Court Opinion

ID: 3592079
Source: CourtListenerOpinion
Date Created: 2016-07-05 23:40:28.656773+00
Date Added: 2024-06-11T07:42:11.960268
License: Public Domain

This action was brought by the plaintiff as administratrix of the goods, chattels and credits of her deceased husband, Samuel Abbott, to recover upon six weekly premium industrial life insurance policies issued by defendant upon the life of deceased on the following dates: Four policies, March 4, 1935; one policy, July 1, 1935, and one policy, August 12, 1935. Samuel Abbott died on August 24, 1935, twelve days after the issuance of the last of these policies, death concededly resulting from a chronic heart disease from which he had suffered since 1931 in which year he received a heart strain in an industrial accident. Plaintiff recovered before a jury at Trial Term. Upon appeal, the Appellate Division reversed the judgment appealed from by a divided vote and granted a new trial on a question of law only. This "implies that the Appellate Division has examined the facts and is satisfied therewith" (Grulich v. Paine, 231 N.Y. 311, 315). There was substantial and ample evidence to sustain the verdict. Plaintiff then gave a stipulation for judgment absolute and appealed to this court.
Transactions between the deceased and the agents of defendant occurring antecedent to the delivery of the policies are of importance and reference must be made to them in some detail. Defendant's agent, Dillon, and its assistant superintendent in charge of its local office, Guinan, knew plaintiff and her husband by reason of previous dealings with them with regard to insurance. Both of them knew of Samuel Abbott's accident in 1931 and of his resulting sickness which both knew had confined him to his bed for a considerable period of time and to his house under his physician's care all of the time up to and including *Page 386 
the date of the issuance of the policies. Dillon knew of and had spoken to plaintiff and her husband concerning the latter's claim for workmen's compensation for permanent injury. In 1933 Dillon advised plaintiff's husband that he would be unable to procure more insurance because he would be unable to pass a medical examination and by the advice of both Dillon and Guinan he was persuaded not to apply for payment of the cash surrender value of certain policies then in effect upon his life. In February, 1935, without invitation by plaintiff or assured, Dillon and another agent called at their home and informed them that the defendant insurance company was issuing a new form of insurance contract referred to as an "anniversary policy" for which the assured was eligible due to the fact that no medical examination was necessary, and that inasmuch as the assured then had a $500 policy with the defendant, he could procure enough of this new insurance to bring his total coverage to $1,500. Plaintiff and her husband inquired of them how it was then possible to procure insurance upon the life of the husband when he was uninsurable in 1933. Dillon replied that this was a new type of policy. Upon application signed by the assured at this conference, insurance in the total amount of $954, divided into four policies, was issued by the defendant on March 4, 1935. The policies were delivered to the insured by Dillon, who collected the premiums on these policies thereafter. On an occasion in June, 1935, Dillon called at plaintiff's home and advised her to take the cash surrender value of various older policies then in effect (issued prior to her husband's accident) on the life of her husband, explaining to her that she could then procure more of the anniversary insurance to take its place. She thereupon applied for and secured the cash surrender value of some of her husband's insurance and on July 1, 1935, procured from defendant another weekly premium industrial policy in the amount of $195 upon the life of her husband and on August 12, 1935, another identical policy. *Page 387 
The written applications for the foregoing policies were signed by the deceased and were forwarded to the home office of the company where the policies were issued. The applications were not attached to nor endorsed upon the policies. The questions in the applications were in such form as to indicate that the defendant expected that they should be answered by somebody other than the insured. Question 17-a read: "What is the present condition of health of the life proposed?" and question 19 read: "Has life proposed ever suffered from consumption, asthma, spitting of blood * * * or accident of any kind?" These furnish a fair sample of the form and indicate the person from whom the information was sought and reasonably it might be inferred that the agent and not the applicant was expected to answer those questions. There was evidence in this case from which the jury were warranted in finding that the applications were not filled out by Dillon or by the insured or by any one in his behalf at the time Dillon procured the signature of deceased and that they were filled out later in Dillon's office. In view of the facts that have been recited above, it is a reasonable inference that the insured would not have signed the applications nor applied for the policies had he known that representations that he was in good health were contained therein.
All premiums required on the various policies were paid to Dillon at the times when they were required to be paid. Proofs of loss were produced and received in evidence and it was conceded that they were timely made and in due form.
Defendant called no witnesses. Dillon, the agent, was in court throughout the trial. It offered certain documentary evidence of which the only pertinent part on this appeal is a clause contained in each of the written applications made for each policy in suit, which read as follows: "I also understand and agree that no agent has power on behalf of the Company to make or modify this application for insurance, or to bind the Company by making any promise, or by making or receiving any representation or information." *Page 388 
Counsel stated that his purpose in offering that evidence was to show the limitation of authority of the agent and that the insured had notice of the limitation of his authority. Upon objection by plaintiff, the evidence was excluded under the provisions of section 58 Ins. of the Insurance Law. The correctness of that ruling was the only question considered as a basis for reversal in the Appellate Division and the only question to be considered as a basis for decision in this court.
The policies themselves contained a clause that "this policy shall not take effect if the Insured die before the date hereof, or if on such date the Insured be not in sound health, but in either event the premiums paid hereon, if any, shall be returned" and another clause that "no condition, provision or privilege of this Policy can be waived or modified in any case except by an endorsement hereon signed by the President," etc., and that "no agent has power in behalf of the Company to make or modify this or any other contract of insurance, to extend the time for paying a premium, to waive any forfeiture, or to bind the Company by making any promise, or by making or receiving any representation or information." Plaintiff conceded that her husband was not in sound health at the respective dates on which the policies were issued and delivered or at the times the several applications were signed, but she sought to avoid those conditions of the policies on the ground that the defendant knew of the condition of health of the insured but in spite of its knowledge of the ill health issued the policies and was thereby estopped to assert such ill health as a defense.
It is now settled that the provisions contained in the policies limiting the authority of the agent do not constitute a good defense to the claim of waiver and estoppel where the alleged waiver occurred before the issuance of the policies (Bible v.John Hancock Mut. Life Ins. Co., 256 N.Y. 458, 463; Lampke v.Metropolitan Life Ins. Co., 279 N.Y. 157, 165). To avoid such a waiver and estoppel, the defendant may show by competent evidence extrinsic of the *Page 389 
policy that the insured knew of the limitation of the agent's authority prior to the issuance and delivery of the policy. Whether the insured had any such knowledge is a question of fact (see Lampke case, p. 165) and was submitted to the jury in the case at bar as a question of fact and is not a question of law for this court. The admission of the insured that he had such notice may be shown by the clauses in the application where the application is endorsed upon or attached to the policy, but not otherwise (Insurance Law, § 58 Ins.; Bible case and Lampke case,supra). As to the force of the statute to exclude evidence of notice to the insured derived from the unattached application, Chief Judge CARDOZO says in the Bible case: "Today, the restriction upon the authority of the agent and the manner of its exercise is commonly stated in the application signed by the insured. Controversy is foreclosed if the application is annexed. Here it was not annexed, and notice of the limitation, if imparted, must be proved in some other way. In these circumstances, whatever would have been effective before the adoption of the statute to charge the defendant with an estoppel through notice to its agent, must be equally effective now. The purpose of section 58 Ins. of the Insurance Law in requiring the whole contract to be stated in the policies, and not pieced out by documents included by mere reference, was not the relief of the insurer. It was the protection of those insured and of the beneficiaries claiming under them. The Legislature had no design to make their situation harder" (p. 464). No offer was made to prove by any other evidence notice of the restriction upon the authority of the agent to bind the company.
It is asserted here that a distinction exists as between offering the application to show misrepresentations by the insured as to his health and to show notice to the insured extrinsic of the policy previous to its issuance of the limitation upon the agent's authority. The clause in the applications was offered solely to prove the latter. On the basis of that distinction and for that purpose the Appellate Division has held that the provisions of section 58 Ins. of the *Page 390 
Insurance Law have no application and that the evidence was admissible. It is suggested by the lower court that Chief Judge CARDOZO had that in mind when he cited the case of Drilling v.New York Life Ins. Co. (234 N.Y. 234), but it might have been observed, by reference to the record in the Drilling case, that the application was attached to and made a part of the policy at the time of its delivery. Reading the entire statement of Judge CARDOZO in the Bible case (p. 462), it is evident that the offer of the evidence from the application in the form in which it was offered could not supply the element of proof or warning "extrinsic to the policy, of a limitation on the apparent authority proper to an agent." If the ruling of the Appellate Division is correct it means that the statement of the insured that he knew of the limitation of the agent's authority might be incorporated into the contract between the parties by reference to the unattached application, the specific thing that section 58 prohibits. The section means what it plainly says, as this court has construed it in the Bible case, that the contract is complete on delivery of the policy, which must contain the whole contract between the parties, and that nothing in the application can be deemed a part thereof unless the application is endorsed upon or attached to the policy at the time of its delivery to the assured. Proof of notice to the assured of such limitations may, of course, be shown by evidence extrinsic to the policy, but when an attempt is made to show it by statements made in the application the evidence must be excluded unless the application itself is part of the contract between the parties.
The purpose of the Legislature is apparent and the salutary effect of the statutory provision is particularly pertinent in the case at bar, where the agent, who is alleged to have received all the information and to have known of the ill health of the assured, not only at the time the applications were signed but at the time the policies were issued and delivered by him, was in court during the trial and was not called upon to testify. To hold otherwise would *Page 391 
permit the insurance company to take advantage of the information which it had, to accept the premiums from the assured and retain them and then, upon the death of the assured, by the simple expedient of offering a written application not a part of the contract of insurance, avoid payment under the policies and thereby perpetrate a fraud upon the estate of the assured (seeLampke case, p. 165).
There can be no question in this case in regard to the authority of the agent. He was not merely a soliciting agent but, as Judge CARDOZO says in the Bible case, "he was that, but much besides. He was authorized not only to solicit applications, but to make delivery of the policies, and upon delivery and afterwards to collect the weekly premiums" (p. 463). Here, he was placed by the company in such a position as to enable him to perpetrate the fraud. As Judge HUBBS says in the Lampke case, "Repeatedly we have held that the knowledge of an agent with the authority of the agent here involved constitutes knowledge on the part of the company" (p. 165). Here, at the times the applications were signed, the assured was advised and was lulled into the belief that the agent had authority to bind the company through contracts of insurance which did not require him to be in good health at the respective dates of the policies. He was given no notice by the defendant to the contrary. The protection placed around such transactions by section 58 Ins. of the Insurance Law should not be relaxed.
The order of the Appellate Division should be reversed and the judgment of the Trial Term affirmed, with costs to the plaintiff in this court and in the Appellate Division.
CRANE, Ch. J., O'BRIEN and LOUGHRAN, JJ., concur with LEHMAN, J.; RIPPEY, J., dissents in opinion in which HUBBS and FINCH, JJ., concur.
Ordered accordingly. *Page 392