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FORMS OF POLICY IN USE 25 YEARS AGO BY METROPOLITAN, JOHN HANCOCK, AND

PRUDENTIAL COMPANIES

The following forms, in part, are taken from a book called Industrial Life Insurance, published by the Spectator Co., 135 William Street, New York, in 1905.

Beginning on page 70 is a set of three sample policies, headed Industrial Policy Forms. The first paragraph under the heading reads :

The following are samples of the industrial policies issued. While but three forms are given, they cover the contracts in general use.”

METROPOLITAN FORM, PAGE 72

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The Metropolitan policy was issued " in consideration of the statements in the printed and written application for this policy, a copy of which is hereto annexed, all of which are hereby made warranties and part of this contract." It also provided that “this policy is void if any of the statements of warranties in the application for this policy be not true."

The Metropolitan application, page 74, contains the following:

“And I further declare, warrant, and agree that the representations and answers made above are strictly correct and true, that they shall form the basis and become part of the contract of insurance, if one be issued,” etc.

ANOTHER METROPOLITAN FORM

Besides the form set out in the Spectator book, copies of Metropolitan applications are frequently found in adjudicated cases dealing with them. In the Barker case in Massachusetts (188 Mass. 542, decided in 1905) the Metropolitan policy read :

* In consideration of the answers and statements contained in the application for this policy, a copy of which is hereto annexed as a part of this contract,

all of which answers and statements are hereby made warranties,” etc. The application, questions and answers are set out on the third page of the policy, and the rest is in print. In addition, however, the policy contained the usual sound health” clause.

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JOHN HANCOCK FORM

The John Hancock policy, page 70, was issued “in consideration of the statements and agreements in the application herefor, which are hereby referred to, and as warranties made a part of this contract.” The application provided that the representations and answers contained in it “shall form the basis and become part of the contract of insurance.” The policy itself, like that of the Metropolitan, provided that “If any statement or answer in the application for this policy, which application is hereb referred to and made a part hereof, is in any respect untrue,

then this policy shall be void.” And the application, page 71, says:

“I declare and warrant that the representations and answers made herein are complete, strictly correct and true; that the several questions were duly asked, and that the answers given by me are truly recorded as above; that they shall form the basis and become part of the contract of insurance," etc.

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PRUDENTIAL POLICY

The Prudential policy in use in 1903 made the application part of it. Witness the following quotations from Russell v. Prudential Ins. Co. of America, 176 N. Y. 178, decided in 1903 :

The application read in part:

“I hereby declare and warrant that all the statements and answers to the above questions, as well as those made or to be made to the company's medical examiner, are or shall be complete and true, and that they, together with this declaration, shall form the basis and become a part of the contract of insurance hereby applied."

The policy begins with this provision, as quoted by the court on pages 186 and 187 :

" In consideration of the application for this policy, which is hereby made part of this contract, and of the quarterly annual premium "-And so forth.

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Mr. BUDLONG. Here is what the Supreme Court of the United States said, not in an industrial case, but the decision has been applied repeatedly to industrial cases since. This is the unanimous opinion of the court, delivered by the great Mr. Justice Harlan: In respect of

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 appl cant 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?

(Moulor v. Ins. Co., 111 U. S. 335; unanimous opinion of the United States Supreme Court.)

Senator VANDENBERG. May I interrupt to inquire whether the conditions you describe in the District exist generally throughout the United States ?

Mr. BUDLONG. Oh, yes. This is widespread; and one reason why I have taken an interest in this matter, having had this injustice in our own family, was because if there is anything wrong with industrial insurance here, it exists all over the country; and both the companies and the Spectator, a leading insurance paper, say that whatever is done here is likely to be copied in the States. Therefore, you should be careful what you do, and what you do will have wide influence.

Senator VANDENBERG. There is no such corrective legislation in other States at the present time?

Mr. BUDLONG. So far as I know, nothing has been done along this line.

Senator Carey. Do you have an insurance commission in the District

Mr. BUDLONG. We have an insurance superintendent; but, of course, he could not remedy the terms of a policy. Or, at least, if be could he has not done so; and I do not blame him, because these policies have been written for 25 years.

Senator VANDENBERG. Has he ever canvassed the matter and made a report on it?

Mr. BUDLONG. I do not know; but I must say that Mr. Baldwin has given me every facility of his office, and I am convinced that he is doing everything he can in the interests of the poor people who are thus insured.

Senator CAREY. The present law does not give him the power?

Mr. BUDLONG. It may; but I do not expect Mr. Baldwin, and I do not think you gentlemen do, coming in six or eight years ago, to compel the companies to do away with a policy that has been written for 25 years.

Senator CAREY. Some States have that power.
Mr. BUDLONG. If I had the job, I should be afraid to do it.

Senator BLAINE. I do not think the District laws permit the Commissioner to have such authority.

Mr. BUDLONG. The Georgia appellate court says:

To permit the insurer, upon the death of the insured, to go back of and behind the bona fide contract and set up its invalidity on account of some unknown and unmanifested disease, which from its nature and customarv

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course must have been existent in some incipient form, although its existence was in no way manifest, * * and despite the fact that the assured was * * * in the actual enjoyment of good health, would be to render doubtful and uncertain the protection afforded by every policy of life insurance, unless, perchance, it might contain other and independent provisions limiting the time of contestability.

In the instant case the medical testimony indicates that the disease must have originated

from 5 to 15 years prior to the contract of insurance. The cause or causes of death are ofttimes as subtle and obscure as any fact which relates to the life of

All life carries within itself the germ of its own dissolution;

to live is to begin to die. (National Life and Accident Ins. Co. 1. Martin, 35 Ga. App. 1.)

I shall have to skip over a lot of these things. I wish to put in the record extracts from the Moular case, which is the great Supreme Court case, and other cases, showing how this decision was used definitely against the Metropolitan and other companies, in New Jersey and elsewhere.

(The matter referred to is as follows:) IMPORTANT DECISIONS OF SUPREME COURT OF THE UNITED STATES AND COURT

OF APPEALS OF THE DISTRICT OF COLUMBIA

THE MOLLOR CASE

The case of Moulor v. Insurance Co. (111 U. S. 335), was not an industrialpolicy case, but it settled a very important principle governing such cases, viz: That although categorical answers may have been made to questions about diseases in the application, it can not be supposed that the applicant intended to warrant or absolutely to represent facts concerning which he could not, in the very nature of things, have accurate knowledge.

From the opinion of the court :

" 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, partic. ularly 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 any one, however learned or skillful, to discover.

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Suppose, at the time of his application, he (the applicant) 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.”

The Moulor case has been cited with approval by various State courts, and (while not binding upon them) it is, of course, binding in this District, nerer having been disavowed by the Supreme Court in subsequent cases.

THE LER CASE

In Prudential Ins. Co. of America 1. Lear (31 App. D. C. 184), the application, which was attached to the policy. warranted the statements in it to be complete and true. The Court of Appeals, in an opinion by Mr. Justice Robb, held that the policy containel statements inconsistent with the application; inti, weighing the two clocuments together, the court said (p. 190) :

“We think this case ruled by Moulor v. American Life Ins. Co. (111 U. S. 335. )"

And the court set out various facts which, it said"lead us to the conclusion that the company did not require more than the utmost good faith on the part of the insured when she made her application."

THE ELZIE OASE

The case of National Benefit Assn. v. Elzie (35 App. D. C. 295) shows the a version of the local appellate court to technical pleas in cases of illiterate industrial policyholders, and is cited by the Court of Appeals in a subsequent

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case on this point. An industrial policy for $50 was involved. The court says (p. 298): • Having permitted these and the earlier payments to be made,

the insured and the beneficiary, apparently ignorant persons, were led to believe that he had never been actually suspended, and that the policy was in force. The association ought, theretofore, to be and is estopped, after the death of the insured, to say that the policy had been forfeited before these payments were accepted and received by it."

And the court quotes the doctrine of the United States Supreme Court that conduct of an insurance company which leads a party honestly to believe that by following a certain course his policy will be valid, followed by conformity on his part, will estop the company from claiming a forfeiture.

THE HEALY CASE

In Healy v. Metro. Life Ins. Co. (37 App. D. C. 240), it was expressly provided that the policy contained the entire agreement between the company and the insured; and, so far as shown by the report of the case, the application was not attached. The Court of Appeals, in an opinion by Mr. Justice Robb, says that a provision of the policy on this subject is “ well calculated to mislead the people who purchase this form of insurance,” but adds:

“We are constrained to hold that the above provisions in the policy relating to the health of the insured at the date of the policy and her prior freedom from certain diseases, standing alone, amounted to conditions precedent, and hence that the company could at any time escape liability by showing that the insured was not in good health at the date of the policy, or that she had previously suffered from the proscribed diseases. After two years from the date of the policy, it is incontestable, except for fraud.

The policy was therefore in force from its date and voidable for two years upon any of the grounds reserved therein, but not thereafter, except for fraud."

In the Healy case the Court of Appeals also cites the Moulor case.

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THE HAWKINS CASE

In Eureka Life Ins. Co. v. Hawkins (39 App. D. C. 329), the Court of Appeals again refers with obvious impatience to technical pleas in industrial-insurance cases, and urges legislative relief from the terms of such policies. In a unanimous opinion by Mr. Justice Robb the court says (p. 332) :

“ Courts of justice do not look with favor upon forfeitures which are the result of technical provisions in contracts of insurance." Then the court cites the Elzie case, heretofore quoted from.

Especially is this true where there is involved a so-called industrial insurance policy, like the one here in issue; since policyholders of this kind are frequently illiterate and generally little versed in business matters. Indeed, it is to be regretted that more adequate protection against the harshness of such contracts is not provided by statute.

The company, after premiums were more than four weeks in arrears and with full knowledge of that fact, sent its agent to make further collections of premiums. It not only sent him once but nine times,

For a period of about seven months after the company now says the policy had lapsed, it continued to solicit and receive payment of premiums thereunder from the insured.”

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THE HEX AND OWEN CISES IN NEW JERSEY

In Henn v. Metro. Life Ins. Co. (67 N. J. Law 310), decided in 1902, the statements in the application were by the policy made warranties. The court (speaking by Fort, J.) says '(p. 312) :

“ If the question asked relates to a matter upon which the insurer should know that the insured could not have the knowledge to fully answer, the warranty will not be held to be more than a warranty in the fair sense of the question, namely, to the belief of the insured.”

And the court, after quoting a paragraph on this subject from Moulor v. Ins. Co. (111 U. S. 335), says:

“ It would be difficult to distinguish between the terms of this warranty and that in Moulor v. Am. Life Ins. Co., or to fail to discern the force of that decision upon the question before us."

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The New Jersey court quotes from the Moulor case the warranties of the policy, which were as follows:

It is hereby declared and warranted that the above are fair and true answers to the foregoing questions; and it is acknowledged and agreed by the undersigned that this application shall form part of the contract of insurance, and that if there be, in any of the answers herein made, any untrue or evasive statements, or any misrepresentation or concealment of facts, then any policy granted upon this application shall be null and void."

In Owen v. Metro. Life Ins. Co. (74 N. J. Law 770), decided in 1907, the statements in the application were by the policy made warranties, and a copy of the application was annexed as a part of the contract. The court, speaking by Mr. Justice Mahlon Pitney, afterward an Associate Justice of the Supreme Court of the United States, says (p. 772) :

“ The derlaration in paragraph 2 of the application, to the effect that the applicant had never had disease of the heart, an obscure disease, concerning which the insured should know that the applicant could not have certain knowledge, saving as he might be told by a physician or other expert, is properly to be construed as a warranty only of the bona fide belief and opinion of the applicant.”

The first syllabus in this case is almost word for word the same as the above quotation from the opinion. The second and third syllabi are as follows:

“2. In such an application for life insurance, representations concerning matters of fact that are presumably within the knowledge of the applicant are to be treated as warranties, a breach of which will render the policy roid.

"3. Such warranties, like all conditions that are to work a forfeiture of a contract otherwise valid, are to be strictly construed in order to prevent a forfeiture."

Senator VANDENBERG. I hope you will not exhaust your time without showing us some specific examples of the impositions you have got in mind. I think that would be the quickest way to get at this.

Mr. BUDLONG. This condition extends all over the country. I have here 10 or 12 pages of cases where the courts, in the most critical language, have denounced what has happened under these industrial policies. I propose to file as an exhibit to the hearing extracts from these cases. The brief ones I have here do not give any of the circumstances. Those that I propose to file do.

A Maryland court says:

The policyholders of this kind of an insurance company (industrial life insurance policyholders) are generally poor and illiterate people who most need protection against harsh, technical forfeitures, because least able to appreciate their significance and because easily induced by the conduct of the company to act upon the belief that their policies are in force. (Balto. Life Ins. Co. v. Howard, 95 Md. 244.)

The Maryland Appellate Court has taken judicial notice of the fact that agents sometimes falsify applications by saying:

It is unfortunately true that agents, in order to effect insurance, sometimes write in their applications, or in some way report to their principals, statements which either are not justified by what the applicants say, or do not disclose the whole truth, as related by such applicants. (Forwood v. Prudential Ins. Co., 117 Md. 254.)

The Virginia Appellate Court can not believe that any person would ever accept a policy guaranteeing that he was entirely free from latent diseases. In its opinion, it says:

When one says he is in good health, he does not mean, and nobody understands him to mean, that he may not have a latent disease of which he is wholly unconscious. It is doubtless competent for a life insurance company, in its policies, to take the expression “good health " out of its common meaning and make it exclude every disease, whether latent or unknown or not (assuming that any person would ever accept a policy of that kind), but it must do so in distinct and unmistakable language. The mere statement by

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