Huestess v. Insurance Co.

In this action by the executors of the will of Joseph B. Huestess on an insurance policy issued on the life of the testator, the Circuit Judge directed a verdict for the defendant, and the plaintiffs appealed. Part one of the application for the policy contained these stipulations, signed by Joseph B. Huestess: "I agree that this application, and the answers made to the medical examiner in Part II of said application, shall be the basis of the contract between the parties hereto, and shall be conclusive upon any person having or claiming any interest in any policy to be issued. * * * That the truthfulness of each statement is material to the risk and is the sole basis of the proposed contract." Part two of the application contained the following agreement, also signed by the applicant: "I hereby warrant and agree that all the aforesaid statements and answers, and all those contained in Part I of this application, are true, and offered to the company as consideration for the policy." The application contained these questions, and the answers to them, which were warranted to be true: "State all diseases or injuries you have had during the past five years that have required medical or surgical treatment? Ans. None. Has any physician at any time expressed the opinion that your urine contained albumen or sugar? Ans. No. How long since you have consulted a physician and for what ailment? Ans. Not at all." The defense set up was thus stated in the answer to the complaint: "That as defendant is informed and believes the answers above quoted were not true when made, but on the contrary they were false and so known to the said Joseph B. Huestess; that the said Joseph B. Huestess had required medical treatment during five years immediately preceding the date of said application; that a physician had previous to the date of such application expressed the opinion that the urine of said Joseph B. Huestess contained albumen or sugar, or both, and that the said Joseph B. Huestess had, previous to the date of said application, consulted a physician."

The evidence was conclusive that the answers above set out were not true — that Huestess had been treated by a physician a short time before the application was made, and that at least two physicians had expressed to Huestess the opinion that his urine contained sugar. There was no dispute as to the further facts that Huestess had been under the treatment of a physician for Bright's disease not more than two or three years before he stated in his application that he had not been treated for any disease in five years, that these answers were made on the 13th day of December, 1907, and that Huestess died of Bright's disease on the 9th day of August, 1908.

Thus it was shown on the trial that the answers to questions of the utmost importance propounded by the insurance company were untrue to the knowledge of Huestess. Under this state of facts this Court has held that there can be no recovery unless there is some evidence of waiver by the insurer of the misrepresentations or the insurer has so acted as to be estopped from relying on the misrepresentations. Prince v. State etc. Ins. Co., 77 S.C. 187,57 S.E. 766; Gambril v. United States etc. Co., 83 S.C. 236,65 S.E. 231; Kelly v. U.S. etc. Ins. Co., 84 S.C. 95,65 S.E. 949. In the case first cited the familiar rule was laid down that one who is under no disability cannot allege against his written contract for insurance on the ground that he neglected to read it.

The sole question, then, is whether there was any evidence of estoppel or waiver. On this point the plaintiffs rely on the testimony of Mrs. Huestess, the widow of Joseph B. Huestess, that she heard him tell Max Fass, the soliciting agent of the defendant company, who was asking him to insure, that "there was no use to ask him because he had been turned down;" and on the following testimony of Clarence Huestess, a son: "Mr. Webster introduced father to Mr. Fass, and he wanted to take out insurance, and father told him he thought there would be no use, as he had tried before to get insurance here at Bennettsville, had been examined by every physician. And Mr. Fass wanted to know what was the trouble, and father told him it was kidney trouble. Then Mr. Fass told him, he wanted to give him a chance to get out insurance, that he could get him through all right, he wanted a chance to get him examined by his physician." Although there is no testimony from any witness on the subject, it seems to have been conceded at the trial that the answers to the questions in the application were written by the examining physician, and signed by Huestess. In the absence of any evidence whatever to the contrary, Huestess must be held to have signed the application containing the answers from him with full knowledge of its contents.

The rule has been laid down in this State that an insurance company cannot set up forfeiture on account of facts known by the agent of the company to be existing at the time of making the contracts. Pelzer Mfg. Co. v. Sun FireOffice, 36 S.C. 213, 15 S.E. 562; Pearlstine v. Phoenix Ins. Co., 74 S.C. 246, 54 S.E. 372; Fludd v. EquitableSociety, 75 S.C. 329, 55 S.E. 762; Rearden v. State M.L.Ins. Co., 79 S.C. 526, 60 S.E. 1106. The exception to this rule is that the principal will not be bound by the knowledge of the agent if the agent is acting in fraud of his principal and is aided in his corrupt design by the intentional fraud of the party applying for insurance. Knobelock v. Germania Savings Bank, 50 S.C. 259,27 S.E. 962; State v. Talley, 77 S.C. 99, 57 S.E. 618; 11 L.R.A., N.S. 938n.

The evidence leaves no room to doubt that Max Fass, the agent, intended to perpetrate a fraud on the insurance company in order to get his commission on the policy; but if the case had depended on the issue of fraud alone, the evidence, though strong, may not be so conclusive that Huestess corruptly participated in the fraudulent design of the agent, as to warrant the direction of a verdict for the defendant on the ground. Regarding the evidence as leaving a doubt as to the applicant's participation in the fraudulent design, the testimony of his communication to Max Fass that, on examination for insurance, he had been found to have kidney trouble, was evidence to go to the jury on the point as to whether the defendant company was estopped from claiming a forfeiture on account of the false answer of the applicant that no physician had expressed the opinion that his urine contained albumen or sugar. On that point I yield to the views of the majority of the Court.

But there was not a particle of evidence that the applicant communicated to Fass that he had ever been treated by a physician for kidney trouble or a disease of any kind. Notice of the mere existence of an infirmity sufficient to cause physicians to report unfavorably on an application for life insurance is not notice that the infirmity is so serious that of necessity there must have been surgical or medical treatment. Certainly, it cannot be held to carry such notice in the face of the express written statement and warranty of the individual himself that he had not for five years received medical treatment of any kind. The rights of the plaintiffs can rise no higher than those of their testator. The position that the company was put on such notice by the communication to its agent of the presence of disease as required further inquiry, even if sound, could avail the plaintiff nothing; for the insurance company did make further inquiry in the most formal manner of the defendant himself, — the only person who could know, — and received the written assurance that he had not for five years been treated for any disease. The case therefore falls directly under the cases of Prince v. Ins. Co., Gambrill v. Ins. Co., and Kelly v. Ins. Co., supra, holding that there can be no recovery on an insurance policy under such a state of facts as here appears.

On the argument here it was insisted that the defendant had elected to waive the forfeiture by not returning the premium paid by Huestess. The burden is on the party who relies on waiver of the terms of a contract to prove the facts which constitute waiver. Spann v. Phoenix Ins.Co., 83 S.C. 262, 65 S.E. 232. Even if the failure to return the premium after the rights of the parties had been fixed would constitute waiver, the plaintiff did not prove nor rely on such failure in the Circuit Court and it cannot be asserted as a fact and made available in this Court.

It seems clear to me that the Circuit Judge was required by the authority of the cases cited and by the express terms of the contract of the parties to direct a verdict for the defendant.