Jones v. Home Security Life Insurance Company , 254 N.C. 407 ( 1961 )

119 S.E.2d 215 (1961) 254 N.C. 407

Mary JONES
v.
HOME SECURITY LIFE INSURANCE COMPANY.

No. 311.

Supreme Court of North Carolina.

April 12, 1961.

Jones, Reed & Griffin, Kinston, for plaintiff appellant.

Wallace & Wallace, Kinston, for defendant appellee.

RODMAN, Justice.

The first question to be disposed of is the right of plaintiff to offer evidence in support of allegations appearing in the reply to defeat defendant's cross-action for cancellation and its defense of misrepresentation. When a defendant aserts an affirmative defense, he in effect becomes the plaintiff and carries the burden of proof of his afirmative defense. When the party carrying the burden of proof rests, his adversary is entitled to offer evidence to defeat the claim or defense asserted. Ordinarily, therefore, a court cannot rule on the right to recover until it has heard all of the evidence; but when, as here, the plaintiff admits the facts pleaded and merely seeks to avoid the force of the admitted facts, plaintiff must both allege and prove the facts on which she relies. The facts alleged in the reply were not sufficient to defeat defendant's rights to cancellation or to impose liability on defendant.

In disposing of the case we treat the statements set out in the affidavit as evidence before the court when it allowed defendant's motion for nonsuit. She says that she and the insured, shortly before 1 December 1957, went to Mr. Davis, the agent of the defendant for the purpose of increasing the amount payable on policies theretofore issued by defendant on the lives of her three children. She was informed that could not be done, but she could continue in force the existing policies and take new insurance for such additional amount as she desired. She elected to pursue that course. The agent inquired if the father of the insured was living. She replied in the negative. "He then asked me if Willis (a brother) had ever had TB, I said no. He asked me if he had been in the hospital and I told him no, that neither of my boys had been in the hospital. He did not ask Bessie Mae Tucker, my daughter, any questions at all, except to sign the application. * * * He did not ask me or either of my children any questions about any diseases."

The first application for insurance on which the policy in suit issued was dated 11 November 1957. That application showed that insured had two brothers living but did not show whether she had any brother who was dead. It showed one sister dead. When that application was received at defendant's home office, it was returned to ascertain if insured had any brothers who were dead. New applications were signed by insured on 26 November. They were identical with the applications of 11 November except for the additional information requested by defendant. Plaintiff, in her affidavit, speaking with reference to the last application, said the agent called her and insured to his office and told them that he had made a mistake in the application. He asked insured to sign another one. "He did not ask any questions at that time about any disease or about anything else. When the policies came, I put them away and did not read either of them and did not know what had been written in the applications until after the death of my daughter. * * * I knew she had had asthma for sometime before her death, and I would have told Mr. Ronald Daniels that she had asthma and had been treated by doctors and had had hospital treatment if he had asked me."

Plaintiff neither alleges nor testifies that the agent for the insurance company in fact knew that the insured suffered from chronic asthma. There is no allegation or evidence suggesting illiteracy on the part of the insured or her inability to fully comprehend each of the questions appearing on Part II of the application. Her signature is neat and legible. There is neither allegation nor evidence suggesting that the insured was prevented from reading the questions or answers by any trick or device. The allegation stops with the assertion that the answers were not in fact written by the insured nor were the questions propounded to her.

Plaintiff points to two statutes: G.S. § 58-30, which provides that statements in applications for life insurance are representations which, unless material or fraudulent, will not defeat recovery on a policy based thereon, and G.S. § 58-197, which makes a person who solicits an application for life insurance the agent of the company and not the insured, to support her contentions that the court committed error in allowing defendant's motion to nonsuit.

Manifestly the questions and answers relating to the physical condition of applicant and her life expectancy because of her chronic asthmatic condition were material to the risk the insured was asked to assume. Swartzberg v. Reserve Life Insurance Co., 252 N.C. 150, 113 S.E.2d 270; Tolbert v. Mutual Benefit Life Insurance Co., 236 N.C. 416, 72 S.E.2d 915; Wells v. Jefferson Standard Life Insurance Co., 211 N.C. 427, 190 S.E. 744; Schas v. Equitable Life Insurance Co., 166 N.C. 55, 81 S.E. 1014.

That the answers were false is conceded.

Since 1945 when the Act of 1899 (codified as C.S. § 6460, later as G.S. § 58-200) requiring insurers to establish fraud to defeat policies issued without medical examination because of false statements in the applications was repealed, it is not necessary to establish fraud. It is sufficient to defeat recovery on policies issued on representations which are false and material. Wells v. Jefferson Standard Life Insurance Co., supra; Tolbert v. Mutual Benefit Life Insurance Co., supra.

Plaintiff, to avoid the effect of the false and material representations, alleged the company issued the policy with knowledge that the answers were false and thereby waived the right which it otherwise would have to defeat her claim.

There is no evidence whatever that the company or its agent knew the answers appearing in the application were in fact false. The evidence is sufficient to permit a jury to find that defendant's agent wrote the answers with total indifference to their truth or falsity. If the acts of the agent as described by plaintiff suffice to establish waiver or to estop defendant from denying liability, the judgment should be reversed. Otherwise it should be affirmed.

"``Waiver is the intentional relinquishment of a known right. It is usually a question of intent; hence knowledge of the right and intent to waive it must be made plainly to appear. * * * "There can be no waiver unless so intended by one party and so understood by the other, or unless one party has so acted as to mislead the other." 2 Hermon on Estoppel, § 825,'" Green v. Patriotic Order Sons of America, 242 N.C. 78, 87 S.E.2d 14, 18. The evidence is insufficient to support plaintiff's claim of waiver. Does it suffice to support the assertion that defendant, by the conduct of its agent, has estopped itself to deny liability on the policy? The answer is no.

In Cuthbertson v. North Carolina Home Insurance Co., 96 N.C. 480, 2 S.E. 258, 260: "The plaintiff proposed to prove that the questions referred to were in fact not asked, and that he signed the application without knowing that it contained them. This was objected to, and the objection sustained, and this is excepted to. It is conceded that the plaintiff could read and write, and that he signed the application with his full name." On these facts Davis, J., said: "There was no error in excluding the proposed evidence. In the absence of fraud or mistake, a party will not be heard to say that he was ignorant of the contents of a contract signed by him."

In Weddington v. Piedmont Fire Insurance Co., 141 N.C. 234, 54 S.E. 271, 274, Walker, J., said: "It made no difference whether the plaintiff knew what was in the nonwaiver agreement or not. He signed it, and the law presumes he did know what was in it, and he will not be heard, in the absence of any proof of fraud or mistake, to say that he did not." The law declared in those cases has been applied in Inman v. Sovereign Camp, W. O.W., 211 N.C. 179, 189 S.E. 496; Equitable Life Assurance Society of United States v. Ashby, 215 N.C. 280, 1 S.E.2d 830; Thomas-Yelverton Co. v. State Capital Life Ins. Co., 238 N.C. 278, 77 S.E.2d 692. See also Metropolitan Life Ins. Co. v. Alterovitz, 214 Ind. 186, 14 N.E.2d 570, 117 A.L.R. 770, with annotations to that case, page 796; Annotations 81 A.L.R. 865; 148 A.L.R. 514; 44 C.J.S. Insurance § 277, pp. 1107-1108. We give our approval to the statement appearing in 29A Am.Jur. 236 that "the rule that the insured is not responsible for false answers in the application where they have been inserted by the agent through mistake, negligence, or fraud is not absolute, and applies only if the insured is justifiably ignorant of the untrue answers, has no actual or implied knowledge thereof, and has been guilty of no bad faith or fraud."

Insurer's lack of knowledge, actual or constructive, of the falsity of statements appearing in the application, distinguishes cases typified by Chavis v. Home Security Life Insurance Co., 251 N.C. 849, 112 S.E.2d 574; Cato v. Hospital Care Ass'n, 220 N.C. 479, 17 S.E.2d 671; and Heilig v. Home Security Life Insurance Co., 222 N.C. 231, 22 S.E.2d 429, from this case.

Affirmed.