Cable v. United States Life Ins. Co. of New York

1. Appeal—Assignments of Error. Where a master to whom a cause was referred to take and report the testimony exceeded his authority by reporting findings of fact and conclusions of law, to which the court entertained exceptions, some of which it sustained, and modified and adopted the findings, they must be regarded as the findings of the court, and ail appellant may assign errors thereon in the appellate court, although he took no exceptions to the report of the master. 3. Life Insurance—Statements in Application—Change of Condition before Delivery of Policy. A statement made in an application for life insurance, whether a warranty or only a representation, speaks from the time of the delivery of the policy, and if, aft'er the statement is made, a material change occurs in the condition of the applicant, covered by such statement, before the contract is consummated, an absolute duty rests upon the applicant to make disclosure of the fact .8. Same—Delivery Procured by Fraud—Concealment? of Facts. C. made application to complainant for a policy of life insurance. Among the statements in the application which were made warranties was one that the applicant had never had pneumonia, and it also con- . tained a covenant that the policy should take effect only “upon payment of the first premium and delivery of the policy during my lifetime, sound health, and insurable condition.” The policy was issued and tendered to C., who declined to accept it at the time on the ground that he had not sufficient time to examine it, and also wished to consult L., an intimate friend, who had made a similar application. C. shortly after became ill with acute pneumonia. Three days later the solicitor who had taken the applications called upon L., with whom he had left his policy for examination, and L. accepted the policy, and also offered to accept that of C., and to pay the premium thereon. The solicitor obtained the policy, and delivered-it to L., receiving the premium thereon, which was forwarded to, and accepted by, complainant. In answer to an inquiry by the solicitor at the time of the delivery if 0. was all right, L. replied that he had been sick two or three days, but was no worse than he had been for the past 48 hours. No further inquiry was made nor information given, although L. knew the serious nature of O.’s illness, and that he was not at the time in an insurable condition. Neither complainant nor its general agent had any actual knowledge or notice of O.’s illness until after his death, which occurred five days later. Held, that it was the duty of L. as O.’s agent to fully disclose his condition; that his partial statement was misleading, and not such as to put the agent on inquiry; and that the delivery of the policy under such circumstances did not create a contract binding on complainant, even though L. was guifty of no intentional fraud. 4. Same—Waiver. The delivery of a life insurance policy, with notice that the insured is ill, will not operate as a waiver or create an estoppel which will preclude the company from asserting the invalidity of the policy under its terms, because the insured was not in an insurable condition, where material facts in regard to his condition were concealed from it which • were of such nature as to make it clear that the policy would not have been delivered if they had been known. 5. Appeal—Law of Case—Decision on Former Appeal. A judgment on appeal sustaining the jurisdiction of the circuit court over the cause becomes the law of the ease, and the question cannot be reconsidered on a second appeal.

Appeal and Cross Appeal from the Circuit Court of the United States for the Northern District of Illinois. The United States Life Insurance Company in the City of New York filed its bill in equity against Alice A. Cable, administratrix of the estate of Herman- D. Cable, deceased, for the cancellation upon the ground of fraud of a policy written by the company upon the life of the defendant’s intestate. A demurrer to the bill was sustained, and upon appeal to 'this court the judgment of the court below was reversed, and the demurrer directed to be overruled. Insurance Co. v. Cable, 39 C. C. A. 264, 98 Fed. 761, to which reference is made for a statement of the allegation's of the bill. Upon the filing of the mandate in the court below, an answer was filed to the bill admitting the fact of the application and of the policy as stated in the bill, but denying the fraud, and containing the following admissions and allegations: “Defendant, further answering, admits that said policy on the life of said Herman D. Cable was, after its execution, sent to the city of Chicago, but to which particular agent of the complainant in said city this defendant is not advised, except as she is informed by the bill of complaint filed herein; and defendant further admits that on or about the 21st day of February, 1899, said policy was tendered by the said James F. McCabe, as agent of the complainant, to said Herman D. Cable, and that at this particular time said Cable declined to take up the matter of said policy with said McCabe and pay the premium thereon, for the reason tnat he was then too busy to examine the policy, and see whether it was the same in its terms and conditions as represented when his application was taken, and for the further reason that he desired to confer with his close and intimate friend, Mr. George S. Lord, who had made an application for insurance through the same agent in the same company, and to whom a policy had also been issued, but had not yet been delivered. Defendant, further answering, says that said Lord and said Cable were connected together by the closest ties of friendship, and were also interested together in various business enterprises, and were in almost daily communication with each other, and had been such friends and so interested in various business enterprises for many years prior to February, 1899, and that each was in the habit of acting for the other in matters in which they were mutually interested. Defendant, further answering, admits that upon the evening of the 21th day of February, 3899, said Cable became ill. and that upon the following day his illness was diagnosed as a slight attack of pneumonia, but denies that upon the 2!ith day of February the life of said Cable was despaired of by his physicians and family, or that any such report was in circulation, but says, on'the contrary, that on the 26th and on the 27th days of February, 1899, his illness was not considered as at all dangerous, but a speedy recovery of said Cable was confidently expected by his said family and said Lord, and that no danger of death from said illness was at all apprehended by them or either of them. Defendant, further answering, admits that the said Lord was in daily communication with said Cable and his family during said illness, as had been his custom for many years prior thereto, but denies that he was informed that said Cable was in serious physical condition, and that his death was expected from the disease which he then had, hut says that, on the contrary, said Lord believed and was informed by the family of said Cable that he was not considered to be in a dangerous condition. Defendant, further answering, admits that on the 27th day of February, 1899, said McCabe went to the oiiice of said Lord for the purpose of ascertaining whether said Lord and said Cable would take said policies, and that he was then informed by said Lord that he, said Lord, was willing to take both of the policies, but that said Cable was then ill at his home in Mvanston, and if said McCabe, with knowledge of this fact, desired to deliver said policies lie would receive and pay for the same; that said McCabe ihen went from said office, and shortly after returned with the policy issued in favor of said Cable, and delivered the same to said Lord, well knowing and being informed of the true condition of said Cable, and that with such knowledge he received from said Lord the premiums upon both of said policios for the first year of the life of the same.—that is, from (.he 6th day of February, 1899. until the Oth day of February, 1900. Defendant further expressly denies that the illness of said Cable was not made known to the complainant, but was purposely and willfully concealed from it. but, on the other hand, defendant alleges that the true condition of said Cabio was fully told and made known to the complainant prior to the delivery of said policy and the payment of the premium thereon. Defendant further denies that said Lord was not authorized by .said Cable to accept said policy and pay the premiums thereon, but, on the contrary, alleges that he was requested by the said Cable to so receive said policy and pay the first premium (hereon when he, the said Lord, should take his policy. Defendant, further answering, admits that the said ('able did on Thursday, March 2. 1899, depart this life, but denies that such death was occasioned by pneumonia, but was occasioned by heart failure. the result of sudden complications which arose a few hours before his said death, and which were not expected or apprehended by his family or physicians unlil a short time before they occurred.” On March 21, 1900, an order was entered that the cause he referred to a master “to take the evidence in said cause and report the same to this court.” The master on October 5, 1900, filed his report, returning the evidence adduced before him, and reported 15 findings of fact, reference being here made to the following: “(1) That the complainant is a corporation, duly organized under the laws of the state of New York, and a citizen of the state of New York, and has been for many years last past, and is now, engaged in the business of insuring lives throughout the United States, and has been for many years, and is now, lawfully engaged in carrying on said business in the state of Illinois, under proper license, and that the defendant Alice A. Cable is a citizen of the state of Illinois, residing in the Northern district thereof. The business of the complainant in Chicago is in charge of a general manager for the states of Illinois and Wisconsin, who has supervision of the company’s business, procuring applications, or seeing that they are procured, collecting premiums, attending to the detail work, looking after disbursements, looking after losses and furnishing proofs, and who is the supreme authority in the state of Illinois in said company’s business in all cases in the agency work, and is hereinafter called ‘general agent.’ “(2) That on or about the 16th day of January, 1899, Herman D. Cable, then a resident of Evanston, in the state of Illinois, made application in writing to the complainant, through one James F. McCabe, for insurance upon his life in the sum of fifty thousand dollars, which application was forwarded to the New York office of the complainant, and in consideration thereof the complainant, on or about the 6th day of February, 1899,.executed its policy, numbered 94,082, upon the life of the said Herman D. Cable, which policy agreed, in further consideration of the sum of $848.50, to he paid on the delivery thereof, and a like sum to he paid on the Gth day of .February in each and every year thereafter, until ten (10) years’ premiums should have been paid, and upon the acceptance of satisfactory proofs of the death of the said Herman D. Cable within ten (10) years ending on the Gth day of February, 1909, that the complainant would pay fifty thousand dollars ($50,000) in thirty (30) consecutive annual installments, of one thousand six lmpdred sixty-six and sixty-six hundredths dollars ($1,660.66) each, to the estate of the said Herman D. Cable. The written application for tire said policy was by the terms of the policy made a part of the iiolicy itself, and was signed by the said Herman D. Cable, and one of the provisions of the said application was as follows, viz.: ‘It is hereby declared and agreed * * * that the policy to be issued hereon shall take effect only upon payment of the first premium and delivery of the policy during my lifetime, sound health, and insurable condition;’ and another provision thereof was as follows, viz.: ‘That only the president, together with the secretary or the actuary, shall have the power to alter or waive the policy or any condition thereof.’ “(3) At the same time when Cable applied for the above policy, a similar application was made to the complainant for a similar $50,000 policy by George S. Lord, who was a neighbor and intimate friend of Cable, and interested with him in numerous business transactions, both being directors of the Bankers’ National Bank and members of the Evanston school boa’rd. Both of the said policies were issued at about the same time, and both were forwarded from the New York office of the complainant to its Chicago office, and were received at the latter office on or before the 20th day of February, 1899, and on the last named day they were turned over by the complainant’s general agent at Chicago to one T. J. Finney. “(4) The said T. J. Finney was a life insurance broker, who was not regularly employed by the complainant or by any other- company, but who had done business with the complainant through the said general agent, among other companies, for the past seven years, and had during the year 1S98 procured other insurance on the life of the said Herman D. Cable in another company, which had lapsed in November, 1898. One. James F. McCabe was also a life insurance agent or broker, who in January, 1899, had a contract of employment with the Equitable Insurance Company of New York, and who had no connection or business arrangement with the complainant, except through the said Finney, and was not known to the general agent of the complainant at Chicago in connection with the Cable policy until about the time when the application therefor was delivered to the complainant’s general agent in Chicago, and was not personally known to said general agent until March 5, 1899. Upon the delivery of the said two policies to Finney, the gross amounts of the premiums due were charged against him by the complainant’s general agent, and he subsequently paid to such general agent the amount due to the complainant out of suc-h premiums. “(r>) Tlio applications of both George S. Lord and Herman D. Cable for insurance were obtained from them by the said McCabe, under an agreement with the said Finney, and when procured were delivered by him to Finney. After the two policies had been received by the complainant's general agent in Chicago, and had been turned over by him to Finney as aforesaid, the latter in tarn delivered them to the said McCabe, on tlio 21st day of February, 18!)!). Thereupon, on the same day, McCabe called first at the office of Herman V). Cable, having both of the said policies with him, hut the said Cable refused to accept his policy at that time, stating that lie did not have lime to look into the matter at the moment, but that he would be guided a good deal by what Mr. Lord said and did in the matter. Afterwards, on the same day, AlcCabe called at Air. Lord's office, found Mr. Lord very busy, and left his (Lord's) policy with him, together with a financial statement of the company, and told him that he might send him (McCabe) a check for it. On ¡.he same day McCabe returned the Cable policy to Finney. “((>) On the 27th day of February, 18!)!>, McCabe again called upon GeorgeS. Lord, and asked for payment of the premium on Iris policy. Mr. Lord thereupon asked him if lie also had the Cable policy with him'. McCabe stated that he had not, but Unit he could get it in a few minutes; whereupon Mr. Lord told him to get it, and he (Lord) would pay him the amount of both premiums. McCabe then went at once to Finney’s office, procured the Cable policy from Air. Finney, and returned with it to Mr. Lord’s office, and handed it to Air. Lord, saying as'he did so, ‘Is Mr. Cable all right?’ or words substantially to that effect:. There was a conflict as to what ldr. Lord said in reply, but the master is of the opinion that the reply was substantially as Air. Lord siated in his testimony, viz.: ‘jSTo; Mr. Cable has been sick for two or three days, but he is no worse than he has been for the last forty-eight hours.’ Thereupon McCabe left the Cable policy with Air. Lord, who already had his own policy, and Mr. Lord paid the premiums on both policies in currency, the premium on the Cable policy being eight hundred and forty-eight dollars and fifty cents (¡5818.50), and McCabe took the money to- Mr. Finney, who subsequently paid to the complainant: the amount due to it. Mr. Lord then took the Cable policy to Evanston, and delivered it to a member of Air. Cable’s family at the latter’s house, in tlio evening of the same day. The master finds that Lord liad been authorized in advance by Herman I). Cable to accept and pay for the latter’s policy, in case he (the said Lord) decided to accept and pay for his own policy, and that the premium advanced by him was repaid to him alvei' Cable’s death by one of the relatives of the said Cable. “(7) Immediately after delivering the said two policies to Lord, AlcCabe went to Cleveland, Ohio, and while there he received, on March 2, 1899, a telegram from Finney, reading as follows: ‘Cable died this morning. AVas sick when policy delivered. Company want policy back. Am noncommittal pending hearing; from you. Have you any advice?’ (See Complainant's Exhibit 3.) AlcCabe thereupon returned to Chicago on March 3, 1890, and oil that day informed Air. Lord, and also the latter’s attorney. Air. H. H. C. Alfiler, that the complainant company demanded the return of the Cable policy. ‘•('8) The masier finds that on the 21st day of February, 1899, when the policy in question was first: presented to Herman I). Cable and he refused to receive it, he was in sound health and insurable condition; that on the 24th day of February, 1899. he was taken ill with incipient pneumonia, and was attended by a physician in the early evening of that day, and was put under the care of a trained nurse the same evening; that his disease developed into a case of acute pneumonia, and that he was seriously ill with that disease and confined to his bed from (he evening of the 24th day of February, 1899, until March 2, 1899, when he died; that on the 27th day of February, .1899, the said Herman D. Cable was seriously ill with acute pneumonia, and was not in good health, and was not in insurable condition, and lliat this was well known to the said George S. Lord when he procured ihe delivery to himself of the Cable policy, and paid the premium thereon, but that he did not communicate such knowledge to the said AlcCabe any further than by making the statement to him which has been set forth heretofore In finding 6; and the master finds that the said Lord’s statement that Cable had been sick for two or three days, but was no worse than he had been the last forty-eight hours, while it was substantially true at the time when it was made, was deceptive in its nature, and not calculated or intended to inform McCabe as to the serious condition of Cable’s health, or to lead him to suspect it. “(9) The master further finds that up to the last day of said Cable’s illness the said illness was not such as to be regarded by his physician and friends as necessarily fatal; that up to the day before his death his attending physician expected him to recover, and so informed his family; that the immediate cause of his death was heart failure, or collapse, which was the result of his illness, and which is one of the common features of pneumonia. “(10) The master further finds that none of the general officers of the complainant company residing in New York City had any personal knowledge that the said Herman D. Cable was taken ill at any time after the application for the policy in controversy was made, and that none of them had any personal knowledge until after his death that he was ill at any time between the date of the application and the date of his death, and that neither the said Finney nor the said McCabe (excepting the statement made to him by Lord on the delivery of the policy), nor the general agent of the complainant at Chicago, nor the complainant itself, had any knowledge or information as to the said Cable’s condition of health at any time between the date of the application for the policy in question and March 2, 1899, but in making this and all other findings the master expressly reserves the question as to whether the information conveyed by George S. Lord to McCabe was of was not, such notice as to bind the complainant company and its rexmesentatives. “(11) That on or about the 16th day of March, 1899, the defendant, Alice A. Cable, was by the probate court of Cook county duly appointed as administratrix of the estate of the said Herman D. Cable, deceased, and qualified, and took upon 'herself the duties of such trust, and that as such administratrix she took possession of the said policy in controversy, and has ever since been in possession of the same; that as such administratrix she filed with the complainant proof of the death of the said Herman T). Cable, and requested payment to her of the commuted value of the unpaid installments of $1,666.66 each, specified in the said policy, being the lump sum of thirty thousand dollars ($30,000), and that the complainant refused to pay the same, and that the defendant herein brought her action at law against the complainant in the superior court of Cook county, Illinois, on May 11, 1899, to recover $30,000 upon the policy offered in evidence in this case, as the commuted value of such policy; that such action was begun by the filing of a praecipe and the issuance of a summons on said day,- about an hour prior to the filing of the original bill herein; that such summons was placed in the hands of the sheriff of Cook county for service upon the defendant immediately upon its issuance, and prior to the filing of the original bill herein, but was not served upon the complainant herein until May 15, 1899, and that no direction to the sheriff to delay the service of summons was given by the plaintiff in said action at law, or her attorney, which action at law is still pending and has never been called for trial, but now stands number 148 upon the new calendar of Judge Chytraus, which said judge began to call September 15, 1900. “(12) The master further finds that before the filing of the bill herein the complainant offered to pay to the defendant herein the amount of the first premium upon the policy in controversy, together with interest thereon, but the offer was refused by the said defendant, Alice A. Cable, administratrix of the estate of Herman D. Cable, deceased. “(13) The master finds that there has been no evidence adduced before him showing or tending to show that any of the conditions of the policy in controversy have been waived by the president and secretary or actuary of the complainant, or any or either of them, and also finds that the general agent of complainant in Chicago never authorized either said McCabe or said Finney to waive any of the conditions thereof, and never waived any of them himself. “(14) That the said Herman D. Cable and George S. Lord, in the making of the application to the complainant and in the delivery of the policies and payment of the premiums thereon, had no dealings with any person other than the said James F. McCabe.” Before the filing of the report Alice A. Cable, administratrix, filed with the master certain objections to his report, which were apparently returned to the court by the master with his report and read as follows: “First, l'or that the master has erroneously found that the statement made by George S. Lord to James F. McCabe as to the illness of Herman D. Cable was deceptive in its nature, and not calculated or intended to inform McCabe as to the serious condition of Cable’s health, or lead him to suspect it; second, for that the said master has omitted to find that on the 27th day of February, 1889, it was the full belief of George S. Lord that said Gable was not dangerously sick, and that he would shortly recover from his then illness; third, for that the said master has omitted to find that the information convoyed by the said George S. Lord to said James F. McCabe was sufficient notice of the illness of Herman D. Cable at and before the time of the delivery of the policy and the payment of the premium thereon; in all of which particulars the said defendant objects to the said report, and submits that the same ought to be varied and altered.” On October 23, 1900, the court ordered that the objections referred to stand as exceptions to the report, and thereupon the cause was heard before the court. Afterwards, on December 21, 1900, the court rendered a decree sustaining the first exception, and disapproving of the second sentence in paragraph 8 of the master’s report, and made the following finding of fact in lieu thereof: “That on the 27th day of February, 1809, the said Herman D. Cable was seriously ill with acute pneumonia, and was not in good health, and was not in insurable condition, and that the said George S. Lord "when the Cable policy was delivered to him and the premium paid thereon was aware of such fact; that when said Lord was asked by Mc-Cabe, as the agent of the complainant, as to the then condition of Herman D. Cable, he in good faith, and without any intent to defraud the complainant or conceal the real condition of the health of said Cable, stated that Cable had been sick for two or throe days, but was no worse than he had been during the last forty-eight hours, as heretofore found in finding 6, but that said Lord did not make any further statement in regard to the condition of said Cable, nor were any further inquiries made, by said Mc-Cabe in regard thereto.” The decree overruled the second and third exceptions to the master’s report, and decreed that the policy in question “was procured on behalf of the said deceased by constructive fraud, and that no actual fraud was intended or practiced in the delivery of the same, and that the complainant is entitled to the relief prayed for,” and thereupon decreed that the policy he annulled and canceled and declared to be of no force and effect as an obligation; that it be forthwith surrendered and delivered; and reserved jurisdiction to make such further order as might he necessary to secure the full and effectual execution of the decree, including power and jurisdiction to prevent the defendant from prosecuting any suit or action upon the policy. From this decree the defendant below appealed. The complainant below also filed an assignment of errors, as follows: “(1) That the circuit court erred in and by said decree in finding that the master’s report was made pursuant to the order of reference to said master, and in entertaining and acting upon exceptions thereto; (2) that the circuit court erred in and by said decree in sustaining the following exception filed by the defendant to the master’s report: ‘First, for that the master has erroneously found that the statement made by George S. Lord to James F. McCabe as to the illness of Herman D. Cable was deceptive in its nature, and not calculated or intended to inform McCabe as to the serious condition of Cable’s health, or lead him to suspect it.’ (3) That the circuit court erred in and by said decree in finding that, at the time Lord procured from Mc-Cabe the Cable policy, Lord told McCabe that Herman D. Cable had been sick for two or three days, hut was no worse than he had been for the last forty-eight hours. (4) Assuming that Lord made said statement as found, the circuit court erred in and by said decree in further finding that it was made by Lord in good faith, and without any intent to defraud the, complainant, or to conceal the real condition of the health of said Cable. (5) That the circuit court erred in and by said decree in finding that no actual fraud was intended or practiced in the delivery of the policy of insurance mentioned in said decree. (6) The circuit court erred in not finding that the delivery of the policy in controversy was procured by actual fraud. Wherefore the said complainant prays that the parts of said decree upon which error is above assigned may be changed and modified, and that as a basis for the relief granted by said decree a finding of fact be made that the delivery of the policy in controversy was procured’ from the complainant by actual fraud.” On the back of the policy, under the title “Notice,” it is provided: “Agents have no power to modify or change this contract, nor extend time for premium payment, nor waive forfeiture.”