report to the company, or otherwise recommend acceptance of the risk, the company shall be thereby estopped from setting up in defense of an action to enforce the policy that the insured was not in the condition of health required by the policy at the time of issuance or delivery thereof, except upon proof of an adverse change in the health of the insured between the date of such examination or inspection and the date of issuance or delivery of the policy, or unless the issuance or delivery thereof was procured by or through the fraud or deceit of the applicant or the insured.

SEC. 13. If fraud shall be claimed as a defense to any policy, or if it shall be claimed that because of fraud no valid contract of insurance existed between the parties, the company shall not be permitted to prove such fraud by reference to anything contained in, or omitted from, the application for the policy unless an exact copy of said application was attached to the policy at the time of issuance; nor by reference to any statement made by the applicant or the insured in the negotiation of the contract of insurance unless said statement was reduced to writing and an exact copy thereof was attached to the policy at the time of issuance. Fraud must be affirmatively proved in order to avoid the policy or to contest it after the expiration of the normal contestable period of six months provided in section 15 hereof, and shall not be presumed from the mere existence of disease unless the nature thereof was such that its existence and seriousness must have been known to the applicant or the insured at the time of application.

SEC. 14. At any time within six months from the date of the policy, provided the insured be then living, the company may cancel the policy by notifying the insured in writing of its action and tendering back to him all premiums paid up to that time, subject to the following exceptions:

(a) In the case of a policy insuring against illness or accident, claims on account of illness or accident occurring prior to the cancellation of the policy shall not be affected thereby.

(b) In the case of a policy insuring against death, if at the time of cancellation the insured be suffering from a disease resulting in death within one year from the date of the policy the cancellation shall not affect the liability of the company, unless it shall prove that such disease existed at the date of delivery of the policy and that at said date of delivery the applicant or the insured knew or had reason to believe that the fatal disease existed.

SEC. 15. After six months from the date of an uncancelled policy, provided the insured be then living, it shall be incontestable upon any ground relating to health unless fraud shall be affirmatively proved by the company as provided in section 13 hereof. It shall be the duty of the company within said six months' period to make all necessary investigations and examinations to satisfy itself as to the health of the insured, and, if not so satisfied, to cancel the policy as provided in the preceding section. If the insured shall die within said six months' period the policy shall not become incontestable, and the company shall have the right to make all proper defenses thereto without regard to lapse of time.

SEC. 16. When the applicant or the insured has been permitted by the company to designate in writing a person to whom he desires payment made, a death claim shall be payable primarily to said person, if living and legally competent, and he shall be entitled to sue in his own name to enforce payment thereof; but if said person shall have died or become legally incompetent, or shall fail to make claim upon the company within five days after death of the insured, payment of the claim may be made as otherwise provided in the policy.

SEC. 17. If any death claim shall be settled for less than the maximum amount payable under the policy, such settlement shall not constitute a bar (except as against the person with whom the settlement was made) to claim and suit for the balance of said maximum amount by the beneficiary, executor, or administrator of the insured.

SEC. 18. Industrial insurance is hereby defined to be that form of life, health, or accident insurance, either

(a) Under which the premiums are payable weekly; or

(b) Under which the premiums are payable monthly or oftener, if the face amount of insurance provided in the policy is less than $1,000, and the words "Industrial Policy' are printed upon the policy as a part of the descriptive matter.

SEC. 19. This act shall take effect thirty days from the date of its approval.

EXHIBIT A

CASES IN WHICH UNATTACHED APPLICATIONS WERE EXCLUDED, UNDER STATUTORY PROVISIONS, IN SPITE OF EFFORTS TO INTRODUCE THEM

METROPOLITAN COMPANY TRIES TO INTRODUCE APPLICATION IN SPITE OF DISTRICT CODE

"In Metropolitan Life Ins. Co. v. Burch (39 App. D. C. 397), the company offered application in evidence. Objection being made because copy was not attached to policy, the application was excluded. The bill of exceptions then says (p. 403):

*

"Counsel for the defendant thereupon stated that in view of the court's ruling * the defendant was without any defense to the policy for the reason that the only defense was in respect to breach of warranties contained in the application for restoration."

*

The court, in its opinion, sets out the provision of the District Code which require a copy of application to be delivered with each policy "so that the whole contract may appear in said application and policy," in default of which "no defense shall be allowed to such policy on account of anything contained in, or omitted from, such application," and the court says: "The section was intended to remedy a mischief * The purpose of the provision is that the insured shall be furnished with a copy of the application, upon the representations in which the validity of the policy and its binding force may be made to depend * The effect of the new contract, evidenced by the terms of the original one and the renewal application, is dependent upon the truthfulness of the representations made in the renewal application."

(Plaintiff won in both courts.)

66

*

METROPOLITAN COMPANY ATTACHES A SUBSTANTIAL OR PARTIAL COPY OF APPLICATION, BUT IT IS EXCLUDED BECAUSE NOT A COMPLETE COPY

In Metropolitan Life Ins. Co. v. Hawkins (31 App. D. C. 493), "the defense was that the insured warranted in his said application that he was in sound health" (p. 494).

"Plaintiff objected to the introduction of the application on the ground that a copy of the same had not been delivered with the policy as required by sec. 657 of the code."

"The policy refers to the application, a copy of which is hereto attached,' making it and its warranties a part of the contract. On the back of this policy appears a substantial copy of Part C aforesaid "-the medical examiner's questions.

The application was excluded because only a partial copy. The court says (p. 498):

"It is not left to the discretion of the insurer to select such parts of the application as it may deem material for delivery with its policy." (Plaintiff won in both courts.)

MISSOURI COURT REJECTS UNATTACHED APPLICATION, AND SAYS THE STATUTE REQUIRING ATTACHMENT OF APPLICATION WAS TO GUARD AGAINST TRAPS FOR

In Schuler v. Metropolitan Life Ins. Co. (191 Mo. App.), the Court of Appeals of Missouri says (p. 68):

"So the reason for our statute appears; it does afford a material safeguard for the assured in giving him an opportunity, after the policy has been delivered, to examine it and correct any misstatements which may be found in the policy itself or in the application. When the insurance company fails to follow out this statutory provision, it should not be permitted, on being brought into court, for the first time to confront the plaintiff or claimant with such a very material matter as is here claimed to be a part, of the very essence of the contract, namely the application and its accompanying certificate; should not be allowed to hold the insured to a knowlege of all that was in the paper which had been kept from him from the time of its execution until brought forward by defendant to defeat the action." Especial attention is called to the following language:

"We all know, courts as well as people generally, that applicants for insurance sign such papers without careful scrutiny. It was to guard against such traps for the unwary that our statute was enacted."

The court comments on fact that not only was no copy of either application or its substance furnished to the insured or her husband, but that when their attorney demanded a copy he was not furnished it until six or eight months after demand.

"Fair treatment demanded more than this, and in the absence of a copy of the application or of its substance from the policy itself, and in the light of the requirement of Sec. 6978, that application, and its accompanying certificate, should have been excluded from the jury."

(Plaintiff won in both courts.)

METROPOLITAN COMPANY ATTEMPTS, BUT FAILS, TO GET IN EVIDENCE ALLEGED FRAUDULENT STATEMENTS IN UNATTACHED APPLICATION

In Acee v. Metropolitan Life Ins. Co. (219 N. Y. Supp. 152), the opinion of the court (pp. 154-155) states that the company set up the claim

"That the insured fraudulently stated in the application for the policy that she had not been under the care of any physician within three years,' except on one occasion referred to. The application was not attached to or endorsed upon the policy as provided by Sec. 58 of the Insurance Law. The defense of breach of warranty is not, therefore, available to the defendant."

In this case, assuming the claim of fraud to be well founded, an injustice resulted to the company as a result of its own action in failing to obey the statute. Thus, the suppression of the application, usually a handicap to honest claimants, served to protect what was claimed to be a dishonest one. Such cases show the importance, in fairness to both parties, of attaching all applications.

(Defendant's verdict in lower court reversed, and new trial granted to plaintiff.)

ALABAMA COURT EXCLUDES UNATTACHED APPLICATION

In Metropolitan Life Ins. Co. v. Hyche (108 Southern Reporter 40), before the Supreme Court of Alabama, Syllabus 3 holds that—

"Replication that agreements or false statements alleged in defendant's pleas were not incorporated, by reference or otherwise, in policy sued on, was good under Code 1923, section 8371."

(Plaintiff won on pleadings in lower court; reversed on appeal.)

PRUDENTIAL COMPANY TRIES TO INTRODUCE STATEMENTS IN UNATTACHED APPLICATION, DESPITE PROVISION OF CODE; IOWA COURT DENIES IN SWEEPING LANGUAGE ITS RIGHT TO DO SO

In Rauen v. Prudential Insurance Co. of America (129 Iowa 725), the Supreme Court of Iowa says (p. 727):

* * *

The defendant

* * *

answered

*

* * *

* * *

"Some time after the appointment of the administratrix she was visited by an agent of the company, and some correspondence ensued, culminating in a refusal to pay the claim on the ground that in his application therefor (that is, for the policy) the deceased had made false representations and warranties as to his medical history and condition of health. alleging that the policy in suit was issued to the deceased upon his written application and medical examination, in which he made material representations as to his physicl condition and health and that the policy was issued in reliance thereon; that said representations and warranties were not true. The answer concedes that no copy of the application or medical examination was ever attached to the policy as required by the insurance statutes of Iowa."

*

* **

The company claimed, however, that the policy having been issued and delivered in Minnesota, it was to be construed as a Minnesota contract; and the language of the Minnesota statute requiring applications to be attached was somewhat different from that of the Iowa statute. The court holds, however (p. 731):

"In our judgment the effect of this provision is to exclude or eliminate from the contract all reference to an application a copy of which is not attached to the policy, and to render ineffective all defenses based upon anything con

32504-31-3

tained in such application. To hold otherwise is to rob the statute of all effective force and make its enactment meaningless."

(P. 732:)

"The statute is clearly intended to protect the policyholder by requiring the company to place in his hands written evidence of the entire contract between them * * The defense ** * * is bottomed upon the proposition that the application was in fact referred to by the policy and made a part of the contract, and this is the very condition to which the statute is by its express terms intended to apply. If we say that the company may disregard this statute and issue its policy without attaching a copy of the application, and still have the right to assert and rely upon such application as a part of the contract, the legislative enactment is reduced to a mere idle form of words."

(Plaintiff won in both courts.)

METROPOLITAN COMPANY TRIES IN IOWA TO USE UNATTACHED APPLICATION AND FAILS

In Kennedy v. Metropolitan Life Insurance Co. (186 Northwestern Reporter 625, Supreme Court of Iowa), the company pleaded (p. 625) that statements made in the application were untrue as regarded treatment by a physician and health of applicant. The court says the application "was not attached to or made a part of the policy, nor is there any language in the policy by which any reference is made to said application." On page 626 the court says:

"It is apparent that in the instant case the application was the very thing that affected the validity of the policy. It was in no way attached to or made a part of the policy, but by the language of the statute the appellant was precluded from pleading, alleging, or proving such application or representations. It was, however, pleaded and proved by appellant."

The court says it has repeatedly denied the legality of such action, giving many citations, and adds (p. 627):

6

"The appellant insisted that it was entitled to show that the certificate of insurance was procured by or through the fraud or deceit of the assured.' This is undoubtedly true, but the fraud or deceit relied upon in the instant case is with respect to the representation that was made by the insured at the time of making application for the insurance."

(Plaintiff won in both courts.)

METROPOLITAN COMPANY AGAIN TRIES, BUT FAILS, TO GET BENEFIT OF ALLEGED FALSE STATEMENTS IN UNATTACHED APPLICATION

In Hicks v. Metropolitan Life Insurance Co. (190 Southwestern Rep. 661), the court (St. Louis Court of Appeals) says (p. 662):

"The defense predicated upon alleged misrepresentations made by the insured in obtaining the policy of insurance, consisting of alleged false answers in the written application therefor, was not available to defendant * * for the reason that the record discloses that neither the application nor the substance thereof was attached to or indorsed upon the policy, as required by section 6978, Revised Statutes 1909. By failing to comply with this statute, the defendant lost the right to avail itself of the application as a means for invalidating the policy.

(Plaint ff won in both courts.)

KENTUCKY COURT OF APPEALS EXCLUDES UNATTACHED APPLICATION IN INDUSTRIAL POLICY CASE

In National Life and Accident Insurance Co. c. Wallace (289 Southwestern Rep. 219), an industrial policy for $545 was involved, with the usual "sound hea'th" warranty. The Kentucky statute provided that all policies containing any reference to the application must include a copy of it; and, notwithstanding absence of copy of application, the company attempted to prove alleged false answers made in it, there being one reference to application in policy. Syllabus 1 says:

"Alleged false answers in application for insurance policy where application was not attached to policy or printed in policy, could not be proved, and could not be relied on in defense in view of Kentucky Statutes, section

(Plaintiff won in both courts.)

OKLAHOMA SUPREME COURT EXCLUDES DEFENSE OF FALSE STATEMENTS IN
UNATTACHED APPLICATION IN INDUSTRIAL POLICY CASE

In American National Ins. Co. v. Robinson (204 Pac. Rep. 269), an industrial policy for $500 was involved. Appeal was heard by Supreme Court of Oklahoma. First syllabus says:

"False representations or warranties in an application for insurance can not be relied on by the insurer, unless a copy of the application is attached to the policy as required by section 3467, Revised Laws, 1910."

The opinion of the court says (p. 270):

66

The application was not attached to the policy nor made a part of the policy, nor is it even attached to the answer."

(Plaintiff won in both courts.)

DISTRICT OF COLUMBIA COURT OF APPEALS PREVENTS ROYAL ARCANUM FROM
INTRODUCING UNATTACHED APPLICATION

In Supreme Council of Royal Arcanum v. Behrend (45 App. D. C. 261), an attempt was made to introduce unattached application and other papers forming part of contract, but they were excluded under the code.

(Plaintiff won in both courts.)

BROTHERHOOD OF RAILROAD TRAINMEN FAIL TO GET IN UNATTACHED APPLICATION

In Grand Lodge of Brotherhood of Railroad Trainmen v. Groves (48 App. D. C. 151), reliance was placed upon misrepresentation of age in unattached application; but the Court of Appeals of the District held it not admissible. (Plaintiff won in both courts.)

EXHIBIT B

CASES OF NEGLIGENCE OR FRAUD OF AGENTS

GENERAL COURSE FOLLOWED IN WRITING INDUSTRIAL POLICIES DESCRIBED BY APPELLATE DIVISION OF NEW YORK SUPREME COURT

The case of O'Farrell v. Metropolitan Life Ins. Co. (22 App. Div. (N. Y.), 495), is notable for the statement by the court of its experience and observation as to the general course followed in writing industrial policies.

The facts of this case are briefly stated in the language of the court, though it should be added that one of the claims made by the company, based upon the language of the application, was that the agent should be regarded as the agent of the applicant.

The court says (p. 497):

"The proof showed that Perkins took the application for insurance; that he produced the application and wrote down the answers; that the paper was not read or its contents stated after it was filled up; that the insured signed it and Perkins took it away with him."

(P. 496:)

The attempt made upon the trial, by the plaintiff, was to show that in fact the insured had made to the agent of the insurance company correct answers to the questions propounded to him, and that he then informed the agent that his brother and sister had died of consumption, and that the agent put down incorrect answers * * * The proof offered by the plaintiff was objected to by the defendant and excluded by the court, to which an exception was taken." Upon the second trial of this case (reported in 44 App. Div. 554) it was shown (p. 555) that the medical examiner wrote "No" in answer to a question as to the existence of consumption in the parents, grandparents, brothers, or sisters of the insured, although

"Upon the trial the plaintiff gave evidence from an agent of the company who was present at the time when the medical examination was had, to the effect that he heard the question asked, and in reply the insured stated that he did not know."

Resuming the quotation from the first hearing of the appeal in 22 App. Div., the court says (p. 498):