have led him to decline the risk altogether or to insure only at a higher premium; it is not necessary that the loss should be caused by the particular condition concealed or misrepresented (1). § 23. Fire and life insurance in general. The same general principles apply to fire and life insurance. Owing, however, to different methods adopted in these classes of insurance, the rule has been modified in its application. In marine insurance, the applicant for insurance went to the company and asked for the issuance of a policy, and the reasonableness of requiring him to state all the facts is obvious. In the case of fire and life insurance, this is not the situation. The person who applies for either of these two kinds of insurance is given a long list of questions in connection with his application for insurance. These questions he must answer before the company will issue the policy. In addition thereto, in most cases, the subject matter of the risk, whether it is a structure or a life, is carefully inspected by representatives of the company, and it frequently has other independent sources of information. For these reasons the rule has arisen in life and fire insurance that the insured may fairly suppose, that, if the company wants any information on any given point, it will ask for it, and if it does not ask, the insured may conclude that either the company knows of the facts or else that it does not regard them as being material (2). Thus, on such matters in fire insurance as the situation or character of the structure, the uses to which it is put, the (1) Carter v. Boehm, 3 Burrows, 1905. (2) Burritt v. Insurance Co., 5 Hill (N. Y.) 188. methods of heating and lighting, the existence of liens and incumbrances, and many other material questions, the insured need say nothing unless asked (3). So, in life insurance, the insured, unless asked, need say nothing as to his habits, past career, diseases, or occupation. § 24. Qualification of ordinary rule. The foregoing rule has the natural and common sense limitation, that, if there is a fact that is obviously material, as defined above, but which at the same time is so peculiar and unusual in its nature that the insured cannot fairly expect the company to make inquiries along that line, then the failure to disclose will avoid the policy. Thus, where, after the insured had made his application but before the policy was issued, the building was burned, his failure to disclose was held to avoid the policy (4). So, where in life insurance A sent in his application but, before the policy was issued, he became dangerously ill in such a way that he must have known that it would effect the issuance of the policy, his failure to disclose his severe illness was held to avoid the policy as a concealment (5). On the other hand, if the change in circumstances does not take place until after the company is bound by the issuance of the policy, it makes no difference if the facts then occurring are disclosed or not, for obviously, since the company is bound, the knowledge of the facts cannot in any way better the company (6). And the same principle applies where the policy is not issued, but where the company has, by a (3) Satterthwaite v. Insurance Co., 14 Pa. 393. (4) Wales v. Insurance Co., 37 Minn. 106. (6) Assurance Co. v. Insurance Co., 52 Conn. 576. binding contract, agreed to issue the policy, and for the same reason. § 25. Existence of peculiar facts. Whether, in cases of such peculiar facts that it is not fair to infer, from the failure of the company to ask, that it either knows or does not care about them, the applicant must disclose the truth at his peril, or whether it is enough that he acts in good faith, though unreasonably, in believing that the company does not want to know, is a question on which the courts are divided. The analogy of marine insurance would seem to lead to the conclusion that he must disclose these facts at his peril, but the tendency of later decisions is in the opposite direction. Thus, where A applied for a policy of insurance on his life and was at the time an embezzler to a large amount, a fact which he did not disclose to the company, Judge Taft held that if the jury found that the applicant did not conceal this fact for fear of being rejected or to defraud the company, but because he in good faith did not believe it would make any difference to the company, then he could still recover on the policy, even though in fact the company would not have issued the policy had it known that he was an embezzler (7). The judge also pointed out, however, the practical qualification that the more clearly material such peculiar facts are, the stronger will become the inference in any given case that the insured concealed them in bad faith, and with an intention to defraud the company. Under such circumstances, of course, the policy would be avoided, for it is clear, as a general principle, that if the applicant (7) Insurance Co. v. Mechanics Bank, 72. Fed. 413. makes an intentionally false statement, whether asked for or not and even whether ordinarily material or not, if it in fact influences the company in issuing the policy, there can be no recovery, not because of any peculiar insurance rule in regard to concealment or misrepresentation, but on the general principle that fraud renders any contract voidable at the option of the party defrauded. § 26. Answers of insured must be substantially true. Coming now to the list of questions put by the company, it is no defense to the company in an action on the policy, that the statements made by the insured in answer to the questions are not literally true. It is sufficient if the insured answers with substantial accuracy, and, in construing the questions and answers, the language used will be given its ordinary meaning as used by business men, and not any technical meaning that might possibly be attached to it. Thus, in a fire insurance application, the question was asked "Are you the owner of the building to be insured?" and the applicant said "Yes;" in fact the building was owned by his wife. It had been given to her by her father, with the understanding that if the insured, her husband, worked off the mortgage, she would convey the property to him, and he had lived there several years and already worked off a large part of the mortgage. His answer was held to be substantially correct, and no ground of defense to the company (7a). So, where the question was put "For what purpose is the building occupied and by whom?" and the answer was "By the applicant for the manufacture of lead pipe only," it was held that the (7a) Insurance Co. v. Fogelman, 35 Mich. 481. fact that he also used the building to make reels upon which to wind the lead pipe, was not a misrepresentation or concealment, since that could fairly enough be regarded as a part of the business of manufacturing (8). So, in life insurance, where the question was, "To what extent do you use alcohol?" and the answer was "None," the policy was not avoided for misrepresentation by showing a reasonable occasional use (9). § 27. Same: Good faith not enough. On the other hand, where a definite question is put, mere good faith on the part of the applicant is not enough, if the answer is materially false. Thus, where the applicant stated, in answer to a question, that he already was carrying $200,000 worth of insurance, while he really only had $30,000, the policy was void for misrepresentation, even though the statement was made by an agent who honestly believed it to be true (10). And the general principle is that the insured is responsible for the acts of his agents, both as to concealment (11) and misrepresentation. But, of course, he must be really his agent, and the mere statement in the policy that any person concerned in the policy is the agent of the insured and not of the company will be disregarded, if in fact he was really the agent of the company (12). § 28. Volunteered information. In connection with the point just discussed, it is necessary to notice an im (8) Collins v. Insurance Co., 10 Gray (Mass.) 155. (9) Grand Lodge v. Belcham, 145 Ill. 308. (10) Armour v. Insurance Co., 90 N. Y. 450. (11) McFarland v. Insurance Co., 6 W. Va. 425. (12) Kausal v. Insurance Co., 31 Minn. 17. |