CABLE v. UNITED STATES LIFE INS. CO. IN CITY OF NEW YORK; UNITED STATES LIFE INS. CO. IN CITY OF NEW YORK v. CABLE, 111 F. 19

JENKINS, Circuit Judge, after the foregoing statement of the case, delivered the opinion of the court. The action of the master in reporting his findings of fact and his conclusions of law upon the evidence was without authority, the order of reference only providing for the taking and return of testimony. The court, however, modified and adopted the findings, and they must be regarded as the findings of the court. An assignment of error to the decree gives the right to a hearing here upon an error well assigned, although no exception was filed to the master’s report.

It is a general rule that meditated silence, there being no duty to speak, will not avail to avoid a contract. There being no duty to communicate intelligence, the one party is not bound to speak although he may know that the other party lies under a mistake. This is because the parties are dealing with each other at arm’s length. But even in such case the suppressio veri must rest in silence, not in partial and misleading statement. The latter amounts to suggestio falsi; for, as it has well been said, “a half truth is often the greatest of lies.” If one would deal at arm’s length, he must remain silent.

He may not speak that which is certain to deceive and suppress that which would challenge attention, disclosing the truth. If the matter be with respect to a material fact which, if known to the one party and not to the other, would, if disclosed, induce that other to refrain from contracting, either wholly or upon the terms proposed, the one having knowledge of the fact, if under no duty to disclose, may not by a partial statement throw the other party off his guard, when disclosure of the truth and the whole truth would have prevented his action.

There is, however, a class of contracts, not arising in confidential relation, where there is a duty to speak, where silence is tantamount to fraud, because “the silence goes to the very essence of the-transaction, preventing the existence of any contract, when the transaction takes the form of cotitract, for want of union of minds between the parties.” Bigelow, Frauds, 594. This class of contracts comprehends many subjects, and especially the subject of insurance. Thus, iu marine insurance, the applicant owes the duty of disclosure.

If lie conceals a material fact, whether or not he be inquired of concerning it, the policy is void, even though his silence arose from error of judgment, and not from fraudulent intent. This is sometimes rested upon the ground that the silence is a breach of the condition precedent of every contract of marine insurance, “that the insured shall make full disclosure of all facts materially affecting the risk, which are within his personal knowledge at the time when the contract is made.” Blackburn v. Vigors, 12 App. Cas. 531; Arn. Ins. (4 Eng. Ed.) 512.

Thus, where insurance was applied for upon a vessel “lost or not lost,” the applicant knowing of its loss, but concealing his knowledge from the insurer, the court held the concealment to be a fraud destroying the validity of the contract, remarking (page 670, 15 Wall., and page 247, 21 L. Ed.): “When the company came to make this instrument, they were entitled to the information which the plaintiffs had of the loss of the vessel.” Insurance Co. v. Lyman, 15 Wall. 664, 21 L. Ed. 246.

So, also, with respect to fire insurance, it has been held that if one knowing of a conflagration near his property, without disclosing the fact, procure insurance of an underwriter ignorant of the fact, the contract is void. Bufe v. Turner, 6 Taunt. 338. A well-considered case upon the subject of disclosure with respect to fire insurance is Insurance Co. v.

Harmer, 2 Ohio St. 452, in which it is held by Ranney, J., that the doctrine of concealment as understood in marine insurance is not applicable in its full extent to fire policies, because the corpus is subject to inspection by either party, but that the assured must not misrepresent or designedly conceal a fact of unusual peril to the property not with reasonable diligence discoverable by the insurer, or anticipated as a foundation for specific inquiry.

In respect of marine insurance, one reason for the requirement of disclosure is that the corpus is often not accessible to the insurer, and reliance must be placed upon the good faith of the insured. In this respect life insurance is more nearly allied to marine than to fire insurance.

It is true that a medical examination will ascertain many things necessary to be known; but there is a large field of inquiry which cannot be so disclosed, and which may be essential to the risk to be assumed, filie past history of the insured, the diseases with which lie had been afflicted, the duration of life of his ancestors, and their diseases, are all matters which go to the question of the assumption of the risk, and of which the insurer would naturally desire ini urination.

So, also, in the interval between the medical examination and the execution and delivery of the policy, a serious change in the health of the assured may have occurred, of which the insurer might be, and probably would be, wholly ignorant.

The insurer has therefore a right to rely upon the utmost .good faith upon the part of the assured, and though the latter may not be bound to communicate, if uninquired of, all the details of his life which might affect the judgment of the insurer with respect to the assumption of the risk, he is certainly bound to disclose any impending peril to life not known to the insurer, and of which the latter cannot reasonably be said to be put upon inquiry. It is the custom of insurance companies to act upon written or printed applications signed by the applicant containing answers to questions propounded.

Generally, as is the fact here, by the terms of the contract the application is made part of and attached to the policy of insurance. In such case the answers to the questions are warranties, and no suggestion of immateriality of the question and answer can be entertained, because it is for the insurer to judge of the materiality of the information demanded and of the reasons that shall determine the assumption of the risk. In the case at bar, Cable in the- application was inquired of whether he had ever been subject to or had pneumonia, to which he gave a negative answer.

This application being made part of the contract, the statement is a warranty, and is so declared to be by the application. This statement, in the law, refers not merely to the date of the application, but to the time of the completion and delivery of the contract. And if, after the statement is made, a material change occur before the contract is consummated, the duty of disclosure on the part of the assured, or the one receiving delivery of the policy for him, is absolute.

The application of Cable covenanted 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 statements in the application of good health and freedom from disease, and specifically from pneumonia, constitute a warranty of the contract as though declared simultaneously with the delivery of the policy.

If there had been a change in health between the date of the application and the delivery of the policy, the company was entitled to know of it, and to be fully informed concerning it, that it might determine whether, notwithstanding such change, it would consummate the agreement and deliver its policy; for, as stated in Traill v. Baring, 33 Law J. Ch. 521, 9 Law T. (N. S.) 708, on appeal 10 Law T. (N.

S.) 215, if a person make a representation which is calculated to induce another to assume a particular liability, and the circumstances are afterwards, before the liability is assumed, so altered to the knowledge of the person making the representation that the alteration might affect the course of conduct of the person to whom the representation was made, it is the imperative duty of the person who made the representation to communicate to the person to whom he made it the alteration in these circumstances, and a court of equity will not hold the person to whom he made the representation to be bound by any contract entered into upon the faith thereof, unless such communication has been made.

In British Equitable Ins. Co. v. Great Western Ry. Co., 38 Law J. Ch. 132, 19 Law T. (N. S.) 476, in-July, a declaration was signed for insurance upon life containing reference to the usual medical attendance of the proposed assured, who certified that the proposed assured was in good health.

The assured was also required to state who was “his latest, if other than his usual, medical attendant.” It was provided in the letter accepting the proposal and in the receipt for the first premium that if any change had taken place in the health of the assured since the date of the medical examination it would render the policy void. In August the assured. consulted another physician, who discovered his patient to be suffering from disease of the kidneys. This fact was not communicated to the company, and the policy was delivered in September. Eight months after-wards the assured died of disease of the kidneys.

It was held that the requirement to disclose his last medical attendant was a continuous one up to the date of the completion of the contract; that the noncommunication of his visit to the physician in the interval between the signing of the application and the taking of the policy voided the policy. This decree was affirmed upon appeal. 38 Law J. Ch. 314, 20 Law T. (N. S.) 422. In Morrison v. Muspratt, 4 Bing. 60, one was represented to the insurers in December of a certain year by a physician as enjoying ordinarily a good state of health.

This representation was repeated in March following, and the insurance was effected in April. Between December and March the person had been ill with a pulmonary attack, and was attended by a physician other than the one who had made the representations to the insurance company, but no disclosure of the circumstance was made to the insurer. In April, a year after the issuance of the policy, the assured died of pulmonary disease. This was a case of mere representation, not of warranty, and the court held that the facts of the illness and of the attendance of the other physician should have been disclosed.

See, also, Rose v. Society, 11 Ct. Sess. Cas. (2d Series) 345; Society v. McElroy, 49 U. S. App. 548, 28 C. C. A. 365, 83 Fed. 631. In Insurance Co. v. Ewing, 92 U. S. 377, 23 L. Ed. 610, the applicant being in extremis, a friend paid the premium, but concealed from the agent the condition of the applicant. The agent delivered the policy in ignorance of the facts. The court held there was no valid contract, saying (page 380, 92 U. S., and page 612, 23 L.

Ed.): “It cannot for a moment be contended that while parties are still in negotiation as to the terms of a contract, one of them, learning of a total change in the condition of the subject-matter of the contract of which the other is ignorant, can at that moment accept terms which he has refused before, and by so doing bind the party who has offered those terms when the condition of affairs was wholly different;” and at page 381, 92 U. S., and page 613, 23 L.

Ed.: “To hold that when he was in extremis, an hour or two before he breathed his last, a friend should pay this small sum to an agent of the company, without the agent of the company having any idea of the condition of the dying man, and thus secure an obligation to pay his administrator $5,000 within sixty or ninety days, is to affirm that one party to a negotiation can delay his assent to the terms of the contract until the changes of fortune enable him to reap all the benefits, and throw all the losses on the other side, and then, for the first time, do what was necessary on his part to make the contract obligatory.” There was therefore here both a warranty of good health and insurable condition at the time of the delivery of the policy, and, whether the statements of the application be treated as warranty or as representations, they were continuing up to and were effective as representations or warranties at the time of the delivery of the policy. 1 May, Ins. (4th Ed.) § 190.

Independent of these considerations, and growing out of the very nature of the subject-matter, there was the legal obligation resting upon Cable, and upon those acting for him, to disclose any material change in - his condition of héalth between the time of the application and the time of the delivery of the policy. Was there such a change of health, and was the duty of disclosure performed? The application is dated January 16, 1899, and by the contract is made a warranty, and, as we have sought to show, that warranty speaks from the date of the delivery of the policy.

That warranty was broken as soon as made, for at the time of the delivery of the policy he had pneumonia, and that fact -was not disclosed to the company, or to the one who for the company delivered the policy to Lord, the latter knowing of the fact. It is, however, urged that sufficient information was disclosed by Lord to McCabe to put the company upon inquiry, and that, with such notice, McCabe delivered the policy and received the premium ; that McCabe was the agent of the company, and notice to him was notice to the company, and the delivery of the policy constituted a waiver of the condition and warranty.

Upon the assumption that McCabe was such agent of the company, and thatdiis action must be treated as the action of the company,—questions which we do not determine,—it becomes us to inquire of the sufficiency of the notice given, and whether the act of delivery of the policy involved a waiver of the warranty. On February 21, 1899, Cable had tentatively declined to "accept the policy, desiring to be guided in his judgment by the action of his intimate friend Lord, who had made a like application upon his own life to the same company.

The polic3r was thereupon returned by McCabe to Finney, the broker from whom he received it. The policy on Lord’s life was on the same day left with him, and he was requested to send a check for the premium. Six days afterwards, and on the 27th of that month, McCabe called upon Lord and asked for' the payment of the premium upon his policy. Lord asked him if he had the Cable policy, to which McCabe answered “No,” but that he could- get it in a few minutes; whereupon Lord told him to get it, and that he (Lord) would pay him the amount of both premiums.

McCabe procured the Cable policy, returned with it to Lord’s office, and handed it to the latter, saying as he did so, “Cable is all right, isn’t he?” Here occurs somewhat of a conflict in the evidence. McCabe says that Lord, in a very low voice, without looking at him and in a casual manner, answered, “The same as he has been for forty-eight hours;” conveying to McCabe’s mind the meaning that Cable was all right. Lord says that he answered: “No; 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.” The master and the court below found the fact to be as stated by Lord, and, while there is much in the testimony throwing doubt upon the correctness of this con-v elusion, we are content to take the fact as found by the master and adopted by the court. Lord at this time knew that Cable was seriously ill with acute pneumonia, that he was not in good health, and that he was not in insurable condition. Lord was a man of affairs, actively interested in many important business adventures.

He must have known—he was bound to know—that no sane man, fully informed of Cable’s condition, would accept insurance and deliver a policy upon such a life. It was his duty to have disclosed the facts, and whether failure so to do arose from design or forgetfulness the fraud upon the company was none the less.. The wrong that was effected cannot be excused upon the ground that Lord did not intend to commit the wrong. Those-whom he represented cannot be permitted to take the fruit of the wrong upon the ground that Lord was innocent of wrongful intent. In Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U.

S. 485, 510, 1 Sup. Ct. 582, 599, 27 L. Ed. 337, 345, the court, speaking of the duty of disclosure in respect of insurance, says: “The duty of communication, indeed, is independent of the intention, and is violated by the fact of concealment, even where there is no design to deceive.” Nor do we think that the statement was such that -a reasonable man would have been put upon inquiry.

It was a casual statement, partial and misleading, and the manner of its delivery was, in our judgment, such as to ward off rather than to invite inquiry, and to convey to McCabe the impression that Cable was, if at all, but slightly indisposed. In order to preclude the insurance company by the action of McCabe, the latter should have been fully informed of the situation; for a waiver cannot be predicated upon a partial and a misleading statement. It was held in Sun Mut. Ins. Co. v. Ocean Ins. Co., 107 U. S. 485, 1 Sup. Ct. 582, 27 L.

Ed. 337, that it was the duty of the assured to communicate all- material facts, and he cannot allege as an excuse for his omission to do so that they were actually known to the underwriter, unless the lcnbwledge, of the latter was as full and particular as his own information. A waiver is an intentional relinquishment of a known right,—an election by one to dispense with something of value, or to forego some advantage that .might be insisted upon.

A waiver exists only where one with full knowledge of a material fact does or forbears to do something inconsistent with the existence of the right, or of his intention to rely upon that right. Bish. Cont. § 792. Waiver is but another name for estoppel. '“It can only be invoked where the conduct of the companies has been such as to induce action in reliance upon it, and where it would operate as a fraud upon the assured if they were afterwards allowed to disavow their conduct and enforce the conditions.

To a just application of this doctrine it is essential that the company sought to be estopped from denying the waiver claimed should be apprised of all the facts, of those which create the forfeiture, and of those which will necessarily influence its judgment in consenting to waive it. The holder of the policy cannot be permitted to conceal from the company an important fact, like that of the assured being in extremis, and then to claim a waiver of the forfeiture created by the act which brought the insured to that condition.

To permit such concealment, and yet to give to the action of the company the same effect as though no concealment were made, would tend to sanction a fraud on the part of the policy holder, instead of protecting him against the commission of one by the company.” Insurance Co. v. Wolff, 95 U. S. 326, 333, 24 L. Ed. 387, 390. It cannot here be doubted that if the insurance company, or Mc-Cabe as its agent, had been informed of the fact, within the personal knowledge of Lord, that Cable was seriously ill with acute pneumonia, the policy would not have been delivered.

It is difficult for us to believe that Lord, with that knowledge, could think he had a right to accept this policy; but, whether so or not, the concealment of the fact was a fraud upon the company. The statement made was deceptive and misleading, whatever were the intentions of Lord, and a court of equity ought not to permit the completion of the wrong. Courts of equity cannot sustain an insurance upon the life of a dying man, when the nature of his malady and the seriousness of his illness are concealed from the insurer.

It was suggested that in view of the decision of the supreme court in Farmers’ Loan & Trust Co. v. Lake St. El. R. Co., 177 U. S. 51, 20 Sup. Ct. 564, 44 L. Ed. 667, we should reconsider our former judgment in this case, and dismiss the bill for want of jurisdiction. We are unable to see that the decision referred to is in conflict, but whether so or not the previous judgment of this court is res judicata between these parties, and we are without authority to disturb it. In this connection, and upon the question of jurisdiction, the case of Ogden City v. Weaver (C. C. A.) 108 Fed. 564, 567, may prove of interest.

GROSSCUP, Circuit Judge. The jurisdictional question was settled on the former appeal. Under our ruling in Supreme Lodge v. Lloyd (C. C. A.) 107 Fed. 70, that decision becomes a part of the law of this case. With the jurisdictional question thus out of the way, I concur in the foregoing opinion. The decree is affirmed. WOODS, Circuit Judge, sat at the hearing of this cause, and concurred in the conclusion reached, but departed this life before the preparation of this opinion.