241 U.S. 613
MUTUAL LIFE INSURANCE COMPANY OF NEW YORK, Petitioner,
L. HILTON-GREEN and W. A. Finlay, Jr., as Executors of the Estate of C. L. Wiggins, Deceased.
Argued December 9 and 10, 1915.
Decided June 12, 1916.
[241 U.S. 613, 614] Messrs. Frederick L. Allen, Emmett Wilson, Philip D. Beall, and Murray Downs for petitioner.
Messrs. William A. Blount, A. C. Blount, and F. B. Carter for respondents.
Mr. Justice McReynolds delivered the opinion of the court:
Respondents sued to recover upon four policies, not different except as to numbers, for $7,662 each, and dated December 16, 1908, on the life of their testator, Wiggins, who died March 26, 1910. By various pleas the insurance company set up that application upon which policies were based contained material representations both false and fraudulent. In reply the executors denied truth of each plea, and also alleged that if appli- [241 U.S. 613, 615] cation contained any misrepresentations, the actual circumstances were known to company when policies issued.
Two separate application blanks, each plainly printed upon a large, single sheet, were filled out and presented. They are substantially identical except medical examiner's report upon one, dated December 15, 1908, is signed by Geo. C. Kilpatrick, M. D., in two places, while the other, dated December 16, 1908, is twice signed by J. S. Turberville, M. D . (Under the company's rules, where insurance applied for amounted to $30, 000, two medical examinations were required.)
At the top of each sheet the following appears: 'THIS APPLICATION made to the Mutual Life Insurance Company of New York is the basis and a part of a proposed contract of insurance, subject to the charter of the company and the laws of the state of New York. I hereby agree that all the following statements and answers, and all those that I make to the company's medical examiner, in continuation of this application, are by me warranted to be true, and are offered to the company as a consideration of the contract, which I hereby agree to accept, and which shall not take effect unless and until the first premium shall have been paid, during my continuance in good health, and unless also the policy shall have been signed by the president and secretary and countersigned by the registrar of the company and issued during my continuance in good health; unless a binding receipt has been issued as hereinafter provided.'
Immediately thereafter are statements concerning assured's address, occupation, birth, character of policy desired, etc., and finally this, alleged and shown to be untrue: '22. I have never made an application for life insurance to any company or association upon which a policy has not been issued on the plan and premium rate originally applied for, except as to the following companies or associations: None, and no such application [241 U.S. 613, 616] is now pending or awaiting decision.' And this part of the paper concludes:
Dated at Pine Barren, Fla. Dec. 15, 1908
Signature of person whose life is proposed for insurance,*) Cilbey L. Wiggins
I have known the above named applicant for six years and saw him sign this application. I have issued binding receipt No. ___.
J. D. Torrey, Soliciting Agent, [by rubber stamp]
J. D. Torrey, Manager, Mobile, Ala.
On lower portion of the same page, under caption, 'Medical Examiner's Report,' are sundry statements, ostensibly by applicant, concerning his health history, etc.,-among them the following, alleged and shown to be untrue:
This division ends thus:
Dated at Pine Barren, State of Florida the 15 day of December 1908
Geo. C. Kilpatrick, M. D.
I certify that my answers to the foregoing questions are correctly recorded by the Medical Examiner.
Cilbey L. Wiggins Signature of person examined. [241 U.S. 613, 617] At the top of reverse page, under 'Medical Examiner's Report ( Continued),' there are many answers purporting to be replies to inquiries propounded by medical examiner concerning applicant's figure, apparent age, measurements, pulse, results of physical examination and personal investigations, etc. And then the following:
I certify that I have made this examination at Pine Barren, Fla., on this 15 day of December, 1908, and that the foregoing questions have been put, and the answers of the applicant recorded as stated.
Geo. C. Kilpatrick,
The four policies, after being signed in New York by the president, secretary, and registrar of the company, were delivered to assured in Florida. Among others, they contain these clauses:
During summer of 1907 assured suffered serious pains in his head, and, after consulting more than one physician, went to a sanitarium at Montgomery, Alabama, and was there operated on for a cystic enlargement of the lower jaw caused by an impacted wisdom tooth. He was confined to the sanitarium for ten days and remained under [241 U.S. 613, 618] immediate care of a physician from July 16th to August 13th, 1907.
Early in November, 1908, he applied to Prudential Insurance Company of America through J. C. Hogue, a special agent operating under J. R. Tapia, its manager at Mobile, Alabama, for insurance amounting to $40,000. The application was accompanied, according to its requirements, by two medical reports dated November 3d and 4th, signed respectively by Dr. J. C. McLeod and Dr. Geo. C. Kilpatrick. Several weeks later the company indicated unwillingness to accept risk because of location, but the application, although marked 'withdrawn,' was retained. At this time Wiggins had $30,000 insurance with the Prudential, $20,000 with the Equitable, and $5,000 with fraternal insurance companies.
The application of petitioner now under consideration resulted from earnest and persistent solicitation by the same J. C. Hogue. The circumstances under which papers were prepared and signed are not entirely clear; but it appears without contradiction that they were not signed by assured in Torrey's presence-there was no personal acquaintance between the two men. Also that neither medical report was signed by assured in presence of Dr. Geo. C. Kilpatrick or Dr. J. S. Turberville; and that neither physician made the personal examination certified by him. The physicians filled the blanks and signed their names at Hogue's request and because of his representations. Through Torrey, petitioner's district manager at Mobile, the application was forwarded to New York, and, relying upon its statements, officers there issued policies and sent them to assured with copies of application papers which, by reference, were incorporated therein. So far as appears, assured accepted them without objection and paid the premiums.
An effort was made to show that facts concerning Wiggins's medical history, former unsuccessful application to [241 U.S. 613, 619] Prudential, and circumstances surrounding transactions now in question, were known by Hogue, the medical examiners, or Torrey, each of whom, it is claimed, was petitioner's agent.
Assured was sixty-one years of age, president of a lumber company, apparently a man of considerable wealth, and experienced in insurance matters.
At conclusion of evidence, counsel for insurance company asked a directed verdict. This was refused; and the court in effect instructed the jury: That in order for company successfully to defend upon ground of false statements, these must have been material, and made by Wiggins with knowledge of their falsity, and with a fraudulent purpose,-that is, with intent to deceive. That if they believed it knew of their falsity when application was accepted, no defense could be based upon them. That it knew the actual facts if the jury 'should find that an agent whose knowledge would be the knowledge of the defendant did so know.' But if the jury found that falsity of statements was within knowledge of Hogue and Torrey and medical examiners, and further found an understanding, tacit or express, between Wiggins and said agents to procure the policies by collusive co-operation to conceal the truth, there could be no recovery. Excerpts which follow fairly indicate general import of charge:
. . .
Petitioner made timely objections and presented special [241 U.S. 613, 621] requests, setting forth its theory, which were denied. The circuit court of appeals affirmed a judgment upon verdict for respondents. Among other things it said (127 C. C. A. 467, 470, 471, 211 Fed. 31, 34, 35):
. . .
All parties treat the policies as Florida contracts. The medical examiners' reports are plainly integral parts of application, and by apt words the latter became an essential constituent of the policies.
Considered in most favorable light possible, the above quoted 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. Moulor v. American L. Ins. Co. 111 U.S. 335, 345 , 28 S. L. ed. 447, 450, 4 Sup. Ct. Rep. 466; Phoenix Mut. L. Ins. Co. v. Raddin, 120 U.S. 183, 189 , 30 S. L. ed. 644, 646, 7 Sup. Ct. Rep. 500; AEtna L. Ins. Co. v. Moore, 231 U.S. 543, 556 , 557 S., 58 L. ed. 356, 365, 366, 34 Sup. Ct. Rep. 186; May, Ins. 4th ed. 181.
The general rule which imputes an agent's knowledge to the principal is well established. The underlying reason for it is that an innocent third party may properly presume sume the agent will perform his duty and report all facts which affect the principal's interest. But this general rule does not apply when the third party knows [241 U.S. 613, 623] there is no foundation for the ordinary presumption,-when he is acquainted with circumstances plainly indicating that the agent will not advise his principal. The rule is intended to protect those who exercise good faith, and not as a shield for unfair dealing. Distilled Spirits (Harrington v. United States) 11 Wall. 356, 367, 20 L. ed. 167, 171; American Surety Co. v. Pauly, 170 U.S. 133, 156 , 42 S. L. ed. 977, 985, 18 Sup. Ct. Rep. 552; American Nat. Bank v. Miller, 229 U.S. 517, 521 , 522 S., 57 L. ed. 1310, 1312, 1313, 33 Sup. Ct. Rep. 883; Mechem, Agency, 2d ed. 1815.
Section 2765 of the Florida statutes, supra, undertakes to designate as agents certain persons who in fact act for an insurance company in some particular; but it does not fix the scope of their authority as between the company and third persons, and certainly does not raise special agents, with limited authority, into general ones, possessing unlimited power. We assume Hogue, Torrey, and the medical examiners were in fact designated agents of the company, with power to bind it within their apparent authority; and in such circumstances the statute does not affect their true relationship to the parties. See Continental L. Ins. Co. v. Chamberlain, 132 U.S. 304, 310 , 33 S. L. ed. 341, 343, 10 Sup. Ct. Rep. 87; New York L. Ins. Co. v. Russell, 23 C. C. A. 43, 40 U. S. App. 530, 77 Fed. 94, 103; Wood v. Firemen's F. Ins. Co. 126 Mass. 316, 319; John R. Davis Lumber Co. v. Hartford F. Ins. Co. 95 Wis. 226, 234, 235, 37 L.R.A. 131, 70 N. W. 84.
The assured at the least consciously permitted an application containing material misrepresentations to be presented by subordinate agents to officers of the insurance company under circumstances which he knew negatived any probability that the actual facts would be revealed; and later he accepted policies which he must have understood were issued in reliance upon statements both false and material. He could claim nothing because of such information in the keeping of unfaithful subordinates. Moreover, the false representations accompanied and were essential parts of the policies finally accepted. He did not repudiate, and therefore adopted and approved, the [241 U.S. 613, 624] representations upon which they were based. Beyond doubt an applicant for insurance should exercise toward the company the same good faith which may be rightly demanded of it. The relationship demands fair dealing by both parties. New York L. Ins. Co. v. Fletcher, 117 U.S. 519, 529 , 533 S., 534, 29 L. ed. 934, 939, 940, 6 Sup. Ct. Rep. 837; Northern Assur. Co. v. Grand View Bldg. Asso. 183 U.S. 308, 361 , 46 S. L. ed. 213, 234, 22 Sup. Ct. Rep. 133; United States L. Ins. Co. v. Smith, 34 C. C. A. 506, 92 Fed. 503.
Considered with proper understanding of the law, there is no evidence to support a verdict against petitioner, and the trial court should have directed one in its favor.
Judgment of the Circuit Court of Appeals is reversed and the cause remanded to the United States District Court, Northern District of Florida, for further proceedings in accordance with this opinion.
Mr. Justice Pitney dissents.