Mutual Life Insurance v. Mullan

Worthington, J., delivered the opinion of the Court. This case was submitted to the jury in the Court below upon certain granted prayers which are set out in the record, and a verdict for $1,050 returned for the plaintiffs, upon which judgment was entered. The insurance company brings this appeal alleging as its chief contention, error on the part of the lower Court in granting the first and second prayers of the plaintiffs, and in refusing to grant certain prayers offered on behalf of the defendant company. Several important questions concerning the law of life insur ⁴⁶⁰ anee are involved in the appeal which we will now proceed to consider.

Before the Act of 1894, chapter 662, it was always a matter of great importance in considering a case like this to determine at the outset whether the answers and statements óf the applicant as contained in his application for insurance, were warranties or mere representations. If the former, the policy was avoided, unless such statements and answers were literally true, whether they related to matters material to the risk or not. Monahan v. Ins. Co., 103 Md. 156 ; Md. Casualty Co. v. Gehrman, 96 Md. 648 ; Bankers Life Ins.

Co. v. Miller, 100 Md. 1 . If the latter the policy was not avoided, unless the answers and statements were false in relation to some matters material to the risk. Bankers Life Ins. Co. v. Miller, supra.

By the aid of warranties, and the innocent mistakes of the insured, it often happened that the insurer was able to escape liability on a ground of the purest technicality. For the purpose of relaxing the harsh rule of the common law which required warranties to be literally true without regard to their materiality to the risk, the Act of 1894, ch. 662, was passed. That Act, which is a literal copy of the Pennsylvania statute, and similar to the statutes of some other States on the same subject, is as follows: “Whenever the application for a policy of life insurance contains a clause of warranty of the truth of the answers therein contained, no misrepresentation or untrue statement in such application made in good faith by the applicant, shall effect a forfeiture, or be a ground of defense in any suit brought upon any policy of insurance issued upon the faith of such application, unless such misrepresentation or untrue statement relate to some matter material to the risk.” Code 1904, Art. 23, sec. 196. In construing the Pennsylvania statute which as we have said is identical with our own, the Supreme Court of that State says: “The meaning of this language is perfectly plain.

A misrepresentation or untrue statement in an application, if made in good faith shall not void the policy, unless it relate to some matter material to the risk. If the matter is not ⁴⁶¹ material to the risk, and the statement is made in good faith, although it is untrue, it shall not avoid the policy.” March v. Life In. Co., 186 Pa. St. 641.

In other words the statute was passed to prevent the defeat of the ends of justice by mere technicality. It is remedial in character and should be given such liberal and reasonable interpretation as will insure judicial investigation in the ordinary way of the question whether any particular statement in the application was untrue, and if untrue, whether it was material to the risk. If the statement is found to be untrue and material, the penalty of the forfeiture of the policy will usually follow as of course, whether the answer be made in good faith or in bad faith. Penn Mutual v. Savs.

Bank, 38 L. R. A. 56. As the application in this case contains a clause of warranty of the truth of the answers therein contained, and as the application is referred to in and made a part of the policy the statute by its very terms is applicable, unless other circumstances render it inapplicable-. And the appellant contends that this Act is not applicable to the case at bar for two reasons: First, Because the contract of insurance expressly provides that it shall be subject to the charter of the company, and of the laws of the State of New York, and as there is no evidence of a similar statute to our own in force in that State, this Court will presume that the common law prevails there, and that consequently this contract must be construed according to the rules of the common law. Citing Ficklin’s case, 74 Md. 172 .

Second, Because as the defendant company is a mutual one, as is alleged, the contract of insurance must be construed in accordance with the laws of the State where the company was created, and agreeably to its charter, in order to preserve the scheme of mutuality as was done in Brashears case, 89 Md. 624 . In answer to the first reason assigned we refer to the case of Keatly v. Travelers Ins. Co., 187 Pa. St. 197, where it was ⁴⁶² attempted to evade the provisions of the Pennsylvania Act, by reciting in the policy that it should be construed by the laws of Connecticut.

The Court in that case held that such an agreement was against public policy, and that the contract musLbe governed by the laws of Pennsylvania, where the contract was made. A similar rule was adopted in Massachusetts in the case of Dolan v. Mutual Reserve, 173 Mass. 197 , the Court saying: “The contract was made in Massachusetts through its agent here, and the policy was delivered and paid for here. It is therefore governed by our laws.” The same rule was applied in the Fidelity Mutual Life v. Jeffords, 53 L. R. A. 193, and in Fletcher v. New York Life, 13 Fed. R. 526. In a suit in the United States Circuit Court, sixth circuit, ■on a policy of insurance issued by a Pennsylvania corporation to a person in Maryland, full effect is given to the Maryland statute.

Fidelity Mutual v. Miller, 92 Fed. 63 . See also Equitable Ins. Co. v. Pettus, 140 U. S. 226 . We think therefore, that while it is perfectly true that in the absence of proof to the contrary, the common law is presumed to be in full force, and to be the same as the common law of the forum., in all those States which were originally colonies of England (8 Cyc., 387B); and although in Ficklin's case, supra, this Court gave the benefit of the remedial statute of Pennsylvania, before its adoption by the Legislature of this State, to •one of our citizens suing in the Courts of this State upon a •contract made here by a Pennsylvania corporation, yet we deem it against public policy to permit a contract of insurance made here since the passage of the Act of 1894 with a citizen -of this State, to be governed by the harsh rules of the common law which by legal presumption merely, is supposed to ■obtain in the State of New York by whose laws it is sought to have this contract construed.

When a corporation undertakes to do business beyond the •territorial limits of the State creating it, it does so merely by ■comity, and the State which it enters for the purpose of trans- • ..acting business therein, has the power to require such corpor ⁴⁶³ ation to carry on its business there subject to its statutes, and this Court will not allow the parties to such contracts as this, by any stipulations contained therein to contravene the salutary provisions of this statute intended for the protection of our own citizens against common law warranties. New York Life Ins. Co. v. Craven, 178 U. S. 389 (44L. ed. 1116.) In answer to the second reason assigned, we have only to say that in the Brashears case (supra) the insurer was the Royal Arcanum, a purely mutual benefit association, which is not controlled in this respect by the ordinary rules of life insurance; (Pe nn Mutual v. Savings Bank, 38 L. R. A. p. 58), and besides in this case, we have no knowledge that the appellant is in fact a mutual company, except the inference to be drawn from the single “Mutual” contained in its corporate name. We think it is perfectly clear therefore, that as the •first, premium on the policy was paid in this State, by a citizen of this State, and the policy delivered here, that it is a Maryland contract and to be governed by Maryland laws.

The Act of 1894, ch. 662, being applicable to this case, as we think it clearly is, the burden of proving the untruth of the insured’s statements and answers in his application, and also, if untrue, that they relate to some matters material to the risk, or that they were not made in good faith, was upon the defendant, if it relied upon fraud or misrepresentation on the part of the insured as a defense to the action. Brashears case, 89 Md. 633 ; May on Ins., sec. 183. Ordinarily the question of the truth of the answers vel non, .as well as the question of their materiality and good faith are to be submitted to the jury with proper instructions; 25 Cyc., -950; Lewis v. Metropolitan Co., 163 Mass. 118 ; but as the evidence in such cases is adduced as matter in avoidance of the inception of the contract, whenever any one of these facts is es-tablisñed by clear and uncontradicted evidence, the Court may, by the great weight of authority, so rule as a matter of law.' Bankers Life Ins. Co. v. Miller, 100 Md. 1 ; Lutz v.Metropolitan Life Ins.

Co., 186 Pa. St. 527. Where a material false representation or breach of warranty ⁴⁶⁴ is shown by the uncontradicted evidence, and no waiver thereof by the insurer is proved, a non-suit should be granted, or a verdict directed for defendant. 25 Cyc., 951. The case now under consideration was instituted in the Circuit Court for Allegany County, and tried in that Court, in April, 1907.

The policy of insurance sued on, and also the application were in evidence at the trial, and both bore the date of November 20th, 1905. Mullan, the insured, died on April 19th, 1906, just five months later. A short time before his death, that is in January, 1906, he was suffering with an abscess of the rectum, for which he was operated upon on February 6th, 1906, at the hospital. He was in the hospital two or three weeks.

Tuberculosis set in the last of March, of which he died April 19th, as above stated. The company denied liability on the ground that Mullan, had made misrepresentations in his application, relating to matters material to the risk. Catherine T. Mullan, the beneficiary named in the policy having died subsequently to the death of the insured; suit was brought by her executors who obtained a verdict and judgment as above recited. The alleged misrepresentation upon which the defendant relies to defeat the action, are the following statements and answers in his application:— 1st.

That the physician last consulted by Mullan was Dr. Brown of Elkins, W.' Va., who attended him four years previously, that the nature of his complaint was, “two ribs broken, the result of a fall,” and further that he had had no other injury or illness of any kind, nor any remaining effects of any. ' 2nd. 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. 3rd. That he had never taken any special treatment for alcoholism. The uncontradicted evidence shows that two or three other physicians attended Mullan subsequently to the time, as stated by him in his application, when he was treated by Dr. Brown. ⁴⁶⁵ One of these was Dr. Carder who testified that he treated Mullan two years previously for