Ayers v. Business Men's Ins. Co.

January 3, 1929. The opinion of the Court was delivered by The subject of this action was a life insurance policy in the amount of $250, issued by the defendant on the life of Mrs. Lillian Mims, a sister of the plaintiff, who was the named beneficiary.

In the trial in the Court of Common Pleas for Sumter County, the presiding Judge, Hon. H.F. Rice, directed a verdict for the defendant upon two grounds: (1) That there was collusive fraud on the part of the agent of the company and the beneficiary in the issuance of the policy; and (2) that the policy was void under its own terms, because at the time of the application and issuing of the policy the insured was not in sound health.

In this appeal by the plaintiff from the directed verdict against him, the contention is made that the agent's knowledge of the ill health of the insured estops the company from asserting the forfeiture; and therefore the case should have been submitted to the jury for determination.

In presenting their position, appellant's counsel rely upon the authority of Rearden v. Insurance Co., 79 S.C. 529,60 S.E., 1106; Huestess v. Insurance Co., 88 S.C. 31,70 S.E., 403; and Rogers v. Insurance Co., 135 S.C. 89,133 S.E., 215, 45 A.L.R., 1172. The main principle stated in the cited cases has been so long recognized by this Court that it is no longer open to question. That general principle, as announced in one of the syllabi of the Huestess case, is this: "A principal is bound by the act of his agent even where he is actuated by a fraudulent intent, if he is acting within the scope of his employment."

But it is recognized in the Huestess case that the company should not be bound by the agent's knowledge when the insured, or the person acting for the insured, participated in the fraud. The majority opinion of the Court on this point seems to be in full accord with the opinion of Mr. Justice Woods (who dissented on other grounds), where the rule, together with the exception that seems applicable to the present case, is concisely stated as follows: "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. SunFire Office, 36 S.C. 213, 15 S.E., 562; Pearlstine v. PhoenixIns. Co., 74 S.C. 246, 54 S.E., 372; Fludd v. EquitableSociety, 75 S.C. 329 [315], 55 S.E., 762; Rearden v.State M.L. Ins. Co., 79 S.C. 526, 60 S.E., 1106. Theexception to this rule is that the principal will not be boundby the knowledge of the agent if the agent is acting in fraudof his principal and is aided in his corrupt design by theintentional fraud of the party applying for insurance. Knobelockv. 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 [122 Am. St. Rep. 559]." (Italics ours.)

We do not find anything in the Rearden and Rogerscases which conflicts with the exception to the rule laid down in the Huestess case, which we have italicized above.

It appears from the evidence that the beneficiary, tempted by the suggestion of the agent that a small policy on his sister's life could be written up without examination, stood by while the agent filled in false answers and forged the name of Mrs. Mims to the application. Coupled with the forged application was the fraudulent certificate of the agent that he had personally seen and questioned the applicant and recommended the risk. The plaintiff's own testimony, showing that the issuance of the policy was procured in this manner, stamps the scheme of taking out the insurance as fraudulent from its very inception. And his testimony also showed that he knew what the agent was doing and aided therein. As soon as the company found out how it had been imposed upon, it offered to return the premiums received by it.

Let the testimony of the plaintiff be reported.

The judgment of this Court is that the judgment of the lower Court be, and the same is hereby, affirmed.

MR. CHIEF JUSTICE WATTS, and MESSRS. JUSTICES COTHRAN, STABLER and CARTER, concur.