Bockes v. Union Mutual Casualty Co.

On March 27, 1926, the plaintiff filed his petition at law, in Grundy County, Iowa, in two counts, alleging in substance that on December 21, 1921, the defendant and the plaintiff entered into a certain contract of insurance, in evidence of which the defendant issued its certain policy of insurance whereby it insured the plaintiff in the principal sum of $5,000.00, for the term of one year. The plaintiff alleged that on January 3, 1922, the plaintiff slipped and fell under a moving passenger train and, as a result of this accident, he lost both of his feet; that during the months of May or June, 1922, the president of the defendant Company, by a malicious, wanton, and wilful fraud, secured a release of all obligations under said policy of insurance for the sum of $1,000.00, payable at the rate of $100.00 per month, and plaintiff prays for judgment for $4,000.00, with interest. In the second count the plaintiff prays for $6,000.00 exemplary damages.

On January 20, 1927, the defendant filed an amended and substituted answer in the form of a general denial with specific exceptions. The defendant admitted the execution of the policy and alleged that the plaintiff, in procuring the same, had falsely and fraudulently stated, warranted and represented in his application that he was engaged as an automobile salesman only; that he was insured in two other companies and that the total amount of indemnity provided in said other policies was in the total sum of $80.00 per month; and that the insurance applied for in the defendant company, in itself or in combination with other insurance did not exceed his monthly income. It is alleged that these statements were untrue and fraudulently made and that the policy would not have been issued to him had he not made these false and fraudulent representations to the Company.

It is also alleged that in addition to being an automobile salesman, the plaintiff is a professional wrestler. It is alleged that the contract of insurance provided, in substance, that the right to recover under any policy which might be issued on the basis of his application for insurance should be barred in the event that any one of the statements contained in said application, material either to the acceptance of the risk or the hazard assumed by the Company, is false and made with the intention to deceive, and that by said agreement it was stipulated that the statements contained in said application were material both to the acceptance of the risk upon the part of the Company in the issuing of the policy and of the hazard assumed thereby.

It is alleged that reports were made in reference to the accident, and thereafter a dispute arose as to the liability of the defendant Company, which dispute was settled and compromised by an agreement to pay and the payment of $1,000.00.

It is also alleged in the amended and substituted answer that at no time did the plaintiff ever earn the sum of $280.00 per month, which is the total amount of indemnity provided in the three policies of accident insurance. It is alleged that the second of the three policies was secured on the 13th day of December, 1921, and the policy in question on the 14th day of December, 1921; that some time prior to the 14th of December 1921, and continuing to said date, the plaintiff became badly involved in financial difficulties by reason of the fact that he had issued worthless checks, for which he had no money to pay, to many and various people in Grundy County; and that he had no ways or means to earn enough to pay said obligations and was not earning sufficient salary or wages to satisfy same; that he was being threatened with criminal prosecution for the issuance of said checks, and thereupon the plaintiff evolved the idea of insuring himself, with the intention, to in some way or manner, suffer an accident whereby he could secure indemnity from said insurance companies and thus retire said obligations and, in keeping with said plan and procedure, this plaintiff on the night of January 3, 1922, voluntarily exposed himself to the risks and dangers of an accident; not the one he eventually received, but said defendant alleges that the said plaintiff went behind said train at the time of said accident, with the purpose and intention of voluntarily exposing himself to an injury, fully intending, without the notice or knowledge of said insurance companies, to claim indemnity, thereby securing funds for the purpose of retiring his obligations.

We now quote some of the material parts of the contract. First, from the application:

"I hereby apply for insurance in the Union Mutual Casualty Company, Des Moines, Iowa, based upon the following representations:

"5. (a) What is your occupation? Auto salesman.

"9. Have you any insurance against accident or sickness in other companies, associations, societies or lodges (Name Company), amount and monthly indemnity). Bankers, Des Moines and Mutual Benefit, $80.00 mo.

"11. Does the insurance hereby applied by itself or in combination with other valid insurance on the same risk or otherwise applied for and not issued exceed your monthly wages, salary or income? No.

"20. Do you understand and agree that the right to recover under any policy which may be issued on the basis of this application shall be barred in the event that any one of the foregoing statements material either to the acceptance of the risk or the hazard assumed by the Company is false, and made with the intent to deceive, and do you further agree that this application shall not be binding upon the Company until accepted by the Company or by an agent duly authorized to issue policies and that the policy will not be in force until all policy fees or premiums are paid and that the maximum contingent liability of the policy holder hereunder shall be in an amount equal to the premium paid for the term for which this policy is written? Yes.

"21. Do you agree to accept the policy subject to all of its provisions, conditions, and limitations and to pay the premium required on or before date due? Yes."

The plaintiff filed a long reply in ten divisions, alleging, among other things, that a copy of the plaintiff's application for the policy was not attached to the policy when delivered to the plaintiff.

The policy provided among other things as follows: That it is issued "In Consideration of the statements and agreements contained in the application herefor (a copy of which is endorsed hereon and made a part hereof); * * *"

It appears from the record that the plaintiff at the time of the trial, December, 1927, was 37 years of age and unmarried. He testifies that on December 21, 1921, he gave his application for the insurance in question to an acquaintance, one Brownell, then living at Eldora; that he did not read the application before signing it. He testifies that he went to the country school until he was 17; after leaving school he farmed a part of the time, working for his father and also for himself. He spent about a year in the service, returning in April, 1919, which year he farmed for himself. He states that he wrestled for money occasionally throughout the country; that in 1921 he sold automobiles and also sold tires and accessories, on the road. When asked in reference to his purpose in taking out this particular insurance, the record shows the following:

"Q. Just what was your reason for taking out this accident policy at that time, Bert?

"A. General protection.

"Q. Had you in mind any special trips?

"A. Oh I had thought maybe I would go to Dakota sometime after the holidays or nearer Spring, or South Dakota."

At that time he was selling automobiles for a concern in Conrad, and also dealt in second hand cars.

The plaintiff's own narrative as to how the accident happened is as follows:

"I was in Grundy Center on or about January 3, 1922. I was at the Rock Island depot about nine, nine-thirty, or ten o'clock that night in Grundy Center and was buying a ticket to Reinbeck and on that occasion and at that time I suffered some injuries. I lost both my feet. The circumstances of that injury and how it happened are that on New Year's day at dinner I had eaten something that did not agree with my stomach. I hated to start out because of the diarrhoea which had been going on for a couple of days. I was in talking with the boys. There was some man from Waterloo as I recall it, I don't remember his name, waiting for the train. I had already bought a ticket and went out, — there was quite a few in there, and I got cramps in the stomach, and felt as if I had to go somewhere for relief and lots of times these toilets are unsanitary or locked and I did not have time to examine them, and went across the railroad track of the loading platform and before I got back the train had pulled in. I came around from behind the platform. I was running fast as I thought I had to hurry and went over the first tracks or somewhere along there and I slipped and fell and that is all I remember of. I don't think I was running either to the east or to the west. I don't think I had turned very much either way. I intended to go west. I think I headed over off straight south at the time I fell."

The plaintiff was taken to a hospital and on the 14th of February following he was moved to his father's home on the farm. In April, the plaintiff made a trip to Chicago in connection with the purchase of artificial limbs.

The notices required by the contract were made out in whole or in part by the plaintiff himself and forwarded to the Company. It appears that the last of these notices was on April 7th. From the time these notices were made to May 9, 1922, no one from the defendant Company saw the plaintiff, except Mr. Brownell and, as the plaintiff says, he had nothing to do with the settlement of the claim. The plaintiff further says: "between the date of my injury and May 9, the day of settlement, no one had been there to see me about the claim." On May 9, 1922, one William Schulz, the president of the defendant Company, telephoned the plaintiff, who was then living with his father on the farm. When Schulz telephoned the first time, the plaintiff was out. Afterwards, on reaching the plaintiff, by telephone, Schulz asked the plaintiff to come to Conrad. On being advised that he had no way to get to Conrad and also that the representatives of the other companies had come out to the farm to see him, Schulz agreed to come out and did so. The entire conversation between Schulz and the plaintiff at the home of the plaintiff's father, with whom the plaintiff was then living, was in the presence and hearing of a brother of the plaintiff, Clarence Bockes.

The record contains a long recital of the alleged conversation between Schulz and the plaintiff in the presence of the plaintiff's brother. The substance of the material parts thereof is that Schulz, on behalf of the defendant Company, was claiming the Company was not liable on the policy for various reasons, among others that, as the plaintiff put it, "I was over-insured." The defendant Company, through Schulz, was contending that the original application contained a material false representation in reference to the amount of the indemnity provided for in the other policies, together with the total amount of indemnity provided for in the three policies, and that the said total amount of indemnity far exceeded the earnings or wages of the plaintiff. Plaintiff, in direct examination, testified on the subject as follows:

"He told me several times that he felt sorry for me and then went ahead and said I was over-insured and due to that fact that I did not have a claim. He said I was over-insured on account of the other policies. That I had been getting more on the monthly plan than I was earning as I understood it. I understood him to mean by over-insurance I had more monthly or weekly indemnity than my wages or earnings."

"He said if I sued them I would not get anything. He said he would rather give it to me than to the Lawyers. He said it would probably cost that much to defend the trial. That was practically all the conversation. I have related here substantially the meat of the conversation and discussion that took place."

The plaintiff was further asked this question by his counsel:

"Q. Bert, I will ask you whether or not Mr. Schulz stated to you how much, if anything, the Company would be forced to pay you if you sued them and did not accept the settlement?

"A. No he did not tell me what I could recover. I believed what he told me and because of that I made this settlement."

On cross examination the plaintiff said:

"In the course of the conversation he told me there was no liability on the part of the Company. He stressed that very strongly and his reasons for saying that, as he told me, was that the amount of my weekly indemnity on these three policies was in excess of my income.

"Q. And the only representation that he made to you that you can remember, which he claimed had invalidated the policies, was the one that your income wasn't equal to the aggregate amount of indemnities upon the three policies or that in substance?

"A. Well he said I was over-insured.

"Q. That is what you understood him to mean when he said you were over-insured, as you stated yesterday? You didn't understand him to mean that you were over-insured in the sense of the indemnity clause that applied in case you lost both legs? You say he didn't make claim you were over-insured in that respect?

"A. No it was the weekly or monthly indemnity."

It appears that as a result of this conversation there was a valid agreement entered into between the parties, by the terms of which the contested claim of the plaintiff against the defendant was to be settled for the sum of $1,000.00 to be paid in monthly installments of $100.00 each. The conversation at the home lasted about one and one-half hours. The parties then went from the farm house to Conrad, where they went into the State Bank. The trip from the farm to Conrad was made with the man who brought Schulz to the farm. On arrival at the bank in Conrad two written instruments were prepared, — first, a proposition of settlement signed and executed by Bockes, and second, a formal receipt and release in words and figures as follows:

"Agreement

"Conrad, Iowa, May 9, 1922.

"It is agreed by and between Bert E. Bockes of Conrad, Iowa and the Union Mutual Casualty Company of Des Moines, Iowa, as follows: In consideration of a full release to the company by Bert Bockes of all liability of whatever sort accrued or to hereafter accrue as the result of the accidental loss of both feet, on January 3, 1922, said company agrees to pay one thousand dollars as follows: Twenty-five dollars on May 9th, receipt of which is hereby acknowledged, Seventy-five dollars on June 1, following the date of this agreement and one hundred dollars on the first of each month thereafter until the total of all payments equals one thousand dollars.

"In the event of default in payment by the company of any installment on a date not later than the 10th of any month when such payment becomes due the unpaid balance of the amount due unto this agreement shall immediately become due and payable at the option of Bert E. Bockes.

"This agreement shall be the property of Bert E. Bockes and if assigned or disposed of by any other means shall be binding upon the company until the full amount of one thousand dollars has been paid.

(Signed) "Bert E. Bockes "The Union Mutual Casualty Co. "By Wm. Schulz, "President, General Manager."

This instrument appears to have been sworn to before a notary public on May 9, 1922. On June 24, 1922, plaintiff assigned the instrument to the Farmers Savings Bank of Holland, Iowa, who afterwards acknowledged full payment thereof. The assignment to the bank was sworn to.

The plaintiff testified in reference to payments as follows:

"As I left he gave me $25.00, it was by check. I think his personal check, but I might be wrong in this. The next payment was $75.00 and the rest of them $100 each month."

After the settlement was consummated, the plaintiff made application to the defendant Company for a position with it as a sales agent. He testified he had offers from other companies. The plaintiff continued to write insurance as an agent for the defendant company for a period of about two years, during which he admits that he frequently told different parties "that the company had made a fair settlement with me and I thought at that time that I had a fair settlement." The plaintiff further states: "The first time that any question regarding the propriety of this settlement arose in my mind was on reading the Dayton case of Eldora. It was about two years ago that I read about the Dayton case."

It will be noted that this suit was started three years and nine months after the date of settlement.

[1] I. The appellant filed an amendment to the abstract in this case on the 2d of December, 1929, after the petition for rehearing had been granted. A motion was filed to strike this amendment, which motion was marked "overruled," and afterwards so entered upon the records. The motion might properly have been sustained, but whether so sustained or overruled is wholly immaterial to a determination of the case; for, under the long, unbroken line of cases of this court, such an amendment cannot be considered on this appeal. See Simplot v. Dubuque, 49 Iowa 630; McDermott v. Railway Company, 85 Iowa 180; Iowa City v. Johnson County, 99 Iowa 513; Martin v. Martin, 125 Iowa 73.

[2] II. It is strenuously contended by the appellant that the record does not disclose that a copy of the application made by the plaintiff to the defendant was attached to the policy. On this theory it is argued that the defendant company was not in a position to take advantage of any misstatement or misrepresentation contained in said application. This has special reference to the provisions of the application hereinbefore quoted pertaining to the weekly indemnity provisions of the three accident policies and the earnings or wages of the plaintiff. The statutory provision (Section 1741, Code of Iowa, 1897) pertaining thereto is as follows:

"All insurance companies or associations shall, upon the issue or renewal of any policy, attach to such policy, or indorse thereon, a true copy of any application or representation of the assured which, by the terms of such policy, are made a part thereof, or of the contract of insurance, or referred to therein, or which may in any manner affect the validity of such policy. The omission so to do shall not render the policy invalid, but if any company or association neglects to comply with the requirements of this section it shall forever be precluded from pleading, alleging or proving any such application or representations, or any part thereof, or falsity thereof, or any parts thereof, in any action upon such policy, and the plaintiff in any such action shall not be required, in order to recover against such company or association, either to plead or prove such application or representation, but may do so at his option." (Writer's italics.)

All that the record contains on the question whether the application was attached to the policy is found in the plaintiff's own testimony, which is as follows:

"The policy was later delivered to me but I did not read the policy over nor the copy of the application with the policy."

The original policy was not before the trial court. It appears some order was made in relation to producing it or a copy, and a blank policy form was presented and introduced. It was described by the witness who presented it as a "specimen policy containing the same form and provision as the policy issued to Bert E. Bockes." There was no attempt at presenting an accurate copy of the policy as finally delivered to the plaintiff.

Without further enlarging upon this phase of the case, we may say there is no evidence in the record to support a finding, that a copy of the application made by the plaintiff was not attached to the policy at the time the same was delivered by the defendant Company to the plaintiff. On the contrary, the only fair and reasonable inference to be drawn from the record is that a copy of the application, as made by the plaintiff, was attached to the policy at the time it was delivered to him. Moreover, it will be borne in mind in this connection that this is not a suit on the policy, as specified in the statute hereinbefore quoted; it is a suit based on fraud. Furthermore, it is the plaintiff who is contending, as a part of his case, that the defendant was in no position to take advantage of the misrepresentations of the plaintiff made in his application for insurance with the defendant Company, because, as the plaintiff claims, a copy of the application was not attached to or endorsed upon the policy. Manifestly, therefore, the burden of proving that the application was not endorsed upon or attached to the policy was upon the plaintiff, and this burden the plaintiff failed to successfully carry. So far as this record is concerned, a copy of the application was attached to the policy.

Manifestly, if the suit were upon the policy and the defendant company sought to defend upon provisions contained in the application, the defendant would carry the burden to prove that a copy of the application was attached to or endorsed on the policy when the policy was issued.

[3] III. It is one of the elements of the plaintiff's claim that the settlement was procured by a false and fraudulent representation on the part of the president of the defendant Company (Schulz) to the plaintiff, that the aggregate of the indemnity provided for in the three policies exceeded the earnings or income of the plaintiff. The record discloses that these indemnities amount to $280 per month. In order to prove that the statement made by Schulz to the plaintiff was false, the burden was upon the plaintiff to show that he, the plaintiff, was earning during the time in controversy $280 or more per month. This burden also the plaintiff failed to successfully carry, and, so far as this record is concerned, it appears conclusively that there was a misrepresentation in the application, and it appears conclusively that, as the plaintiff put it, he was over-insured; that is to say, the amount of the indemnity provided for in the three policies was in excess of the earnings of the plaintiff per month. The net result of all this is that the record conclusively shows that Schulz was correct when he said, in substance, that the plaintiff was over-insured, and it was the contention of Schulz at that time, by reason thereof, that there was no liability, on the part of the defendant, to the plaintiff, on the policy in controversy.

It will be recalled that the application in paragraph 9 stated the amount of the monthly indemnities from the "Bankers, Des Moines Mutual Benefit" was $80.00 a month, when, as a matter of fact, it conclusively appears it was $280.00 per month. The application, therefore, contained a false statement in that regard, a statement which must have been known to the plaintiff to have been false when it was inserted in the application.

It must also be borne in mind that paragraph 11 of the application provided as follows: "Does the insurance hereby applied by itself or in combination with other valid insurance on the same risk or otherwise applied for and not issued exceed your monthly wages, salary or income? A. No." Here again the plaintiff made a false representation to the defendant Company and one which must have been known to the plaintiff to have been false at the time he made it.

It will here be recalled that the contract provision on the subject, as found in the application, is as follows: "Do you understand and agree that the right to recover under any policy which may be issued on the basis of your application shall be barred in the event that any one of the foregoing statements, material either to the acceptance of the risk or the aforesaid, assumed by the company is false, and made with the intent to deceive: * * *? A. Yes."

It must be recalled that at the time the plaintiff was testifying in this case, he had been in the insurance business for a considerable period of time and had become familiar, more or less, with insurance terms as they are ordinarily used by the layman. It was on that account he was continually referring to "over-insurance," but it clearly appears from the record that he fully understood, at the time Schulz was talking to him, what Schulz meant, to wit: That the plaintiff had made false representations in his application to the defendant Company in that, first, he had misrepresented the amount of the indemnities provided for in the other two policies, and, second, he had misrepresented in his application that the total provided for in the indemnities in the three policies did not exceed his income.

As previously stated, as the plaintiff charged that Schulz, in his conversation with the plaintiff at plaintiff's home in connection with the settlement, claimed that the policy in controversy contained this over-insurance and that said statements were false, it was incumbent upon the plaintiff to prove, as a part of his case in support of his claim of fraud, that the plaintiff actually was, during the time in controversy, receiving a salary equal to or in excess of the amount of the indemnities provided for in the three policies. This he failed to do.

[4] IV. From an examination of the application and the policy issued thereon, it clearly appears that the contract provides for indemnity. It is to be in different amounts depending upon the injury received, as, for instance, loss of life, loss of limb, loss of sight, loss of time, loss of time by accidental means, loss of time by sickness. Definite specific rates of indemnity are provided for each particular accident which may be sustained by the policy holder. For loss of time, depending upon the circumstances, the indemnity is at a specific rate for a specific period of time, and for loss of an eye or both eyes, or a foot or both feet, and for all similar losses covered by the policy, there is provided a specific definite indemnity.

The application is the basis for the issuance of the policy and is a part thereof. In this application the plaintiff definitely agreed that "the right to recover under any policy which may be issued on the basis of this application shall be barred in the event that any one of the foregoing statements (statements made in the application) material either to the acceptance of the risk or the hazard assumed by the company is false and is made with intent to deceive." (Writer's italics). This is plain, unambiguous language which the parties had a right to insert in a contract entered into between them. The president of the defendant Company had a right to assume that the language would be construed in accordance with its ordinary and usual meaning. The president knew, as did the plaintiff, that there were false statements contained in the application, which were material, either to the acceptance of the risk, or to the hazard assumed by the Company, or to both, and, therefore, we think the president was justified in assuming and believing that the Company had a good defense to the policy, and that he was warranted in so stating to the plaintiff at the time of the settlement.

At all events, the plaintiff cannot here recover, nor is he entitled to go to the jury with the case unless he has at least made a prima facie case, showing that Schulz made a statement or statements of material facts as differentiated from mere expressions of opinion, which statements were false and known by Schulz to have been false at the time they were made, or that they were statements which Schulz had no reason to believe were true, that such statements were made for the purpose of inducing the plaintiff to believe and rely upon them, that the plaintiff did rely upon them, and that he was damaged thereby.

The burden was on the plaintiff from the beginning to the end of such proof. The record is silent of any showing that Schulz made any statements to the plaintiff, which he, Schulz, knew were false at the time they were made. On the other hand, while we are not here determining the Company's defense to a suit on the policy, if one had been brought, it clearly appears that Schulz was warranted in believing that the Company had a good defense to an action which might be brought upon the policy, by reason of the terms of the application and the policy and the false statements contained in the application as made by the plaintiff. Further discussion seems unnecessary.

In order to sustain the holding of the lower court, it is not necessary for us to here find that, in an action on the policy by the plaintiff, the defendant must necessarily recover. It is incumbent upon the plaintiff to show that Schulz representing the Company, fraudulently made false statements to the plaintiff, knowing them to be false at the time they were made, and that such statements were made for the purpose of fraudulently deceiving the plaintiff into a settlement. This burden the plaintiff has not successfully carried. There is here no proof that any of the statements made by Schulz were not his opinions as expressed by him at the time. Johnson v. C.R.I. P. Ry. Co.,107 Iowa 1. On the question of "over insurance" the plaintiff knew all the facts and could not have been misled. Had the plaintiff brought a suit on the contract, an entirely different case would have been before us, but upon this case of alleged fraud we must find that the plaintiff has failed to make out a prima facie case, and therefore, the holding of the lower court must be and is — Affirmed.

EVANS, STEVENS, FAVILLE, ALBERT, KINDIG, WAGNER, JJ., and MORLING, C.J., concur.