Story Case

Mr. Charles Bowman was employed by the Chicago Brick Company as dynamite man, his business being to cave down the banks in the clay pits. For this purpose, dangerous explosives were used. In answering the questions relative to his occupation, when he took out his life insurance, he stated merely that he was a "brick yard man." Several years thereafter, Mr. Bowman was fatally injured by an untimely explosion of dynamite and died a few days later in the brick company's hospital. The insurance company insists that it is not liable on the policy because Mr. Bowman's misrepresentations. Is its contention good?

Ruling Court Case. Bawls Vs. American Mutual Life Insurance Company, Volume 27 New York Reports, Page 282

This was an action upon an insurance policy issued by the American Mutual Life Insurance Company on the life of John L. Fish, payable to Rawls. In the application, many specific questions were put which were answered correctly. But after the death of Fish, the insurance company was unwilling to pay the loss, because Fish drank heavily of intoxicating liquors. The company contends that he should have disclosed these facts, even though no specific questions were asked in regard thereto.

Mr. Justice Wright said: "The third and only branch of the charge singled out for exception was the instruction 'that if Fish answered frankly and truly all the questions put to him, then there was no concealment.' The mere omission to state a matter not called for by any specific or general question, would not be a concealment, and would not affect the validity of the policy. This was not wrong. It may be conceded that if the applicant, when a specific or even a general question is put to him which would elicit a fact material to the risk, untruly stated or concealed the fact, it would vitiate the policy; but I know of no case in the law of life or fire insurance, in which insurers, having framed and put to the insured, and having been fully answered by him a series of questions calling for such information as they desired, touching the subject insured, have been discharged from their contract because the insured did not go farther and state what was not called for in the interrogations. As was said by the learned judge in the court below, 'the presumption is that the insurers questioned the party upon all subjects which they deemed material, and all which were in the contemplation of the parties at the time; and beyond that, clearly a party is not bound to disclose." Judgment was given for Rawls.

Ruling Law. Story Case Answer

A representation is a statement of fact made by the insured, the literal truth of which is not a condition precedent to the validity of the contract. The untrue representation does not render the policy void, unless the statement was material to the risk. Thus "A" represents that he has never been subjected to a surgeon's knife; whereas, in fact, he once had a slight operation performed on his eye. He dies in a railroad wreck. The falsity of his statement does not void the policy. Sometimes it is difficult to determine what is material to the risk. Thus "A" represents that he is not afflicted with consumption, but at the time of making the application he is so diseased. He dies in a railroad wreck. His misrepresentation did not contribute to the loss, yet had the company known that he had consumption, it would have refused his application. Therefore, the majority of the courts will hold that his policy is void.

As a general rule, in fire and life insurance companies, the applicant for insurance is under no duty to volunteer information. The company ordinarily knows better than the applicant what information it desires and usually asks a great number of questions. Therefore, the fact that the applicant does not state some material fact, or volunteer some information in regard thereto, does not void the policy. The applicant may safely assume that the company will ask for all the information it deems material.

An examination of the facts in the Story Case shows that Mr. Bowman was questioned concerning his occupation, and his answer was ambiguous. The question put to him was, it is true, a general question, yet it should have elicited the fact, which, if given, would have been material to the risk. The misrepresentation will, therefore, avoid the policy.