Court Opinion

ID: 7198064
Source: CourtListenerOpinion
Date Created: 2022-07-24 17:04:45.942377+00
Date Added: 2024-06-11T16:16:25.570507
License: Public Domain

OpinioN ON Rehearing.
Blanchard, J.
Charles H. Schaefer owed the plaintiff bank a sum ‘exceeding thirty thousand dollars. To protect the bank ho assigned to it two policies of insurance on his life, one in the New York Life Insurance Company for $10,000, the other in the Manhattan Life Insurance Company for $20,000.
This suit deals with the latter.
This policy was taken out.in January, 1893. Schaefer was-then between fifty-three and fifty-four years of a¿e. At that time he carried policies on his life in four other companies.
The policy in defendant company was applied for at the instance of the plaintiff bank. The application for the insurance, made out by Schaefer, directed the policy to be made payable to “S. Chalaron, Agent”, .and stated the latter’s relationship to the insured to be that of creditor. Chalaron was the agent of the plaintiff bank, who was the creditor of Schaefer.
But when the policy came to he made out, it was not written payable to S. Chalaron, Agent, as Schaefer had directed, but was made payable to Schaefer himself. This change was effected at the instance of the company, it being well understood that the purpose Schaefer had in taking out the insurance could be as well subserved by the assignment of the policy to the bank.
It was the bank that paid the premium, $1118.00, when the policy was delivered, and it was the bank that paid the two remaining premiums of $1118.00 each, which accrued prior to the death of Schaefer.
The insurance company, therefore, had full knowledge from the *44beginning that -it was the bank which was taking out the insurance upon the life of Schaefer for its own protection as against the large indebtedness he owed that institution.
The policy was forthwith, after its issue, assigned to the bank, and due notice of assignment transmitted to defendant company.
Schaefer died on January 7, 1896, just twenty-three days prior to the third anniversary of the elate of the policy. If this third anniversary had been reached -before his death the policy would, by its terms, have become incontestable as to the grounds upon which the company’s defense to this action rests.
Following the death of Schaefer demand of payment of the policy was, after proof of death, made by the bank, and declined by the company on the ground that the insured had made mis-statements in his application for insurance, constituting a breach of warranty and an avoidance of the policy.
This suit followed.
The defense -rests on Schaefer’s response to two questions. Among the printed questions he was required to answer in filling out the application for insurance was the following: "Have you ever applied to any company for insurance on your life without receiving a policy of the exact kind and amount applied for? If so, state the name of each company.”
He filled the blank with the simple response, “No.”
Then when he came to fill out the blanks in the printed “Medical Examiner’s Report,’* in response to the 68th question: “Have you ever been declined or postponed by any company? State name of company” — he answered “No.”
It appears that these answers were not true, for on the 6th of May, 1891, less than two years prior, an application by him for insurance in the New York Life Insurance Company had been declined.
The application for the present insurance warranted the statements and answers made therein to be full, complete and true in every particular, but stipulated that “they are offered as a consideration for the insurance applied for”; and the policy itself recites that it is issued in consideration of the statements and covenants made in the application, which are constituted part of the contract, and which if untrue avoids the policy and forfeits to the company all payments made upon it.
Upon this state of facts, if this were all there was in the case, if *45Schaefer had died without the untruthfulness of his answer® as above having' seasonably come to the knowledge of the insurer, and after or about the time of his death the company had discovered the same, and set up the breach of warranty as against the demand for payment of the policy, there would be little or no doubt of the legal sufficiency of the defense..
But there was a sequel and from it appears another. aspect of ,the case and one not so favorable to defendant.
If the insurance company knew at the time it issued the policy that Schaefer had previously applied, to another company for insurance on his life and had been declined — in other words, if it knew that his answers in this regard were not true and still saw fit to favorably consider his application, the administration of justice would interfere to prevent denial of liability on the policy which followed.
The warranty stipulation as to no declination by any other company was one made or exacted for the benefit of the insurer and could be waived by the latter, and would, of course, be held to have been waived, if, with knowledge of the untrue answer, it had nevertheless executed the contract.
Further, if at the time it issued the policy the company did not have knowledge of the untruthfulness of the answer of the insured, but subsequently' acquired this knowledge and yet, thereafter, accepted payment of a premium due on the policy, this act could not be considered otherwise than, as an election on its part to continue the policy in force, and it would not be heard to set up its avoidance because of this breach of warranty.
Phoenix Life Ins. Co. vs. Reddin, 120 U. S., 196.
And, still further, if after the policy had issued and after two payments of premiums upon it, besides the. initial ’ one, had been made, knowledge of the fact had been brought home to the company that the insured had formerly applied to another company for insurance ■ which had been denied, and it (the present insurer), had inquired into this and learned from the other company the grounds upon which it had declined' the risk upon the life of the insured, and then had, notwithstanding, permitted a long period of time (nine months) to elapse without exercising its right to declare the policy void, and this had been continued down to within a few days (twenty-three) of the time when the fourth premium would be due, after payment of which the policy on this ground would become incontestable,' and this con*46dition of things had ended only by the death of the insured, the company would by its conduct be placing itself in a position where it could not successfully impeach the policy for breach of the warranty.
Especially is this true, where, to the knowledge of the insurer, another other than the insured had taken out the insurance on the latter’s life as protection against a large indebtedness he owed the other.
And that is this ease. •
At the time when, in May, 1891/Schaefer applied to the New York Life Insurance Company for the policy which was declined, that company and defendant company were,, through their Medical Boards, members of, or subscribers to, a common agency maintained in the city of New York by the principal life insurance companies located there.
The purpose of this agency, or bureau, was to make, keep and preserve a record of the names of those who had applied for insurance in any of the companies subscribing to the agency and had teen declined. It was for the mutual benefit of the companies. Each was to furnish the agency with the names of rejected applicants, and the records thus kept were always accessible to the companies having membership in the agency.
Accordingly, when the New York Life declined Schaefer’s application, that company reported his name to the agency and it went on the list of rejected applicants. It was there when he made his application to defendant company, and the knowledge of his former rejection was, therefore, easily accessible to the latter.
It is true there is lack of proof that the company had availed itself of the means thus at hand to ascertain at the time whether Schaefer spoke the truth or not when he answered he had never applied and been rejected for insurance. But it does not strengthen the company’s case that it did not so avail itself, if it be true that it did not, and whether it did or not was peculiarly within its knowledge, and yet it made no attempt to show the facts by calling any of its officials as witnesses.
Nor does it appear from the evidence that at the time when the-premiums fell due and were paid the company had yet availed itself of the means at hand to discover the true facts.
But it does appear that on the 1st of April, 1895, more than nine months before Schaefer died, the resident physician of defendant company addressed a communication to the New York Life Ins. Co., *47or to its medical director, asking why that company had rejected Schaefer’s application for insurance made in May, 1891, and that two •days later the medical director had replied, giving the desired information.
So that it is shown defendant company had knowledge of the fact of rejection prior to the 1st of April, 1895. How much prior was best known to defendant, but no light did it shed upon the subject by calling- any of its employees to the stand. Nor did it produce the let--ter of the medical director of the New York Life Ins. Co., giving- the reason for the rejection, and the record does not, from any other source, disclose the reason. Enough is shown, however, to impress us with the belief that Schaefer was not rejected because of an adverse condition of health disclosed by the examination then made of him.
On the contrary, the medical examiners of the New York Life reported him as a first-class risk.
In the application he then made he reported his age as 52, but wanted the policy issued as of age 51 years, and asked that it be dated back accordingly.- It is quite likely, at least we are left to surmise so, that the company was unwilling to do this and, hence, declined the application.
If this were the case, if it .were reported to defendant company that Schaefer had been rejected because of his peculiar request as to the age at which he desired to be rated, and not because of ill health, or unfavorable symptoms likely to affect his health, it might well be that defendant saw no reason for exercising its right to declare the policy it had issued on the life of Schaefer void by reason of his false answer, and concluded to stand by the contract.
It did stand by it 'for more than nine months thereafter, and repudiated it only when Schaefer died, just within the time after lapse of which the policy would have become incontestable.
After the discovery of the breach of the warranty it was the right of the company to speak in avoidance of the policy, and we must hold it was likewise its duty to speak within a reasonable time thereafter.
It is not the case of acquiescence by mere silence and inaction. After the discovery of the fact of other insurance applied for and declined — how long after we know not, though defendant was in a position to have told us — an investigation was set on foot by the company to ascertain the cause of rejection. This was action by the de*48fendant with reference to the breach of warranty, and we must pre-surne that the result of the investigation was so satisfactory that it concluded to let the contract remain intact, else it would have exercised its right to repudiate it arid retain the-payments made upon the policy, as the terms of the latter permitted.
The company could have insisted upon the avoidance of the policy, or could have waived it, as it might deem most to its interest. But it must xnake its election to do the one or the other within a reasonable time, having due regard to the rights of others.
Here, had it exercised its right to cancel the policy, the plaintiff bank, having large interests at stake, could have protected itself by taking out other insurance upon the life of Schaefer, for it is in evidence that he remained a good insurable risk, so far as his general health was concerned, down to the time of his death.
Even silence and inaction are, under some circumstances, the means of showing an assent that creates an obligation. C. O., 1811.
Omission to repudiate-within a reasonable time is evidence, and may be conclusive evidence, of an election to affirm the contract.
Pollock on Contracts, p. 50738 Fed. Rep., 806; 83 Ill., 455; 59 Tex., 512.
Our review of the case has not led to a conclusion different from that first reached, and, accordingly, the judgment appealed from is affirmed.
MoNROE, J., takes no part in this decision.
Watkins, J., adheres to his dissenting opinion.