United States Annuity & Life Insurance v. Peak , 122 Ark. 58 ( 1916 )

Hart, J.,

(after stating the.facts)., (1) The cause was submitted to the jury on the theory that the main question of fact for their determination was whether or not the policy was obtained through fraud. The court instructed the jury that if the insured was affected with Bright’s 'disease at the time he made the application, that such fact was material to the risk and avoided the policy if the insured either knew that fact or concealed it from the company, or purposely furnished the medical examiner of the company with a specimen of urine for examination which was not his- own. The appellant, to maintain the charge of fraud, introduced considerable evidence tending to show that the .specimen of urine examined by its medical examiner was a spurious specimen. The appellee then, by way of rebuttal, introduced witnesses who testified that they were acquainted with the general reputation of Peak for truth and morality in the neighborhood where he lived, and that that reputation was good. Counsel for appellant assigns as error the action of the court in admitting this testimony, and we think they are right. It is true there is some authority to the effect that in civil cases where a party is charged with fraud, and the charge is based only on circumstantial evidence, he may rebut the charge by proof of his good character. We think, however, the far safer rule is that in conformity to the general rules of evidence in civil cases each transaction should be ascertained by its own circumstances, 'and not by the character of the parties. See 16 Cyc. 1263.

In the case of Great Western Life Ins. Co. v. Sparks, 38 Okla. 395, 132 Pac. 1092, 49 L. R. A. (N. S.) 724, the court held that in an action on a life insurace policy where one of the def enses set up in the answer was that the insured had falsely and fraudulently 'answered certain questions propounded to him in his application for insurance, it was error to admit evidence to the effect that the general reputation of the insured for being a truthful and honest man in the neighborhood in which he resided was good' for the purpose of rebutting direct evidence tending to establish the allegation of fraud.

Many cases are cited in the opinion to sustain it and many others are cited in an extensive case note to the opinion as reported.

Then, too, we think this is the effect of our decision in the case of Powers v. Armstrong, 62 Ark. 267. See, also Stone v. Hawkeye Insurance Co., 68 Iowa 737, 28 N. W. 47, 56 Am. Rep. 870; Munkers v. Farmers and Merchants Insur. Co., 30 Oregon 211, 46 Pac. 850; Fowler v. Aetna Fire Ins. Co., 6 Cow. (N. Y.) 673, 16 Am. Dec. 460.

(2) It is also insisted by counsel for appellant that in any event the policy had lapsed for nonpayment of the installment due on the note on the 14th day of January, 1914. It will be remembered that the applicant executed a note for the first year’s premium payable to the order of J. L. 'Carter, the local agent of the company. Carter, who was the local soliciting agent of the company at Eudora, Ark., and the State agent of the company deposited the note with a local bank as collateral security for borrowed money. Out of the proceeds, the agents paid to the company the 'amount due it out of the first year’s premium and retained the amount of the commissions due them. The company accepted the amount isent it as payment of the amount due it; and there could thereafter be no forfeiture of the policy for nonpayment of the premium for the first year because the company treated the premium as paid.

(3) Finally it is insisted by counsel for appellant that it was the duty of the applicant to disclose facts coming to his knowledge material to the risk while the appellant company had his application for insurance under consideration and before its acceptance. In short, they contend that it was his duty to disclose the fact that he had been told by Doctor Meriwether that he had chronic Bright’s disease, and that his failure so to do avoided the policy. They contend that the subject-matter of the contract is the life of the applicant, and that if, after the application had been made and representations forwarded to the insurer to induce them to enter into the contract, there is a change in the subject-matter of the contract, considerations of fair dealing require the applicant to disclose the change, that good faith requires the applicant to disclose to the company every fact material to the risk which came to his knowledge at any time before the contract was closed. In support of their contention, they cite Peidmont & Arlington Life Ins. Co. v. Ewing, Admr., 92 U. S. 377; Harris v. Security Mutual Life Ins. Co., 130 Tenn. 325, 170 S. W. 474, L. R. A. 1915 C, 153. Several cases are cited in the opinions in these cases in support of the rule, ¡and other cases are cited in the case notes to which they refer.

We do not adopt the reasoning of these cases in their entirety. We do, however, 'think the rule announced there was correct when 'applied to the facts of those cases. For instance, in the case in 92 U. S. 377, while negotiations were still pending between the agent of the company and the applicant touching the terms of the contract, the amount of the premium ¡and the mode of payment, a friend paid the premium to conceal from the agent the condition of the applicant, who was then in extremis and died in a few hours. The agent, in ignorance of the facts, delivered the policy, and the court held that no valid contract arose from the transaction. The court said:

“To hold that, when he was in extremis, an hour or two 'before he breathed his last, a friend could pay this small sum to an agent of the company, without the agent of the company having any idea of the condition of the dying man, and thus secure an obligation to pay his administrator $5,000 within sixty or ninety days, is to affirm that one party to a negotiation can delay his assent to the terms of the contract .until the changes of fortune enable him to reap all the benefits, and throw all the losses on the other side, and then, for the first time, do what was necessary on his part to make the contract obligatory.”

In the instant ease the policy had not been issued, but the applicant bad done all that had been required of him. We do not think he would be required, as a matter of law, to disclose to the'Company the result of a medical examination for insurance in any other company regardless of the fact whether or not he in good faith believed what the medical examiner had told him. For instance, when the applicant went to Doctor Meriwether 'and was examined by him for life insurance in another company, and Doctor Meriwether told him that he found albumen in his urine and other indications of Bright’s disease, the applicant would not be required to state this fact to appellant company unless he believed it to be true; for, if he did not believe the statement made by Doctor Meriwether, he could not be said to conceal a material fact from the company. He 'might believe that his kidneys were only temporarily affected, and that the physician was mistaken in believing it to be Bright’s disease.

(4) The testimony in the case before us, however, went further than this. After Doctor Meriwether had examined him 'and told him that the results of the examination indicated that he had Bright’s disease, Peak became alarmed. Doctor Meriwether told him that he could not tell much about it until he made a microscopic examination, and as a result of this examination told him he thought he had chronic Bright’s disease. The applicant then told him that he intended to go to Roswell, New Mexico, at once, and Doctor Meriwether selected a physician to treat him for Bright’s disease while he was out there. Doctor Meriwether is a physician of good reputation, and there is nothing whatever in the record to dispute his testimony.

So, it may .he said that the result of Doctor Meriwether’s examination of the applicant was to disclose to him that he had .a fatal disease, the presence of which he could not he ignorant of, and the failure to disclose his knowledge that he had chronic Bright’s disease was an intentionarconcealment on his part of a material fact, and his failure to communicate it to' the company avoided the policy. Under -the undisputed facts, we think there was an element of knowledge on the part of the applicant that he had Bright’s disease, and that there was an intentional concealment of this fact from the company.

For the reasons given in the opinion, the judgment will he reversed and the cause remanded for a new trial.