Action on a policy of life insurance, issued March 26, 1918, to John F. Livingston for $1,000, payable to his wife, the plaintiff. The insured died February 23, 1919, under an operation for duodenal ulcer. Suit was instituted June 9, 1919. The defendant denied liability upon the ground that the insured had, in his application for insurance, made an untrue answer to the question: "Have you had any illness or have you consulted any physician in the last five years?" The application is dated March 17, 1918, and contains a declaration that the answers to the question "are complete and true, and I agree that they shall form a part of the contract issued by said company on my life."
At the close of the testimony, the presiding Judge directed a verdict in favor of the plaintiff, for the amount of the policy with interest, upon the ground (the second of three) that the defendant had not shown that the subject of the alleged misrepresentation was material to the risk. The plaintiff based the motion upon two other grounds: (1) First, because there is no allegation or evidence of fraud on the part of the insured in making alleged erroneous answers in the application, and they constitute no defense; (3) third, and because it did not elect to rescind and tender back the premium within a reasonable time; and upon this appeal has given proper notice to sustain the judgment upon them, if necessary.
The party who moves for a directed verdict does so with the implied admission that every material fact in the adversary's testimony is true, and that every legitimate inference in his favor may be deduced therefrom. With this principle before us, let us examine the case as presented.
The evidence tended to establish the following facts:
On the 17th of March, 1918, John F. Livingston made written application for a policy of life insurance for *Page 110 $1,000 in the defendant company. The application consisted of two parts: Part 1 was the formal application for the policy, and contains nothing of interest to this controversy; part 2 contains the report of Dr. Heyward, the medical examiner of the company, and consists of a number of questions and answers relating to the applicant's family history, habits, and health, past and present. The only question and answer having immediate bearing upon this appeal is as follows:
"27. Have you had any illness or have you consulted any physician in the last five years? Answer `Yes' or `No.' No. (In case the answer was `Yes' the applicant was asked to specify the illness, giving the month, year, duration, result, and the physician's name and address.)"
At the foot of the application the following certificate was signed by the applicant:
"I hereby declare that my answers to the question in part I and part II, which together constitute my application to the Union Central Life Insurance Company for life insurance, are complete and true, and I agree that they shall form a part of the contract issued by the said company on my life."
The application was received and accepted by the company, which issued its policy conformably with the application, dated March 26, 1918. The policy contained the following clause:
"20. Contract. This policy, together with the application, a copy of which is indorsed hereon or secured hereto, shall constitute and contain the entire contract. All statements shall, in the absence of fraud, be deemed representations and not warranties. No such statement shall avoid this policy or be used in defense to a claim thereunder, unless it is contained in the written application, and unless a copy of such application is indorsed on or attached to the policy when issued." *Page 111
The insured died within a year thereafter, on February 23, 1919, and the sole ground of defense against the action brought by the beneficiary, is that the answer to question 27, above set forth, was untrue, and necessarily so within the knowledge of the insured. The defendant disclaims all charge or suggestion of fraud on the part of Mr. Livingston, who is conceded to have been a man of the highest character; its position is that the foregoing representation was false, and that the subject-matter of it being material to the risk, such misrepresentation avoided the policy and relieved it of all liability.
It is conceded that, either in the year of 1914 or 1916, the insured had a serious spell of illness and was attended for a period of two weeks by three physicians. It is immaterial, in the conflict of the testimony, which is the correct date, as either would be within the five-year period referred to in question 27; but under the rule stated, we will accept as the true date that which is more favorable to the party against whom the verdict was directed, the year 1916. The circumstances of that illness and medical attention were as follows: Dr. McIntosh was called to see Mr. Livingston. He had been his family physician for 10 years. Mr. Livingston was subject to severe gastric attacks that were ascribed to an infected gall bladder; that was Dr. McIntosh's diagnosis. He advised that the gall bladder be removed and that a surgeon be called in; upon that advice Mr. Livingston went to see Dr. Taylor who made an examination and diagnosed the case as one of duodenal ulcer, infected gall bladder, or chronic appendicitis. Dr. Taylor advised an operation, but that an X-ray picture be taken before the operation. Dr. Gibbes took the pictures, which showed negative result. In preparing for the picture, Dr. Gibbes administered a large dose of bismuth, which relieved the pain, the symptoms disappeared, the patient was much better, and he (the patient) declined to consider the matter of operation further. At *Page 112 the time that Dr. McIntosh was called in, Mr. Livingston "had one of those serious gastric attacks," vomiting a great deal of green bile; the acute attack lasted two or three days and it took many more days for him to get well. In the year 1911 Mr. Livingston had a severe attack of "multiple neuritis," lasting from June to October, crippling him so that he was in a rolling chair for a while, on crutches for a while, and walked with a stick for a number of weeks, during which attack he was attended by three doctors. Dr. McIntosh stated that "multiple neuritis" can follow an acute attack of duodenal ulcer, and that after the operation, which resulted in his death, developed the fact that he had a duodenal ulcer, the doctors knew that it was the cause of the attack of multiple neuritis in 1911. At the time of the examination in 1919, Dr. McIntosh gave to Dr. Taylor a history of Mr. Livingston's attacks; they consisted of nausea, vomiting, digestive disturbance, stomach trouble due, as he thought, to an infected gall bladder. Mr. Livingston also gave a history of periodic attacks extending back a long time; his mother stated that he had had those attacks for years. Dr. Taylor testified:
"In my opinion he had at that time, and I said so on that consultation, that he had an ulcer of the duodenum, that is, where the intestines join the stomach — or he had trouble with his gall bladder, or chronic appendicitis. * * * My opinion at the time was that he most probably had doudenal ulcer. That is the reason I sent him for the X-ray pictures."
The pictures showed negative, so far as an ulcer was concerned, but the doctor adds:
"Nevertheless, in view of Mr. Livingston's history, which at that time was very important, more valuable to us than the X-ray pictures, because in the X-ray pictures, we had not reached the degree of refinement in our work that we have now, and we could not tell as definitely in as large a *Page 113 percentage of cases then as we can now of the presence of duodenal ulcer."
— that Mr. Livingston was relieved of the symptoms by the large amount of bismuth which was given to him; "it fills up the ulcer and the patient is relieved over good long periods, he got relief as a result of this"; that Mr. Livingston was so greatly relieved that he thought he was perfectly well, and jokingly referred to his escape from the surgeons, to which the doctor with prophetic ken replied: "Oh, you will fall into our hands later." When he did so, this is what the doctor swore: "When I operated on him in 1919, I found the condition I had suspected, and he did not survive the operation." The doctor does say that, after Mr. Livingston passed through that attack and appeared in such perfect health, he destroyed the records of his examination because he felt that they were mistaken in the diagnosis, and the records would be of no further use. The tragic result, however, unfortunately demonstrates the correctness of that diagnosis.
Mrs. Livingston, the plaintiff, testified in reference to her conversation with Dr. Taylor:
"He said, `Mrs. Livingston, I think if I were in Mr. John's place I would go around to the hospital and let us make an incision and see if there is anything wrong with him. I want you to understand that we may go in and find malignant cancer or nothing at all; the pictures don't show anything.' * * * Off and on Mr. Livingston had some attacks with the stomach. On one occasion he had an attacks that was so severe he was incapacitated for work for three or four months — I think it was possibly a couple of months before he went back to work. I could not say how many attacks he had subsequently to that. I don't think they were serious enough for me to remember them in detail."
These facts abundantly showed, or at least tended to show, which is sufficient in answer to the motion for a directed *Page 114 verdict, that there was a misrepresentation on the part of the applicant. Upon the further issues of the materiality of the subject-matter of the misrepresentation, the evidence was of the following tenor:
Dr. Pauli, assistant medical director of the company, who passed upon the application of Mr. Livingston, testified:
"If an applicant states he consulted a physician within the past five years for an illness which lasted more than a few days, we require a statement from the physician who treated him, giving the diagnosis of the illness and the probable cause. Under the rules and customs of our company, if Mr. Livingston had disclosed that he consulted with Drs. McIntosh, Gibbes and Taylor, or with any of them within two years of his application, the application would not have been approved without further investigation. * * * Whenever there is any indication of any stomach disorder or indigestion or abdominal colic, we require the amendment form 1968 above referred to."
The form referred to was offered in evidence. It is a letter addressed to the agent of the company, signed by the medical director, instructing him to mail the form of a letter enclosed to the physician who is shown by the applicant's answer to question 27 to have attended the applicant. This letter, intended for the physician, recites that the applicant has stated in his application that the physician addressed had been consulted by him for treatment of an illness in a certain year, and calls upon the physician for a statement of the diagnosis of the illness and its probable cause, particularly enquiring: "Was there ever any suspicion or indication of appendicitis, ulcer of the stomach, etc?" The witness Dr. Pauli further states:
"We make free use of these amendments, as we regard the question, `Have you had any illness or injury or have you consulted any physician in the last five years,' as of vital importance in deciding our action on an application. * * * We positively refuse to issue insurance to an applicant *Page 115 that has consulted a physician for any stomach disorders, diagnosed as possible duodenal or gastric ulcer and an operation recommended or suggested, until five years have elapsed since complete recovery from the gastric symptoms and no recurrence of the symptoms. * * * An applicant who has had any signs of symptoms of gastric or duodenal ulcer within the past five years is not eligible for insurance in this company."
Dr. Muhlberg, the medical director of the company, testified:
"Cases giving a history of gastric ulcer are not accepted, if there have been any attacks of gastric ulcer or any symptoms of gastric irritation within five years from the date of the examination. * * * Gastric ulcer or duodenal ulcer — a personal history of gastric or duodenal ulcer within the past five years declines a risk. * * * Where an applicant states that he has consulted a physician within five years for indigestion or gastric irritation, our practice, in a case of this sort where any history is given within five years, is to send to the attending physician form 1968. * * * Our practice, where one states in his application that he has consulted a physician and does not give the reasons for consulting a physician, is to write back to find out why he consulted a physician within the past five years."
Dr. Heyward, the local medical examiner of the company, testified:
"I asked him the question, `Have you had any illness or have you consulted any physician in the last five years?' to which he answered `No.' If he had ever reported any examination I certainly would have made a note of it. The company requires it, and I carried out absolutely the instructions of the company. * * * If Mr. Livingston had reported he had consulted a physician within five years, I would have taken the name and address of the physician and asked him what was the matter with him and sent the name and address in to the company, together with what he *Page 116 reported was the matter with him, and they would write the physician to find out the diseases under interpretation. The company don't issue the policy until they have looked into it carefully. If he had had one or more gastric attacks within the five-year period in which he was carried to a physician and an operation was suggested, I would consider that a serious condition, and, if I had reported such a condition. I do not think the company would have issued the policy without further investigation."
Mr. Querry, the agent who solicited the insurance, was put up as a witness for the plaintiff. He testified:
"If a man for whom I am trying to write insurance told me that within two years previous to the application he had been in consultation with two physicians, and, after examination, that one of those physicians had told him that he either had duodenal ulcer or gastric irritation or gall stones, one of these things, and that in his opinion an operation was necessary, and that after that time, X-ray pictures were taken which disclosed no duodenal ulcer, I would not have felt that I could write that policy, leaving my company in total ignorance of that condition.
"Q. Mr. Querry, when a man, in answer to that question as to whether or not he has consulted a physician within five years, if he reveals the fact that he has consulted a physician for gastric irritation, vomiting, soreness of the stomach, what is the custom of your company before you write a policy under those circumstances? A. I never bother with it at all.
"Q. You don't go any further? A. No, sir; the chances are it will never go through.
"Q. The chances are it will never go through? A. Well, our ruling is five years after the last attack they will consider it, otherwise they will not. * * * It is the rule of the Union Central Life Insurance Company, and my experience is that the rule is strictly adhered to through custom, that whenever an application for insurance discloses a *Page 117 medical consultation within the five-year period, the company writes to the physician with whom the consultation was had and secures all facts, and, if a serious physical condition was disclosed at the time of said consultation, the policy is rejected. I think there can be no question that, if Mr. Livingston had disclosed a consultation with either Dr. McIntosh, Dr. Gibbes, or Dr. Taylor, the company would have ascertained all the facts concerning said consultation and why the consultation was had, and, if it had appeared that he was suffering with some stomach trouble and that an operation was advised by one or more of these physicians, the company would have rejected the policy."
This was the testimony as to the materiality of the subject of the representation, and as to the conclusion to be drawn from it, I do not see how there can be a doubt; certainly there was sufficient evidence of it to send the question to the jury. It is remarkable to note the very strong conviction that first seized the trial judge, forcibly and I think correctly stated by him, and his sudden veering to the opposite and erroneous conclusion. He stated:
"Now if the jury is ever — and the jury is a very component part of our Court and our system of jurisprudence — if a jury is ever to have a case, following our rule in this state, that where there are two reasonable inferences to be drawn it must go to the jury, if they don't get it in this case, where could there ever be a case in which they would get it? * * * They have come in here with testimony from those who pass upon the risks, who are there to protect the rights of the company, whatever those rights are, and there is testimony in here which goes to the crux of this matter that the company deems material, when a question like this as to consultation was not answered so as to put them on notice so they could make further inquiry. * * * Now it is a serious proposition for a trial Court, in the light of a Supreme Court decision that had only certain facts before it to say that when additional facts come in *Page 118 and from men in a department who are there for the special purpose of passing upon its materiality — in fact, of even checking up the agent very often — it is a very serious proposition for this Court to say that there is nothing at all from a reasonable standpoint to go to that jury, from the company's viewpoint, because I have to take it that there may be two viewpoints here; I have got to hold the balances as best I can, and I seriously think it is a question for you gentlemen to argue before the jury as to whether or not it would be considered material. Now, there is the company through its proper person saying it is material, and they are reasonable in saying that, with all of the evidence in this case, for there certainly is more not only in quantity but in quality. Now, then, it is for the jury to say whether those men representing the company say whether it is material and they would have refused that policy or whether they would not. It is a question of materiality. * * * That being so, I not only have more in quantity here, but more in quality, because they said that there wasn't testimony there showing how the company would have found out."
He then suddenly shifted, and, while admitting that the testimony upon this trial on the vital issue of materiality was "more in quantity and more in quality" than on the former trial, held to the assumption, practically, that the same testimony on this trial was before this Court on the former appeal; an assumption rebutted by his own conclusion and by the statement of counsel to which no dissent was entered by the opposing side. As a matter of fact, the record of the former trial was not before him, and had absolutely no place in the discussion. The decision of this Court upon the former appeal was not before him except as to the principles of law announced therein. In the trial of this case, it cannot possibly be ascertained, in the present state of the record, what facts were before the Court in the former appeal. If we should follow the remarks of *Page 119 the trial Judge, we must conclude that the testimony was greater in quantity and stronger in quality than on the trial of the other case. If we should follow the undisputed statement of counsel for defendant, we must conclude that the testimony of Dr. Muhlberg, that it was the custom of the company to write to the attending physician for a statement of the illness of the applicant, was before the Court on this trial and not on the first; that the same is true of the testimony of Dr. Pauli and Mr. Querry; that the forms were in evidence at this trial and not at the first; the same as to Dr. Heyward's testimony.
The leading opinion states that the trial Judge ruled that the evidence upon this trial differed merely in quantity and not in quality or character from that before the Court upon the former trial. As a matter of fact, he ruled directly to the contrary: "There certainly is more not only in quantity but in quality; that being so, I not only have more in quantity here, but more in quality." He does say: "I simply have accumulative testimony here"; which in view of the former statement carries little weight.
But assume that the leading opinion is correct in its interpretation of the trial Judge's construction of the evidence in the two trials, and also that that construction is correct, to my mind it is a most illogical conclusion to hold that, because the defendant in the former case did not have enough testimony upon the issue of the materiality of Livingston's representations to escape a directed verdict, it must suffer the same fate in this case, for the reason that its testimony differed only in quantity, the element in which it was deficient before.
But compare the testimony at this trial with the meager statement of it in the opinion in the first case, and it will be seen that the testimony upon this trial supplied the very deficiency upon which the Court directed a verdict for the plaintiff on the former appeal. *Page 120
I admit that I do not apprehend the difference between the excerpt from Dr. Muhlberg's testimony, set forth in the former opinion at page 191, and the statement of the Court as to what the defendant should have proved. That excerpt is this:
"If any applicant states that he has consulted a physician within five years, our practice is to find out why he consulted a physician."
The opinion declares:
"It (the company) was bound to offer testimony tending to prove that, in the instant case, had it known of the consultation, it would have found out the reason of the consultation."
My mind does not grasp the distinction between finding out why he consulted a physician, and finding out the reason of the consultation. Perhaps it was intended to declare that, instead of testifying to the practice of the company he should have testified what would have been done in this particular contingency. If that be true, noting that the opinion declares that the testimony of Dr. Muhlberg was the only testimony on that point, the deficiency is fully supplied by the testimony of Dr. Pauli upon this trial:
"If Mr. Livingston had disclosed that he consulted with Drs. McIntosh, Gibbes and Taylor, or with any of them within two years of his application, the application would not have been approved without further investigation" — by the testimony of Dr. Muhlberg; by the testimony of Dr. Heyward, quoted above, and the testimony of Mr. Querry, witness for the plaintiff, also quoted above.
The opinion in the former case further declares: "The witness did not say how he would find out." This deficiency is also fully supplied by the ample testimony of the four witnesses, named above, starting with the agent who took the application (quoted above) detailing with exhibit of the forms used, the practice of calling upon the attending physician: *Page 121
"Will you kindly state your diagnosis of the illness for which you treated him and also submit the additional information requested, in order that final action can be taken upon this application?"
The leading opinion declares:
"Counsel for appellant admitted on the record, during the trial, that he did not allege or charge in the evidence that Livingston was guilty of fraud. This was an admission that Livingston did not know and was not conscious at the time he made the answers, that his answers were false in fact."
This is clearly a non sequitur; it does not necessarily follow that, because Livingston may have known of the falsity of the representation, he was guilty of fraud, that is, of a purpose to deceive; his knowledge and his freedom from fraud are therefore entirely compatible with each other; and hence the admission of his freedom from fraud cannot be said to eliminate his knowledge of the falsity of the representation. However innocent and free from imputation of fraud he may have been in stating that he had not been attended by a physician in the last five years, that freedom from fraud cannot have the effect of rendering him unconscious of the fact. As this Court has said in Gambrill v. Ins. Co., 83 S.C. 236; 65 S.E., 231:
"The statement which the assured warranted to be true was that he had not had medical or surgical treatment within the past five years, and he knew, or is presumed to know, that this statement was false."
The leading opinion further declares:
"Even if he had answered, as appellant now contends he should have answered, and the appellant had written the doctors, the appellant would not have received any further information that would have helped it, as an examination of the testimony of Drs. Gibbes, Taylor and McIntosh will disclose." *Page 122
It is not a question of what information the company would have received from the doctors, or whether that information would have helped it or not. Under the terms of the contract the company had the right to a truthful answer to this question, and they did not get it. It was as to a matter clearly within the range of information necessary to its decision to accept or reject the risk. An insurance company is not like a common carrier, legally bound to serve all who may apply; it is not legally obligated to issue the policy; it was a matter of convention between it and the applicant; and it had the right to insist upon truthful answers to questions upon a matter within the knowledge of the applicant and reasonably required as the basis of its action. But, aside from this, would the company have received helpful information upon application to the doctors, if Mr. Livingston had truthfully answered the question?
From Dr. Taylor alone, the intimate friend of the insured, the company would have received information which would unquestionably have caused it either to decline the application or conduct an independent examination of its own. Guided by his testimony in this case, Dr. Taylor would have written:
"In 1916 Mr. Livingston came to me for an operation, after Dr. McIntosh and I had seen him together and had been in consultation. He had been having attacks for some time, marked by nausea, vomiting, stomach disturbances and pain in the upper abdomen. Dr. McIntosh was of the opinion that he had a gall bladder infection. Mr. Livingston gave a history of periodic attacks, extending back a long time. His mother stated that he had had these attacks for years. At that time in the development of the profession, the most valuable criterion for the determination of the presence of a duodenal ulcer was the history of the patient, next in importance came the X-ray pictures. *Page 123 We stripped him to the waist, laid him on the table and examined his abdomen. Based upon his history, the examinations and what Dr. McIntosh said, I announced at that consultation that he had an ulcer of the duodenum, or trouble with his gall bladder or chronic appendicitis. The symptoms of these diseases are similar; I thought that most probably he had a duodenal ulcer. Before operating we sent Mr. Livingston to Dr. Gibbes for an X-ray picture; he reported the result negative. The process of taking these pictures had not reached a reliable state and I regard his history as more valuable. Before taking the picture Dr. Gibbes administered a large dose of bismuth, which relieved the symptoms at once. Bismuth acts like soda, fills the ulcer and relieves the patient for a long period. Mr. Livingston apparently made a full recovery and stated that he was perfectly well. I told him that he would fall into the hands of the surgeon later. I destroyed the records because I felt that we were mistaken in our diagnosis."
Can there be any doubt but that with this information before it, the company would either have declined the application or insisted upon an examination of its own?
But that is not all. Dr. McIntosh would have written:
"I have been Mr. Livingston's family physician for 13 years. He was subject to severe gastric attacks which I ascribed to an infected gall bladder. I advised a surgical operation; went to see Dr. Taylor, who concurred in my diagnosis. There was no suggestion or suspicion of duodenal ulcer (disagreeing with Dr. Taylor); pictures were advised; Dr. Gibbes gave Mr. Livingston a large bismuth meal before photographing; the result of the picture was negative, the bismuth relieved the symptoms, and Mr. Livingston thereafter refused to submit to an operation; he appeared after that to have fully recovered."
Here we have two distinguished professional men, one a surgeon and the other a physician, with conflicting *Page 124 opinions as to the cause of the serious attacks suffered by the applicant for many years, but both agreeing that the ailment was an exceedingly serious one, calling for surgical relief.
If the company chose to take the risk after the receipt of this information, upon the assurance of the doctors that the applicant had apparently fully recovered, all well and good; but that was a matter for it to decide, upon receipt of information to which it was entitled under the contract. This Court has no right to assume that the company would so have acted, when that information was denied to it by the misrepresentations of the assured, upon the ground that the information "would not have helped it."
There is testimony tending to show that the application, under these circumstances, would not simply have been suspended for further information, but that it would not have been entertained at all, would have been instantly rejected.
Dr. Pauli testified:
"We positively refuse to issue insurance to an applicant that has consulted a physician for any stomach disorder, diagnosed as possible duodenal or gastric ulcer and an operation recommended or suggested, until five years have elapsed since the complete recovery from the gastric symptoms and no recurrence of the symptoms. * * * An applicant who has any signs or symptoms of gastric or duodenal ulcer within the past five years is not eligible for insurance in this company."
Dr. Muhlberg testified:
"Cases, giving a history of gastric ulcer, are not accepted, if there have been any attacks of gastric ulcer or any symptoms of gastric irritation within five years from the date of the examination. * * * Gastric ulcer or duodenal ulcer — a personal history of gastric or duodenal ulcer within the past five years, declines a risk." *Page 125
Mr. Querry, the agent, and a witness for the plaintiff, testified that, under the circumstances of this case, he would not even have forwarded the application (see extract from his testimony above), and that if forwarded it would have been rejected by the company.
Under this testimony I do not see how it is possible to hold that there was absolutely no testimony upon the point that the misrepresentation was of a fact material to the risk, a conclusion essential to the correctness of the directed verdict.
The aftermath is interesting, but of course not conclusive, of the question at issue. The assured had a recurrence of the attacks that had at intervals distracted him for so long a time, in February, 1919. The same doctors were called in; the delayed operation was performed and disclosed a duodenal ulcer, a confirmation of Dr. Taylor's diagnosis precisely of less than three years before. "When I operated on him in 1919 I found the condition I had suspected, and he did not survive the operation." Can it be said, as a matter of law, that, if the applicant had answered the question truthfully, and Dr. Taylor upon application had stated to the company that he examined Mr. Livingston in 1916 and suspected duodenal ulcer, the company would have issued the policy? In the letter which the company would have sent to Dr. Taylor he would have been asked for "the diagnosis and probable cause of the illness." A statement of the "suspected cause" more narrowly limits the field of unknown causes, more nearly approaches a definite opinion of the cause, than a statement of the "probable cause." The company was entitled to know the probable cause of the illness; it would have received from Dr. Taylor more definite information in his statement of the suspected cause.
Not only this; Dr. McIntosh testified that, in 1911, Mr. Livingston had an attack of neuritis which prostrated him, *Page 126 put him in a rolling chair, on crutches, and with a stick, for four months; that multiple neuritis is a probable or possible result of duodenal ulcer; that when the operation of 1919 was had and the duodenal ulcer was discovered "we knew why he had this attack of multiple neuritis in 1911."
The attack of 1911 and the recurrent gastric attacks up to 1916 were the history of the patient upon which Dr. Taylor diagnosed the case as duodenal ulcer, in greater reliance than on the pictures. If he had been called upon for information as to the treatment in 1916, which the company had a right to call for, he would frankly have given not only his diagnosis as duodenal ulcer, but a history of the multiple neuritis attack of 1911, upon which and its connection with duodenal ulcer, his diagnosis was based. With this information, can it be said as a matter of law that the company "would not have been helped, but would nevertheless have issued the policy?"
The policy provides that the statements made by the applicant shall, in the absence of fraud, be deemed representations and not warranties. This is a concession in favor of the policyholder, for it is greatly to the advantage of the company that they be deemed warranties and not representations simply; the main distinction being that a statement deemed a warranty need not be shown to have been material to the risk, while the converse is true, if it be deemed simply a representation.
Considered then as a representation, what were the legal rights of the company in connection with a truthful answer to the question? The question was: "Have you had any illness or have you consulted any physician in the last five years? Answer "Yes" or "No." (In case the answer was "Yes" the applicant was asked to specify the illness, giving the month, year, duration, result and the physician's name and address.) The applicant answered "No," and *Page 127 certified not only that his answer was "complete and true," but that it should form a part of the contract issued by the company on his life.
Upon the issue of materiality, it is not necessary that the matter misrepresented contributed in some way or degree to the loss for which indemnity is claimed; the determining factor is whether the answer would have influenced the company in deciding for itself, and in its own interest, the important questions of accepting or rejecting the risk.Lewis v. Ins. Co., 201 Mo. App. 48; 209 S.W. 630.
That the company is entitled to a truthful answer and to the information which it will lead up to; and that such a representation is material to the risk and if false avoids the policy to the same extent as if it had been an express warranty, is supported by both reason and authority. 25 Cyc. 801; 3 Joyce Ins. § 1882 et seq.; 2 Cooley's Briefs, 1166; Metropolitan Life Ins. Co. v. Brubaker,78 Kan., 146; 96 Pac., 62; 18 L.R.A. (N.S.), 362; 130 Am. St. Rep., 356; 16 Ann. Cas., 267; 3 Cooley's Briefs on Law of Insurance, p. 2156a; Rigby v. Metropolitan Life Ins. Co.,240 Pa., 332; 87 Atl., 428; Owen v. Metropolitan Life Ins.Co., 74 N.J. Law, 770; 67 Atl., 25; 122 Am. St. Rep., 413;Bryant v. Mod. Woodmen, 86 Neb. 372; 125 N.W., 621; 27 L.R.A. (N.S.), 330; 21 Ann. Cas., 365; Schwartzbachv. Ohio Val. Protective Union, 25 W: Va., 622; 52 Am.Rep., 227; Kasprzyk v. Metropolitan Life Ins. Co.,79 Misc. Rep., 263; 140 N.Y. Supp., 211; Trav. Ins. Co. v.Lumpkin, 5 Colo. App. 177; 38 Pac., 335; 3 Cooley's Brief on Law of Insurance, pp. 1953c, 1959; Mattson v. Mod.Samaritans, 91 Minn., 434; 98 N.W., 330.
In Germania Ins. Co. v. Klein, 25 Colo. App. 326;137 Pac., 73, it is said:
"In our opinion no inquiry was made in the instant case, or can be made, more material to the risk and more essential to properly advise the company contemplating or considering *Page 128 the issuance of a policy, and which would more probably influence it in determining whether it would enter into the contract, than the question as to whether the applicant had consulted a physician, or what physician she had consulted. It is in evidence that this answer was relied on by the company in approving the application. If the applicant had truthfully answered that she had consulted and been treated by Dr. Lefcowitch, inquiry could have been made of him, and it will be presumed that the company would have been informed that he had diagnosed her case as carcinoma of the liver and had so treated it, and there is little reason to doubt that such information would have so influenced the defendant in this case that it would have declined the application."
"But if he had consulted a physician, or been treated by one, during that time, the defendant had the right to know it. by whom and what for, so that it might ascertain the particulars from him." Aloe v. Mutual Ass'n.,147 Mo., 561, 49 S.W. 553; Society v. O'Hara, 120 Pa., 256,13 Atl., 932; McCollum v. Ins. Co., 124 N.Y., 642;27 N.E., 412; Cobb v. Ben. Ass'n., 153 Mass. 176, 26 N.E., 230, 10 L.R.A., 666; 25 Am. St. Rep., 619; Ins. Co. v. McTague,49 N.J. Law, 587, 9 Atl., 766, 60 Am. Rep., 661;Cummings v. Ins. Co., 89 Me. 37, 35 Atl., 1032; Mengel v.Ins. Co., 176 Pa., 280, 35 Atl., 197.
In Ins. Co. v. McTague, 49 N.J. Law, 587; 9 Atl., 766; 60 Am. Rep., 661, it is said:
"That representation did not aver a condition of health, or that it was requisite or proper to consult a physician. It averred that he had not consulted a physician or been prescribed for by a physician. The fact found contradicted this averment, whether the consultation and prescription related to a real disease or an apprehension of disease. Indeed, so material does such a representation seem to be to the contract proposed by the application that in my judgment, *Page 129 if made falsely and knowingly, it would avoid the contract."
In Mutual Co. v. Hurni, 260 Fed., 641, 171 C.C.A., 405, quoting from the syllabus, it is declared:
"A statement by an applicant for life insurance that he had not consulted nor been treated by a physician during the previous five years, when in fact he had been treated or prescribed for each year for supposedly temporary ailments, held a material misrepresentation, which, under the terms of his contract, invalidated the policy."
The application, as it was presented to the company for acceptance, with an untruthful answer to this material question, disclosed a most favorable insurance risk. The company acted upon it as it was. There is abundant evidence, tending at least to show that, if it had been otherwise, and in conformity with the facts, the application would not have been immediately accepted as it was, but would have been suspended for further information or declined altogether. Has the assured the right to stand upon a contract which was consummated upon the faith of the company in the truthfulness of a misrepresentation which is conceded to have been as a matter of fact untrue?
The respondent, however, contends that the direction of a verdict was proper, for the reason that there is neither "Allegation nor evidence of fraud on the part of the insured in making alleged erroneous answers in the application, and they constituted no defense." I assume that the proposition intended to be advanced is that irrespective of the materiality of a misrepresentation, it will be no defense against liability under the policy, unless such misrepresentation was accompanied by a fraudulent intent upon the part of the assured; that there can be no such defense as an innocent misrepresentation of a material fact. I am content to base my opinion, in opposition to this proposition, upon the case of Mutual Life Ins. Co. v. Hilton-Green, *Page 130 241 U.S. 613, 36 Sup. Ct., 676, 60 L.Ed., 1202, where it is said:
"Considered in most favorable light possible, the abovequoted incorrect statements in the application are material representations; and, nothing else appearing, if known to be untrue by assured when made, invalidate the policy without further proof of actual conscious design to defraud," and upon the following cases which sustain the principle: Momer v. American Life Ins. Co., 111 U.S. 335,345, 4 Sup. Ct., 466, 28 L.Ed., 447, 450; PhoenixMut. Life Ins. Co. v. Raddin, 121 U.S. 183, 189,7 Sup. Ct., 500, 30 L.Ed., 644, 646; Aetna Life Ins. Co. v.Moore, 231 U.S. 543, 556, 557, 34 Sup. Ct., 186,58 L.Ed., 356, 365, 366; May, Ins. (4th Ed.), § 181; 16 Am. and English Ency. of Law (2nd Ed.), p. 933; 14 Ruling Case Law, p. 1025; Joyce on Insurance (2nd Ed.), 3 vol. § 1897; Gardner v. North State Mutual Life Ins. Co.,163 N.C. 367, 79 S.E., 809, 49 L.R.A. (N.S.), 714, Ann. Cas., 1915B, 652; New York Life Insurance Company v.Fletcher, 117 U.S. 529; 6 Sup. Ct., 837, 29 L.Ed., 934.
In the case cited from 241 U.S. 613, 36 Sup. Ct., 676,60 L.Ed., 1202, the lower Court had held:
"That, in order for the company successfully to defend upon the ground of false statements, there must have been material, and made by Wiggins (the assured) with knowledge of their falsity and with a fraudulent purpose, that is, with intent to deceive."
It was in answer to this proposition that the Court announced the principle above quoted.
No South Carolina case has been cited in support of the proposition and I have not found one. In the Gambrill case it is held that the applicant is presumed to have known of his sickness and the attendance of a physician, and in Drakeford v. Knights of Damon, 61 S.C. 338,39 S.E., 523 (cited by the respondent) it is held: *Page 131
"If the deceased made misstatements and concealed facts in order to induce the company to enter into the contract, we cannot conceive how any other inference could be drawn than that it was a fraud upon the rights of the defendant."
See, also, 3 Joyce, § 2003; Metropolitan Co. v. Brubaker,78 Kan., 146, 96 Pac., 62, 18 L.R.A. (N.S.), 326, 13 Am. St. Rep., 356, 16 Ann. Cas., 267; Cobb v. Ins. Co.,153 Mass. 176, 26 N.E., 230, 10 L.R.A., 66, 25 Am. St. Rep., 619.
In reference to the suggestion of the respondent that the company has lost the right to interpose the defense which has been discussed, by its laxness in not tendering a return of the premiums paid in due season, a neglect in this particular has been held to warrant a submission of the waiver to the jury, but it extends no further.
In view of the request of the appellant that the Court review the decision in the former appeal between these parties in another suit, 115 S.C. 128, 104 S.E., 538, which I think should be granted, I am impelled to advert to a most strained and I think erroneous construction of a certain stipulation in the policy, which presents the limit of microscopic criticism.
The stipulation referred to is as follows:
"All statements shall, in the absence of fraud, be deemed representations and not warranties. No such statement shall avoid this policy or be used in defense to a claim thereunder, unless it is contained in the written application, and unless a copy of such application is endorsed on or attached to the policy when issued."
The opinion declares:
"The converse of the latter clause of that stipulation is that statements contained in the application shall avoid the policy. But there is no sense in such a stipulation: it is without meaning, and it must be read out of the contract. *Page 132 If the Company meant to say that false statements in the application by the applicant should avoid the policy, it has not said so by expression or by necessary implication; it has said nothing like that."
By every reasonable intendment, the provision could only apply to statements which might be effective as a defense and was intended to limit them to such as were contained in the written application. It was for the protection of the policyholder, so that a false representation not contained in the application might not be used against him. To imply that any statement, true or false, contained in the application, might be used to avoid the policy, is to read into the stipulation not only what the parties could not have intended, but a rank absurdity.
My conclusion is not only that there was abundant evidence tending to establish the misrepresentation of a fact material to the issue, truthful information as to which was contracted for by the applicant's stipulation, but that no other reasonable inference can be drawn from the testimony. The verdict should if moved for have been directed in favor of the defendant.