Emery v. Life Insurance Co.

This case comes to the writer for opinion on reassignment. It is a suit on a policy of life insurance. In the trial court there was a judgment for plaintiff. Defendant was allowed an appeal to the Springfield Court of Appeals, where the judgment was affirmed. One member of that court, dissenting from the conclusions reached by the majority, asked that the cause be certified to this court, which was accordingly done.

The policy in suit is for $1,000; it is a twenty-pay life old-line policy, bearing date, July 16, 1919. It was issued on the life of Pauline Emery, and plaintiff, the mother of said Pauline, is named as the beneficiary therein. The insured died on the 20th day of December, 1919, and this suit was brought to the May term, 1922, of the Circuit Court of Greene County.

The petition is conventional. The gist of the defense is embodied in the following excerpt from the answer:

"The defendant further says that the policy of insurance sued on herein was procured by fraud and false representations in the application therefor as to the physical condition and health of the said insured, Pauline Emery, as before stated, and by concealment of the fact that she was then afflicted with the disease of goiter, which disease later caused her death; and had not consulted other physicians; that said false representations and concealments were material and rendered said policy null and void; that the said incomplete and untruthful answers of the insured, as to her health and physical condition, and the misrepresentations and concealments, as to her being afflicted with goiter and having been treated by physicians, rendered said policy contract void and same never took effect or became a valid and binding obligation of this defendant."

The reply is as follows:

"Now comes the plaintiff in the above styled cause and for reply to the defendant's amended answer, denies each and every allegation therein contained. And plaintiff, for further reply, says that defendant's medical examiner examined the insured as a part of the application and said examiner at the time saw or by the exercise of ordinary care could have seen the goiter at the time and defendant is estopped from claiming it was unaware of its existence."

Attached to and forming a part of said Pauline Emery's application for the policy sued on were certain questions propounded to her by defendant's local medical examiner and her answers thereto. That part of the application, so far as material to the controversy here, was as follows:

"The applicant must answer these questions fully and with special care:

"8. Have you ever suffered from any ailment or disease of:

"A. The brain or nervous system? A. No.

"B. The heart or lungs? A. Yes, pneumonia, 1913. Duration 10 days. Light. Result, recovery.

"C. The stomach or intestines, liver, kidneys, or bladder? A. No.

"D. The skin, middle ear, or eyes? A. No.

"9. A. Have you ever had rheumatism, gout, or syphilis? A. No.

"B. Have you ever raised or spat blood; if so, give full details? A. No.

"C. Have you ever had any accident or injury? A. No.

"D. Have you ever consulted a physician for any ailment or disease not included in your above answers? A. No.

"E. What physician or physicians, if any, not named above, have you consulted or been treated by within the last five years, and for what illness or ailment? A. Dr. J.W. Love, Springfield, Missouri, April 9, 1919. Tonsils removed. Results good.

"I agree, represent, and declare, on behalf of myself and of every person who shall have or claim any benefit in any insurance made hereunder, that I have carefully read each and all of the above answers, that they are each written as made by me, that each of them is full, complete and true, and that I am a proper subject for life insurance. Each and all of my said statements, representations, and answers contained in this application are made by me to obtain said insurance, and I understand and agree that they are each material to the risk, and that the company, believing them to be true, will rely and act upon them.

"Dated this 15th day of July, 1919. "Witnessed by: Signature of person ALBERT F. WILLER, M.D., applying for insurance: Medical Examiner. PAULINE EMERY."

In connection with the application just referred to there was forwarded to defendant the report of its local examiner, which was in part as follows:

"Do you find any evidence of past or present disease? No.

"A. Of the brain or nervous system? No.

"B. Of the heart? No.

"C. Of the lungs? No.

"D. Of the stomach or any of the abdominal organs? No.

"E. Rheumatism or gout? No.

"F. Of the skin, middle ear, eyes, or any other part of the body? No.

"Q. Do you know anything about the applicant's character or mode of life which unfavorably affects his insurability? A. No.

"Q. Have you reviewed all answers on this and on the reverse side, and are they as far as you know full, complete, and true answers? Yes.

"I certify that I have carefully examined Pauline Emery of Springfield, Missouri, in private, and not in the presence of any third person, this 15th day of July, 1919, 5:30 o'clock, P.M., for insurance of $1,000 on the applicant's life; that I have asked each of the questions exactly as set forth on the other side of this sheet, and that the applicant's answers thereto are in my handwriting and are exactly as made by the applicant to me, and that this applicant signed them in my presence.

"(Signed) ALBERT F. WILLER, M.D. "Springfield, Missouri."

At the time of making the application for insurance Pauline Emery was employed as a clerk in the offices of the Frisco Railroad Company at Springfield, Missouri, and it seems had been so employed for sometime prior thereto. In September, 1918, she consulted a practicing physician of Springfield (Dr. Cox) with reference to an ailment with which she was suffering, and he diagnosed it as exophthalmic or toxic goiter, the form that affects the heart, the nervous, the circulatory and the digestive systems. He prescribed for her and advised her as to the nature and seriousness of her trouble. In January she consulted a physician at the Frisco Hospital at Springfield. Shortly thereafter she told a friend that she would be compelled to go to St. Louis for an operation for goiter, but expressed an unwillingness to submit to the operation until she had seen her brother, who had been a soldier in the World War and was still overseas. On July 15th she made the application for insurance which has heretofore been quoted in part; on July 17th she obtained from her employer a permit to enter its general hospital in St. Louis for treatment; and on the second day of August she entered that hospital. At that time she told the physician in charge that her thyroid gland had become enlarged about a year before and had gradually grown larger; that for the past six months she had noticed herself being nervous and had felt weak; that for four months she had had exophthalmia (protrusion of the eye-balls); and that for six months her heart had beat hard and fast and she had had tremor of the hands. On September 2nd a preliminary operation was performed; on December 17th the final one; and on December 20th she died of broncho-pneumonia, superinduced by the ether which had been used as an anaesthetic.

With reference to what they had observed at the time Pauline was being examined by defendant's local examiner, in connection with her application for insurance, both plaintiff and another of her daughters, Ellen, testified:

Ellen said: "They were standing at the window. I saw the doctor looking at her face and neck. The shades were rolled to the top and the curtains pulled back. It was light enough to see. I have seen my sister's goiter. I think it could be readily seen."

Plaintiff testified: "I saw them standing close to the window and the doctor seemed to be looking in her face and at her neck. She had on a low-neck dress. This goiter could readily be seen at that time. . . . The goiter was enlarged quite a good deal on both sides. The left side was larger than the right. I had known for sometime that she had a goiter."

The foregoing is a brief summary of the facts as disclosed by the evidence bearing on the knowledge possessed by both Pauline Emery and defendant's local examiner, at the time the application and the medical report were signed by them respectively, with reference to the existence and nature of the disease with which she was then afflicted.

The case was tried to the court and it found the facts to be as follows:

"1. That at the time the insured, Pauline Emery, applied for the insurance sued on and signed her medical examination she was afflicted with the disease of goiter.

"2. That she then knew of her said affliction.

"3. That she then contemplated going to a hospital for the treatment of said disease.

"4. That she made no mention of her affiction in her written application and medical examination, but concealed the same.

"5. That her then disease of goiter caused her, shortly thereafter, to undergo an operation therefor, resulting in pneumonia and death.

"6. That her said disease thereby contributed to her death.

"7. The court further finds, however, that the disease of goiter, with which the insured, Pauline Emery, was afflicted, was then so far developed and the symptoms so prominent that the local physician of defendant, by the exercise of ordinary care in making his examination, could have discovered it, and did discover it and know about it.

"8. The court also finds that the insured had, within the past five years before her said application and medical examination, consulted and been treated by physicians whose names were not disclosed therein, and one of same, Dr. Cox, knew of and had advised her concerning her goiter."

These findings were amply sustained by the evidence.

The trial court's finding of the issues for the plaintiff was evidently based on the theory that the knowledge of defendant's local medical examiner was imputable to it, because there was no suggestion in the evidence that any other officer or agent of the company knew of Pauline Emery's having the disease of goiter, at the time her application for insurance was received and acted upon. But the principle that the knowledge of an agent must be imputed to his principal is entirely inapplicable in a case where the conduct of the agent raises a clear presumption that he would not communicate the fact in controversy. [21 R.C.L. 843.] And such a presumption arises where the agent and the applicant for insurance join in an attempt to deceive the insurer and thus fraudulently procure insurance. An agent thus acting is not only stepping outside the limits of his authority, but is known to the applicant to be doing so. [Tripple Link Mutual Ins. Assn. v. Williams, 121 Ala. 138; Mudge v. Supreme Court, 149 Mich. 467; Rinker v. Insurance Company,214 Pa. 608; Elliott v. Knights of Modern Maccabees,46 Wash. 320; Mutual Aid Union v. Blacknall, 196 S.W. (Ark.) 792; Ryan v. Insurance Company, 41 Conn. 168; Sprinkle v. Knight Templar,124 N.C. 405.]

"If a person colludes with an agent to cheat the principal, the latter is not responsible for the acts or knowledge of the agent. The rule which charges the principal with what the agent knows is for the protection of innocent third persons, and not those who use the agent to further their own frauds upon the principal." [National Life Ins. Co. v. Minch, 53 N.Y. 144, 150.]

It is not necessary that collusion on the part of the applicant and the agent be shown by direct evidence. Where an applicant falsely answers a question, and such falsity being known to the agent, he nevertheless writes out the answer and forwards the application to the insurer, who issues a policy thereon, it will be presumed that there was collusion between the applicant and the agent. [Tripple Link Mutual Ins. Assn. v. Williams, supra.] In the instant case there was no specific finding by the court of collusion between the applicant and the medical examiner, but from the facts which the court did find the conclusion is inescapable that they were joint participants in the fraud attempted to be perpetrated upon defendant.

It follows that the judgment of the trial court must be reversed. It is so ordered. Graves, P.J., and Atwood, J., concur, Atwood, J., in separate opinion; Gantt, J., not sitting.