Johnson v. Central Mutual Ins. Assn. , 346 Mo. 818 ( 1940 )

^* NOTE: Opinion filed at May Term, 1940, July 18, 1940; motion for rehearing filed; motion overruled at September Term, 1940, September 18, 1940. This is an action in two counts on life insurance certificates, of $1000 each, issued by an association organized under Article 3, Chapter 37, R.S. 1929, and operating on the assessment plan. Plaintiffs, beneficiaries, had verdict and judgment on each count. Defendant appealed to the Kansas City Court of Appeals, which affirmed the judgment. [Johnson v. Central Mutual Ins. Assn., 132 S.W.2d 674.] However, "deeming this opinion in conflict with the question of St. Louis Court of Appeals," in two cases named, the court certified the cause here under the provisions of Section 6, Amendment of 1884, to Article 6, of the Constitution.

[1] Defendant defended on the ground that these certificates were "void from the beginning," because purported insured was disqualified to be a member of or insured by the Association when these certificates were issued to her in 1931 upon applications stating her age to be fifty years. Defendant tendered into court all fees and assessments paid by or on behalf of Mrs. Parrish to whom these certificates were issued. [See Klaber v. O'Malley (Mo.), 90 S.W.2d 396.] Defendant assigns error in refusing its requests for peremptory instructions. However, the Court of Appeals found, and defendant seems now to concede, that "there was evidence, both oral and documentary, showing that insured was 55 years of age when the certificates were issued, and there was evidence the statements in the applications, that she was born January 13, 1881, was correct." Therefore, this assignment is overruled.

[2] Defendant's other and principal assignment is against plaintiffs' instruction No. 1, which was as follows:

"The Court instructs the jury that under the law, if the age of the insured was misrepresented in the application for insurance, that fact does not constitute any defense to this action, and said misrepresentation, if so made, would not be a valid reason for refusing to pay the full amount of the insurance issued by defendant upon the life of Norah Isabelle Parrish, unless the jury believe and find from the evidence that the matter misrepresented actually contributed to or caused the death of said insured, Norah Isabelle Parrish."

Defendant's complaint is that it was error to direct the jury that the age of the insured did not constitute any defense if such age did not contribute to cause her death. Defendant's point is that the certificates never became valid contracts, if insured was over the Association's age limit when issued. For the validity of the policies and the propriety of this instruction, plaintiffs rely upon the applicability of the misrepresentation statute. [Sec. 5732, R.S. 1929, 6 Mo. Stat. Ann. 4373.] Each of the certificates sued on provided that "the By-laws of the Association now in force or hereinafter amended or enacted, are taken and construed and made a part of this agreement." Defendant's by-laws, Section 3, provided: "The members of the Association shall consist of . . . persons fifteen years of age, and who at nearest birthday is not more than fifty years of age, who shall make application for and receive a membership certificate . . . and who shall remain in good standing" by paying required assessments. Section 20 provided that "the Board of Directors have power to make . . . (rules and regulations respecting membership application, etc.) . . . and may change the age limit at which members may be accepted into the Association but no changes in the age limit shall be construed as effecting policies theretofore issued." Section 5751, R.S. 1929 (6 Mo. Stat. Ann. 4406) provides that "no corporation doing business under the article shall issue a certificate or policy upon the life of any person who at the nearest birthday is more than sixty years of age." It has been definitely settled that a policy issued to a person over this age, provided in the statute, is void ab initio. [McNairy v. Standard Life Ins. Co. (Mo. App.), 114 S.W.2d 156; Parish v. Missouri Mutual Assn. (Mo. App.), 8 S.W.2d 1018; Reed v. Missouri Mutual Assn. (Mo. App.), 5 S.W.2d 675; Riley v. Missouri Mutual Assn. (Mo. App.), 278 S.W. 780.] Likewise, as recognized in Dieterle v. Standard Life Ins. Co. (Mo. App.), 119 S.W.2d 440, referred to by the Kansas City Court of Appeals as in conflict with its opinion herein, the same thing would be true if the certificate violated the prohibition in Section 5751 against issuing a policy "upon any life in which the beneficiary named has no insurable interest." Does the same rule apply here to a lesser age fixed for membership by the by-laws of this assessment company?

[3] The misrepresentation statute, Section 5732, R.S. 1929 (6 Mo. Stat. Ann. 4373), provides: "No misrepresentation made in obtaining or securing a policy of insurance on the life or lives or any person or persons, citizens of this state, shall be deemed material, or render the policy void, unless the matter misrepresented shall have actually contributed to the contingency or event on which the policy is to become due and payable, and whether it so contributed in any case shall be a question for the jury." This court held, in Bowers v. Missouri Mutual Assn.,333 Mo. 492, 62 S.W.2d 1058, that this statute was applicable to assessment insurance companies. The Court of Appeals decided the case upon the applicability of this statute to this case and both sides have briefed and urge consideration of the question decided in the Bowers case. However, the Bowers case did not involve age limitations and, because of the view we take, it is not necessary to discuss the matter of the general applicability of the statute.

In Carter v. Metropolitan Life Ins. Co., 275 Mo. 84, 204 S.W. 399, this Court en Banc said that what is meant by this section (misrepresentation statute) "is that no false statement made in the application for the policy shall avoid the same, unless such statement concealed a condition which contributed to the death of the insured." This court held, under the facts of the Carter case, wherein the required physical examination was not taken by the insured but by one impersonating him, "no real agreement had ever been entered into by the parties," because the party contracting for insurance did not submit to examination. Therefore, the misrepresentation statute was held not applicable. Likewise, in Reed v. Travelers Ins. Co., 227 Mo. App. 1155,60 S.W.2d 59, wherein the insured was in a class which the policy by its express terms did not insure, the Kansas City Court of Appeals said that the misrepresentation statute "ought not to be so stretched out of its meaning and purpose as todestroy all right of an insurance company to say that it will not insure a designated class of persons especially when the affliction or condition is a bona fide matter which actually renders the insurance of such persons more hazardous and lessdesirable." Also, in Langan v. United States Life Ins. Co.,334 Mo. 989, 130 S.W.2d 479, this court, overruling several cases to the contrary, ruled that "whatever effect the statute may have on other statements, the misrepresentation statute does not require an insurance company to unqualifiedly base its premium upon the age which the applicant represents himself to be, but permits a contract for equitable adjustment in the event the insured can show the represented age is incorrect." Otherwise stated therein, this statute does not apply to "a provision ofthe policy limiting recovery to the amount of insurance the premium would buy at the correct age of the insured." [For discussion of the legal, practical, and Biblical aspects of the question of age in insurance, see Langan v. United States Life Ins. Co. (Mo. App.), 121 S.W.2d 268, l.c. 273.] We, therefore, rule that an insurance company has the right to make reasonable provisions (other than those applying to the health or general physical condition of the insured), in its contract, prohibiting it from applying to persons of a specified class which would increase the risk; and that, as to a person actually in an excluded class, no contract to insure him is made when such person procures the issuance of a contract to him which expressly provides that it does not insure anyone in such class. Of course, as held in the Langan case, this is an affirmative defense upon which the insurance company has the burden of proof.

[4] In the case of insurance on the assessment plan, when the application, by-laws or articles of association are made a part of the certificate by proper reference, they form a part of the contract of insurance. [Nastav v. Missouri Mutual Assn. (Mo. App.), 47 S.W.2d 166; Propst v. Capital Mutual Assn. (Mo. App.), 124 S.W.2d 515; see also Beazell v. Farmers' Mutual Ins. Co., 214 Mo. App. 430, 253 S.W. 125; 14 R.C.L. 935, sec. 109; 32 C.J. 1121, sec. 221.] Insurance on the assessment plan is carried only on members of the association or company, and the payment of benefits is "dependent upon the collection of an assessment upon persons holding similar contracts." [Sec. 5745, R.S. 1929, 6 Mo. Stat. Ann. 4398.] The plan of insurance contemplated under Art. 3, Chap. 37 of our statutes (which includes sections referred to herein) is that of levying assessments, equal in amount, upon all members to pay benefits and to establish the required emergency fund as security for its contracts. [Sec. 5749, R.S. 1929, 6 Mo. Stat. Ann. 4403.] Thus it is of greater importance that the risks of all members of assessment associations be more nearly equal, than is true in the case of those insured under the plan of premiums different for each age of contract. Obviously, this is the principal reason for the statutory limits, and it is intended to protect members of such associations from excessive assessments. Certainly, it is proper for an assessment company to equalize its risks to a greater degree by providing lesser limits than those imposed by statute. It is apparent that the contract in this case, by including these by-laws, definitely stated that it excluded and prohibited from insurance persons over the age of fifty. Our conclusion is that no contract was made with the purported insured in this case, if she was over the age required for members, because, under the specific terms of the contract offered to her, there was no agreement to insure her unless she was within such age. [5] In other words, the misrepresentation statute applies whenever it is sought toavoid a policy because of misrepresentations made in obtaining a contract, upon the terms of which the parties actually agreed and under which the named insured was included; but it cannot be applied to change the contract upon which they did agree, and under which the named insured was excluded, so as to make a new and different contract for them. In this case, defendant is not seeking to avoid the contract agreed upon; but instead, plaintiffs, without grounds for reformation, seek to have it changed to insure one whom (if over fifty) by its specifications it did not insure. Plaintiffs are not entitled to have this done.

[6] Plaintiffs point to the authority given to defendant's board of directors to change the age limit for membership. While the directors may have this power (within the statutory limits) if not in conflict with the articles of association, still there is no evidence in this case to show that they ever did increase the age limit above the age of fifty. Plaintiffs also say that they interpret defendant's plea "to be in the nature of a plea ofultra vires;" and that "such a plea cannot be made when the contract is fully and completely executed on behalf of one of the parties." The trouble with this argument is, that if the insured was over the age of fifty, she did not either have or perform any insurance contract, because the contract was both that she was of this age and that only a person within the age specified was insured. [See DeLoach v. Ozark Mutual Life Assn. (Ark.), 230 S.W. 268, 14 A.L.R. 921, and note l.c. 926-927; note 1 A.L.R. 459, l.c. 463.] Clearly plaintiffs' Instruction No. 1 was wrong, squarely in conflict with defendant's instruction stating that plaintiffs could not recover if Mrs. Parrish was over the age of fifty when the certificates were issued, and prejudicial error.

The judgment is reversed and the cause remanded. Bradley andDalton, CC., concur.