Cooley v. Metropolitan Life Ins. Co.

December 12, 1929. The opinion of the Court was delivered by This is an action upon a policy of insurance in the sum of $500, alleged in the complaint and admitted in the answer to have been issued by the company and delivered to the insured, on March 1, 1928, upon the life of Emma Smith, and payable, in the event of her death, to her daughter, the plaintiff Mamie Cooley.

The defense of the company was that at the time of the application, and at the time of the payment of the premium, and at the time of the issuance and delivery of the policy, the insured was suffering from a malignant cancer, for which she had been treated constantly by physicians for at least ten months prior thereto, and from which she died in less than ten days thereafter.

The testimony abundantly established the following facts which appear in the statement of facts in the transcript of record, admitted on all sides:

During the spring and summer of 1927, nearly a year before the date of the policy, March 1, 1928, the insured was living at Belton, S.C. In May, 1927, she consulted Dr. Young at Anderson. He diagnosed her ailment as cancer, but did not communicate his opinion to her. At Dr. Young's suggestion, she was examined by Dr. Wrenn, an X-ray specialist, who reached the same diagnosis, but who, like Dr. Young, did not disclose it to Mrs. Smith. He found that thedisease had made such headway that a cure was impossible.This was nearly a year before the date of the policy. The fact that neither physician acquainted Mrs. Smith with the fatal nature of her disease could not alter the fact that ten months before her application she was suffering from cancer. During the remainder of the year she made constant visits to the hospital at Anderson for treatment. In the fall she moved from Belton to Williamston, which is only a few miles from Pelzer. Dr. Martin of Pelzer was called in at some time in January, 1928, a little more than a month before the date of her application for insurance. He diagnosed her trouble as cancer, and, like the other physicians who did not care to add the certainty of impending death to her physical suffering, withheld the information from her. She became ill on March 2d, the day after the date of the policy, and died on the 9th, a week later, unquestionably of cancer. Proofs of death were forwarded to the company. They disclosed the cause of her death as cancer. The company promptly declared the policy void, denied liability, and tendered a return of the premium which had been paid. This was declined.

After the testimony was all in, each side moved for a directed verdict; the plaintiff for the full amount of the policy with interest; the defendant for a verdict in favor of the plaintiff for the amount of the premium paid with interest. His Honor, Judge Townsend, granted the defendant's motion, ruling as follows:

"This receipt states the contract between the parties, made at the time of the application for the insurance, and bases the right of the plaintiff to recover upon the condition that Mrs. Emma Smith, the insured, was in sound health at the time the application was made. Now, it appears from the uncontradicted evidence in this case that Mrs. Smith died before the policy was delivered and within less than a month after the application was made for the policy, from cancer, a disease which existed at the time the application was made and was then in an advanced stage, although its existence at that time and up to the time of her death was unknown both to her and to the insurance company. This being the only conclusion that can reasonably be drawn from the uncontradicted evidence, it seems to me that there is no question to submit to the jury, but that it is my duty to direct you to find a verdict in favor of the defendant.

"The direction of a verdict, it seems to me, is also proper in favor of the plaintiff, only, for the return of the amount of the premium which had been paid to the Company at the time of the application. This conclusion is strengthened by the conditions in the Policy, that ``if the insured, Mrs. Smith, had been treated by a doctor for any serious disease within the space of two years before the date of the policy, then the liability of the Company should be restricted or reduced to the return of the premiums which had been paid the Company.'"

From this order and the judgment entered upon the verdict so directed, the plaintiff has appealed.

There is a minor controversy in the case whether the policy was ever actually delivered to the insured. I think that as the action was based upon the policy which the complaint alleges was issued and delivered on March 1, 1928, and the answer admits that fact, it is open to neither party to contest the fact, and I will consider it as admitted.

Taking the application then, along with the receipt and with the policy, there does not appear the shadow of a doubt, in my mind, that the company was entitled to deny its liability upon the policy, and that his Honor, Judge Townsend, was right in directing a verdict for the plaintiff, for the amount of the premium paid with interest.

The receipt contains the following:

"No obligation is incurred by said Company, by reason of this deposit, unless and until a policy is issued upon said application,and unless at the date and delivery of said policythe Life proposed is alive and in sound health. * * * No obligation is assumed by the Company unless the application is so approved and the Life proposed is now in soundhealth."

In reference to the application, the transcript in the "statement of facts and testimony" declares: "In the application Mrs. Smith stated that she had never had cancer, was then in sound health, had not been under the care of any physician for three years and had never been under treatment in any dispensary or hospital."

In the policy it is specifically provided under the heading "Conditions": "If (1) the Insured is not alive or is not insound health on the date hereof; or if (2) the Insured has within two years before the date hereof, been attended by a physician for any serious disease or complaint, or, before said date, has had cancer, or disease of the heart, liver, or kidneys, then, in any such case, the Company may declare this Policy void, and the liability of the Company, in the case of any such declaration or in the case of any claim under this Policy, shall be limited to the return of premiums paid on the policy."

It is established by the overwhelming evidence in the case, in fact it is conceded by the plaintiff:

1. That the insured was afflicted with cancer, and had been a sufferer from that dread and fatal malady for at least ten months before the date of the policy; that she died within less than ten days thereafter from that cause; she could not possibly have been in "sound health" at the date of the policy.

2. That within less than a year before the date of the policy, she had been attended by at least three physicians, all of whom diagnosed the case as one of cancer; and had received repeated treatments in the Anderson Hospital for that disease.

I cannot discern, either in the exceptions of the plaintiff, any valid, or even plausible, reason why the defendant company should be denied the conventional rights which it has secured; by that term I mean the rights which it has securedby the contract (which is evidenced by the premium receipt, the application signed by the insured, and the policy), unless it be decreed by this Court that a different rule should be applied to contracts of insurance, from that which obtains in the interpretation of every other form of contract; this would be manifestly unjust.

By the exceptions the beneficiary of the policy contends that the company, in dispensing with a medical examination before issuing the policy, has waived its right to claim a forfeiture of the policy by reason of the express stipulations in reference to "sound health," treatment by physicians, and presence of cancer, contained in the documents mentioned which constitute the basis of the contract of insurance. It is difficult to understand how this waiver could be held to exist, in view of the specific stipulations entered into after it became understood that a medical examination in small policies like this would not be required. Notwithstanding this, the premium receipt, the application, and the policy, each, contained the stipulations.

In 37 C.J., 381, it is said: "Sometimes, however, no medical examination is required, and in lieu thereof the contract is made subject to certain conditions as to sound health and freedom from specified diseases."

The usual provision for a medical examination is a precaution for the benefit and security of the insurance company. If it sees proper to dispense with it, there can be no objection to its doing so; but dispensing with it, and at the same time providing for the conditions mentioned, can in no sense be held a waiver of what was later specifically provided.

The decision in favor of the beneficiary is proposed to be based, not upon the contention of the appellant just mentioned, but upon the ground that neither the insured nor the company was aware, at the time of issuing the policy, of the presence of the disease.

I do not think it can be controverted that a stipulation. made a part of the contract of insurance, to the effect that in order for the policy to become effective, the insured must at the time of the issuance of the policy be in "sound health," is valid.

In 37 C.J., 403, it is said: "A stipulation or agreement by the Company and an applicant that the policy of insurance shall not take effect or be binding on the Company unless the first premium is paid while the applicant is alive and in good or sound health is valid and will be given effect according to its terms; it is a condition precedent to liability on the part of the Company and a performance or waiver thereof is necessary in order to render the contract of insurance effective and enforceable, unless the case falls within the operation of an incontestable clause. Citing Perry v. Ins. Co.150 N.C. 143, 63 S.E., 679; Rathbun v. Ins. Co.,30 Idaho, 34, 165 P., 997; Hawley v. Ins. Co., 92 Iowa, 593,61 N.W., 201; Whiting v. Ins. Co., 129 Mass. 240, 37 Am. Rep., 317;Ins. Co. v. Salisbury, 279 Mo. 40, 213 S.W. 786; Ormondv. Ins. Co., 96 N.C. 158, 1 S.E., 796; Bowen v. Ins. Co.,20 S.D., 103, 104 N.W., 1040; Rossiter v. Ins. Co., 91 Wis. 121,64 N.W., 876; Anders v. Ins. Co., 62 Neb. 585,87 N.W., 331; Ins. Co. v. Hightower, 148 Ga. 843,98 S.E., 469; Clark v. Ins. Co., 129 Ga. 571, 59 S.E., 283;Reese v. Ins. Co., 111 Ga. 482, 36 S.E., 637; Williams v.Ins. Co., 146 Ga. 246, 91 S.E., 44; Oliver v. Ins. Co.,97 Va., 134, 33 S.E., 536; Stringham v. Ins. Co., 44 Or., 447,75 P., 822."

This has been recognized as the settled law in this jurisdiction.Welch v. Ins. Co., 124 S.C. 492, 117 S.E., 720. In that case the application and the policy contained this stipulation: "This policy shall not take effect until the first premium is paid and the policy delivered, nor unless on the date of said payment and delivery of the policy the insured is alive and in sound health."

This policy was not delivered for the reason that when it was received by the local agent for delivery, the insured was sick. The beneficiaries brought an action for damages on account of the refusal to deliver. The Court held: "The appellant was entitled to a nonsuit as asked for on the whole case, on the ground that the application and policy contained three conditions precedent: First, payment of the premium; second, delivery and acceptance of the policy; third, a state of good health at the time of delivery."

In 1 Joyce, Ins. (2d Ed.), § 97a, it is said: "Whether or not the applicant is in an insurable condition, is an insurable risk, at the time of the delivery of a life or accident policy is an important factor, and therefore where it is stipulated that the insurance shall not be binding unless delivery is made and the first premium paid during the lifetime of the applicant or while he is in sound or good health, or some like provision is made a condition precedent, it must be complied with to render the company liable, unless such condition is waived or there is an estoppel" — citing many cases.

In 14 R.C.L., 900, it is said: "However, applications for policies of life insurance, as well as policies, frequently provide that the policy shall not take effect unless it is delivered to the insured and the first premium paid while he is in good health and such a provision is valid and enforceable. * * *"

See also Wright v. Ins. Co. (Tex.Com.App.),248 S.W., 325; Ins. Co. v. Mandelbaum, 207 Ala., 234, 92 So. 440, 29 A.L.R., 649; Ins. Co. v. Mason, 151 Ark. 135,235 S.W., 422, 19 A.L.R., 618; Denton v. Ins. Co. (Tex.Civ.App.),231 S.W. 436; Rathbun v. Ins. Co., 30 Idaho, 34,165 P., 997; Ebner v. Ins. Co., 69 Ind. App. 32, 121 N.E., 315; Ins.Co. v. King, 137 Tenn., 685, 195 S.W. 585; Logan v. Ins.Co., 107 Wn., 253, 181 P., 906.

In Oliver v. Ins. Co., 97 Va., 134, 33 S.E., 536, it was held, quoting syllabus: "An applicant's express agreement in his written application that the policy should not take effect until the first premium was paid, and the policy delivered during his continuance in good health, created a condition precedent to the company's liability. * * *"

In Reese v. Ins. Co., 111 Ga. 482, 36 S.E., 637, it was held, quoting syllabus: "Where the application for a policy of life insurance and the policy itself both stipulated, in effect, that the policy should not become binding on the association issuing it until the first premium had been actually received by the association or its authorized agent during the good health of the applicant, * * * the actual payment of the first premium during the good health of the applicant was a condition precedent to the liability of the association. * * *"

In Ins. Co. v. Hightower, 148 Ga. 843, 98 S.E., 469, it was held, quoting syllabus: "Where the application for a policy of life insurance and the policy itself stipulate that the insurance shall not become effective until the first premium shall have been actually paid while the applicant is in good health, * * * the actual payment of the first premium during the good health of the applicant is a condition precedent to the liability of the insurer. * * *"

In Stringham v. Ins. Co., 44 Or., 447, 75 P. 822, 824, the court said: "By the application it is made a condition of the contract's becoming effective that the first premium shall have been paid during the continuance in good health of the applicant, and the policy shall have been signed by the secretary of the company and issued. If these things have been done and performed, plaintiff's right of action upon the contract of insurance has accrued; otherwise not."

In Anders v. Ins. Co., 62 Neb. 585, 87 N.W., 331, it was held, quoting syllabus: "A provision in a life insurance policy as follows: ``This policy shall not take effect until the first premium thereon shall have been paid to the Company, or to some person authorized by the Company to receive it, in accordance with the premium receipt accompanying the same, and while the insured is in good health, as evidenced by the health certificates properly executed and furnished to the Company,' is a condition precedent, and, before recovery can be had, insured must show compliance therewith, or a waiver by the insurer."

See also Ins. Co. v. Wertheimer (D.C.) 272 F., 730.

The foregoing authorities are clear to the point that the provision in question constitutes a condition precedent, the performance of which must be shown. This makes it unnecessary to enter upon the much debated issue as to whether a statement by the insured constitutes a warranty or a representation.

Under the accepted definition of "sound health," I do not think that there can be a question but that the presiding judge was right in directing a verdict.

In 3 Joyce Ins. (2d Ed.) § 2004, it is said: "In other words, the term ``good health,' when used in a policy of life insurance, means that the applicant has no grave, important, or serious disease, and is free from any ailment that seriously affects the general soundness and healthfulness of the system."

The proposition that the validity of the stipulation depends upon the knowledge of the insured that she was afflicted with a disqualifying disease I do not think can be maintained. If, as a matter of fact, she was at the time so afflicted, which is conceded, and if, as is held in the Welch case, the fact of her being in good health was a condition precedent to the effectiveness of the policy, her ignorance of the fact that she was cancerous could not possibly alter the admitted fact that she was.

In 37 C.J., 404, it is said: "The actual and not merely the apparent health of the applicant is controlling in determining whether he was in good health when the first premium was paid or tendered."

In Thompson v. Ins. Co., 13 N.D., 444, 101 N.W., 900,901, the Court said: "There is no controversy as to the validity or effect of the condition in question. It was made a part of the contract by the parties, and, in terms, it makes the liability of the defendant depend upon an extrinsic fact, namely, the good health of the deceased when the first premium was paid. It will be noted that this provision is not a mere representation that the assured was in good health, or a statement of his belief or opinion that such was the fact. It is equivalent to a warranty of the fact, and is a fact agreed upon by the parties as a condition precedent to the attaching of defendant's liability. Apparent good health was not sufficient. The fact that a disease may be latent and unknown does not relieve the insured from his stipulation. It is the fact of good health which governs."

In Powers v. Ins. Co., 50 Vt., 635, the insured had warranted in his application, which by stipulation was made the basis of his policy, that he did not have diseases of the heart. The jury found that the insured had a disease of the heart at the time when he made his application, but did not know it, and might not be reasonably expected to know it. It was held that as the insured had thus agreed that the company should not assume the risk of that disease, it was not liable. The Court said: "A policy of insurance is to be construed like other contracts inter partes. * * * In this case the parties have mutually agreed upon the terms of their contract; the language embodying it is plain; and its scope and effect are neither difficult nor uncertain. By the terms of the policy and application * * * the parties agreed that the truthfulness of the applicant's answer to the questions propounded should be the basis upon which the validity of the policy should stand — if true, the policy should be a valid contract; if untrue, the policy should have no force as a contract. The applicant assumed the whole risk of the consequences, if his answers turned out untrue. The existence of disease in an applicant for life insurance is the presence of the very peril the Company insures against. It is like insuring a building already on fire. The question as to the health of the applicant is a preliminary one, to ascertain if he is an insurable subject. The force of the stipulations and conditions above recited is, to create a contract obligation on the part of the applicant that he was free from the heart disease. He agreed that such peril and risk would not be encountered by issuing the policy, and if such peril did exist, the contract should not be operative. Proof of the existence of the heart disease established a breach of the underlying contract upon which the policy rested. It is wholly immaterial whether the applicant knew of the existence of the disease, because he agreed absolutely that it did not exist. Nor is it any answer to say that the question is a scientific one, and a layman might easily be deceived into a false answer. Scientific or simple, the applicant took the risk of the answer."

See also Tobin v. Woodmen, 126 Mich., 161,85 N.W., 472; Blumer v. Ins. Co., 45 Wis. 622; Baumgart v. Woodmen,85 Wis. 546, 55 N.W., 713; Boyle v. Association,95 Wis. 312, 70 N.W., 351; Ins. Co. v. Pyle, 44 Ohio St., 19,4 N.E., 465, 58 Am. Rep., 781; Volker v. Ins. Co., 1 Misc Rep., 374, 21 N.Y.S., 456; Miles v. Ins. Co., 3 Gray (Mass.) 580; Ins. Co. v. France, 91 U.S. 510,23 L.Ed. 401; Jefferies v. Ins. Co., 22 Wall, 47, 22 L.Ed. 833; Associationv. Jeffords (C.C.A.) 107 F. 402, 53 L.R.A. 193.

In Logan v. Ins. Co., 107 Wn., 253, 181 P., 906, it was held that the condition that the insured be in good health at the time the policy is delivered is a condition precedent, and it was immaterial that the insured did not know of the disease which affected his condition.

In Sulski v. Ins. Co., 274 Ill., 516, 113 N.E. 862, it was held that in a life policy providing that no obligation is assumed by the insurer unless at the date of the policy the insured is alive and in sound health, the fact of the sound health of the insured at such time is what determines the liability of insurer, and not the apparent health of insured, nor any one's belief that insured was in sound health at such time.

For these reasons I think that the judgment of the Circuit Court should be affirmed, and the majority of the Court agreeing thereto, it is so ordered.

MESSRS. JUSTICES BLEASE, STABLER and CARTER, and MR. ACTING ASSOCIATE JUSTICE GRAYDON, concur in result.

MR. CHIEF JUSTICE WATTS did not participate.