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Shinpaugh v. Midwest Life Ins. Co.

OCTOBER 5, 1961.




Appeal from the City Court of Alton, Madison County; the Hon. I.H. STREEPER, III, Judge, presiding. Judgment reversed.


This case was brought by an agent of the defendant life insurance company to recover as the named beneficiary on a credit life insurance policy issued by the defendant on the life of Esther M. Harting. The policy had been issued pursuant to an application made through the agency of the plaintiff.

The trial court, sitting without a jury, entered judgment for the plaintiff in the sum of $3,000, being the face amount of the policy.

The policy insured the payment of the balance due plaintiff on an alleged indebtedness owed him by Esther M. Harting, the named insured. The date of issue was May 29, 1958 and the term was 12 months. The insured died approximately 5 months after the policy was issued.

Plaintiff had a written contract with defendant company under the terms of which he was appointed specifically for the purpose of soliciting insurance on the lives of debtors "appearing to be in sound health and actively employed." The agency contract further provided that "No insurance shall be written on a debtor except at the time the indebtedness occurs."

The defendant company has alleged the following three defenses: (1) that contrary to the terms of the policy, the debt owed was not incurred on the date of the application for the insurance; (2) that the plaintiff agent failed to inform defendant of the actual condition of health of Esther M. Harting although he had knowledge of her illness, and, (3) that the signature of the insured on the application was forged.

Plaintiff and Esther M. Harting had been social acquaintances for over 35 years. He testified that he saw her about once a week during the last year of her life. From 1920 on through the years, he advanced monies to her for herself and her mother. Although he had not kept an exact account, he thought that the total accumulation of advances prior to May 1, 1958 would amount to about $4,000.

For a number of years, Esther M. Harting was employed at a clothing store in Alton, Illinois. In July of 1958, she left her employment on a leave of absence because of her ill health. At that time, she was 60 years old. Being a Christian Scientist, she did not consult a doctor for her condition until July 18, 1958. The doctor, who was called by the defendant, diagnosed her ailment as advanced carcinoma of the face and throat, and stated that the external condition of this sickness must have been progressing for a period of from 6 to 12 months prior to July, 1958.

Plaintiff, who was his only witness, admitted that he knew of the "sore" on the face of Mrs. Harting a month or six weeks before she quit her job in July. He further testified that "she was grieving herself to death after her mother died in 1957."

Fellow employees, called by the defendant, testified that they knew of the sore on her face for many months before she left in July of 1958. They described it as it appeared to them during the preceding Christmas season. They said it was "terrible," "an open sore," and was "easily discernible." One witness said she begged Mrs. Harting to go to a doctor, but that she wouldn't. This witness further stated that she was in such poor health that she could hardly "totter" when she got off the elevator.

On May 1, 1958, a note was signed by Esther M. Harting in the sum of $3,350, due 6 months after date and payable to the order of plaintiff. This was intended to state the amount due plaintiff for all the advances he had previously made. Four weeks later, on May 29, the application for the insurance here involved was made in the office of plaintiff. Portions of the application including the name of the beneficiary, the amount of insurance and term were typed in, apparently by someone in plaintiff's office. The name and address of insured and her age were written with pen. The question, "Are you in good health to the best of your knowledge?" was not answered. The form was very short and asked only the above questions.

This appeal presents the basic question of whether, under these circumstances, the plaintiff agent may benefit from a policy he procured from his principal to secure the payment of a long standing indebtedness due him from a close friend who died shortly after the policy was issued from a condition existing at the time the application for the insurance was made.

We cannot make any conclusion from the evidence in this record but that the plaintiff was well aware of facts which he failed to disclose to his principal. These facts included the condition of health of the insured and the long standing nature of plaintiff's personal loans to Mrs. Harting. Plaintiff knew any insured must be in apparent good health and that the inception of the debt covered must be concurrent with the application. His contract so stipulated.

[1-3] Justice Daily has very adequately summarized the policy of our law in cases dealing with the loyalty that an agent owes his principal. In the case of Blanchard v. Lewis, 414 Ill. ...

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