TELFORD v. NEW YORK LIFE INS CO (1936)

Plaintiff recovered judgment upon an insurance policy issued on January 7, 1933, upon the life of Catherine H. Telford, who signed an application for the policy on December 30, 1932. Plaintiff, the beneficiary, was the husband of the insured, who died March 15, 1933. Defendant filed a cross-complaint seeking rescission of the contract. The action was tried by the court without a jury.

The application was made part of the contract of insurance, and in that part of the application under the heading “Answers to the medical examiner,” these questions were asked: “7-a Have you ever had any accident or injury or undergone any surgical operation? 7-b Have you ever been under observation or treatment in any hospital, asylum or sanitarium?” Following these questions the following appears: “If the answers to any query is ‘yes' give date, detailed results and, if within five years, name and address of any physician consulted.” In the space opposite question 7-a the application contains the following, and nothing else: “Yes. Appendix removed–1920–good results–no complications.” In the space opposite question 7-b, the following appears: “No.” It is conceded that the insured was a patient in a Salt Lake hospital for about 10 days in 1929, and that her left breast was amputated at that time. Manifestly, the answers given by the applicant, failing to disclose the amputation of the left breast, were untruthful and constituted a false representation upon a material matter. They are equivalent to a direct statement that no such operation had been performed. The false representation is sufficient to defeat recovery on the policy and call for the rescission of the contract of insurance. Whitney v. West Coast Life Ins. Co., 177 Cal. 74, 169 P. 997. An insurance company which makes inquiry about prior medical treatment or surgical operations of an applicant is entitled to truthful answers so that it may, with full information, exercise its judgment as to whether it cares to issue the policy.

Plaintiff attempts to excuse the failure of the applicant to disclose the facts of the operation by the contention that the medical examiner must have discovered that the breast had been amputated. The evidence is insufficient to justify this contention. The applicant was not entirely unclothed, and that part of the applicant's body in the region of the left breast was not exposed. The medical examiner testified that he did not examine her breast; that by the rules of the company he was instructed not to examine the breasts of women, and accordingly never did so; that by applying the stethoscope to the region of her heart he did not learn that the breast had been amputated. Moreover, at the bottom of the application, and above the signature of the applicant, the following is printed: “It is mutually agreed as follows * * * that notice to or knowledge of the soliciting agent or medical examiner is not notice to or knowledge to the company, and that neither one of them is authorized to accept risks or to pass upon insurability.”

Plaintiff asserts that the applicant was ignorant of the contents of the application when she signed it, and argues that for this reason the contract may be enforced. The policy was delivered to the beneficiary, husband of the applicant, in the presence of the applicant, and kept by him in a trunk for two or three weeks, and was thereafter placed in a safe deposit box. A person is presumed to have knowledge of the contents of an instrument executed by him or in his possession. Wilson v. Coffey, 92 Cal.App. 343, 268 P. 408. The rule has often been applied to insurance cases. Ryan v. World Mutual Life Insurance Co., 41 Conn. 168, 19 Am.Rep. 490; Sun Fire Office v. Wich, 6 Colo.App. 103, 39 P. 587; Susquehanna Mutual Fire Insurance Co. v. Swank, 102 Pa. 17; Quinlan v. Providence Washington Ins. Co., 133 N.Y. 356, 31 N.E. 31, 28 Am.St.Rep. 645; Goldstone v. Columbia Life & Trust Co., 33 Cal.App. 119, 164 P. 416, 418; Madsen v. Maryland Casualty Co., 168 Cal. 204, 142 P. 51. In Goldstone v. Columbia Life & Trust Co., supra, it is said: “As already seen, the policy was immediately delivered to Goldstone. It was his duty to read it, and we must assume that he did so.” In Ryan v. World Mutual Life Insurance Co., supra, the court said: “She says that she and her husband signed the application without reading it and without its being read to them. That of itself was inexcusable negligence. The application contained her agreements and representations in an important contract. When she signed it she was bound to know what she signed. The law requires that the insured shall not only, in good faith, answer all the interrogatories correctly, but shall use reasonable diligence to see that the answers are correctly written. It is for his interest to do so, and the insurer has a right to presume that he will do it. He has it in his power to prevent this species of fraud and the insurer has not.” If, as claimed, the insured was ignorant of the contents of the application at the time she signed it, she doubtless had ample opportunity to inform herself on the subject, and her neglect to do so cannot now be advanced by the plaintiff as justification for the palpable misrepresentation.

Our conclusion in the matter of the answers to question 7-a makes it unnecessary to pass upon the contentions of defendant that the applicant made other false representations in her answers to question 8.

This policy contains this provision: “The Policy and the application therefor, copy of which is attached hereto, constitute the entire contract. All statements made by the Insured shall, in absence of fraud, be deemed representations and not warranties, and no statement shall avoid the Policy or be used in defense to a claim under it, unless it is contained in the written application and a copy of the application is endorsed upon or attached to this Policy when issued.” Plaintiff now points out that a copy of the medical examiner's report was not attached to the policy delivered, and that there was not attached thereto a copy of several questions and answers appearing on the reverse side of one page of the application. He argues that the failure to attach these copies deprived defendant of the right to defend the action on the ground of misrepresentations. The contention is without merit. The report of the medical examiner is not a part of the application. The questions and answers on the reverse side of the application are not relied upon by defendant as grounds for rescission of the contract, and are of no consequence in this litigation. The point advanced is highly technical, and does not affect the rights of the parties. It was manifestly the intention of the parties to agree that no statement of the insured should avoid the policy unless it was contained in the application and a copy of the application bearing the statement relied upon to avoid the policy delivered to the insured attached to the policy.

By the provisions of section 956a of the Code of Civil Procedure the reviewing court may in proper cases make findings contrary to those made by the trial court based on evidence adduced before the trial court. This court now finds that Catherine H. Telford underwent a surgical operation in the year 1929, and that at said time her left breast was amputated; that immediately before the issuance of the policy sued upon herein she falsely represented to the defendant that she had not undergone said operation.

The judgment is reversed, with directions to the superior court to enter judgment for defendant upon the complaint, and to grant relief to cross-complainant in accordance with the prayer of the cross-complaint.

I dissent. We would not be human if we could agree in all the cases which we review. I do not agree with the decision reached by the majority of the court in this case, possibly for the reason that I may have a stronger predilection than some appellate judges toward affirming the judgments of the trial court. This case largely turns upon the evidence with regard to the alleged fraud in answering the questions which were a part of the application in obtaining the insurance. In this regard we should keep in mind that this court is not a weigher of evidence, that the duty of this court upon appeal is to view the evidence in the light most favorable to the party who was successful in the trial court, and that, if there is any substantial evidence to sustain the findings, they should not be disturbed. Also, that in a case of this nature, “‘the court will construe the question and answer strictly as against the company, and liberally with reference to the insured.”’ Lyon v. United Moderns, 148 Cal. 470, 83 P. 804, 807, 4 L.R.A.(N.S.) 247, 113 Am.St.Rep. 291, 7 Ann.Cas. 672; Newton v. Southwestern Mut. Life Ass'n, 116 Iowa, 311, 90 N.W. 73.

After reviewing the evidence in the light of the foregoing rules, I am not prepared to say that the evidence is such that the trial court was bound to find that the answers to questions 7-a and 7-b constituted false representations. Far less am I prepared to say that this court on appeal should make findings to that effect. On the contrary, I believe that there is evidence from which the trial court reasonably found that the answers did not constitute false representations. Being in the minority, I shall not be contentious nor verbose in my point of view.

WOOD, Justice.