Fairchild v. North-Eastern Mutual Life Ass'n

Parties. Covenant. Cien. Sts. c. 71, ss. 23, 24. Life Insurance. Wagering Policy. Burden of Proof. Principal and Agent. JEvidence. Presumption. Por breach of covenant, the covenantee, or his legal representative, is the only one who has a right of action; and although the instrument containing the covenant may be expressed to be for the benefit of a third person, there is not such privity between such person and the covenantor as will enable him to maintain an action thereon. Thus, where by a sealed policy of insurance on the life of N., the insurer agreed, on the death of N., to pay a certain sum to P. or his legal representatives, and, on the death of N., F., who was administrator of N’s estate, brought covenant in his representative capacity for the agreed sum, it was held, that the action was rightly brought by F. as administrator, and that the common-law rule in respect thereto was not changed by sections 23, 24, c. 71, Gen. Sts. The written application on which the policy was issued was ostensibly made by N. through plaintiff, who was defendant’s agent and medical examiner, and was signed by N. as applicant and by plaintiff as medical examiner. The policy appeared on its face to have been issued to N. “in consideration of the representations and agreements made in the application.” After the policy was issued, and before the death of N., defendant’s secretary addressed to N. and plaintiff certain notices of assessments to meet death losses, with receipts for payments thereon. Plaintiff testified that he paid the assessments. Held, that although under section 18, c. S2, Gen. Sts., and on the evidence, it must be assumed that plaintiff sued as trustee for himself as beneficiary as well as in his capacity of administrator, yet, as it did not appear that he procured the policy to be issued for his own benefit, but, prima facie, that N. procured it to be issued,— it was to be presumed after verdict that N. did procure it to be issued, and that the payments of assessments were made by her procurement; that N. had an insurable interest in her own life, and might procure insurance thereon for the benefit of another; and that, therefore, the question of whether plaintiff had an insurable interest in her life did not arise. The application contained printed questions as to whether the applicant then or ever had “scrofula, cancer, or any cutaneous disease,” and, among other things, ■whether she then had “any disease or disorder, any infirmity or weakness, tending to impair the constitution or to shorten life.” The written answer to each question was in the negative. The application stipulated that it and the medical examiner’s certificate thereto attached, should be the basis of the contract; and that if any fraudulent or untrue answers were therein made, or any material facts suppressed, the contract should be void. The medical examiner’s certificate, which was made by plaintiff, also stated the applicant’s health to be good. N. died of cancer n.ot long after the policy was issued, and question was made as to the truth and good faith of said answers. Defendant requested the court to charge that as plaintiff was its agent, the burden was on him to prove that the transaction was “ in every respect, just, fair, and upright, and clear of all objection,” and made on the “ fullest disclosure” of every fact that he had any reason to believe material. The court charged that the answers were warranties, and that if they were in any respect untrue, plaintiff could not recover, although their falsity was not known to the applicant nor to any one. Held, that as the presumption was that in procuring the policy plaintiff acted solely as defendant’s agent, and as the contract was not made by plaintiff in defendant’s behalf, but by defendant itself after notice that it was for plaintiff’s benefit, defendant could, at most, avoid the contract because only of some representation in the apxfiication or the appended certificate that was false, and known to x>laintiff to be false, or of an omission by him fairly and fully to impart to defendant all his knowledge as to the condition of the applicant’s health; and that, as the condition of the applicant’s health was fully stated in the axiplication and certificate, the charge more than complied with the request, so that there was no revisable error. Where answers to questions put on cross-examination may in any degree affect any question of fact in the case, the questions are relevant, and the answers thereto do not conclude the examining party. Defendant, in effect, requested the court to charge that the evidence introduced by plaintiff had no tendency to show the number of defendant’s members at the time of N’s death; and that there was no evidence to show whether an assessment was made or attempted by defendant, to pay the loss on the policy in question. Held, that the notices of assessments, q. v., which were introduced in evidence by plaintiff, tended to show the number of members, &c.; that as the policy provided for the making of an assessment on proof of death, it was to be presumed that one was made; and that not to charge as requested was therefore no error.

Covenant on a policy of insurance on the life of the plaintiff’s intestate. Plea, general issue, and several special pleas in bar. Trial by jury, September Term, 1878, Pierpoint, C. J., presiding. The plaintiff offered in evidence a policy of insurance under seal, issued by the defendant, and dated July 4, 1874, the substance of which was as follows : In consideration of the representations and agreements made in the application therefor, and the sum of eight dollars in hand paid, and also the additional sum of four dollars, as a deposit to pay for death losses of two memberships when they shall occur, and ... of the further payment of all future assessments in advance for death losses, . the said association does hereby issue this policy to Lorane D. Nay . . . with the following agreements : Upon the death of the said Lorane D. Nay, she having conformed to all the conditions thereof, and on satisfactory proof of said death being filed with the secretary of said association, an assessment for as many dollars as there are policy-holders in this association who have become such under this plan, shall be made upon all such policy-holders; . . . and the sum collected on such assessment (less the added cost for collection) shall be paid to Benjamin Fairchild, or his legal representatives, . . . within ninety days from the time of the filing said proof of death. The policy provided that the defendant should in no case pay thereon more than $1,000 ; and it was also thereby agreed, among other things, that if the answers or declarations made in the application therefor, should be found in any respect untrue, the membership of the intestate should cease, and the policy should be void. The defendant objected to the admission of the policy, for that the administrator could not maintain the action. The plaintiff also offered in evidence certain notices of asses,sments with receipts for payments thereon that were addressed to the intestate and Fairchild by the defendant’s secretary, from time to time after the policy was issued till the death of the intestate, which was admitted to have occurred in the latter part of March, 1875. Those notices appeared to be of assessments for death losses occurring from July 17, 1874, to February 18, 1875, and were signed by the secretary. Each notice contained a statement of the number of members liable. There was a notice bearing date October 1, and also one bearing date November 2. Each of those notices contained the statement, “We have over 1,000 members at this date, and are daily adding thereto.” There was also a n'otice dated January 2, which contained the statement, “ We have now 1100 members at this date,- and are daily adding thereto.” The several notices further stated the number of members liable as seven hundred and forty-four on July 17, seven hundred and ninety-five on August 19, eight hundred and thirty-eight .on September 4, eight hundred and sixtv-five on September 13, nine hundred and thirty-four on October 9, eleven hundred and eighty-two on February 16, and eleven hundred and eighty, thi’ee on February 18. The defendant objected to the admission of the notices, for that they did not tend to show the number of members, nor the assessments; but they were admitted; to which the defendant excepted. The plaintiff testified that he received said notices in due course of mail, and paid the several sums for which the receipts thereon were given. On cross-examination he testified that at the time the policy in question was issued he was, and for several years before that time had been, an agent for the defendant to obtain policies and transact business in reference thereto, but that owing to the controversy that had arisen in regard to the policy, he had ceased to do business as such agent, although he had never been notified of the termination of his agency. On' this evidence, as to the truth of which no question was made, the plaintiff rested. The defendant thereupon moved for a verdict, for that the plaintiff could not maintain the action as administrator, and that the evidence was not sufficient to entitle him to recover even if he could maintain the action in his representative capacity. The court declined so to rule; to which the defendant excepted. The defendant then introduced in evidence the written application on which the policy was issued, which was dated July 1, 1874, and was admitted to have been signed by the intestate as applicant, and by the plaintiff as medical examiner. It contained the following printed questions: “ Has the applicant now, or has she ever had, . . . scrofula, cancer, or any cutaneous disease ?” “ Has the applicant ever had any serious illness or personal injury ?” “ Are yoii now afflicted with any disease or disorder, any infirmity or weakness, tending to impair the constitution or to shorten life ?” The written answer to each of those questions was in the negative. It was therein stipulated that the application and the medical examiner’s certificate thereto attached, should be the basis of the contract between the applicant and the insurer, and that if any misrepresentations or fraudulent or untrue answers were therein made, or any facts that should have been stated therein were suppressed, then the contract should be void. The medical examiner’s certificate also stated the applicant’s health to be good, and the answers to the questions in said certificate to be true. The defendant then introduced evidence tending to show that the intestate died of cancer of the lip and mouth; that she had had it at least several months before the policy was issued ; that it was then in an advanced stage', and that she knew it; that she had-' lived in the plaintiff’s family, and had been there two or three weeks when the application was made; that the plaintiff had known her for many years, had prescribed for her as a physician, knew the general state of her health, and knew when the application was made, and before, that she had a cancer ; that the duration of cancers of the kind had by the assured was generally two and a half to three and a half years, and that the shortest recorded case was six months. The defendant also introduced evidence tending to show that she had had scrofula, had broken one of her arms, and had been in ill health for a year or more, when the application was made ; and that all those facts were then known to the plaintiff. The plaintiff introduced evidence tending to show that the cancer came after the policy was issued, that the intestate had not had scrofula, that the breaking of the arm occasioned no permanent injury to her health, and that when. the policy was issued she was in general good health. Certain witnesses on the part of the defendant testified to an interview had with the intestate in the latter part of June, 1874, at which the sore on her lip was examined, and declared by one of the witnesses to be a cancer, and to a condition of the sore that expert witnesses testified indicated that it was a cancer. It was contended on the part of the plaintiff that that interview was not had in the latter part of June, but on or about July 16. One of the witnesses who testified to that interview on the part of the defendant, was Mrs. Manley Holmes.' She testified with considerable positiveness that the interview occurred in June, 1874. On cross-examination she was inquired of in regard to the first time her attention was called to that interview, and if she did not then call in Mrs. Edgar Holmes, who was present at that interview, and talk the matter over with her. She was also asked if they did not then attempt to fix on the time by referring to other contemporaneous matters — the cutting of certain hay, and the selling and carrying away of a hog. But she denied calling in Mrs. Edgar Holmes, and denied having talk with her about it. The plaintiff then introduced Mrs. Edgar Holmes, and asked her when her attention was first called to the date of that interview, and she replied that it was at some time when she was at Manley Holmes’s after the intestate’s death. She was then asked what was said between her and Mrs. Manley Holmes, to ascertain the 'date of that interview; to which the defendant objected, for that the plaintiff was bound by the answers of Mrs. Manley Holmes ; but the witness was permitted to answer, and testified in effect that the date of that interview was then talked about, and by reference to the cutting of certain hay, and the carrying away of a hog, was ascertained to be July 16. To the admission of that testimony the defendant excepted. The defendant requested the court to charge that the action could not be maintained in the name of the plaintiff as administrator ; that the proof on the part of the plaintiff was not sufficient to entitle him to recover; that the number of members at the time of the intestate’s death was not shown, nor any amount or criterion of amount as the basis of recovery; that it was not shown whether or not any assessment was made or attempted to be made, to pay the loss on the policy in question ; that the evidence on the part of the plaintiff was not sufficient to support the transaction as a valid contract of insurance in his favor; that as the plaintiff was the defendant’s agent, the burden was on him to prove that the transaction was “ in every respect, just, fair, and upright, and clear of all objection,” and made on the “ fullest disclosure ” of “ every fact and circumstance that he had any reason to believe ” material; that the effect of an omission to disclose was not limited to questions in the application, but extended to any material fact; that on the general principles of the. law of insurance, if the answer of any specific question was untrue, the plaintiff could not recover, although there was no fraud, as the answers were warranties ; and that if there was any intentional misrepresentation or concealment on the part of either the intestate or the plaintiff, it avoided the policy. The court charged that the action might bo maintained in the name of the administrator; that the plaintiff was not precluded from maintaining the action by having been the defendant’s agent when the policy was issued and himself the beneficiary; that the burden was on the defendant to show that when the application was made the representations therein were false; that the answers to the questions as to whether the applicant had certain diseases were warranties that she had not those diseases, and were not mere representations, and that if those answers were in any respect untrue, the plaintiff could not recover, even though their falsity was not known to the applicant nor to any one. To the refusal to charge as requested, as far as the court did refuse, and to the charge given on the subject of the requests, the defendant excepted. The action cannot be maintained in the name of the plaintiff as administrator. Davenport v. North Pastern Mut. Life Association, 47 Vt. 528 ; Bliss Life Ins. 496, 497 ; Boyle v. Q-uardian Life Ins. Co. 6 Robertson, 567 ; Buppart v. Union Mut. Ins. Co. 7 Robertson, 155; Meyers v. Keystone Mut. Life Ins. Co. 27 Penn. 263; MeCord v. Noyes, 3 Bradf. 139 ; Fraternal Mut. Life Ins. Co. v. Applegate, 7 Ohio, 295 ; In re Kugler, 3 Bigelow Life Ins. Cas. 592. These cases proceed on the ground that such a policy, under such statute or charter provisions as those of Vermont, is in law a contract with the person for whose benefit the policy is taken and to whom it is made payable. Gen. Sts. c. 7, ss. 23, 24. The question is, with whom is the contract, in its legal effect? A life insurance for the benefit of a third person is a peculiar contract. The theory on which it rests, the relation of the parties, the object in view, and the special provisions of the statute,^are all to be regarded in giving it a construction. A contract regulated as to its legal effect by a statute, must be construed as if the provisions of the statute were in terms incorporated into it. It may therefore receive a very different construction from that which might prevail in the absence of the statute. Without the statute, it would seem plain that the legal effect of the policy is, to confer the right of action on the person to whom the payment is agreed to be made and who has the entire beneficial interest. But taken in connection with the statute, the question cannot be open to doubt. The statute excludes the estate of the insured from all benefit under the policy, and secures it exclusively to the beneficiary. The contract, if not so before, becomes a contract with him in its legal effect. Upon what conceivable gi’ound, then, should the administrator have a right of action upon it ? The plaintiff had no insurable interest in the life of the intestate, and without it the policy cannot be supported. A life insur-* anee policy was at first regarded as an indemnity, like a fire or a marine policy, to support which a legal interest must be shown. Grodsell v. Boldero, 9 East, 72; Bevin v. Qonn. Mut. Life Ins. Oo. 25 Conn. 244; Lord v. Dale, 12 Mass. 115 ; 4 Bigelow Life Ins. Cas. 455, 458. A more liberal rule has since obtained, and a policy is sustained whenever the beneficiary has any personal interest in the life insured. But some such interest must always appear. Without it, a policy is regarded as a mere wager, and is void. Qonn. Mut. Life Ins. Co. v. Schceffer, 94 U. S. 460 ; Loomis v. Eagle Life Ins. Co. 6 Gray, 399, per Shaw, C. J.; Phoenix Life Ins. Co. v. Bailey, 13 Wal. 616 ; 3 Kent Com. 368 ; Hoyt v. N. Y. Ins. Co. 3 Bosw. 440; Mowry v. Home Life Ins. Co. 9 R. I. 346; Cammach v. Lewis, 15 Wal. 643; YEtna Life Ins. Co. v. France, 94 U. S. 561; Ruse v. Mat. Ben. Life Ins. Co. 23 N. Y. 516 ; Stevens v. Warren, 101 Mass. 564; Mitchell v. Union Life Ins. Co. 45 Me. 104 ; Shilling v. Acc. Ins. Co. 2 H. & N. 42; Bliss Life Ins. ss. 20-31. A wagei’ing transaction is void in Yermont. Collamer v. Day, 2 Yt. 144. Whether the insurance runs in'terms to the insured for the benefit of, and payable to, the beneficiary, or directly to the beneficiai'y, is immaterial, under the circumstances of this case. Phoenix Ins. Co. v. Bailey, supra. The court ex’red in ruling that the bux’den of px'oof was not on the plaintiff to establish the fairness and honesty of the transaction, but was- on the defendant to impeach it. The plaintiff was the agent of the defendant. He was also its medical examiner. He stood toward it, therefore, in a two-fold fiduciary relation of the most important character. Standing in that relation and dealing with his principal for his own benefit, in a transaction on the face of it so suspicious, he cannot avail himself of the benefits of it without proving that it was in all respects fair, honest, just, and in uberrima ficle. This burden the law casts upon him, and until it is fully discharged, the transaction is regarded as constructively and presumptively fraudulent. The rule of law on this subject admits of neither doubt nor exception. It extends to every conceivable relation of a fiduciary character, and to every conceivable transaction in which a person standing in such a relation deals with his principal for his own benefit. 1 Story Eq. Jurisp. ss. 311, 312 ; Hunter v. Atkyns, 3 Myl. & K. 113 ; Paley Agency, 36, note, 11, note ; Edwards v. Meyrick, 2 Hare, 60, 68; Montesquieu v. Sandys, 18 Yes. 302; per Lord-Eldon ; 2 Sugden Yend. & Purch. 362, 363 ; Story Agency, 212, 252, note; Gillett v. Pepper come, 3 Beav. 78, 83; Gibson v. Jeyes, 6 Yes. 266, 278 ; Harris v. Tremenheere, 15 lb. 34, 40 ; Famham v. Brooks, 9 Pick. 212 ; Howell v. Hansom, 11 Paige, 538 ; Stone v. Hayes, 3 Denio, 579 ; Aberdeen Railway Co. v. Blackie, 1 Macq. Ap. Cas. 461; Fox v. Mackrath, 1 Lead. Cas. Eq. 105, notes ; Jackson v. Ludeling, 21 Wal. 616 ; Koehler v. Iron Co. 2 Black, 720 ; Michaud v. Gouraud, 4 How. 503. So much of the evidence of Mrs. Edgar Holmes as was objected to, should have been excluded. Its materiality is obvious. It was hearsay. It cannot be sustained as impeaching Mrs. Manley Holmes. • There was no adequate or legal proof tending to show the amount to which the plaintiff was entitled under the policy, if entitled to recover at all. The action was properly brought by the plaintiff as administrator. Though the insurance was effected for Fairchild’s benefit, and the covenant is to pay to him, the contract was made with the intestate, the consideration moved from her, and the covenant runs to her. Her representative is therefore not only the proper party to bring the action, but the only party who can sustain an action in this form. Davenport v. North-Eastern Mut. Life Association., 47 Vt. 528 ; Eugure v. Mut. Society of St. Joseph, 46 Yt. 3,62; Hall v. Huntoon, 17 Yt. 244; Corey v. Powers, 18 Yt. 587. The policy is a specialty, and- covenant is the proper form of action. Angelí & Ames Corp. ss. 223-225, 295 ; Clark v. Woolen Manf. Co., 15 Wend. 256 ; Marine Ins. Co. v. Young, 1 Cranch, 321; Randall v. Van Vechten, 19 Johns. 60, 65. But if it were not, the objection was waived by the defendant’s neglect to make it in the County Court. There was no error in admitting the notices of assessment. They tended to show the number of- members subject to assessment. The objection to the testimony of Mrs. Edgar Holmes was properly overruled. Her testimony was competent to impeach that of Mrs. Mauley Holmes as to the time of the interview to which she had testified. The defendant was not entitled to a compliance with that part of its request that related to the burden of proof. The policy was not issued by Fairchild, but by the defendant itself, on the .written application of the intestate ; and there is neither authority nor reason for holding that in such a case, a different rule as to the burden of proof should be applied than is applied to ordinary cases.