Froehler v. North American Life Insurance

We are unable to concur in the majority opinion.

The plaintiff contends that the issue involved is whether the answers in the application for reinstatement were made in good faith, and contends they were representations and not warranties. She also claims it is a question for the jury as to whether the company unreasonably delayed passing upon the application for reinstatement.

The policy had lapsed on May 1, 1933, for non-payment of premium due, and could only be reinstated upon evidence of insurability satisfactory to the company. On May 6, 1933, the application for reinstatement was received. About a week after the application for reinstatement, the insured called upon a doctor complaining of headaches, weakness, difficulty of vision and nausea, and he was advised to go to a hospital for examination. On May 17, 1933, he had a diagnosis of tumor of the brain, and died as the result of an operation on May 19.

The opinion holds that one of the issues is whether the insured had acted in good faith when he stated in his application for reinstatement that he was in good health. In United StatesFidelity and Guaranty Co. v. First Nat. Bank, 233 Ill. 475, we said: "The law is well settled, in its application to insurance contracts, that a misrepresentation of a material fact, in reliance upon which a contract of insurance is issued, will avoid the contract, and it is not essential, in equity, that such a misrepresentation should be known to be false. A material misrepresentation, whether made intentionally and knowingly or through mistake and in good faith, will avoid the policy." A misrepresentation is the statement of something as a fact which is untrue and material to the risk and which the insured states, knowing it to be untrue, in an attempt to deceive, or which he states positively is true without knowing it to be true and which has a tendency to mislead. Hancock v. Knights and Ladies ofSecurity, 303 Ill. 66, 71.

In the application for reinstatement Froelich stated he was in good health and had not consulted a physician within the last five years. As pointed out above, at the time he made the application for reinstatement, or shortly thereafter, he was suffering from different things that indicated he was not in good health, and certainly on May 17, 1933, when he was informed he had to have an operation for a brain tumor, he knew he was not in good health. Under these circumstances we think Western and Southern Life Ins. Co. v. Tomasun, 358 Ill. 496, is in point. In that case on the day the insured signed an application for a policy she consulted a doctor, and the next day was operated on in a hospital. The policy was delivered about two weeks later. The insured died in about a year. The court says: "Regardless of her knowledge on June 5, it cannot be urged with any degree of plausibility that she considered herself in good health when the policy was delivered two weeks later, and it became her duty during that interim — i.e., after her examination and before the delivery of the policy — to disclose the changed condition in her health to the insurer."

The insured here understood he might not receive notice of approval from the company for thirty days because the receipt for the premium contained the following language: "If notice of approval is not received within thirty days the amount tendered will be refunded by this company upon request." Froelich consulted a doctor within a week after the application for reinstatement was received by the company, and went to the hospital within eleven days after the application was received, both within a period of thirty days within which, by implication at least, the company had a right to act on reinstatement.

In Stipcich v. Metropolitan Life Ins. Co. 277 U.S. 311, the court held that risks which come to the knowledge of the insured after the application, and before the delivery of the policy should be disclosed, saying: "If, while the company deliberates, he discovers facts which makes portions of his application no longer true, the most elementary spirit of fair dealing would seem to require him to make a full disclosure. If he fails to do so, the company may, despite its acceptance of the application, decline to issue a policy." While it is true that this was said concerning an original application for insurance, there seems to be no distinction in applying the rule where used in connection with reinstatement as opposed to its use in taking out a new policy. 100 A.L.R. anno. 362; 4 Cooley's Briefs on Insurance, 3791.

The question of whether the defendant acted with reasonable celerity has no bearing upon the result in this case, because the facts as contained in the application for reinstatement changed in a material respect, which was known to the insured, and under such circumstances if the application had been granted without knowledge of the material change in facts it would have avoided the policy.

We think the judgment of the Appellate court should have been affirmed.

Upon petition for rehearing, the following additional opinion was filed: