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LET US HAVE ENFORCEABLE POLICIES

It is laid down as an indisputable proposition that every policyholder who pays money week after week, month after month, year after year, should have a legally enforceable instrument, not dependent upon liberality cr discretion or charity. And let it be remembered that if unlimited discretion as to payment were reposed in the largest and best companies, and never abused by them, the smaller fry, often hard pressed financially, could not and would not adopt the same high standard. There comes a time when even a concern of good intentions, brought to the verge of financial embarrassment, must stand strictly on its rights and forego liberality.

UNJUST CONTESTS ACCIDENTALLY FOUND IN LAW BOOKS

The foregoing cases came accidentally to the notice of the lay writer of this brief. What glaring cases might not have been found by a skilled lawyer? Who will deny that thousands and tens of thousands of industrial policies are first repudiated and then compromised unfairly and unjustly in such a way as never to reach the point even of filing suit, much less of going to an appellate court of record?

How highly indiscreet it was for great and rich corporations to contest so stubbornly cases totally devoid of merit on their part, so far as we can judge from the reports. How much better judgment must ordinarily be shown by a company's officials where a policyholder refuses to be bluffed cut. The very case that interested the writer in this subject was compromised shortly after suit was filed. Its damaging facts will never appear in the records of an appellate court.

Where there is so much smoke a tremendous conflagration must rage underneath.

THE CONCEALED APPLICATION

With the applications reposing in the files of the companies, their contents unknown to the poor policyholder, who has " signed on the dotted line," often without knowing what he was doing, what opportunities exist for a smooth claim adjuster to bargain shrewdly with a bewildered and inexperienced widow or orphans. How easy to demonstrate to a humble washerwoman, by reference to the theretofore concealed application, that her late husband had deceived the company as to his health, and then settle, for a pittance, her just claim for two or three hundred dollars. She does not know that the District Code prohibits use of the application against her if not attached to the policy. Many highly intelligent white people do not know it. Will any man of common sense and ordinary knowledge of human nature deny that this sort of bargaining must happen in countless cases?

THE HELPLESS INDUSTRIAL POLICYHOLDER

It is clear, therefore, that unless policyholders are protected by a statute similar to the pending bill, a company may unjustly defend on the ground that a diseased condition, disclosed for the first time by post-mortem examination, must, from its nature and obvious long standing, have been in existence at the date of the policy, when that condition was totally unrelated to the cause of death, and had no more to do with it than the flowers that bloom in the spring." As so many courts have held, the only question under an express warranty is, "Was the insured in sound health?"

Shall poor laborers, and truck drivers, and laundresses, and domestic servants, and clerks in 10-cent stores, and other self-supporting girls alone in the world, continue to pay out their pitiful pennies for alleged insurance policies that even occasionally will be construed in this outrageously unjust manner? Shall the widows of thousands of policyholders be left to depend upon the generosity of a company organized primarily for profit?

CHILDLIKE FAITH OF INEXPERIENCED POLICY HOLDERS

The attitude of the average poor colored person toward one of these handsomely printed documents, purporting to be a policy is much like that of the colored soldier who performed numerous feats of valor during the World War. Commended by his superior officer the darkey protested, "Why, colo

nel, that wasn't nuthin' at all. I wasn't takin' no risks. They just couldn't hurt me. I done had my life insured!"

Who will assert that the poor washerwoman or day laborer ever reads, much less understands, the complicated phraseology of a policy containing an express warranty? And, remember, these humble folk do not even append their names to the cast-iron guarantee that binds them.

THE SPECIAL DUTY OF CONGRESS

If an industrial contract is so worded that none but an expert can grasp all its implications, Congress owes a special duty to its poverty-stricken wards in the Federal District, particularly those of the colored race, to give them a fair contract, enforceable in any court of competent jurisdiction.

POLICIES ARE CAREFULLY CONCOCTED TO CONSERVE THE COMPANY'S INTERESTS

A delightful bit of alliteration is found in the opinion of the Kansas Supreme Court in Pfiester v. Missouri State Life Ins. Co. (85 Kans. 97). While of a general nature, the following excerpt aptly describes the course followed in framing industrial policies (p. 101):

"Few persons solicited to take policies understand the subject of insurance or the rules of law governing the negotiations, and they have no voice in dictating the terms of what is called the contract. They are clear upon two or three points which the agent promises to protect, and for everything else they must sign ready-made applications and accept ready-made policies carefully concocted to conserve the interests of the company. The agent in fact prepares the contract when he writes the application, because the policy, which the applicant does not see until delivered and does not sign, follows an acceptance of the application as a matter of course."

This language is especially important in connection with the next subdivision of this brief.

SUPPRESSING THE APPLICATION IS A FRAUD UPON THE POLICYHOLDER

When the application states-as it does-that the policy is issued in consideration of the statements made in it, and that any misrepresentation wilfully made in the application shall invalidate the policy, it is nothing short of a fraud upon the applicant to suppress all the statements made by him in the application, which, if attached to the policy, would hold him only to the test of good faith and fair dealing, and deliver to him, later on, a policy completely ignoring his application, denying him the rights which would follow reliance upon it, and incorporating the fatal express warranty against which good faith, truthfulness, and lack of intent to deceive are all unavailing. Before quoting the exact language of a typical application, let us see what is said by the Circuit Court of Appeals (9th Circuit) in McElroy v. BritishAmerican Assurance Co. (94 Fed. Rep. 999). The fourth syllabus reads: "An insured has the right to rely on the presumption that the policy he receives is in accordance with his application, and his failure to read it will not relieve the insurer or its agent from the duty of so writing it."

It was sought to have this case reviewed by the Supreme Court of the United States, which denied the petition without opinion in 175 U. S., 728. To the same effect are Kister v. Ins. Co. (128 Pa. St. 553); Gristock v. Ins. Co. (87 Mich. 428); Ins. Co. v. Dafrin (80 Kans. 578). The last case cited uses this language:

"The application itself expressly provided that it was the basis on which the insurance was to be effected. The defendant could not change this basis of contract, substitute another in its stead, and thereby bind the plaintiff, without his knowledge or assent."

As to industrial policies, however, this is like the lawyer telling his client that he could not be put in jail for a certain act, though the client was already there. Every time an industrial policy is issued on an application which states one thing while the policy provides another, it does just what the Kansas Court said could not be done, and what the Circuit Court of Appeals for the Ninth Circuit condemned.

Now let us see how the companies deal with their policyholders in respect of the application.

METROPOLITAN APPLICATION

The Metropolitan application begins:

"To induce the Metropolitan Life Insurance Co. to issue policy and as consideration therefor, I agree, on behalf of myself and of any other person as follows: (Wherever nothing is written in the following paragraphs it is agreed that the declaration is true without exception).” Then follows a list of the principal diseases, other than epidemic ones, and the general statement:

"I am now in sound health. I am not blind, deaf, or dumb, nor have I any physical or mental defect or infirmity of any kind, except-."

Then the policyholder is given the ample space of one square inch in which to list all his physical and mental infirmities. The application continues: "I hereby declare that the statements recorded above and on the reverse side hereof are true and complete, and I agree that any misrepresentation wilfully made shall render the policy void, and that the policy shall not be binding upon the company unless upon its date, I shall be alive and in sound health.' We need not worry about the words "sound health" here; for, despite their sweeping import in law, the application never forms part of the policy. Does not fair dealing require that where emphasis is laid upon the necessity of refraining from wilful nrisrepresentations, the policyholder shall not only sustain the burden but be granted the legal privileges and immunities which would follow a reliance upon frank and honest statements?

WHAT IS DONE WITH THE APPLICATION?

Assume that the applicant is honest with the company, and answers all questions to the best of his ability. Assume that within the space of one square inch he lists all his known physical and mental impairments-an undertaking of no mean size. Is the company honest with him?

What happens?

The company inferentially asures him that his policy will be founded upon the statements in the application. Then it takes away the application, and he never sees it again. The application may or may not contain what he told the agent in answer to questions. This, he has no way of verifying. Presently, the policy arrives. Is it based upon the statements in the application? Not at all. Does it provide that for any misrepresentations wilfully made the policy shall be void? Oh, no! Search the policy from beginning to end, and you will find not one word about the application. It is totally ignored. But in the policy is a smooth, innocent-looking, apparently harmless stipulation that the policy shall not take effect if the insured is not in sound health on the date thereof, or if prior thereto, he has had any of the principal internal, concealed diseases.

PERILS LURKING IN AN EXPRESS WARRANTY

The committee has been apprised of the frightful dangers lurking in these words. The policyholder is totally ignorant of them. He has never heard that the highest court of the land had pronounced it impossible for a layman to know definitely whether he has an internal disease in its early, or even sometimes in its active stages. He does not know that even if a medical examination were made, the company could repudiate the favorable report of its own physician months and years afterward, and that even if he had the money to pay a physician for a thorough diagnosis it would be entirely unavailing. Just so surely as either physician overlooks anything; just so surely as the insured has suffered in the past, even without the slightest knowledge of the fact, from any of the proscribed disease diseases, good faith avails him nothing. The reports of physicians are not worth the snap of a finger. The deadly express warranty steps in and takes charge of the situation. But for the generosity of a distant corporation, the widow and orphans will in many cases get absolutely nothing.

The poor man has exchanged his good money for a bad contract.

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WHO SHOULD BEAR THE RISK OF UNDISCOVERED DISEASE?

One objector has said to the writer, "The bill aims to render insurable persons who really are uninsurable, because they have an undiscovered disease. This is not just; for if the company knew their real condition it would not insure them."

Let us see whether or not it is just.

Insurance is designed to cover a risk. That is why it is sanctioned by law. If no risk exists, the company is betting on a sure thing," and taking money under false pretenses. People take out life insurance policies, instead of putting their money in savings banks, for fear they may not live out the term necessary to save an adequate sum. The insurance company knows the likelihood of undiscovered disease. It knows the probability of tuberculosis in undernourished persons, and of cancer, hardened arteries, heart disease, and Bright's disease in those past middle age. It has every facility for making thorough medical examinations. In most cases it fails to exercise due diligence by making them, and then seeks to take advantage of its own wrong if it contests the policy.

The risk of death from undiscovered and undiscoverable disease should be borne by the insurer, not the policyholder. That is what the latter pays his money for.

No aggregation of individuals is compelled by law to enter the insurance business. The companies are formed voluntarily, and solicit every available prospect, hoping for profit from taking a legitimate risk. If no substantial risk of death from disease existed, only accident policies would be written.

Furthermore, many States have statutes providing that life insurance policies shall be incontestable after two years (except on grounds not pertinent here), and that inaccurate statements made in good faith shall not invalidate the policy unless the risk is materially affected thereby, to the prejudice of the company. This presupposes that the company has exercised due diligence, and can not protect itself otherwise than by relying upon the statements of the insured. What is the object of these statutes except to compel payment to the legal representatives of a person who was actually uninsurable? Where the well known equitable principle of waiver and estoppel is applied, what is its object if not to render valid a contract legally invalid but for the estoppel?

CONSIDERATIONS OF PULLIC POLICY

Richards (Law of Insurance, p. 584) puts the matter succinctly:

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"The insurer makes whatever examination he chooses to make before closing his engagement, and commands methods of getting at the material facts with a measure of thoroughness and accuracy. Now and again he may be seriously deceived by an applicant; nevertheless, it is more important that millions of honest families should purchase peace of mind and immunity from litigation than that insurers should be given a longer and better opportunity of detecting and taking advantage of occasional fraud."

THE GREAT MOULOR CASE

The best authority on this subject has been reserved until the last. When the Supreme Court of the United States speaks, even by a 5-to-4 decision, the matter is settled. When it speaks by unanimous opinion, no lawyer raises further contention.

In Moulor v. American Life Insurance Co. (111 U. S. 335) the unanimous opinion of the court was delivered by that great Kentucky jurist and statesman, John M. Harlan. The decision was handed down in 1884. Among other things, the court said:

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"The argument is, that if the insured was, at the time of his application, or had been at any former period of his life, seriously or in an appreciable sense, afflicted with scrofula, asthma, or consumption, his answer, without qualification, that he had never been so afflicted, being untrue, voided the policy, without reference to any knowledge or belief he had upon the subject soundness of this proposition could not be disputed if, as assumed, the knowledge or good faith of the insured, as to the existence of such diseases, was, under the terms of the contract in suit, of no consequence whatever in determining the liability of the company. But is that assumption authorized by a proper interpretation of the two instruments constituting the contract? We think not."

Remember that in this great case the warranties of the policy referred to or were based upon the statements in the application.

"Looking into the application upon the faith of which the policy was issued and accepted, we find much justifying the conclusion that the company did not require the insured to do more, when applying for insurance, than observe the utmost good faith, and deal fairly and honestly with it, in respect of all material facts about which inquiry is made, and as to which he has or should be presumed to have knowledge or information. The applicant was required to answer yes or no as to whether he had been afflicted with certain diseases. In respect of some of those diseases, particularly consumption, and diseases of the lungs, heart, and other internal organs, common experience informs us that an individual may have them, in active form, without at the time being conscious of the fact, and beyond the power of anyone, however learned or skillful, to discover. Did the company expect, when requiring categorical answers as to the existence of diseases of that character, that the applicant should answer with absolute certainty about matters of which certainty could not possibly be predicated? Did it intend to put upon him the responsibility of knowing that which, perhaps, no one, however thoroughly trained in the study of human diseases, could possibly ascertain?

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Suppose, at the time of his application, he had a disease of the lungs or heart, but was entirely unaware that he was so affected. In such a case, he would have met all the requirements of that particular question, and acted in the utmost good faith, by answering no, thereby implying that he was aware of no circumstance in his then physical condition which rendered an insurance upon his life more than usually hazardous. And yet, according to the contention of the company, if he had, at any former period of his life, been afflicted with a disease of the heart or lungs, his positive answer to the seventh question, that he had not been so afflicted, was fatal to the contract; this, although the applicant had no knowledge or information of the existence at any time of such a disease in his system.

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"Looking at all the clauses of the application, in connection with the policy, it is reasonably clear that what the company required for the applicant, as a condition precedent to any binding contract, was, that he would observe the utmost good faith toward it, and make full, direct, and honest answers to all questions, without evasion or fraud, and without suppression, misrepresentation or concealment of facts with which the company ought to be made acquainted.

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"The jury should have been instructed, so far as the matters here under examination are concerned, that the plaintiff was not precluded from recovering on the policy, unless it appeared from all the circumstances, including the nature of the diseases with which the insured was alleged to have been afflicted, that he knew, or had reason to believe, at the time of his application, that he was or had been so afflicted."

Especial attention is called to the foregoing sentence in view of the claim, strongly insisted upon by some opponents of the bill, that it is impossible to prove what a policyholder knew. The Supreme Court of the United States does not support that view.

"In the absence of explicit, unequivocal stipulations, requiring such an interpretation, it should not be inferred that a person took a life policy with the distinct understanding that it should be void and all premiums paid thereon forfeited, if at any time in the past, however remote, he was, whether conscious of the fact or not, afflicted with some one of the diseases mentioned in the question to which he was required to make a categorical answer."

And here is the loophole in that great decision; the alternative reluctantly admitted by the court; the condition to which in recent years all the industrial insurance companies have conformed, thus rendering their policies absolutely unenforceable in many cases:

"If those who organize and control life insurance companies wish to exact from the applicant, as a condition precedent to a valid contract, a guaranty against the existence of diseases, of the presence of which in his system he has and can have no knowledge, and which even skillful physicians are often unable, after the most careful examination, to detect, the terms of the contract to that effect must be so clear as to exclude any other conclusion."

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