In September, 1934, plaintiff issued a policy of life insurance to Verner R. Hansen, with the defendant, his wife, as beneficiary.
The contract contained this provision: "This policy may be reinstated at any time within five years after any default, upon *Page 387 presentation at the Home Office of evidence of insurability satisfactory to the Company and payment of overdue premiums with six per cent interest thereon from their due date. . . ."
The company determined what was to be "evidence of insurability."
The insured failed to pay the premium due in September, 1935, and the policy lapsed. On November 30, 1935, the insured applied in writing to the company for reinstatement of the policy, upon blanks furnished by plaintiff, and in the application stated, "for the purpose of inducing the Company to reinstate said Policy, I make the representations contained in my answers to the following questions:
"1. Are you now, to the best of your knowledge and belief, in the same condition of health as you were when this Policy was issued? (If not, give details.) Ans. Yes."
"2. Within the past two years have you had any illnesses, diseases or bodily injuries or have you consulted or been treated by any physician or physicians? (If so, give full details, including nature, date, and duration of each illness, disease or injury, the name of each physician, and the dates of and reasons for consultation or treatment. Ans. No."
Upon this application, the policy was reinstated on December 6, 1935.
The insured failed to pay the next premium due, and on May 23, 1936, he made a similar application to the company, answering similar questions the same way; and on May 25, 1936, the policy was again reinstated.
The insured died on July 26, 1937. He had gone with a group to one of the lakes, and in diving, sank after swimming a short distance. The death certificate was offered by the plaintiff in evidence and received. This shows drowning as the cause of death. The proofs of death were offered in evidence by the defendant and received, no objection being made. These proofs show death by drowning. The record is clear that it was an accidental death. On August 6, the proofs of death were sent to the company on forms prepared and furnished by the company.
In November, 1937, the plaintiff commenced this action to cancel the policy, alleging the answers to the questions in the application for reinstatement were knowingly false when made by the insured; that the insured, for sometime preceding the date of the application, had been *Page 388 suffering from serious physical ailments and diseases, the exact nature of which is not known to the plaintiff; had in said period consulted physicians; and was treated for such ailments and diseases, and was in fact confined in a hospital while receiving such treatments; that the plaintiff was deceived by these representations, and reinstated the policy believing and relying thereon; and that "had said application disclosed the truth concerning the physical ailments . . . and the truth of his consultations with and treatment by physicians the plaintiff would not have reinstated said policy nor accepted said defaulted premium."
The complaint further alleges that immediately upon discovering the misrepresentations (on October 8, 1937), the plaintiff notified the beneficiary in writing that it rescinded the contract and tendered to defendant the premiums paid in connection with the reinstatements, together with interest.
The answer consists in the main of a general denial, with a counterclaim, wherein the defendant, as the beneficiary under the policy, seeks to recover the amount alleged to be due under the contract of insurance.
The plaintiff replied, admitting the defendant was the beneficiary of the policy, and restated the allegations of its complaint with reference to alleged misrepresentation and deception.
The case was tried to the court. Judgment was rendered for the defendant on her counterclaim, and plaintiff appeals, demanding a trial de novo.
At the trial, plaintiff moved "to strike out the counterclaim on the ground that it is not a proper counterclaim under the definitions of the Statute, § 7449." The trial court reserved a ruling on this motion. The record shows no formal ruling, but as the court found for the defendant, the trial court in fact overruled the motion, and this action of the court is alleged as error.
There was no error in this respect. When the counterclaim was served upon the plaintiff, it elected to reply thereto. No demurrer was interposed, no motion made at that time, and, therefore, the motion, when interposed, came too late.
Defendant contends there is no proof the insured gave the answers set forth in the form of application for reinstatement. Plaintiff's solicitor of insurance testified he asked the insured if he wanted to reinstate, and prepared the applications for him. The defendant testified *Page 389 that the signature to each application was the signature of her husband. There is no proof insured did not know what he was signing. The presumption is he did, and, therefore, he knew he answered "Yes" to the first question and "No" to the second.
The answer to the first question is merely a matter of opinion by the insured, and a wrong answer thereto does not vitiate the agreement to reinstate, when made in good faith and in the absence of proof showing intentional misstatement. See Donahue v. Mutual L. Ins. Co. 37 N.D. 203, 218, 164 N.W. 50, 52.
The reinstatements by the company were based upon these applications. Plaintiff did not see fit to require a medical examination as a prerequisite.
These applications were the only evidence of insurability required by the company, and in the form the company prepared is this statement: "If the evidence of my insurability is satisfactory to the Company and it has received all sums the Policy requires to be paid for reinstatement, then, and not until then, said Policy shall be deemed reinstated."
The company "received all sums the Policy requires to be paid for reinstatement." The insured paid premiums subsequently, evidently on the theory that the policy had been reinstated, for the premiums were payable semiannually.
The burden of proving the statements false is upon the plaintiff. The only real issue in dispute is the effect of the answers to the second question.
There is nothing in the testimony which shows when the company learned of the visits to the Mayo Clinic made prior to the first reinstatement; and it was more than a year and a half after the first reinstatement that the insured drowned, and almost two years after this reinstatement before the action was commenced to cancel the policy.
The medical director of the New York Life Insurance Company testified that if the insured had answered "Yes" to this question, the policy would not have been reinstated until the Company "had received authorization from Mr. Hansen to consult with the Mayo Clinic and obtain full information regarding the reasons for attending that clinic with full details of the history given to the physicians connected with the clinic and the diagnosis made, and if Mr. Hansen had declined to permit the Company to get this information from the clinic the applications *Page 390 for reinstatement would have been declined."
The defendant testified that in May, 1935, her husband, the insured, went to Rochester, to the Mayo Clinic; that he may have been there again in August of that year; that the May visit was to see about his eyes, that he had some spells of dizziness; but she also testified that he made no complaints.
The employer of the insured testified the insured had been continuously employed by him from the spring of 1932 until the time of his death; that deceased was away on a trip one time for a short while, but excepting during that period, he took no time off whatever, nor did he lose any time during that period because of sickness — working until the day he died.
Dr. Shelden of the Mayo Clinic testified that in the latter part of May, 1935, the insured had been at the clinic for several days; and in August, 1935, returned to the clinic and remained there for four days under observation. During this visit he was in a hospital. The nature of the first visit was not disclosed, nor was it shown that insured was in a hospital at that time.
The record is silent as to the nature of the examination which the insured received; what trouble, if any, he had; and whether the two visits related to the same subject. Dr. Shelden declined to answer questions with reference thereto on the ground that the statutes of Minnesota — the state where his deposition was taken — prohibited him from testifying regarding confidential information received from the patient for the purpose of enabling the doctor to diagnose or treat the patient. This privilege was claimed by the physician on all occasions where an attempt was made to ascertain the nature of the visits to the clinic, and what, if any, condition was discovered.
At the taking of the deposition of Dr. Shelden, the plaintiff made an offer of proof to show "that if the privilege asserted by the doctor be not sustained that he would testify" showing a very serious condition of the insured in 1935, setting it forth in the offer of proof. This offer was not made at the time of trial, nor any ruling thereon sought. An offer of proof must be presented to the court for a ruling and must show reasonable grounds for believing the witness will testify, and an outline of what testimony is expected so the materiality may be disclosed. See Krogh v. Great West Life Assur. Co. 55 N.D. 722, 728, 214 N.W. 897, 899; and see 26 RCL 1032. *Page 391
If the statutory prohibition prevents the introduction of the evidence, the effect thereof should not be charged to the defendant.
It is claimed the answer to the second question in the application for reinstatement is false, in part, at least, in that the insured had consulted physicians "within the past two years," but there is no proof whatever tending to show the insured "had any illnesses, diseases or bodily injuries" during the two years immediately preceding his application for reinstatement. Neither is there proof that the answer to the first question is false.
In the light of the record, we must determine whether the plaintiff has sustained the burden of proof to show that it was deceived by the alleged falsity of the statement, or the misrepresentations increased the risk.
Just what is included in the terms "consulted" and "treated" with reference to visits to physicians is set forth in 29 Am Jur 463, Insurance, § 570, and reference to such terms is treated in Brown v. Inter-State Business Men's Acci. Asso. 57 N.D. 941, 949,224 N.W. 894, 897.
Both applications for reinstatement were taken by one Peter McIntyre, who was plaintiff's solicitor of insurance residing in Williston, the home of the insured and his wife. Mr. McIntyre had been with the plaintiff company continuously from 1921 to the time of trial. He went to see the insured, and "asked him if he was going to reinstate and if he was in the same good health as he was when it was taken out." So far as the record is concerned, other than the statements made in the application, this was the only question McIntyre asked him.
Good faith is presumed, for a person is presumed to be innocent of wrongdoing. ND Comp. Laws 1913, § 7936, subd. 1.
McIntyre approached the insured apparently for the purpose of having him reinstate his policy. He was never even asked if he had propounded this second question to the insured. He was questioned as to whether he had asked the first question. No reference was made to the second question. He says he wrote out the application, handed it to him (the insured), and he signed it; that he had asked him that one question, "whether he was in the same good health," and that was the same procedure with reference to the other application.
But a statement may be false, and yet this falsity not be material. Section 6501, ND Comp. Laws 1913, provides: "No oral or written *Page 392 misrepresentation made in the negotiation of a contract or policy of insurance by the insured or in his behalf shall be deemed material or defeat or avoid the policy or prevent its attaching, unless such misrepresentation is made with actual intent to deceive, or unless the matter misrepresented increased the risk of loss."
This section is applicable to the contract of reinstatement. There are two provisions therein which make a representation material. The first is the "actual intent to deceive." There is nothing in the testimony anywhere which shows any actual intent to deceive. Other than the fact the insured signed the statement, there is nothing to show that he even knew that answer was there.
The evidence also is defective in this, that we do not know whether there was anything actually wrong with the insured at that time so that he would attach any importance to the fact that he went to the Mayo Clinic and was checked over twice. Just why the insured went to the clinic, or how serious he thought any situation was is not disclosed.
In Brown v. Inter-State Business Men's Acci. Asso. supra, a doctor had consulted physicians, somewhat casually, and omitted to make reference thereto, and we construed such failure in the light of this statute. There is no evidence showing actual intent to deceive.
The other feature is the evidence does not disclose this misrepresentation increased the risk.
Our statute lays down the rule (§ 6500) that "the materiality of a representation is determined by the same rule as the materiality of a concealment." Section 6480 provides that a neglect to communicate that which a party knows and ought to communicate is called a concealment. The materiality of a concealment "is to be determined not by the event, but solely by the probable and reasonable influence of the facts upon the party to whom the communication is due in forming his estimate of the disadvantages of the proposed contract or in making his inquiries." ND Comp. Laws 1913, § 6484.
The fact the insured died from drowning and not from any disease does not eliminate the effect of materiality of concealment in the light of this section quoted. Nevertheless, there must be some proof adduced showing "the probable and reasonable influence of the facts" upon the insurance company. There is no showing of any disease, symptoms, or *Page 393 other facts. The testimony does not intimate what the examination would have disclosed. For all we know, the company would have reinstated after an examination.
It is true the complaint specifies that the insured was in fact suffering from diseases and ailments at the time of reinstatement, and that if the plaintiff had known of these ailments and diseases, it would not have reinstated the policy.
As pointed out heretofore, there is nothing in the record to show the insured was suffering from ailments and diseases at the time he applied for reinstatement. The complaint does not specify what were these ailments and diseases. It alleges the plaintiff was informed and verily believed that the representations made were not true, but it expressly says, with reference to these ailments and diseases, "the exact nature of which is not known to the plaintiff." What record there is shows good health, for he worked continuously.
The insured owed the company the same good faith which he had a right to demand of the company (Brown v. Inter-State Business Men's Acci. Asso. supra), but the plaintiff must show in what way the misrepresentation or concealment would have affected it under the facts that would have been disclosed.
Whether the policy would or would not have been reinstated is not a matter to be settled by the mere statement of the plaintiff, after the death has occurred. Volunteer State L. Ins. Co. v. Richardson, 146 Tenn. 589, 606, 244 S.W. 44, 49, 26 ALR 1270, 1278. That is a question to be determined by the court on the facts adduced.
It is not enough to show merely that had the insured answered "Yes" to the second question, the company would have made an investigation. Plaintiff must also show something in regard to the result of the investigation so that we may determine what would be the probable and reasonable influence of what it found out upon examination.
The record does not show that if insured had stated he had consulted physicians, the policy would not have been reinstated. At the very best, there would have been merely a delay on the part of the company, for, so far as the record here shows, no serious condition would have been disclosed.
Such matter is treated excellently in a case which arose in Ontario and found its way to the Privy Council of Great Britain, the Supreme *Page 394 Court of the Empire. The Mutual Life Insurance Company of New York had issued a policy of life insurance, and upon the death of the insured, refused payment on the ground of material misrepresentation and concealment. The trial court held for the beneficiary; the Ontario Court of Appeals reversed his judgment; the Supreme Court of Canada reversed the Ontario Court of Appeals; and the Privy Council sustained the Supreme Court.
The insured had certified he had not consulted, been prescribed for, or been treated by, any physician during the five years preceding his application, whereas in fact he had been treated by a physician on several occasions during that period. The policy contained a provision with reference to such statements to the effect that in the absence of fraud they were to be deemed representations and not warranties. The Ontario Appellate Court held that the misrepresentations and concealment were proven, were material, and, therefore, avoided the policy. Ontario Metal Products Co. v. Mutual L. Ins. Co. 54 Ont L Rep 299. On appeal to the Supreme Court of Canada, that court reversed, holding, "A policy cannot be avoided for nondisclosure or misrepresentation because the insured fails to mention as an illness or disease a condition which a reasonable man might not consider such, especially if on the whole the Court concludes that the contract was entered into in good faith; and the burden of proof of nondisclosure sufficient to avoid, and of the untruth of the answers of the insured lies on the insurer." [1924] (Can) SCR 35, [1924] 1 DLR 127.
On the appeal to the Privy Council, that court went even farther than this in sustaining the trial court, the syllabus stating, "When statements made by an insured person upon his application for a policy of life insurance are not made the basis of the contract but are to be treated merely as representations, an inaccurate statement is material so as to vitiate the policy if the matters concealed or misrepresented, had they been truly disclosed, would have influenced a reasonable insurer to decline the risk, or to have stipulated for a higher premium; it is not sufficient that they would merely have caused delay in issuing the policy while further inquiries were being made." [1925] AC 344, 16 BRC 893.
An excellent annotation follows this latter decision and covers the *Page 395 large field of the effect of failure to disclose the fact of consultation, or of illnesses.
It was almost two months after the proofs of death were furnished before the company decided to attempt cancelation.
The plaintiff received the premiums and retained them until three months after the proofs of death were furnished. There is nothing in the testimony showing when the plaintiff learned of the alleged partial falsity of the answer to question No. 2. There is nothing to indicate whether the soliciting agent knew of his own knowledge that Hansen had been at the Mayo Clinic twice that year before the first application was made. There is nothing to indicate that insured consulted any physician between the time of the making of the first and the making of the second application. It was incumbent on the plaintiff to show when it learned of the falsity of the statement, for it was paid and it accepted premiums on the policy from that time on, and the policy was kept alive by the payment of premiums for a period subsequent to the time of death. It was on October 8, more than two months after the insured died, before the plaintiff tendered to the defendant a check for the premiums, with interest, but she declined to accept it.
Upon the whole record, we are satisfied that the trial court's finding of liability on the part of the plaintiff is correct, and we so find. The judgment, therefore, is affirmed.
MORRIS and NUESSLE, JJ., concur.