Forwood v. Prudential Insurance Co. of America

Boyd, C. J., delivered the opinion of the Court. On the 16th day of December, 1909, the appellee issued an insurance policy on the life of William T. Eorwood, the husband of the appellant, which was originally payable to the executors, administrators or assigns of the insured, but the appellant was subsequently made the beneficiary. The insured died on the 21st of August, 1910, and the appellee having declined to pay the policy, suit was brought thereon. In addition to the two general issue pleas, the appellee filed three special pleas — in the first of which it is alleged that the insured made application on or about the 2nd of December, 1909, for the insurance, “and on or about the 4th day of December, 1909, did falsely and fraudulently represent, and warrant to the defendant in continuation of said application, and as part thereof, which application constitutes a part of said policy of insurance, that he did not use malt liquors, wines and spirits.” In the next plea (4th) ²⁵⁶ it is alleged that he falsely and fraudulently represented that he had never used malt and spirituous liquors to excess, and in the last (5th) that he represented that he was engaged, and had been for a long time' prior thereto, as a salesman of pianos and sewing machines, and that he was not then engaged, had never been engaged, and had no intention of engaging in the manufacture, sale and handling of malt and spirituous liquors.

The three special pleas seem to be in due form — making the necessary allegations that the representations and warranties were false, etc., and issue was joined on them. The only exceptions taken were to the refusal to grant the plaintiff’s first, second and third prayers, and to granting an instruction drawn by the Court. _ That instruction was: “The Court instructs the jury that uncontradicted evidence in this case shows that the statements made at the time of signing the application for insurance by the insured, whether-as contained in the application or as-testified to by the wife of the insured as then made by him, were untrue, and that these statements being material to the risk, their verdict must be for the defendant.” A verdict was rendered for the' defendant in pursuance of that instruction, and from the judgment - entered thereon this appeal was taken. The defense made by the first two special pleas (numbered third and fourth) will be considered togéther. In the application for insurance, under the head qf “Declarations made to the Medical Examiner,” there are the following statements: “3A.

State the quantity you use each day of Malt Liquors (None), Wines (None), Spirits (None). C. Have you ever used malt or spirituous liquors to excess? (If yes, give full particulars.) No.” The evidence shows beyond all controversy, and it may be said to be without contradiction, that the statements made under 3A and the answer to “0,” as written on the application were false. Fifteen or sixteen witnesses testified to the habits of the insured, and while some of them seemed to have had some difficulty in determining when a man could be ²⁵⁷ said to be "'drunk”, all of them had seen him more or less under the influence of liquor, and some of them had ire-quently seen him in that condition.

At times he became very noisy and unruly, and on one occasion, when he was arrested for indecent exposure of his person, he offered as an excuse before the recorder of Atlantic City that he was under the influence of liquor when it occurred. lie was living at Atlantic City when he applied for this insurance and for several years before, but left about the time the policy was issued, and most of the witnesses who testified to his habits knew him there. Indeed the appellant said that he drank a glass of beer or whiskey whenever he felt like it. As the insured admittedly signed the application, it would be useless to discuss this branch of the case, were it not for the fact that the appellant contends that the insured did not, answer the questions as the answers are stated in the application, but that they were written there by the medical examiner, and are simply conclusions of the examiner and his construction of what the insured said. In other words, it was in effect conceded that those answers, as they were written in the application, were untrue, but it is contended that they were not the answers given by the insured.

At least since the case of Mutual Life Insurance Co. v. Mullan, 107 Md. 457 , it cannot be doubted that such misstatements as are alleged to be in the application were concerning matters material to the risk, and the insured necessarily knew them to be false, if made as stated in the application. Mullan, in his application stated that his habit as to the use of intoxicants was one glass of beer a day on an average, and that such had been his habit in the past. The testimony showed that he drank to excess, was quite frequently drunk and had been treated for acute alcoholism. It was said in the opinion delivered by Judge WokthiNg-ton: “The fact that Mullan drank intoxicating liquors very-much in excess of fine glass of beer a day on an average’ was also material to the risk as a matter of law, and the-Court below by granting the defendant’s sixth prayer prcqfi ²⁵⁸ erly so instructed the jury.” Again it was there stated: “As we have already said, the fact tbat tbe applicant used intoxicants very much in excess of one glass of beer a day on an average was palpably material to tbe risk.” Tbe burden, was on tbe defendant (appellee) of proving tbe falsity of tbe statements and answers made in tbe application, and also, if untrue, tbat they related to some matter material to tbe risk.

Royal Arcanum v. Brashears, 89 Md. 633 ; Mullan’s Case, Supra. But tbat burden has been clearly and fully met as to tbe statements and answers in tbe application, and they were material to tbe risk and can be so determined by tbe Court as a matter of law, Banker’s Life Ins. Co. v. Miller, 100 Md. 1 ; Mullan’s Case, Supra. See also other cases cited in Mutual Life Ins.

Co. v. Robinson, 115 Md. 408 . Inasmuch then as tbe appellee has, with evidence which is uncontradioted, met tbe burden originally on it, and inasmuch as tbe insured admittedly signed the application, which declared, “tbat all tbe statements and answers to above questions are complete and true, and Í agree that they shall form a part of tbe contract of insurance applied for,” clearly tbe burden of showing tbat they were not tbe answers and statements of tbe insured, or tbat be qualified those statements and answers, but (the agent of tbe company without bis knowledge did not insert tbe qualifications, is shifted and rests upon tbe appellant. In Globe Reserve Mut. Life Ins.

Co. v. Duffy, 76 Md. 293 , it appears tbat tbe medical examiner wrote down tbe answers to tbe various questions upon tbe printed application and among others it was stated tbat the insured bad no pulmonary and no kidney trouble. Tbe evidence on tbe part of the insurer tended to prove tbat be bad, and for some years prior to tbat bad bad both of those troubles, from which be died in less than two months after tbe date of tbe policy. Judge McSheejry said that if tbe medical examiner was <the agent of the company, it required no argument' to show tbat it was not within tbe scope of bis authority to mislead and deliberately impose upon bis principal, and ²⁵⁹ he then went on to say: “Notwithstanding this is so, there are many cases in which, to prevent fraud and gross injustice, an insurance company is estopped, on grounds of the highest public policy, to object that the statements made by its agents beyond the scope of their authority are false. But there must bo no complicity on the part of the assured; because, if false answers be written in the application by the agent with the knowledge of the assured the latter becomes an accomplice and both perpetrate a fraud upon the company.

In such a ease it is obvious that a recovery could not be permitted upon a policy thus procured. And so, where false answers have been written by the agent without the knowledge of the assured, but the latter has the means at hand to discover the falsehood and negligently omits to use them, he will be regarded as an instrument in the perpetration of the fraud, and no recovery could be had upon the policy.” He cited New York Life Ins. Co. v. Fletcher, 117 U. S. 519 , and several other cases, and then continued: “If the assured be neither an accomplice nor an instrument, and be imposed upon without fault on his own part by the agent of the company, his beneficiary will be entitled to recover, notwithstanding the statements are inaccurate or untrue. Keystone Mut.

Ben. Association v. Jones, 72 Md. 363 .” In Fletcher’s Case the Supreme Court said it was the duty of the insured to read the application he signed, and after discussing that added: “There is another view of this case equally fatal to a recovery; assuming that the answers of the assured were falsified, as alleged, the fact would be at once disclosed by the-copy of the application, annexed to the policy, to which his attention was called. He would have discovered by inspection that a fraud had been perpetrated not only upon himself, but upon the company, and it would have been his duty to make the fact known to the company. He could not hold the policy without approving the action of the agents, and thus becoming a participant in the fraud committed.

The retention of the policy was an approval of ²⁶⁰ tbe application and of its statements. Tbe consequences of that approval cannot, after bis death, be avoided.” It is true that tbe provision prohibiting an agent from changing or modifying tbe terms of a policy may not apply to conditions which relate to tbe inception of tbe contract, as illustrated in Dulany v. Fidelity and Cas. Co., 106 Md. 34 ; N. J. Mut. Life Ins.

Co. v. Baker, 94 U. S. 610 , and Ins. Co. v. Mahone, 88 U. S. 593 , and it is said in Dulany’s Case that “If tbe actual facts were explained by tbe assured to tbe agent of the company