Appeal from the Circuit Court of Winnebago County, Seventeenth
Judicial Circuit; the Hon. ARTHUR V. ESSINGTON, Judge, presiding.
Reversed and remanded with directions.
MR. JUSTICE SEIDENFELD DELIVERED THE OPINION OF THE COURT.
Appeal is taken from a summary judgment entered in favor of the Insurance Company, denying a claim for $1,569 in major medical expenses.
The controlling issue is whether the Company can forfeit the contract for failure to include in the application for insurance certain prior medical history which was within the knowledge of the insurer's agent.
The complaint was filed within two years from the date of issuance so that the general incontestability clause did not become an issue. However, the Company alleged, as a separate defense, that the application which was attached to the policy contained the following clause:
". . . and provided that if any of the statements and answers set forth in Part A and Parts B, if any, of this application are not complete and true as though given at the time of such delivery and payment, the Company shall have the right to void the policy, subject to the Incontestability provision of the policy. III. Except as otherwise may be specifically provided in the policy, notice to or knowledge of any agent or medical examiner, whenever given, is not notice to or knowledge of the Company, and no agent or medical examiner is authorized to make or discharge contracts or waive or change any of the conditions or provisions of any application, policy or receipt, or to accept risks or pass upon insurability,"
and that in the application plaintiff was asked certain questions concerning his past medical history and made certain false statements and misrepresentations and failed to disclose information which materially affected the acceptance of the risk. *fn1 The Company also counterclaimed for rescission of the policy, offering to return the premiums paid.
Plaintiff admitted the allegations of the separate defense to the extent that he was asked the questions related, but further alleged that he, at no time, filled in the personal health application and that it was filled in by Herbert C. Liedberg, agent of the John Hancock Company, who had knowledge of the omitted medical history and who stated to plaintiff that the omissions were immaterial.
The order for summary judgment on the motion of the Insurance Company followed.
Plaintiff relies principally on the decision of this court in Asselborn v. State Farm Life Ins. Co., 1 Ill. App.2d 104, 116 N.E.2d 902 (1954) (which, in turn, cites as its basis, Security Trust Co. v. Tarpey, 182 Ill. 52, 54 N.E. 1041 (1899)) as authority for the proposition that an insurance company cannot insist on a forfeiture of a policy for a cause which was within the knowledge of its agent at the time the policy was issued. Defendant answers this argument by reference to the exculpatory clause in the present policy which was not present in the Asselborn and Tarpey cases. Defendant cites authorities to the effect that contract provisions may negative a claim that the insurance company has waived a lawful provision of its contract and may avoid the charge that it is estopped to assert limitation of the agent's authority.
In Asselborn v. State Farm Life Ins. Co., supra, a judgment entered on a jury verdict for the beneficiary of a deceased insured was affirmed. The evidence was overwhelming that the insured did not know that he had a heart condition and, therefore, could not have intended to deceive the company within the purview of section 154 of the Illinois Insurance Code. *fn2 It was significant also in the court's opinion, that the company's medical examiners had familiarized themselves with the insured's E.K.G.'s and had pronounced him normal and "a first class risk"; and that the discrepancies and incomplete answers in the examiner's reports were evident to the company, which made no further inquiry. The court concluded, page 116:
"In Security Trust Co. v. Tarpey, 182 Ill. 52, at page 59, it is said: `It has been the rule of this court that an insurance company cannot insist upon the forfeiture of a policy for a cause which was within the knowledge of its agent at the time the policy was issued.' In the instant case, our review of the record convinces us that the agents of appellant knew as much or more about the physical condition of Joseph C. Asselborn at the time he made his application for this policy as Mr. Asselborn himself. The judgment of the trial court is in accordance with the facts as disclosed by this record and the applicable law, and that judgment will be affirmed."
In Security Trust Co. v. Tarpey, supra, the company sought to avoid a policy for alleged false representations that the deceased had made no application to other companies and that he stated his health was good when, in fact, he had consumption. In affirming a judgment for the beneficiary, the court held that no question of fraud or warranty was present since the facts indicated that the company solicited risks rejected by other companies and had before it a copy of the rejection by another company; and, in addition, the medical report indicated a probability of tuberculosis, but that the facts showed that if the doctor concluded that the insured had the disease he did not so inform him.
Plaintiff argues that the rule of the above cases should apply as well to the application containing the clause exculpating the company from notice of facts within its agent's knowledge in the inception of the contract.
Defendant cites a number of Illinois cases for the general rule that parties may incorporate lawful provisions in an insurance contract and the courts will then enforce the contract as made (e.g., Moscov v. The Mutual Life Ins. Co. of New York, 387 Ill. 378, 56 N.E.2d 399 (1944); Western & Southern Life Ins. Co. v. Tomasun, 358 Ill. 496, 193 N.E. 451 (1934); and Pioneer Life Ins. Co. v. Alliance Life Ins. Co., 374 Ill. 576, 30 N.E.2d 66 (1940)). Only the Western & Southern Life Insurance Co. case deals with misrepresentations, and those by the insured directly. The court, in fact, distinguishes the Security Trust Co. v. Tarpey, supra, and a number of similar cases on the ground that ...