Summary
In Fjeseth, the court determined that the applicant had a duty to disclose that he was provisionally diagnosed with angina pectoris when he learned of this fact after filling out an insurance application but before the policy became effective.
Summary of this case from Tomlinson v. Midamerica Mut. Life Ins. Co.Opinion
May 2, 1963 —
June 4, 1963.
APPEAL from a judgment of the circuit court for La Crosse county: WILLIAM E. GRAMLING, Circuit Judge of the Twenty-Second circuit, Presiding. Reversed.
For the appellant there were briefs by Johns, Pappas Flaherty of La Crosse, and oral argument by Robert D. Johns.
For the respondent there was a brief and oral argument by N. George DeDakis of La Crosse.
Action by plaintiff Martha S. Fjeseth against defendant New York Life Insurance Company to recover the $10,000 principal sum, together with interest, on a life insurance policy issued by defendant upon the life of plaintiff's deceased husband, Benjamin D. Fjeseth (hereinafter the "insured").
The insured held a Bachelor's degree in mechanical engineering from the University of Minnesota and was employed as a design engineer by the Trane Company at La Crosse. On May 26, 1959, he signed Part I of the defendant's standard application form by which he applied for a $35,000 policy on his life payable to plaintiff as beneficiary. This was witnessed by defendant's La Crosse agent Ruediger. The next day the insured was examined by Dr. Hickey, defendant's medical examiner, who was a physician associated with the La Crosse Clinic. The insured was then asked the questions appearing in Part II of the application which contains the answers recorded by Dr. Hickey. Question 14 read, "Have you ever had pain in the chest, shortness of breath, or palpitation?" which was answered "No." Questions 15 and 16 inquired whether the insured had ever had or consulted a physician or practitioner with respect to certain enumerated diseases, and these questions were answered "No." One of such listed diseases was "Heart or Blood Vessels." Question 17B inquired whether the insured during the past ten years had "consulted or been examined or treated by any physician or practitioner" not named with respect to his other answers, and this question was also answered "No." Insured signed Part II of the application on May 27, 1959. Defendant does not claim that any of these answers were false when made on May 27, 1959. Part I of the application form states that the medical examiner is not authorized to pass on insurability, and there is no evidence that Dr. Hickey ever certified insured's health to defendant.
Ruediger forwarded the completed application to defendant at its home office together with a request that an additional $10,000 policy be issued although the insured had not applied for the same. Insured paid no premium at the time he applied for the $35,000 policy. The application contained two alternative provisions with respect to the effective date of the policy. The first applied to a situation where at least one month's premium, but not less than 10 dollars, had been paid. The second applied to insured's situation, where no premium had been paid, and provided:
"[T]he policy applied for shall not go into force unless and until it is delivered to the Applicant and the first premium for it is paid in full during the lifetime of the Proposed Insured . . . and then only if the answers made in the application represent, without material change, true and complete answers to the same questions if asked at time of delivery, and thereupon the policy shall be deemed to have taken effect as stated therein."
On June 15, 1959, the insured sought to consult Dr. Hickey not in the capacity of defendant's medical examiner but as insured's own physician. Finding Dr. Hickey away, the insured then consulted Dr. Pribek, a physician also associated with the La Crosse Clinic. The insured complained of a pain he had experienced in the left side of his chest. Dr. Pribek testified that the insured stated that the immediate pain which had caused him to consult the doctor had been recurring over a two-day period, but that the insured recalled four similar experiences during the previous week. The doctor examined his eyes, ears, nose, throat, lungs, blood pressure, and abdomen and ordered an electro-cardiogram and X rays of the heart. He found everything normal and requested the insured to return to see him in three days.
When the insured returned to Dr. Pribek in the latter part of the morning on June 18, 1959, he stated he continued to have chest pain which occurred mostly in the morning. The insured described in particular an episode of chest pain suffered that: morning while walking to his car. Despite the normal electrocardiogram and heart X ray, Dr. Pribek told insured that a diagnosis of angina pectoris was likely. The doctor explained to the insured that angina pectoris is a form of chest pain which is associated with a disease of the heart and that the underlying cause is the hardening of one or two of the major coronary arteries. The insured was reluctant to accept the doctor's diagnosis because of the normal electrocardiogram and heart X ray. Dr. Pribek then told him that the electrocardiogram was perfectly normal in roughly half of the cases involving similar chest pain.
In view of insured's young age of thirty-six, Dr. Pribek prescribed further tests to rule out the possibility of diseases of the esophagus and gall bladder which mimic heart disease. Nevertheless, the doctor did not feel that there was any likelihood that the insured was suffering from esophagus or gall bladder trouble. The insured said he could not have these tests made right away because he was leaving on a vacation trip to Texas. The doctor warned him to avoid severe forms of exertion on the trip and prescribed nitroglycerin pills to be taken for chest pain.
In the meantime, defendant issued the $35,000 policy which insured had applied for and the additional policy for $10,000 requested by Ruediger. These policies were forwarded to Ruediger and dated June 11, 1959. On the evening of June 18th, a few hours after the insured had been advised by Dr. Pribek of the provisional diagnosis of angina pectoris, Ruediger called at the Fjeseth home with the two policies and conferred with the insured and his wife, the plaintiff. At this conference the insured decided that he would also take the $10,000 policy. Ruediger informed the insured that he would have to execute a separate application for that policy.
The insured requested that the effective dates of the two policies be changed to July 1, 1959. The reason for this was that he had a policy of life insurance issued by another company, which he had decided to discontinue, on which the premium was paid to July 1, 1959. Ruediger then handed the insured three forms to be signed. One was entitled "Supplemental Application for Insurance" by which the insured applied for $10,000 of additional insurance and reiterated and confirmed the statements, representations, answers, and agreements contained in his original application dated May 26 and 27, 1959. This supplemental application also contained a declaration by insured that, to the best of his knowledge and belief, no change had occurred in his health or insurability since the date of the previous application. The other two forms were each entitled "Amendment to Application" and had the effect of changing the effective date of each of the two policies to July 1, 1959, and provided for the policies' taking effect as of that date upon the prior payment of at least one month's premium but not less than 10 dollars. Each of these two amendments to the application contained this declaration by the insured:
"I DECLARE THAT: to the best of my knowledge and belief, the answers made in the application for the policy referred to herein represent, without material change, true and complete answers to the same questions if asked at the time this Amendment was signed, subject to any modification requested in this Amendment."
The insured signed the supplemental application form and the two amendment-to-application forms without reading them although plaintiff testified that nothing prevented his doing so. He also signed two checks payable to defendant as part payment of the premiums on the two policies. The check applicable to the $10,000 policy was in the amount of $25. The insured made no mention to Ruediger of (1) the chest pains which he had experienced since the signing of the original application on May 26th and May 27th, (2) his two consultations with Dr. Pribek, or (3) the provisional diagnosis of angina pectoris which he had received from the doctor a few hours before.
Ruediger forwarded to defendant the two undelivered policies, the supplemental application, the two amendments to the application, and the two premium checks. Defendant then issued two new policies dated July 1, 1959. The $10,000 policy had attached thereto photostatic copies of the original application of May 26 and 27, 1959, the supplemental application, and the amendment to the application. These policies were then forwarded to Ruediger who delivered them to the insured on the evening of July 13, 1959. At about 1 a. m. on July 14, 1959, the insured died of an acute myocardial infarct.
Defendant refused to pay the principal sum of both policies and tendered the amount of the premiums paid thereon by the insured to plaintiff which she refused. The instant action was instituted upon the $10,000 policy. After issue was joined, defendant moved for summary judgment which the circuit court granted. On appeal this court reversed. Fjeseth v. New York Life Ins. Co. (1961), 14 Wis.2d 230, 111 N.W.2d 85. Trial was then had to the court and jury. A special verdict was submitted containing these two questions:
"Question No. 1: Did Benjamin Fjeseth read the supplemental application and the amendment to the application before he signed those documents?
"Question No. 2: Did any change occur in the health of Benjamin Fjeseth to the best of his knowledge and belief between May 27, 1959, and June 18, 1959?"
The court answered the first question "No," leaving only the second question to be answered by the jury. The jury answered the second question "No."
Judgment was entered November 16, 1962, upon the verdict in favor of plaintiff and against defendant for $11,950 principal and interest together with costs. Defendant has appealed.
In the opinion by this court on the former appeal, the court stated (p. 235):
"Questions of law have been argued by both parties that can best be resolved after the facts and inferences from facts have been properly determined. We have not passed upon them for that reason."
One of the questions of law presented on the former appeal, referred to in above-quoted paragraph, concerned the legal effect of insured's failure, during his conference with defendant's agent Ruediger on June 18, 1959, to disclose that he had consulted Dr. Pribek because of the pains in the left side of his chest, and that the doctor had told him that very day that the likely diagnosis was angina pectoris.
The generally accepted rule is that the applicant for life insurance is under a duty to disclose to the insurance company any facts which develop or are discovered by him after the making of the application, and before the policy takes effect, that materially increase the risk. 29 Am. Jur., Insurance, p. 960, sec. 697; 45 C. J. S., Insurance, p. 155, sec. 473 (3); 1 Appleman, Insurance, p. 227, sec. 219; 7 Couch, Insurance (2d ed.), p. 464, sec. 37:109; and Vance, Insurance (3d ed.), pp. 379, 380, sec. 63.
One of the leading cases in which the foregoing is stated is that of Stipcich v. Insurance Co. (1928), 277 U.S. 311, 316, 317, 48 Sup. Ct. 512, 72 L. Ed. 895, in which Mr. Justice (later Chief Justice) STONE, speaking for the United States supreme court, declared:
"Insurance policies are traditionally contracts uberrimae fidei [the most abundant good faith] and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer's option. [Citing cases.]
"Concededly, the modern practice of requiring the applicant for life insurance to answer questions prepared by the insurer has relaxed this rule to some extent, since information not asked for is presumably deemed immaterial. [Citing cases.]
"But the reason for the rule still obtains, and with added force, as to changes materially affecting the risk which come to the knowledge of the insured after the application and before delivery of the policy. For, even the most unsophisticated person must know that in answering the questionnaire and submitting it to the insurer he is furnishing the data on the basis of which the company will decide whether, by issuing a policy, it wishes to insure him. If, while the company deliberates, he discovers facts which make portions of his application no longer true, the most elementary spirit of fair dealing would seem to require him to make a full disclosure. If he fails to do so the company may, despite its acceptance of the application, decline to issue a policy [citing cases], or if a policy has been issued, it has a valid defense to a suit upon it."
Other cases which have applied the rule stated in the Stipcich Case are: Cohen, Friedlander Martin Co. v. Massachusetts Mut. Life Ins. Co. (6th Cir. 1948), 166 F.2d 63, certiorari denied, 334 U.S. 820, 68 Sup. Ct. 1086, 92 L. Ed. 1750; Pierre v. Metropolitan Life Ins. Co. (1937), 22 Cal.App.2d 346, 70 P.2d 985; Lennon v. John Hancock Mut. Life Ins. Co. (1959), 339 Mass. 37, 157 N.E.2d 518; Metropolitan Life Ins. Co. v. Goldsmith (1952), 201 Misc. 569, 112 N.Y. Supp. 2d 385; Metropolitan Life Ins. Co. v. Somers (1946), 137 N.J. Eq. 419, 45 A.2d 188; Gordon v. Prudential Ins. Co. (1911), 231 Pa. 404, 80 A. 882; and Moore v. American Home Mut. Life Ins. Co. (Tex.Civ.App. 1943), 174 S.W.2d 788.
In his original application for the $35,000 policy which, together with the supplemental application, also constituted the application for the $10,000 policy, insured stated in his answers to specific questions that he had never had pain in the chest and that he had not consulted, or been examined by, a physician during the past ten years. Part I of the application conditioned its becoming effective on the continued truth of such answers up to the time that both policies went into effect. Nevertheless, in between the date of such original application and insured's conference with Ruediger on June 18th, the insured did suffer chest pains severe enough to cause him to consult Dr. Pribek for an examination to ascertain their cause. Moreover, Dr. Pribek had advised the insured earlier that same day that the provisional diagnosis of his ailment was angina pectoris. Furthermore, the doctor then gave the insured an explanation of this disease and its cause and prescribed nitroglycerin pills to relieve his chest pains. Under the authorities hereinbefore cited, a duty rested upon insured to disclose to defendant or its agent these facts occurring (1) after the date of the original application for the $35,000 policy (since the supplemental application for the $10,000 policy incorporated this earlier application) and (2) before the common effective date of the two policies.
Plaintiff's counsel argues that insured had no duty to make such disclosure because he, in good faith, did not believe that any change had occurred between May 27 and June 18, 1959. On this appeal we accept the jury's finding to this effect as a verity because there is credible evidence to support it. This good-faith belief on insured's part is material with respect to whether the representation or warranty made in the supplemental application, that to the best of his knowledge and belief no change had occurred in his health or insurability since the date of his previous application, was false within the meaning of sec. 209.06(1), Stats. Nevertheless, we do not deem such good-faith belief, that the condition of his health had not changed since May 27th, material on the issue of whether he had a duty to disclose to defendant or its agent the fact of the chest pains, the consultations with, and examination by, Dr. Pribek, and the provisional diagnosis of angina pectoris. Cohen, Friedlander Martin Co. v. Massachusetts Mut. Life Ins. Co., supra; cf. National Life Accident Ins. Co. v. Gorey (9th Cir. 1957), 249 F.2d 388. The insured was chargeable with knowledge that defendant would not have propounded questions in the original application about chest pains and consultations with, and examinations by, physicians if it did not consider that these questions had a material bearing on his insurability. Insured had a duty to disclose the activities and changes which had occurred in the meantime with respect to these factors because defendant's judgment as to insurability, and not insured's, controlled the question of whether a policy would be issued.
Sec. 209.06(1) provides: "No oral or written statement, representation or warranty made by the insured or in his behalf in the negotiation of a contract of insurance shall be deemed material or defeat or avoid the policy, unless such statement, representation or warranty was false and made with intent to deceive, or unless the matter misrepresented or made a warranty increased the risk or contributed to the loss."
On this latter point we deem apposite the decision in Lennon v. John Hancock Mut. Life Ins. Co., supra. There the insured answered in his application that he had never been told that he had cancer; and that he had never been treated for cancer. He further answered that he had not been treated by a doctor or in a hospital during the previous five years. One week after making the application, the insured submitted to an operation to remove a cancerous growth from his larynx. The policy was issued eight days later. Insured died of cancer of the pancreas less than two years later. His wife, the beneficiary, testified that insured at the time of performance of the operation did not know he had cancer, but thought he was being treated for hoarseness. Nevertheless, the Massachusetts court stated (p. 41):
"We do not think that the insured's lack of knowledge that he had cancer discharged him from the obligation to report the operation to the insurance company. We can see no basis for an assumption by the insured, in good faith, that the insurer would not deem such an operation material, whatever the disease."
This brings us to the question of whether these facts that insured failed to disclose were so material to the issue of insurability, in that they increased the risk or contributed to the loss, that defendant is now entitled to avoid the policy. We need not decide whether sec. 209.06(1), Stats., is directly applicable. Nevertheless, we deem the tests of increasing the risk or contributing to the loss, set forth therein, the proper ones to be applied. Crowell, False Statements by Applicants for Policies of Life Insurance, 19 Marquette Law Review (1935), 228, 235. Dr. Jernigan, defendant's associate medical director, testified that had defendant received information of the provisional diagnosis of angina pectoris, it would have declined the application. No evidence was adduced that this would not be in accord with the practice generally followed by life insurance companies. Furthermore, we consider it a matter of common knowledge that persons afflicted with angina pectoris are not considered good risks by life insurance companies. Therefore, we conclude that the facts that insured failed to disclose increased the risk and contributed to the loss so as to entitle the defendant to avoid any liability on the policy.
Sec. 209.06(1), Stats., applies to statements made in applications for insurance. Strictly speaking, it does not apply to changes in the facts which occur after application is made. These are embraced by the continuing common-law duty to make disclosure. Thus it is arguable that sec. 209.06(1) does not apply to the original application even though it does apply to the same facts which, by the time of their reiteration in the supplemental application, had become false when the supplemental application was executed on June 18th. Nevertheless, since the insured and defendant agreed that insured's answers to the original application were to be true as of the effective date of the policies as a precondition to such policies' becoming effective, it is arguable that sec. 209.06(1) is properly applicable to the original application incorporated in both policies.
Under the original application in the instant case, the policy applied for was not to go into effect until delivery of the policy and payment of the first premium "and then only if the answers made in the application represent, without material change, true and complete answers to the same questions if asked at the time of delivery, . . ." This provision with respect to the effective date of the policy was not altered by the supplemental application which incorporated the original application into the $10,000 policy. Nevertheless, the amendments to the application, which were executed by the insured at the same time that he signed the supplemental application, changed the effective-date provision of the original application so as to remove therefrom the above-quoted portion with regard to the truth of insured's answers. If the amendment with respect to the instant $10,000 policy is to be given the effect of removing the provision which prevented the policy's taking effect unless the answers made in the original application were true as of the date of delivery of the policy, then it is arguable that the declaration in such amendment whereby the insured declared these answers to be true as of the time of the amendment must be given effect whether the insured read it or not. This is because a party to a contract cannot ordinarily accept the advantageous portion of a contract without also being bound by the portion that is disadvantageous.
See Emmco Ins. Co. v. Palatine Ins. Co. (1953), 263 Wis. 558, 58 N.W.2d 525; and Langlois v. Wisconsin Nat. Life Ins. Co. (1963), 19 Wis.2d 151, 119 N.W.2d 400. These two cases hold that where an agent of an insurance company inserts false answers, not based on facts supplied by the insured, in a policy or application, the insured is not necessarily bound thereby where he fails to read and discover such false answers in such policy or application.
By the Court. — Judgment reversed, and cause remanded with directions to dismiss the complaint.