from truth be such as to change the nature, extent, or character of the risk."
such contract is void. "It is therefore immaterial," the court declared, "whether the warrantor acted in good faith in making them."
"It is scarcely conceivable that the company would have issued the policy if the applicant had answered that he was or had been afflicted with heart disease, or even if he had answered doubtfully. We think that, if the answer made was untrue, the plaintiff below cannot recover."
The judgment in the case was reversed upon the ground, among others not necessary to be considered, of error in the instruction of the court, "that, if Wood had heart disease and did not know it, the failure on his part to disclose it could not avoid the policy." There was dispute as to the fact, but the court did not pass upon it, remitting it as a question for the jury to decide at the next trial.
will be void, and that this will be so whether they are or are not willfully or fraudulently made."
It is, however, contended by respondent that the questions asked in the application were truthfully answered, or at any rate, whether they were truthfully answered was a question for the jury. And it is insisted that the answers of Salgue in regard to other insurance and the action thereon by other companies were correct.
But granting that the truthfulness of the answers was a question for the jury, the testimony was conflicting, and, as the verdict was general, it is not possible to say what view the jury took of the conflict, or that it was necessary to resolve it in view of the charge of the court, or how they would have resolved it if instructions requested by the insurance company had been given.
application before it reached the company, and that Salgue "could answer in the future that he had never been rejected by any company," and the agent testified "that it is customary entirely with agents to stop examinations that way."
It is contended by respondent that this testimony shows that Salgue's application to the Penn Mutual was not rejected, but was withdrawn, and, besides, whether it was rejected or withdrawn was a question for the jury. We are unable to concur with either contention. The question was a very broad one. It was whether any proposal or application had been made for which insurance had not been granted, and particulars were asked for, "and the names of all such companies, associations, or agents." Regarding the sense of the question -- indeed, if not its letter -- the answer was untruthful. The question certainly called for something more than an absolute negative. Its purpose was to ascertain the conduct of Salgue with reference to life insurance in order to judge of him as a risk. If it had been answered according to the facts, the company would have received information of circumstances certainly material for it to consider.
or concealment of facts with which the company ought to be made acquainted, and that, by so doing, and only by so doing, would he be deemed to have made 'fair and true answers.'"
"Whether there is other insurance on the same subject, and whether such insurance has been applied for and refused, are material facts, at least when statements regarding them are required by the insurers as part of the basis of the contract. . . . Where an answer of the applicant to a direct question of the insurers purports to be a complete answer to the question, any substantial misstatement or omission in the answer avoids a policy issued on the faith of the application."
establish that, where the agent of the company prepares the application or makes representations to the insured as to the character and effect of the statements of the the other rights, privileges, and immunities as the agent of the company, and not the agent of the insured. Among the cases cited to sustain the principle are the following in this Court: Union Mutual Insurance Co. v. Wilkinson, 13 Wall. 222; American Life Insurance Co. v. Mahone, 21 Wall. 152; New Jersey Mutual Life Insurance Co. v. Baker, 94 U. S. 610; Continental Life Insurance Co. v. Chamberlain, 132 U. S. 304; German-American Life Association v. Farley, supra, is also cited, and, being a Georgia case, its authority is especially urged.
There are, however, later cases which enforce the provisions of a policy, and we have seen that it was agreed in the policy under review "that no statement or declaration made to any agent, examiner, or other person, and not contained in" the application, should "be taken or construed as having been made to or brought to the notice or knowledge of" the company, "or as charging it with any liability by reason thereof." And he, Salgue, expressed his understanding to be that the company or one or more of its executive officers, and no other person, could grant insurance or make any agreement binding upon the company.
The competency of applicants for insurance to make such agreements, and that they are binding when made, is decided by Northern Assurance Co. v. Grand View Building Association, 183 U. S. 308; Northern Assurance Co. v. Grand View Building Association, 203 U. S. 106; Penman v. St. Paul Fire & Marine Insurance Co., 216 U. S. 311.
To the contention that German-American Life Association v. Farley is determinative, we answer that the principle which it is cited to support is one of general jurisprudence, and therefore the case is not controlling. Kuhn v. Fairmont Coal Co., 215 U. S. 349.
This case was consolidated by the court, against the objection of the insurance company, with the trial of the case of the same plaintiff against the Prudential Insurance Company. This action of the court was based on § 921 of the Revised Statutes, which provides that "causes of a like nature, or relative to the same questions," may be consolidated "when it appears reasonable to do so." The action of the court is assigned as error. We doubt if it was reasonable to consolidate the cases. We need not, however, pass definitely on that point, as we direct a new trial on other grounds.
Judgment reversed and cause remanded to the district court for a new trial.
"SEC. 2480. Effect of misrepresentation. Any verbal or written representations of facts by the assured to induce the acceptance of the risk, if material, must be true, or the policy is void. If, however, the party has no knowledge, but states on the representation of others, bona fide, and so informs the insurer, the falsity of the information does not void the policy."
"SEC. 2481. Concealment. A failure to state a material fact, if not done fraudulently, does not void, but the willful concealment of a fact which would enhance the risk will void the policy."
"SEC. 2483. Willful misrepresentation voids policy. Willful misrepresentation by the assured or his agent, as to the interest of the assured, or as to other insurance, or as to any other material inquiry made, will void the policy."
"SEC. 2499. Law of fire insurance applicable. The principles before stated as to fire insurance, wherever applicable, are equally the law of life insurance."

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