Theros v. Metropolitan Life Insurance Company

CALLISTER, Justice: •

Andrew James Theros made written application for a life insurance policy with defendant insurance company through its agent, William Homer George, on May 28, 1960. The policy was issued without a medical examination,-bearing date of July 1, 1960, and Theros died March 31, 1962 (within the two year contestable period contained in the policy). Plaintiff, widow of Theros and beneficiary under the policy, made claim with defendant who refused to honor it and she brought suit. From a summary judgment in favor of defendant, plaintiff appeals.

In its answer to plaintiff’s complaint, defendant alleged that the deceased had falsely and knowingly given untrue answers to questions contained in the application for the purpose of inducing defendant to issue the policy and that defendant would not have issued the policy had it known the answers to be untrue. The questions referred to and the answers recorded were as follows:

2. How much time have you lost from work, school or normal activities in the past two years because of health? Answer: none.

(a) Reasons and dates for time lost. Answer: none.

(b) Name and address of each doctor consulted. Answer: none.

3. Have you ever had or been told that you had or been treated for or sought advice concerning:

(a) Chest pain, disease of heart, arteries or other blood vessels? Answer: No.

4. Have you had health examinations or check-ups in the past five years?

(a) In the course of employment? Answer: No.

(b) Other than in the course of employment? Answer: No.

(i) Did you request examination because of symptoms or ailments? Answer: No.

(ii) Was any treatment, change in living habits, further examination or consultation, suggested or advised? Answer: No.

5. Have you had any electrocardiograms, x-rays, laboratory examinations, or other diagnostic tests within the past five years? Answer: No. (If yes, indicate which and give reasons, dates, name and address of each doctor and each hospital, and results.) No response.

7. (a) Have you ever had a surgical operation, been a patient in or visited a hospital, clinic, dispensary or sanitarium for observation, examination or treatment of any condition or disease not described above ? Answer: yes; Explanation: Tonsillectomy as a child about five years old. Fine now.

(b) Have you ever had a surgical operation, or been examined or advised by any physician or practitioner within the past five years for any condition or disease not described above? Answer: No.

The defendant alleged’ that,’ contrary to the foregoing answers, the true facts were: that on the 10th day of April 1959, the deceased was afflicted with heart disease and suffered an acute cardiac failure due to past rheumatic heart disease and thyrotox-osis; that he was sent to a hospital by his attending physician for medical care and treatment for said heart disease and was confined in the hospital for¹ a period of nine days during which time he received care, attention and medical treatment. During said period, deceased was under the care and treatment of Dr. Pearse.’ 'In the course of such hospitalization, deceased was given numerous electrocardiograms, laboratory examinations and other diagnostic tests; that the deceased' continued to suffer from the heart disease after his release from the hospital and remained' under the care and treatment of Dr.- Pearse up to the time of his death. He died on-March 31, 1962 as the result of the heart disease. Deceased had been fully advised by the doctor of his affliction and told to refrain from any strenuous physical exertion.

At the pretrial hearing the deposition of defendant’s agent, William Homer George, was ordered published. In this deposition, George testified that he had filled out the application and that he had, on his own initiative, inserted false answers although the deceased had given him truthful information. Based upon this deposition and the pleadings, plaintiff moved for summary judgment. The lower court did not rule upon this motion and granted defendant’s request to file an amendment to its answer.

In the amendment to its answer, defendant alleged that the deceased had informed George of his hospital confinement and treatment for heart disease. That both George and the deceased knew that if such information were given to defendant that it would not issue the policy without a medical examination and that the chances of the deceased passing such an examination were highly improbable. That George advised deceased, in effect, that it was necessary to make the false representations .in the application in order to obtain the policy.

At a second pretrial conference, plaintiff moved to strike the amendment to defendant’s answer and renewed her motion for a summary judgment. Both of these motions were denied and dcf.ndant’s motion for summary judgment was granted.

Upon the record, and plaintiff does not contend otherwise, it appears that the answers contained in the application were untrue; they were material to the risk; the defendant believed and relied upon them; and the defendant, being deceived by them, would not have issued the policy had it known the truth' — at least, not without a medical examination.

However, plaintiff’s argument is to the effect that the fraud upon defendant was committed, not by Theros, but by the defendant’s agent, George, and,- therefore, it is denied the right to assert the fraud as a defense. It is plaintiff’s position that Theros gave truthful answers concerning his health and medical history but that the agent incorrectly recorded them. In such an event, the agent’s act is that of his principal and not that of the applicant and the knowledge of the agent is the knowledge of the insurance company.¹

In the instant case, the application was signed by Theros in two places. His signature below the part relating to his health and medical history follows a printed statement : “I have read the foregoing answers before signing. They have been correctly written, as given by me, and are true and complete. There are no exceptions to any such answers other than as stated therein.” This statement was in the same size type as the other printing in the application. Furthermore, a photostatic copy of the application was attached to the delivered policy and, by the terms of the policy, made a part thereof.

Whether Theros read the completed application is not ascertainable from the record. The agent’s testimony in this regard is equivocable. He was unable to state with any degree of positiveness whether Theros read the application before signing it. The plaintiff, whose deposition was published, did not know.

In order to defeat recovery on an insurance policy because of misrepresentation in the application, the misrepresentations must have been made with an intent to deceive and defraud the insurance company. However, such an intent may be inferred where the applicant knowingly misrepresents facts which he knows would influence the insurer in accepting or rejecting the risk.² The same rule should apply where the applicant knowingly, or with constructive knowledge, permits such misrepresentations to be submitted to the insurance company.

The rule supported by the great weight of authority is to the effect that if .an applicant gives truthful answers to the questions contained in the apolication, but they are falsely recorded by an agent of the insurer, then the latter cannot rely upon the falsity of such answers to avoid liability under the policy issued upon the application in the absence of fraud, collusion, actual knowledge of the insured or the existence of circumstances from which constructive knowledge of such falsity might be imputed to him.³

It is also the majority rule that an insured is under a duty to read his application before signing it, and will be considered bound by a knowledge of the contents of his signed application.⁴ This is merely an application of fundamental contract law. While courts generally are inclined to treat insurance contracts as special and do not always vigorously apply all the principles of contract law, that tendency should not be allowed to overrun the bounds of legitimate exception.⁵

The facts here presented provide absolutely no basis for applying any exception to the basic contract law. The record is devoid of any facts or circumstances that would indicate or imply that Theros was by fraud, accident, misrepresentation, imposition, illiteracy, artifice or device reasonably prevented from reading the application before signing it. Therefore, he is, by law, conclusively presumed to have read the application and his beneficiary is bound by the contents thereof.⁶ It therefore follows that the lower court should be affirmed.

In view of the foregoing conclusion, it is not necessary for the court to consider the import of the fact that a copy of the application was attached to, and made a part of, the insurance policy issued and delivered to Theros.⁷

Affirmed. Costs to defendant.

HENRIOD, C. J., and McDONOUGH, J., concur.

1 . Appleman, Insurance Law & Practice, Vol. 17, Sec. 9401.

2 . See concurring opinion of Justice McDonough, New York Life Ins. Co. v. Grow, 103 Utah 285, 135 P.2d 120 (1943).

3 . 148 A.L.R. 508; Mutual Life Ins. Co. of New York v. Hilton-Green, 241 U.S, 613, 36 S.Ct. 676, 60 L.Ed. 1202.

4 . 148 A.L.R. 514.

5 . Lawein v. Metropolitan Life Ins. Co., 211 Minn. 211, 300 N.W. 823 (1941).

6 . Metropolitan Life Ins. Co. v. Coddington, 131 N.J.Eq. 430, 26 A.2d 41 (1942); Kasmer v. Metropolitan Life Ins. Co., 140 Pa.Super. 46, 12 A.2d 805 (1940); Prevete v. Metropolitan Life Ins. Co., 343 Pa. 365, 22 A.2d 691 (1941); Rhodes v. Mutual Benefit Health & Accident Assn., 62 Ga.App. 208, 8 S.E.2d 685 (1940); Telford v. New York Life Ins. Co., 9 Cal.2d 103, 69 P.2d 835 (1937).

7 . The majority view is that the insured is bound by misstatements appearing in an application attached to the policy delivered to and retained by him. Couch on Insurance, 2d Ed. 35:211; e. g., Hein v. Family Life Ins. Co., 60 Wash.2d 91, 376 P.2d 152 (1962).