Opinion
8 Div. 844.
June 7, 1928.
Appeal from Circuit Court, Morgan County; O. Kyle, Judge.
Cabaniss, Johnston, Cocke Cabaniss, of Birmingham, and Eyster Eyster, of Decatur, for appellant.
The policy, including documents adopted by reference and attached, constitutes the sole exposition of the contract between the parties. Empire Life Ins. Co. v. Gee, 171 Ala. 438, 55 So. 166. The policy and the application must be construed as a single contract. Satterfield v. Fid. Mut. L. I. Co., 171 Ala. 429, 55 So. 200. Plaintiff is held and bound to the terms and provisions of the contract and that the insured knew the contents thereof. Maryland Cas. Co. v. Eddy (C.C.A.) 239 F. 478; Lumber Underwriters v. Rife, 237 U.S. 605, 35 S.Ct. 717, 59 L.Ed. 1140. Misrepresentations made in the application with actual intent to deceive, or which increase the risk of loss, are sufficient to avoid the policy. Code 1923, §§ 8364, 8371; Metropolitan L. I Co. v. Goodman, 10 Ala. App. 451, 65 So. 449; Empire L. I. Co. v. Gee, supra; Mut. L. I. Co. v. Allen, 174 Ala. 519, 56 So. 568. It is not necessary that misrepresentations both increase the risk and be made with actual intent to deceive. Mass. Mut. L. I. Co. v. Crenshaw, 186 Ala. 467, 65 So. 65. False representation renders the policy void on the ground of fraud, while noncompliance with a warranty operates as a breach of condition. Mass. Mut. L. I. Co. v. Crenshaw, supra. Notice to, and knowledge of, the soliciting agent or medical examiner is not notice to or knowledge of the company, and neither is authorized to accept risk or pass upon insurability. Mut. L. I. Co. v. Hilton-Green, 241 U.S. 613, 36 S.Ct. 676, 60 L.Ed. 1202; Ætna L. I. Co. v. Moore, 231 U.S. 543, 34 S.Ct. 186, 58 L.Ed. 356; Prudential Ins. Co. v. Moore, 231 U.S. 560, 34 S.Ct. 191, 58 L.Ed. 367; Mut. L. I Co. v. Powell (C.C.A.) 217 F. 565. The court judicially knows that a person suffering with cancer does not enjoy good health, and that cancer tends materially to shorten life, to increase risk of loss. Miller v. Metropolitan L. I. Co., 214 Ala. 4, 106 So. 336; Brotherhood, etc., v. Riggins, 214 Ala. 79, 107 So. 45. Acceptance of the policy by insured amounted to a warranty of good health, and such warranty, made when he was afflicted with cancer, was material and such as to increase the risk of loss. Pleas 19 and 20 meet the requirements. Brotherhood, etc., v. Riggins, supra; Mutual L. I. Co. v. Mandelbaum, 207 Ala. 237, 92 So. 440, 29 A.L.R. 649. A replication to a plea setting out matters different from that declared on is a departure. Patterson Edey L. Co. v. Daniels, 205 Ala. 521, 88 So. 657; Ala. Gro. Co. v. Ensley Bank, 158 Ala. 143, 48 So. 340; 21 R. C. L. 557; Cherokee L. I. Co. v. Brannum, 203 Ala. 146, 82 So. 175; Christian v. Niagra Fire Ins. Co., 101 Ala. 634, 14 So. 374. Reports of medical examiners are no part of the policy. Mass. Mutual L. I. Co. v. Crenshaw, 195 Ala. 267, 70 So. 768; Flynn v. Equitable L. A. Soc., 67 N.Y. 500, 23 Am.Rep. 134; John Hancock Mut. L. I. Co. v. Houpt (C. C.) 113 F. 572. Private correspondence and confidential reports of employee not required to be disclosed by employer. A. G. S. v. Taylor, 129 Ala. 238, 29 So. 673; Collins v. M. O., 210 Ala. 238, 97 So. 631.
Sample Kilpatrick, of Hartselle, and S. A. Lynne, of Decatur, for appellee.
The provision that insured must be in sound health at date of delivery of policy means he must be in the same condition he was in when his application was made. Mass. Mut. L. I. Co. v. Boswell, 20 Ga. App. 446, 93 S.E. 95; Chinery v. Metropolitan L. I. Co., 112 Misc. Rep. 107, 182 N.Y. S. 555; Webster v. Columbia Nat. L. I. Co., 131 App. Div. 837, 116 N.Y. S. 404; Johnson v. Royal N. of A., 253 Ill. 570, 97 N.E. 1084. The question whether insured was in good health at the stipulated time was for the jury. Mut. L. I. Co. v. Hoffman, 77 Ind. App. 209, 133 N.E. 405; Maine Ben. Ass'n v. Parks, 81 Me. 79, 16 A. 339, 10 Am. St. Rep. 240; Plumb v. Penn. Mut. L. I. Co., 108 Mich. 94, 65 N.W. 611; Thompson v. Metropolitan, 128 App. Div. 420, 113 N.Y. S. 225. Defendant's physician, having examined deceased and reported that he was fit subject for insurance, and defendant having issued the policy based on said report, such action amounts to ratification of the act of the physician in making the examination, and estops the defendant. Mut. L. I. Co. v. Brown, 34 Ga. App. 301, 129 S.E. 307; N.Y. L. I. Co. v. Fukushima, 74 Colo. 236, 220 P. 994; Thompson v. Metropolitan (Sup.) 99 N.Y. S. 1006; Stewart v. Equitable, 110 Iowa, 528, 81 N.W. 782; Metropolitan v. Mitchell, 175 Ill. 322, 51 N.E. 637. False statements as to physical condition do not avoid the policy unless such as to deceive the insurer about a matter material to the risk, and relied on by it. Providence Soc. v. Pruett, 141 Ala. 688, 37 So. 700; Mass. Mut. L. Co. v. Crenshaw, 195 Ala. 269, 70 So. 768; Empire L. I. Co. v. Gee, 171 Ala. 435, 55 So. 166.
This court has often considered and stated the distinction between warranties which are contractual terms of a policy of insurance, and usually promissory in form, and representations, which are matters of inducement merely, and usually relate to presently existing facts or conditions. Ala. Gold Life Ins. Co. v. Johnston, 80 Ala. 467, 470, 2 So. 125, 128, 59 Am. Rep. 816; Mut. Ben. Life Ins. Co. v. Lehman, 132 Ala. 640, 32 So. 733; Kelly v. Life Ins. Clearing Co., 113 Ala. 453, 21 So. 361; Sov. Camp, W. O. W., v. Hutchinson, 214 Ala. 540, 542, 108 So. 520; Brotherhood, etc., v. Riggins, 214 Ala. 79, 107 So. 44. These cases hold that representations will not be regarded as warranties merely because they are incorporated in the policy, or made a part of it by reference and adoption, and that the form of the statement is not conclusive of its character.
It is also held that a condition precedent to the operation of the policy, such as is set out in pleas 19 and 20 herein, is in legal effect a warranty. Mut. Life Ins. Co. v. Mandelbaum, 207 Ala. 234, 236, 237, 92 So. 440, 29 A.L.R. 649.
Tested by these principles, the misrepresentations charged in each of the special pleas, except 19 and 20, were not warranties, and are governed by the rules prescribed for the pleading of misrepresentations as fraudulent inducements to contract: (1) That the representations were false; (2) that they were intrinsically relevant to the subject-matter; and (3) that the other party relied upon them to his prejudice. In general, actual intent to deceive is not, in this state, an element of actionable or defensive fraud. Code, § 8049; Davis v. Betz, 66 Ala. 206, 210; Jordan v. Pickett, 78 Ala. 331, 339; Ala. Gold Life Ins. Co. v. Johnston, supra; Sov. Camp, W. 0. W., v. Hutchinson, supra; Empire Life Ins. Co. v. Gee, 171 Ala. 435, 55 So. 166; Greil Bros. v. McLain, 197 Ala. 136, 72 So. 410.
When, however, misrepresentations are pleaded in defense to an action on a life insurance policy, it must also be alleged either that they were "made with actual intent to deceive," or that "the matter misrepresented increased the risk of loss." Code, §§ 8364, 8507; Mut. Life Ins. Co. v. Allen, 174 Ala. 511, 56 So. 568; Sov. Camp, W. O. W., v. Hutchinson, supra.
Pleas 1 to 18, excepting 14, 16, and 17, are all defective in failing to aver that defendant relied upon the misrepresentation pleaded. Pleas 17 and 21 were not subject to any ground of the demurrer, and the demurrer, as to them, was erroneously sustained. Plea 21 is substantially like 14 and 16, but plea 17 is substantially different from any other.
With respect to these misrepresentations, it should be observed that they need not be the sole inducement to the contract, nor the chief influence leading to action. It is enough if, as a contributory influence, they operate upon the mind and conduct of the other party to any material extent. Greil Bros. v. McLain, 197 Ala. 136, 72 So. 410; Hafer v. Cole, 176 Ala. 242, 247, 57 So. 757; Jordan v. Pickett, 78 Ala. 331; Sledge v. Scott, 56 Ala. 202, 206. The fact that the other party makes an investigation of his own does not absolve the declarant from speaking the truth, nor lessen the other's right to rely on his representations. Sledge v. Scott, supra.
Plaintiff's replications 3 and 4 were sustained, against demurrer, as good answers to defendant's pleas 19 and 20. These pleas set up a condition in the policy that it should not take effect unless, upon its delivery to the applicant, he was then in good health; and they aver a breach of this condition in that, at the time of said delivery, the applicant — the insured — was not in good health, but was suffering from a serious disease of the stomach, to wit (in 19), a cancer of the stomach, or (in 20) a cancer or ulcer of the stomach. In both pleas it is expressly averred that this disease increased the risk of loss under the policy. This condition precedent is, as we have noted, in legal effect a warranty.
We need not, on these pleadings, determine whether, if defendant had knowledge, when it delivered the policy, of the alleged state of the applicant's health, such delivery would have operated as a waiver of the warranty, and of the right to avoid the policy thereafter for its breach. See, however, 37 Corpus Juris, 526, §§ 260-262; Id. 535, § 267; Triple Link, etc., Ass'n v. Williams, 121 Ala. 138, 145, 26 So. 19, 77 Am. St. Rep. 34.
These replications aver an investigation of the insured's health by defendant's medical examiner, and (in 3) a "report of his conclusions" to defendant, or (in 4) a report that the applicant was "a fit subject for insurance." Neither of them avers any knowledge on the part of defendant or its medical examiner of the applicant's diseased condition. They are therefore wholly insufficient to show a waiver or avoidance of the warranty or its breach. Triple Link, etc., Ass'n v. Williams, supra; 37 Corpus Juris, 535, § 267. Apt grounds of demurrer pointed out this defect, and the overruling of the demurrers to these replications was prejudicial error.
As to the admissibility in evidence of the report of defendant's medical examiner upon the condition and insurability of the applicant, the authorities all agree that it is competent evidence either in support or in impeachment of the statements made in the application. 37 Corpus Juris, 625, § 423. And so it has been held by this court. Sov. Camp, W. 0. W., v. Gibbs, ante, p. 108, 114 So. 915, 916.
It is competent for the parties to stipulate in the policy that the insurance company shall not be constructively charged with its medical examiner's knowledge of the falsity of the applicant's statements. Ward v. Met. Life Ins. Co., 66 Conn. 227, 33 A. 902, 50 Am. St. Rep. 80; Globe Mut. Life Insurance Co. v. Wolff, 95 U.S. 326, 332 ( 24 L.Ed. 387); 37 Corpus Juris, 531.
As to general agents of the company, it is the settled rule in this state, as in most others, that a stipulation in the policy that they have no authority to change its terms or waive any of its conditions or warranties, is without effect. Pope v. Glen Falls Ins. Co., 130 Ala. 356, 30 So. 496; U.S. Life Ins. Co. v. Lesser, 126 Ala. 568, 28 So. 646. On that principle it might seem that the insurer could not stipulate against the constructive imputation to it of the knowledge acquired by its general agent, or perhaps by any other, intrusted with contractual authority or discretion in the actual making or handling of the contract of insurance.
But that question is not before us, and we, of course, do not decide it. Our decision is limited to the case of medical examiners, who are not contracting agents, and as to whom, very clearly, the immunity stipulated is not contrary to public policy.
What has been said will be a sufficient guide to the court on another trial.
For the errors noted, the judgment will be reversed, and the cause remanded.
Reversed and remanded.
ANDERSON, C. J., and THOMAS and BROWN, JJ., concur.