The decision about to be made is an unusually interesting one because it introduces a new feature into the law of contracts by which persons of sound and open minds and honest purposes are cut off in one direction from freedom of contract, in that they may not agree that an intermediary shall for all purposes of the contract be deemed the agent of one of the parties if some court be of the opinion that he was the agent of the other; and this is to be held notwithstanding this court, in Allen v. German *Page 29 Am. Ins. Co. (123 N.Y. 6, 13), in speaking of a similar provision in a contract of insurance, said: "Parties may insert any provisions they choose in contracts, provided they violate none of the rules of law, and they should all be given their appropriate and intended effect."
The underlying reason prompting this decision received both consideration and condemnation in Maier v. Fidelity Mut. LifeAssn. (78 Fed. Rep. 566), by Mr. Justice HARLAN, writing for the Circuit Court of Appeals of the sixth circuit, his associates concurring. In that case an application blank was erroneously filled up by an agent of defendant, for whose neglect or wrong plaintiff contended the defendant should not be advantaged, and the court said: "But here the assured was distinctly notified by the application that he was the party held as warranting the truth of his statements, `by whomsoever written.' Such was the contract between the parties, and there is no reason in law orin public policy why its terms should not be respected and enforced in an action on the written contract. It is the impression with some that the courts may, in their discretion, relieve parties from the obligation of their contracts whenever it can be seen that they have acted heedlessly or carelessly in making them. But it is too often forgotten that in giving relief, under such circumstances, to one party, the courts make and enforce a contract which the other party did not make or intend to make."
In the case at bar the defendant proved a breach of warranty which forfeited the policy. The facts thus warranted are found in that part of the application signed by the medical examiner and the contention of the plaintiff is that Dr. Langley, the medical examiner, was the agent of the defendant, and hence it may be shown that the insured communicated to him certain facts about his life which the doctor did not write down and which were in conflict with those written down and that this may be done notwithstanding the application, which forms part of the contract, contains this provision:
"It is hereby declared, agreed and warranted by the undersigned that the answer and statements contained in the foregoing *Page 30 application and those made to the medical examiner as recorded in parts `A' and `B' of this sheet, together with this declaration, shall be the basis and become part of this contract of insurance with the Metropolitan Life Insurance Company; thatthey are full and true and are correctly recorded, and noinformation not contained in this application and in thestatements made to the medical examiner (`A' and `B' respectively), received or acquired at any time by any person shall be binding upon the company or shall modify or alter the declaration and warranties made therein; that the person whowrote in the answers and statements were and are our agents forthe purpose and not the agents of the company; and that thecompany is not to be taken to be responsible for its preparationor for anything contained therein or omitted therefrom; that any false, incorrect or untrue answer, any suppression or concealment of facts in any of the answers, any violation of the covenants, conditions or restrictions of the policy, any neglect to pay the premium on or before the day it becomes due shall render the policy null and void and forfeit all payments made thereunder."
At the close of the statements of the medical examiner which are to be found in Exhibit "B" is the following: "I hereby declare that the application to the Metropolitan Life Insurance Company, on the reverse of this sheet, for an insurance on my life, was signed by me, and that I renew and confirm my agreement therein as to the answers given above to the medical examiner, and I hereby declare that said answers are correctly recorded." This was followed by the signature of the applicant.
It appears, therefore, by the terms of the contract that the insured declared that the medical examiner had correctly recorded the answers given to the questions, and it would seem that in the absence of fraud, of which there is no pretense in this case, that the insured would be bound by the answers written out by the medical examiner although he were in fact the defendant's agent and there was no agreement on the part of the insured and the company that the physician *Page 31 should, for the purposes of the contract, be deemed the agent of the insured.
Now, notwithstanding his agreement renewed and confirmed the answers as written out by the medical examiner, those answers were in fact untrue in important particulars, so important that it is quite likely that if the questions had been answered truly a policy would not have been issued. But that fact, if it be such, is one of no legal importance in the disposition of this case. By the terms of the application it was agreed that the insured warranted the truth of the answers as they appeared in the application and further that if untrue the policy should be null and void.
Unless the right of insurance companies and individuals to contract with each other as they will may be abridged by the courts this judgment must be affirmed. That the legislature may provide a standard form for life insurance policies is unquestioned, but the power is legislative and no attempt should be made indirectly to exercise it by the courts, which would best discharge their duty in the end, as experience proves, by giving full force and effect to the contracts of all parties.
The method by which the plaintiff sought to relieve the contract from the effect of the several untrue answers in the application upon which the defendant acted, was to prove that the insured made very different answers to Dr. Langley, the physician who undertook to write down the replies, to prove, in fact, that the insured told Dr. Langley everything which the defendant has now proved about his physical condition, and then to ask the court to hold, notwithstanding the insured had contracted to the contrary, that Dr. Langley was the defendant's agent, and hence that the defendant is estopped from denying that it knew the whole truth about the insured's prior state of life.
The defendant's counsel contended, and so far the courts have sustained him, that his client had issued its policy in reliance on the truth of the statements contained in the application, and that Sternaman, the applicant, had in terms *Page 32 contracted that it might do so, and that if any of the answers should prove to be untrue it should render the policy null and void. He asserted the right of his client to the protection of the law in the enforcement of its contract and pointed out the necessity, according to his client's view, of the incorporation into such contracts of a provision that the applicant for insurance shall be held to warrant the truth of all answers no matter by whom written and although the writer be in the service of the company.
The reasons presented in support of defendant's contention are briefly stated in the language of Mr. Justice WILLIAMS inBernard v. United Life Ins. Assn. (14 App. Div. 142), in which all his associates concurred. The aim of the defendant is "to protect itself in two respects by its policy: First. Against any attempt by the agent and the insured conspiring together to defraud the company, by presenting to it an application containing false statements and answers, and securing a policy thereon, which would not have been issued had the truth been known to the company. Second. Against any attempt by the beneficiary, after the death of the assured, by parol evidence, to avoid the effect of false statements and answers in an application upon which a policy was actually issued." These reasons seem to be well grounded, for it is not in the public interest that frauds should be permitted for the benefit of individuals, however needy they may be.
But it matters not whether the reasons be sound or not, the defendant has a right to issue policies of insurance to such persons and upon such terms as it chooses, so long as it violates no provision of law, and he who would be insured must accept its contracts upon its own terms or go elsewhere for his insurance.
These parties agreed that for the purposes of the application for the policy of insurance the medical examiner who wrote down the answers was to be regarded by both parties as the agent of the applicant, and one of the objects of that stipulation was to assure the defendant that it could rely upon the truth of the answers contained in the application and that it *Page 33 could issue a policy without fear that it might afterwards be claimed that it was bound by some information that its agent had obtained that was in conflict with the answers in the application. And this does not seem at all unfair to the applicant, for he signs the application and is carefully advised of the importance of the truth of his answers, while it is certainly no more than fair to the defendant that it should have the whole truth before it when determining whether the risk is one that it should accept.
But in any event the defendant has the right to insist as a condition of its issuing the policy that an applicant shall agree that for the purposes of the application and the issuance of the policy whoever fills up the blanks, whether he be in the employ of the defendant, or a soliciting agent, or one occasionally paid by it for making a medical examination, shall for that purpose be deemed the agent of the applicant. If the applicant does not care to so agree he need not make the application. But if he does make it and incorporates that agreement into his application and upon the strength of it the policy is issued, he is bound by it and the defendant is entitled to the full protection of it, and so this court and the Supreme Court of the United States have unvaryingly held.
Rohrbach v. Germania Fire Ins. Co. (62 N.Y. 47) was an action on a policy issued for insurance against fire. The facts stated in the application were by its terms made warranties as stated therein. They proved to be untrue and it was held that a recovery could not be had, although the applicant had truly stated the facts to the agent who filled up the application, and the reason for it was, as in this case, that the policy provided in effect that the agent should be deemed the agent of the insured, and not of the company, and it was held that the knowledge of the agent was immaterial and could not affect the warranty. In the course of the opinion the court said: "It is hereupon urged by the plaintiff that the errors and omissions were those of the defendant. But the plaintiff and defendant have in the policy, the contract between them, expressly agreed that Brand should be deemed the agent of *Page 34 the plaintiff and not of the defendant under any circumstances. * * * But we must take the contracts of the parties as we find them, and enforce them as they read. By the one before us the plaintiff has so fettered himself as to be unable to retain, as the case now stands, the real essence of his agreement. Though he has frankly and fully laid before the actor between him and the defendant all the facts and circumstances of the case, he is made responsible for error in legal conclusions which he never formed, and which were arrived at by one in whom he trusted and whom he supposed to stand in the place of the defendant. * * * Held to the letter and substance of his contract, the plaintiff made a breach of warranty and condition precedent, upon the truth of which his contract rested, and for that reason may not recover in this action, as the facts now stand."
The Rohrbach case was followed by the Alexander Case (66 N.Y. 464). That contract contained the following clause: "It is a part of this contract that any person other than the assured who may have procured this insurance to be taken by this company shall be deemed to be the agent of the assured named in this policy and not of this company under any circumstances whatever or in any transaction relating to this insurance." The court (Judge RAPALLO writing) on the assumption, as he said, that the agent, Brewster, was the agent of the company for the purposes of the application, said: "But the policy now in question contains an express agreement that any person other than the assured who may have procured the insurance to be taken by the company shall be deemed to be the agent of the assured, and not of the company under any circumstances whatever, or in any transaction relating to the insurance. In Rohrbach v. Germania Fire Ins. Co. (62 N.Y. 47, supra) this court decided that such a clause was operative and precluded the insured from claiming that the company was bound by the knowledge of a similar agent through whom the policy had been procured."
The last utterance on the subject in this court is to be found in the Allen Case (123 N.Y. 6, supra). In that case, *Page 35 as in this one, the court was asked to draw the inference of fact that the person who did the writing was the agent of the company (notwithstanding the stipulation that he should be deemed the agent of the applicant for all the purposes of the contract) and to thrust its inference of fact into the contract in the place of the provision declaring him to be the agent of the insured. But the court repudiated the plaintiff's claim, saying, among other things, Judge GRAY writing: "Then, too, the policy contained the provisions that the company would not be bound by any acts of, or statements of, or to, any agent, or other person, which were not contained in the policy, and, further, that any person other than the assured procuring the policy, or any renewal thereof, should be deemed the agent of the assured, and not of the company. To these conditions the plaintiff's assent is presumed to have been given by his acceptance of the policy, and there is no reason why he should not be bound by them. If Noble had been the agent of the defendant, it was perfectly competent to stipulate by this contract of insurance that anything done by, or known to, the agent should be without effect upon the contract, unless made known in writing to the principal." (Citing authorities above quoted.)
The parties were competent to make that stipulation, said this court in that case, but they are not competent to make the stipulation in this case, it is now said. No attempt, however, is made to give a reason for holding that the parties are competent to make one but not the other. None can be given, I assume, that will persuade any mind.
A reversal in this case will, as a matter of fact, overruleAllen's case, and it would seem as if the court's assertion in that case of competency on the part of the parties to contract as they did should be opposed with something more than a contrary assertion in this case; that, at least, the court should point out what it is that prevents two men of sound mind, dealing with each other honestly, from agreeing that for all the purposes of a particular contract a person who shall act as the agent for one shall be deemed the agent of the other. *Page 36
In the United States courts the view hitherto taken by this court has been adopted. (N.Y. Life Ins. Co. v. Fletcher,117 U.S. 519; Maier v. Fidelity Mut. Life Assn., 78 Fed. Rep. 566, supra.) The Fletcher case was an action brought upon a life insurance policy, the application for which stipulated that the statements therein were warranties, and that no statement to the agent not contained in the application and thus transmitted to the company should be binding upon it. The agent, without the knowledge of the applicant, wrote down false answers and the applicant signed, without reading the application. It was held that the policy was void and no recovery could be had thereon, notwithstanding the insistence of counsel that, inasmuch as the applicant never in fact made the false statements and representations to which his name was signed, but did truthfully answer the agent, the company which employed the agent should suffer rather than the applicant. From the opinion in that case we quote: "It was his duty to read the application he signed. He knew that upon it the policy would be issued, if issued at all. It would introduce great uncertainty into all business transactions if a party making written proposals for a contract, with representations to induce its execution, should be allowed to show, after it had been obtained, that he did not know the contents of his proposals, and to enforce it, notwithstanding their falsity as to matters essential to its obligation and validity. Contracts could not be made, or business fairly conducted, if such a rule should prevail; and there is no reason why it should be applied merely to contracts of insurance. There is nothing in their nature which distinguishes them in this particular from others. But here the right is asserted to prove not only that the assured did not make the statements contained in his answers, but that he never read the application, and to recover upon a contract obtained by representations admitted to be false, just as though they were true."
The Maier Case (78 Fed. Rep. 566, supra) has already been briefly referred to, and other reference to it will not be had except to say that the contention of the plaintiff in that *Page 37 case was that the questions were propounded and answers written by an agent of the insurance company who knew all of the facts, but suppressed them when preparing the answers, and that hence the company was estopped from denying that it possessed the knowledge which he had. But the court held that the insured, having contracted otherwise, should be bound by his contract, in a very careful opinion written by Mr. Justice HARLAN, in which he cites, among other cases, in support of the decision made, theFletcher Case (117 U.S. 519, supra).
This position is followed in a carefully considered opinion by the Appellate Division of the first department in Bernard v.United Life Ins. Assn. (14 App. Div. 142, supra) and by the fourth department in Hamilton v. Fidelity Mutual Life Assn. (27 App. Div. 480), and there are no later authorities in this court or in the United States Supreme Court to which our attention has been called which are in conflict with the decisions to which reference has been made.
Appellant's counsel cites Sprague v. Holland PurchaseAssn., (69 N.Y. 128) and Whited v. Germania Fire Ins. Co. (76 N.Y. 415). The Sprague case, the opinion in which was written by Judge FOLGER, who also wrote in the Rohrbach case, is distinguishable from the latter in two respects, which will be sufficiently pointed out by taking extracts from the opinion. The first is: "Nor will the defendant's position hold, that Bowers was the agent of the plaintiff therein. There is the clause, to be sure, in the policy, that he who procures the insurance from the defendants shall be held by contract to be the agent of the plaintiff. There is, however, the other condition hostilethereto, imposed by the defendants themselves, that theapplication must be made out by an authorized agent of them. And the referee finds, and so is the proof, that Bowers was the agent of the defendant." And the second extract is: "This defense of the defendant rests entirely upon the statement in the paper called the application. There is no finding of fact which permits us to call that the application of the plaintiff, and hence his warranty. *Page 38 There is no breach of warranty, therefore, by him, for he has made no warranty. The case is entirely without findings of fact to sustain the position of the defendants."
The opinion in the Whited case, Judge FOLGER again writing, distinctly approves of the Rorhbach case, which is controlling in the case at bar. After saying that it would be fatuous to deny that Harmon was the agent of the defendant were it not for a clause in the policy upon which the defendant builds, the opinion continues: "The clause is in this wise: That any person other than the assured, who may have procured the insurance to be taken, shall be deemed to be the agent of the assured, and not of the company, under any circumstances whatever, or in any transaction relating to this insurance. That clause we have held to be forceful, in Rohrbach v. Germania Fire Ins. Co. (62 N.Y. 47) and Alexander v. Same Defendant (66 N.Y. 464). We have not held it so, as yet, further than the scope of the facts in those cases. * * * That case [referring to the Rohrbach case] dealt with matters before the issue of the policy," meaning thereby that the stipulation by which the plaintiff agreed that the answers were true and were made by him, and that if written out by another that other was his agent and not the agent of the company, was incorporated into the application upon which the company acted in determining whether to issue a policy, in theRohrbach case, whereas in the Whited case the policy was not issued on the strength of a partly written and partly printed application, and the provision as to agency was merely incorporated in the policy which was procured through one Harmon, who countersigned it as defendant's agent. That policy was renewed twice, each renewal receipt being signed by the defendant's president and each containing this clause: "Not valid unless countersigned by the duly authorized agent of the company." Each receipt was countersigned by Harmon, who received the premiums and forwarded them to the defendant. On applying for a third renewal plaintiff informed Harmon that he had sold the premises and that his interest was as mortgagee. Harmon received the premium, gave *Page 39 another renewal receipt and said he would make it all right. The court held that in the renewal of the policy, not in obtaining it, Harmon was the agent for the defendant and it was bound by his acts.
If there are any other authorities in this court which, even as a matter of first impression, appear to militate against the position taken by this court and the United States courts in the cases cited supra, they have not been brought to my attention. The Grattan Cases (80 N.Y. 281 and 92 N.Y. 274), and Flynn v.Equitable Life Ins. Co. (78 N.Y. 568), and O'Brien v. HomeBenefit Society (117 N.Y. 310) certainly do not, for they have not even the merit of being in point. The question presented in this case was not raised in those cases, and could not have been because in none of them did the contract contain a stipulation that the medical examiner or other representative of the company should be deemed to be the agent of the insured.
Since the foregoing was written I have found the case ofNorthern Assurance Co. v. Grand View Buildg. Assn. (22 Sup. Ct. Rep. 133), decided by the U.S. Supreme Court less than two months ago, which contains an exhaustive review of the cases both in England and this country which have grown out of attempts through one device or another to break down the written contract by parol evidence. In that case the attempt was made to show knowledge in the company's agent of a fact denied in the policy, and because of such agency to charge the company with knowledge. The court in repudiating the plaintiff's contention pays critical attention to some of the authorities in this state and demonstrates, as I think, that both on principle and on the authority of nearly all jurisdictions in this country, as well as England, the stipulations of this contract should control.
The judgment should be affirmed, with costs.
O'BRIEN, BARTLETT, HAIGHT and MARTIN, JJ., concur with VANN, J.; GRAY, J., concurs with PARKER, Ch. J.
Judgment reversed, etc. *Page 40