THE LEGAL ASPECT OF THE WORDING OF THE APPLICATION FOR MEMBERSHIP AND THE MEDICAL EXAMINER'S

CERTIFICATE.

By Edmund S. Cummings, Chicago.

Address Read Before Law Section, Annual Meeting, August 15, 1910, Detroit, Michigan.

The statute of the state under which the society is organized, its charter, its constitution and by-laws, the benefit certificate, the application for membership, and the medical examiner's certificate, all enter into and form a part of the contract between the society and the member.

In recent years careful consideration has been given by the officers of our societies to the statutory and charter powers of the society, and also to the construction of the constitution and by-laws, but little or no attention has been given, so far as I have been able to learn, to the construction of the application for membership and medical examiner's certificate. The purpose of this paper is to call to your attention the necessity of a careful revision of the application for membership and medical examiner's certificate blanks, so that the wording thereof shall so clearly and concisely state the meaning of the parties and the scope of the contract that the courts, when called upon to interpret the same, may have no difficulty in so doing.

It seems to me that in endeavoring to determine the previous physical and family history of the applicant, we have over-reached ourselves, particularly when we have attempted to make a contract of warranty on the part of the applicant, that all his answers are to be construed as strict warranties, and that if any one of them be in any respect untrue, then all rights of himself and of his beneficiary under the contract shall be forfeited.

CRITICISMS OF THE COURT.

The Texas Civil Court of Appeals, in the case of Daniel vs. Modern Woodmen of America, 118 S. W., 211, speaking of the application and medical examiner's certificate of the Modern Woodmen of America, says:

"This application contained numerous questions to applicant and his answers thereto concerning his family history, his own history, health, occupation and habits of life, and in response to two questions the applicant stated that he had never been intoxicated, and that his maternal grandmother, who died at the age of 69 years, was never insane. It was expressly stipulated on the application and in the policy that the two instruments should be considered together as constituting the contract of insurance, and by the terms of the application and the policy, the answers of the applicant were warranted to be true. He also warranted the truth of all answers made to the physician who examined him, and whose report accompanied the application. Applicant's own answers were in 35 groups, aggregating approximately 100 in number, and the answers of the medical examiner numbered approximately 50. The questions to which all these answers were given took an extremely wide range, embracing questions as to the color of hair and eyes of the applicant, and inquiries concerned almost all the ills that 'flesh is heir to,' taken in alphabetical order, beginning with appendicitis and ending with tumors. And by the terms of the contract applicant warranted the exact ages, as well as good health of all the members of his immediate family; that he resembled his mother in general characteristics; also warranted the correctness of the diagnosis given of the ailments which resulted in the deaths of his paternal grandfather, and both his maternal grandparents. He also warranted the exact ages of those three grandparents at the respective dates of their deaths. However, it seems that the applicant was not required to warrant the age, health, or disposition of his mother-in-law."

And the Supreme Court of Illinois, in the case of Illinois Masons' Benevolent Society vs. Winthrop, Admr., 85 Ill., 537, on pages 540 and 541, says:

"If a warranty was required of the answers to some of these questions it would be useless for persons to become members of the society. Each applicant is required to answer the question whether he is able to earn a livelihood for himself and family. Now, with the great majority of men this is problematical. That power depends upon so large a number of circumstances that a prudent man might well hesitate to answer it in the affirmative. The solution of this question depends, with most men, so decidedly on such a variety of contingencies, that almost any man, whatever his mental or physical endowments, would be regarded as extremely rash to warrant that he could. If able at the time, what guaranty that he could do so for any definite period? Does this statement require

that he should remain so during life, or for a shorter period? And if so, for what period? It is manifest that all can be required of the applicant is that he should give to this question an answer based on an honest, fair and intelligent belief.

The applicant is also asked if his ancestors generally reached old age. Now, who are his ancestors referred to in this interrogatory? How many generations back is it intended to extend? And, suppose the applicant, on slight or unreliable information, answers in the affirmative, do the directors suppose they can show the misinformation and defeat a recovery? If such a construction is to be given to this application, then members, if not wronged, cheated, or defrauded, are, we have no doubt, generally deceived unintentionally. Suppose, to the question whether the applicant is, at the time, in good health, the answer is in the affirmative, is very slight obstruction to the performance of their proper functions by the various organs of the system to be held as a breach of warranty, and to avoid the policy? Such, we presume, was never intended to be the construction given to the answer, as all know that but a small percentage of the human family are entirely free from some infirmity, slight or serious.

There is the question whether the applicant has ever had any serious illness or personal injury. Suppose the applicant answers in the negative, may the society show that the applicant, in his early infancy, and so far back that it is beyond memory's reach, had serious illness, and defeat a recovery, although he had never been informed of the fact? That would be a fact that would, in all probability, be wholly unknown to him, and neither party intended that a negative answer should be a warranty that it did not so occur, and a misrepresentation or suppression of such an unknown fact was intended to be included in the exception in the statement. It was only known facts that were not to be misrepresented or suppressed."

In Royal Neighbors of America vs. Wallace, 64 Neb., on 333, it is said:

"It is fair to presume that the association dealt with the assured in good faith, and that its acceptance of her premium, receiving her into the order and issuance to her of the certificate in question, was more than an idle ceremony, and that it intended thereby to bind itself by a valid contract of insurance. There are upwards of a hundred questions in the application and medical examination. Many of them are of such a character that no person, however hon

est his intentions, could answer them with any degree of assurance that each of his answers was literally true. To hold that such questions and answers amount to warranties would be to impute bad faith to the association in pretending to enter into a contract of insurance with the assured which could become binding upon it by the merest chance."

"If policies of insurance can be forfeited or their payment defeated by failure to remember or to have stated correctly in the application every pain or ache or indisposition which the applicant may have had and to which the human body is subject, they would be of but little value, and would wholly fail to accomplish the purpose for which they are designed. Undoubtedly the assured and beneficiary were bound by the contract, but the burden of proof was on the complainant to prove the substantial violation of its terms as alleged in the bill."

Arnhorst vs. National Union, 179, Ill. 491.

In Minnesota Mutual Life Insurance Co. vs. Link, 230 Ill., 273, on 276, it is said:

"It is well known that a person may have diseases of the presence of which in his system he has and can have no knowledge, and which even skillful physicans are unable to discover after a most searching examination. It is therefore, unreasonable that persons who organize corporations for the purpose of selling life insurance would exact a warranty of an applicant for insurance of the truth of a matter, which from the very nature of the inquiry, might be wholly unknown to the applicant, and still more unreasonable, that any sane person would knowingly warrant that he had never had, in any form or any degree, any disease embraced within the long catalogue embodied in this application."

All the courts of last resort which have had occasion to express themselves upon the subject are in accord with the foregoing criticisms. Is there not much of justification in such criticisms? Have we not attempted to demand too much of the applicant in the way of a warranty on his part as to much of his own personal physical history, as well as that of his ancestors? Have we not also been careless in the arrangement of our application blanks and medical examiner's certificates, and thereby have attempted to exact from the applicant a strict warranty on many questions that in the very nature of things cannot reasonably be warranted by the applicant? It

is axiomatic in the law of insurance that the contract shall be liberally construed in favor of the insured and strictly construed against the insurer. As is said in Union Mutual Accident Association vs. Frohard, 134 Ill., 228, on 236:

"It is to be noted that the words used in the contract are words selected and used by the corporation itself, and are therefore to be interpreted most strongly against it, or that, at all events, they are to be construed according to their common and literal meaning, in favor of the insured."

Let us therefore briefly consider some of the interpretations which the courts have put upon the wording of the application blank and medical examiner's certificate.

In Rasicot v. Royal Neighbors of America, 108 Pac., 1048, the Supreme Court of Idaho uses the following language:

"The state is vitally interested in the thrift and frugality of its citizens, and in encouraging the citizen in providing for his family and looking to their protection and comfort in the event of his demise. To allow him when acting honestly and from the most laudable motive to be led on under the belief that he is devoting his savings to the purchase of a legacy for his dependent ones, and then when the beneficiary comes to make demand for that paltry recompense to tell him that the courts, the final arbitrators of his rights, will not listen to the equity of the case, would be doing violence to the principles of fair dealing, and would be likewise contrary to the best interests of the public at large which we term 'public policy.' Had the insured been in any manner advised that her policy was not in force she would perhaps have procured one that would have been valid, and this fair dealing, and would be likewise contrary to the best interests of society as well, and the state itself must feel an interest in having her take such precautions, and in that sense the construction of such contracts becomes a matter of public policy. The insurer cannot suffer half so much from such a policy, and such a construction as the individuals interested and society at large must in the end of necessity suffer from the cold blooded technical rule that seems to prevail in so many jurisdictions. This ought to be the rule in order to prevent organizations soliciting membership, receiving insurance applications, and accepting dues and assessments for years, and then, after the applicant is perhaps too old to procure insurance elsewhere, tell the insured that he made a false answer in some one of the numerous questions propounded by the society, and that consequently his policy has never been in force. Such a contract is clearly violative