HINKLE v. NEW ENGLAND INS. CO.
Legal provision: Writ Improvidently Granted
Argument of Leland S. Forrest
Chief Justice Earl Warren: Number 28, Maxine K. Hinkle, Administratrix of the Estate of W. Max Hinkle, deceased, petitioner versus New England Mutual Life Insurance Company of Boston, Massachusetts.
Mr. Forrest --
Mr. Leland S. Forrest: Mr. Chief Justice –
Chief Justice Earl Warren: -- you may proceed.
Mr. Leland S. Forrest: -- may it please the Court.
This was an action of law commenced in an Iowa state court upon what is commonly denominated an interim contract of interim insurance.
It appears at page 17 of the record, that is a photostatic copy of what was delivered by the defendant insurance company to Max W. Hinkle.
The unfortunate thing happened that he took out this insurance and paid the first premium on a Friday morning, the 25th February and the next day he was killed by the crashing of his airplane.
Our contention is that this was a binding contract of insurance.
That all the conditions occurred, that the matter of doing business here by this matter, they induced him or led him to believe that he was insured when he paid this premium and that under the decisions of the Supreme Court of Iowa, it is against the public policy of Iowa or any court, either the Iowa courts or any other court to assist an insurance company from evading that liability when they -- Iowa has said that by the -- the fact that they are charging him a premium over that interm, that if they don't have to pay it is unpaid.
Now our chief complaint against the Court of Appeals is that they decided this case by numerous decisions other than from Iowa.
They did mention and cite the Reynolds case that we cite in our brief and I have cited it to that.
They stated what the court said in that case, then they took a large number of cases, mostly cases from states where the fact I'm going to call your attention to, the most essential fact did not exist and then said by interpreting this Iowa case, in the light of this -- these other cases that there should have been a verdict directed for the insurance company.
So the real question in the case, it's not a case of who should recover and who shouldn't, it's a case of whether or not the court should have directed a verdict for the insurance company.
The trial court overruled the motion of the defendants for directed verdict, submitted to the jury and under his instructions the jury found for the plaintiffs.
Now it's immaterial, nobody took any exceptions to these instructions, I didn't and they didn't.
Justice Charles E. Whittaker: (Inaudible) lawyer and the Court of Appeals who wrote this opinion was an Iowa lawyer, is that right?
Mr. Leland S. Forrest: That is where I made my mistake in the oral argument and of course that did create I think considerable prejudice in the part of the Iowa judge against the man from the Missouri and I think that is one of the reasons I claim it wasn't due process of law, because then when you emphasis the fact where the judge came from, then you haven't got due process of law, but (Inaudible) prejudice.
And I might say however that the gentlemen, if you gentlemen set up there from Kansas City, you probably know him better than I do, was one of the most brilliant men and you didn't have to hit him over the head with the case to get him to see it, he was usually two jumps ahead of you.
And my contention is that don't make any difference where the judge came from, there isn't any judge in Iowa that would have sustained the motion for a directed verdict in this case.
Now if you look at that, in the first place they have written in there the word immediate coverage in ink in addition to what they printed, and here is what they printed, the insurance applied for shall be in full force and effect from this date, provided the proposed insured is now in good health, notwithstanding any change of the proposed insured's health or condition due to disease hereafter acquired or to any subsequent causality.
Now by the time the average man and I'm going to refer to the Judge Hand's opinion in the Second Circuit obviously, by the time the average man reads through the sentence the rest of it is he is confused.
It took the court -- Judge (Inaudible), it took him 20 some pages with briefs and weighted authority to convince himself that this meant what he said would be.
Now if you refer to Judge Hand's opinion, he says in the Second Circuit, that these things are to be interpreted not like an insurance adjuster, an insurance underwriter would interpret it, that it be interpreted the way the average man would interpret.
Justice Felix Frankfurter: Would you think that Judge Hand was an average man?
Mr. Leland S. Forrest: No, but he didn't do this which the Court of Appeals did.
He doesn't write his knowledge of insurance business into the opinions and make an expert witness out of himself subconsciously.
Now that's what he was saying I think, that no judge, no matter how much he knows about insurance, should not write his knowledge of the insurance business into a contract and thereby read his knowledge in there as if he were an expert witness, and that's what I claim, the Court of Appeal's statement.
They took review of that -- they took their knowledge of a -- of the insurance underwriter and they said this conclusively shows that he wasn't insurable, but the only way they could do it under not here, but they didn't say it was insurable, but not insurable under the underwriting rules and practices of the company.
Now they did put in evidence some of their underwriting rules and practices, now that was over by objection.
Now here is what is actually happened.
They introduced parole evidence over my objection to vary the terms of this contract and your judge, he knew his evidence law, because I objected that it was varying the pro tanto.
He says I'll let it in but I can take care of it on the instructions which is just another way of saying the parole evidence rule is rule of substantive law, so what difference does it make (Inaudible), as long as I take it out from the (Inaudible), and that's the only evidence a judge take out, and my understanding (Inaudible) and tell the jury not to consider it is what violate the parole evidence rule because parole evidence rule (Inaudible).
Now words of this can't goose out of a turkey but from goose – turkey to goose and now let me call your attention to the most important Iowa decision.
I made a mistake in the case you mentioned, because I assumed as you hinted I should assume that the Iowa judge knew the Iowa law.
Now I don't dispute he does, he knows it, but he knows it the way he thinks it ought to be, he doesn't know it the way the Supreme Court of Iowa says it is, and here is what the Supreme Court of Iowa said, and this is the case the Court of Appeals refused to read, of course I asked him to read it, and they wrote in the opinion and said it's unnecessary to pass on that question because we hold that the it doesn't make any difference where the agent had the authority or not.
Now he was about to say it and I read it for two reasons, one because I think under your Erie rule the Court of Appeals was bound by it and the second it's effect duration of the policy of Iowa, as to what is good public policy and whenever the Court of Iowa says that the thing is not good public policy then if an Iowa Court goes in to defeat that public policy, it isn't just right.
Now let me read what it says, this is a quote, "Where the policy covers the risk from the date of the application."
Justice Hugo L. Black: What are you reading from?
Mr. Leland S. Forrest: This is from the (Inaudible) case cited in my brief, (Inaudible) against the Fire Insurance Company.
Justice John M. Harlan: What page?
Mr. Leland S. Forrest: Well I wrote is here in typewriting I can't give the exact page, but the case, is a 199 Iowa, I think --
Unknown Speaker: On page 34 of the brief.
Mr. Leland S. Forrest: It's in my brief and I haven't proffered this in the brief, but I want to read it because for the very thing that they said, they presumed that this Iowa judge knows the Iowa law and I'm sure he does, but he doesn't know it the same way the Supreme Court of Iowa knows.
It is apparent that the insured pays for insurance for the stipulated period beginning with the application, not the date of its acceptance.
No one would be expected to take out insurance for a period of time that had already lapsed, but unless there is a preliminary contract of insurance covering the time between the making of the application and its acceptance or rejection, that is what every insured who received such a policy is required to do, but just the injustice of saying that on the acceptance of the application, the insured has had protection from the prior date where no loss occurs, where it is also said, that there is -- and that he is not protected, if a loss did occur, is plain.
In other words, they declared the public policy of Iowa that if they are collecting a premium, that is going to date the policy prior, back to the application then if he, when he dies -- when he gets insurance of course sure he wasn't insured, or if he is still alive, then they charge him and begin to collect the premium as the date of his application, not the date of his policy.
So Iowa says there's scheme for doing it.
The injustice of it is plain.
Now when I, my contention that when the Supreme Court of Iowa declares a public policy of Iowa of what is an injustice and then some, if he is not a judge that sits on the Federal Court, when he sits on the bench and you just hit the decision as a Federal Judge to produce the very injustice that the Iowa court has denounced it against its public policy, he is certainly not following the Erie rule.
I think Erie rule as I understand it they are supposed to get the same results that an Iowa would get.
Justice William O. Douglas: You said in this situation the man pays the premium he gets in every case of term insurance.
Mr. Leland S. Forrest: No I don't -- it depends on how they worded their application and their policy, but their idea here was that well I mean read their own evidence, he says in here that I am a State Director, so I am naturally State of (Inaudible) wherever it comes.
Turn over on next page to Page 20 is the fact of this application and that is the very thing -- it was on the application in the (Inaudible) case.
If the premium is paid on the date the application is signed the policy will usually bear that date it's issued as applied for.
In other words they told him right there and they told the agent, we are going to date this policy, the date of the application, not the date we issue the policy.
Now I didn't discover that, I didn't know it was there I have to try, so I thought that I have to prove that fact by cross examination.
So I asked the Vice President of the company who testified in his evidence I think is on Page 47 on that, I asked him, if you had issued a policy in this case what would have been the due date of the premium, the date of the policy or the date of the application.
He said the date of the application, and I asking if that was in their usual practice.
And he said no, not always but that would have been the practice in this case.
In other words they have gotten up a scheme or a contract which if you read the defendant opinion, I think you get, it's clear in (Inaudible) by which day or time that agent sells, in the competition of selling insurance where they wanted induce the man to take out insurance right now and pay the premium and if you will, they will make his insurance effective immediately and that's what they tell him.
Now after they tell him that of course and they take his money, then they hand him these receipts and of course receipts (Inaudible) court.
Now that in -- this case is in conflict when these two Iowa cases that I have cited the Reynolds case and this (Inaudible) case.
Now let me explain about the (Inaudible) case.
This (Inaudible) case was a fire insurance policy and the argument was whether or not the agent had the authority to make that effective immediately or wait until he delivered the files.
They had good enough evidence in that case, his contract with the insurance company which said, expressly that the agent did not have that authority.
The Supreme Court of Iowa says, irrespective of what you put in there if -- and they said this what I quoted here, if they are charging a premium over that time or fixing it so when they issued the policy they have the authority to charge a premium over that time then the -- and because of the injustice of such a situation I think they should have said they are going to stop to deny his authority, but they didn't say that, they went farther than that.
They said he had apparent authority.
Now if he had apparent authority there is only one way that it could have appeared to the insured that he had authority and that is that he has authority to tell the truth.
The Iowa case says the reason he had apparent authority to promise immediate coverage is because the charging the premium under the Iowa law there was as immediate coverage.
And if there's immediate coverage the reason, he ain't got apparent authority to tell the truth and that's I think what that case means.
But it does make any difference in every case, well there are the two actually, and they're -- that is they don't have a new rules, that what they are doing is saying that whenever this situation arises, there -- a mere effect that they are charging that premium means as a manner of public policy in Iowa whether they claim to have no authority or whatever they claim they are lying.
And I think you could even say that they have a case actually interprets or construes that collecting that premium simply impose a liability.
Now they haven't used it and in this, insured in this agency case.
They did finish up and said we do not mean to hold here necessarily, that we are imposing our liability, but they didn't say, we are not I think that they mean next time don't argue about authority, come up here and claim this as an imposed liability and we'll hold (Inaudible).
But anyhow whatever you take it, in every case, it's a declaration of the public policy of Iowa and that's (Inaudible) shall we give a signal and I want to reserve the rest of the time to rebuttal.
Don't ever you forget on the (Inaudible)
Chief Justice Earl Warren: You could do it your own way.
Argument of Phineas M. Henry
Mr. Phineas M. Henry: Chief Justice, may it please the court.
I am not familiar with whether or not Your Honors have had any provision – (Inaudible) about this case but if you haven't I am sure that you don't know anything about the facts of it by misstatement of opposing counsel.
The receipt is what is called a conditional receipt and it contains not only the proviso which he read, but a second proviso, first proviso that he'll be in good health and second that he furnish evidence of his insurance -- satisfactory evidence of his insurability.
This was on a priority.
An arrangement the -- after the application had been signed the agent said, when can you take the medical examination and he said that day.
There is some slight conflict about whether this was forenoon, or afternoon or who called the doctor, but any how they, in his presence they called the doctor and they arranged that the examination be held that day and then the applicant said stop I've got to be away, I'm going away and they arranged to have it on Monday.
Then he signed up the application and in the application in answer to the question there is a proposed insured plan to make him fly as trainee pilot or a crew member or has he made such flights in ten years, he said no.
As flying (Inaudible) as his flying time -- well this is above (Inaudible) he said no.
Beyond an air plane he had been flying for years.
He flew every Sunday.
He went out the next day and was killed in his plane.
Before there ever had been a medical examination, a check has been given to the first premium and that check after being held for sometime pending an examination by some other attorneys was never cashed and was returned to the applicant, to his widow.
And a suit was brought on the theory that there is, on two first count was that the receipt in itself was a temporary contract of insurance and the second was that if there was any requirement for a medical examination that has been waived or excused by the company.
Now just a word about a conditional receipt, the great cry is that a conditional receipt is an engine of fraud because it lures a man into thinking he has been insured when he hasn't been.
There are several kinds of conditional receipts.
There is an exhaustive note in 2ALR second which is referred to in the Circuit Court's appeals opinion in which they list various categories of conditional receipts.
Some of them are conditioned upon the approval of application at the home office of the company.
Some are conditioned upon the issuance of the policy or delivery the policy and some of them as this one condition upon the insurability of the applicant and Judge Hand in the (Inaudible) case referred to that form a receipt as being a more favorable to the applicant than any other.
Now what does the applicant get?
Assuming that the applicant passes his medical examination and there is no other outside evidence with regards to his habits, occupations, the family history and so forth, the (Inaudible) uninsurable.
The -- he is covered from that date regardless of whether his death occurs before the application reaches the home office of the company or before a policy is issued, but the point that I want to emphasize here and the point that is made in the cases where there have recovery, is that this conditional receipt is meant to protect an insurable applicant and not an applicant who is uninsurable.
Now the testimony here was that this man was not insurable for the plan and rate applied for.
To go back again to explain a little bit more about it, because that's was when -- this is what is called an increasing term policy, and it starts out at $10,500 which is a small unit issued, and then the amount is reduced $500 a year and the purpose of it was to protect people who are -- have mortgages on their homes, on which they are paying an installment payment so that as the amount of the mortgage goes down, the amount of the insurance goes down, but in any event the insurance protects the man from his decreasing death.
Then there is in the record a showing that if a man says that he is engaged in aviation, they give him what is called an aviation questionnaire in which he recites whether he owns a plane or whether he is a pilot, how many hours he has flown and so forth, and then at the bottom of that aviation questionnaire as shown in the record on page 43 is a notice to the agent asking him if the insured wants to be covered with an aviation limitation, that is to say that if the insured is killed while flying as a pilot, the premium will be returned, or the (Inaudible) or wants to pay an extra premium, which in this case it would have been $3.75 a thousand and he is given the opportunity to do that and if he wants to pay the aviation -- if he wants to have the aviation exclusion cause, he has had it right down there, a writer to his policy which appears in the record on page 44, which he signs and which agrees that if he is killed, while acting a pilot, or officer or member of the crew, the company's liability is limited.
Now the agent testified that this man said no.
The petitioner claims that this answer no was written in by the agent after he left.
Well, now the agent swore, definitely you could say so, a woman was there, who was a clerk around there and she said that she was there, but she didn't pay any particular attention until they called up the doctor on the telephone.
The insurer says over his signature which contains his answers, the foregoing information is true and complete and is correctly recorded.
Now if he had told the agent that he was a flier, that would have been -- he would have been given the opportunity to either sign the aviation amendment or to pay an extra premium, as he didn't of course nothing was known about that, but the record shows that in cases of this kind an investigation is made for the retail credit company and as everybody in the office says that they knew he was a pilot and that would have undoubtedly been disclosed and there again he would have been given the opportunity to have the aviation exclusion clause or the -- pay the extra premium, but the policy would not have been issued as applied.
He was not insurable for the plan rating applied for.
He was eligible for insurance and Mr. Forrest says that the agent -- that the agency vice -- the underwriting Vice President of the company said that he was insurable.
He said and I'm sorry to say there is a slight (Inaudible) where he is quoted in the brief on page 12, the word any appears as in by the bench, but this is what he said, "If Mr. Hinkle's aviation record had been disclosed in the aviation questionnaire, a policy would not have issued (Inaudible) extra rating or without the limit of the aviation coverage.
If a man owns an airplane and answers the questions regarding aviation any further, he would be eligible for every plan of insurance we have, with either an aviation exclusion clause or an extra premium."
Now that's all that was done.
Now it's so happens that one of the leading cases on conditional receipt is Reynolds case in our (Inaudible) and I will remind Your Honors, what was suggested by the Judge Whitaker that in three, not the two recent cases, not too old cases, Ragan against Merchants Transfer & Warehouse Company, Helvering against Stuart, Spiegel Estate against Commissioner who say that ordinarily you will accept the opinion of a local judge and the local law and judge Van Oosterhout has shown by who is who practiced law, was in the Iowa bar for 30 years and sat for 11 years on the district bench in Iowa, which is our in court.
Now the Reynold's case is a case against Northwestern Mutual, where the receipt was conditional upon insurability.
The man passed his medical examination and then died the next day and the company said that he wasn't insurable because the proof of death showed some previous heart trouble.
Now exactly the same claim was made in that case that is made in this, that when the receipt was given he was granted temporary insurance subject to be discontinued upon the rejection of the application on the ground of his non-insurability.
And the Iowa court held that the insurability of the applicant on the date of the medical examination is by the contract made the test of a company's liability.
Now the counsel for the plaintiff in that case says -- said just what he is saying here, that the insurance becoming effective upon the date of the medical examination, now that was date of the medical examination, here it's the date of the application, but there is no difference between those two, it is the prior case, and they are both of course (Inaudible).
He contended the insurance becoming effective upon the date of the medical examination continues in full force, until the application is rejected by the company.
That contention was denied and the Court went on to say that if the insurance did become effective, it became effective at the past date of the medical examination because that's what the receipt said, but that's what they didn't say; that, that was against the public policy of Iowa, and there is not a word (Inaudible) about public policy.
They said that the contract contemplates that the liability will attach before the issuance of a policy, but they said that as he was not insurable on the date of the medical examination, although he had passed it, the company was not liable.
Justice Hugo L. Black: Why was he not insurable there?
Mr. Phineas M. Henry: He had a previous history of heart trouble which he had denied in the application and which appeared from the proofs of death.
Justice Hugo L. Black: But was he insurable?
Mr. Phineas M. Henry: No sir, because of his past medical history.
Justice Hugo L. Black: He Couldn't have gotten the policy?
Mr. Phineas M. Henry: No sir, they have (Inaudible)
Justice Hugo L. Black: Impossible for him to get a policy?
Mr. Phineas M. Henry: Well I mean if -- it's not (Inaudible), he might have got one with a rating for bad health, a rate up policy, what they call a substandard policy that didn't appear, but they found that he was not insurable because of his past record of heart trouble and several serious heart attacks.
Now this Reynold's case is the law of Iowa.
Counsel takes two extraordinary positions here.
He says that Court of Appeals was wrong because it didn't follow the Iowa Law, under the Erie case and then he says that the Erie case will throw that up now and make a uniform federal rule of that would be applied to all of these cases and not follow the law of the state.
This is obviously since Erie Railway, a decision to be governed by the law of Iowa.
The law of Iowa was laid down by the Reynold's case and the Court of Appeals after signing that case wound up with the one paragraph that summed up the whole thing, the insurance was not in effect for reason that the applicant did not and could not meet the insurability conditions set out in the conditional receipt, because of his aviation pursuits.
Justice Charles E. Whittaker: Mr. Henry –
Mr. Phineas M. Henry: Yes sir.
Justice Charles E. Whittaker: -- may I ask you sir, you referred to the answer on -- to question 17 on the application 70 -- exhibit 2 on page 20.
Would it make a difference if that were not Mr. Hinkle's answer?
Mr. Phineas M. Henry: Not in the view of the court.
Now perhaps I apologize to the Court, I should have gone on to say what was left to the jury in this case.
It was left to the jury on question (Inaudible).
The court, the lower court picked out the receipt the first proviso, which was that he shall be in good health.
He ignored the second proviso entirely and he instructed a jury, that there was only one question in the case and that was whether the insured, the applicant was in good health on the date of the application.
Now there was no illness in the record whatever about this good health, except for the fact that he had passed an examination of a pilot's license about months before and there was nothing in the record to show what the qualifications for that were.
But in view of his view and the view of the view of the Circuit Court tool, it didn't make any particular difference whether he lied about his aviation record or didn't lie or whether he -- the fact was that, that would have been discovered by the -- as you can see, that would have been discovered by the investigation and whether or not he told the truth or didn't tell the truth was really immaterial.
Justice Charles E. Whittaker: Here is what I mean to get to, as I have done a little looking at this record and there was some evidence that this answer to question 17 may not have been Mr. Hinkle's answer, but the answer written in by the agent.
Was there enough there, to make an issue of fact for a jury and on that question and so that the Court of Appeals ought to have sent the case back for a retrial before a jury of that issue, rather than to have simply held the plaintiff was entitled to recover?
Mr. Phineas M. Henry: I don't think so Your Honor, because as I say, in the view that both the trial court and the lower court made, it make any difference.
I mean if we grant that, it didn't make a difference whether the applicant told the truth or didn't tell the truth or that doesn't make any difference where the applicant wrote the -- signed the application after the answer was there or before it was there.
Now the only evidence to this, the only evidence on the book was the direct testimony of the agent and the testimony of a woman clerk who was there, and said that she didn't hear him ask Hinkle, any aviation questions, but she was busy about her own work, and did not pay any particular attention to the conversation, until she heard the agent call on the telephone to make the appointment with the doctor.
Now that is the only contradictory evidence on the point, but I think in view -- I think that the point is immaterial in view of the fact that he was, because of his aviation activity, uninsured.
Justice Charles E. Whittaker: Well there wouldn't have been any representation in that respect although absent a negative answer to question 17.
Mr. Phineas M. Henry: That's right sir.
But we are not -- if the policy had been issued, and then it had been later discovered that insured was a pilot and the company had brought the suit to cancel the policy for misrepresentation or if the insured had then died, it might have been a very, very important point then to determine, whether this policy was obtained by fraud, and of course if they didn't write in the application, it was written in by the agent, after he signed it, or then it wasn't obtained by fraud, that might have been very important, but that is not so important here, in view of the fact of his non-insurability.
Justice Charles E. Whittaker: The fact of his non-insurability, I'm having a little difficult with this, was not bad health, it was merely that he did some flying and in the answer to question 17 said he did not.
Mr. Phineas M. Henry: Didn't matter whether there had been -- if Your Honor please, suppose there had been no question at that time.
Justice Charles E. Whittaker: Yes.
Mr. Phineas M. Henry: And suppose that then, the inspection report had disclosed that he was a pilot and owned his own plane, and the company had then refused to issue the policy, that would have been, because he was uninsurable regardless of whether he said he said he was pilot or not a pilot.
Justice Charles E. Whittaker: But as in this case when he died the next day by an accident.
Mr. Phineas M. Henry: And we say that he was not -- and we would have said he was non-insurable.
Justice Charles E. Whittaker: But he had made no representations though in the assumption we make now, that this was not his answer to question 17 that did not fly.
Mr. Phineas M. Henry: That doesn't make any difference if Your Honor please, whether it was the fact, not a misrepresentation as to the fact.
Suppose that he said nothing in the application about his habits discovered that he was an alcoholic, that no misrepresentation about his alcoholism in his application.
The company would have had a perfect right refuse to issue a policy because he was an alcoholic, even though he hadn't said a word about his being not an alcoholic or quite (Inaudible).
Justice Charles E. Whittaker: Well isn't it true that in the absence of some such representations in the application, are absent some condition excusing liability in the conditional receipt, the company would be liable if he were killed the next day?
Mr. Phineas M. Henry: Yes sir.
Justice Charles E. Whittaker: Well then do you find (Inaudible) –
Mr. Phineas M. Henry: The condition was in the receipt.
Justice Charles E. Whittaker: In the receipt?
Mr. Phineas M. Henry: Yes sir.
The insured's life shall be in full force and effect from this day, provided the insured is not in good health, notwithstanding any changes and provided that satisfactory evidence of the (Inaudible) is not insurable to the amount, plan, rate (Inaudible).
Now it would have received evidence that he was a pilot in the normal course of events and would therefore have failed to insure.
Chief Justice Earl Warren: How about those words -- I was going to say how about those words like immediate coverage that appeared in there apparently in the handwriting of the agent.
Mr. Phineas M. Henry: Now I call your attention to that and I call your attention to where it occurs.
Chief Justice Earl Warren: Yes.
Mr. Phineas M. Henry: It occurs under the amount, now the testimony was that the agent explained to Hinkle that this policy started at $10,500 and then it went down $500 a year.
Now the only place, the only way the amount of the insurance can be put on the print blank is by putting in the amount and he said he wanted to make it crystal clear to Mr. Hinkle that he wasn't (Inaudible) policy for $10,500 it was a reducing term policy.
Chief Justice Earl Warren: Does that term express immediate coverage, does that express that fact?
Mr. Phineas M. Henry: No sir.
The immediate coverage as both the trial court and the Court of Appeals held, the immediate coverage added nothing to receipt because if the receipt was a contract of temporary insurance, it took effect immediately anyhow.
And if it was a conditional receipt, conditional upon the other thing, then the coverage was purely explanatory, but as is I said to Your Honor --
Chief Justice Earl Warren: It's not a usual thing for them to do, to put that immediate coverage?
Mr. Phineas M. Henry: Well you might say this is rather an unusual type of policy because when you pick out $1,000 of insurance, you think that yourself is having taken out $1,000 of insurance.
But because of the fact that this amount was reduced every year, he said, this is his testimony, I made it a point of making it crystal clear to Mr. Hinkle, that this was decreasing term insurance, that this $10,500 was not a permanent situation and as I have explained to the court and jury it decreases each year, that is the reason why I wrote I the receipt, I put it back in, so that there would be no misunderstanding at all on part of Mr. Mr. Hinkle.
I told Mr. Hinkle why I put that in, I wrote it out there, so there is no possible chance of any misunderstanding.
Chief Justice Earl Warren: But do you think that those words convey that meaning?
Mr. Phineas M. Henry: Well, I will say it to Your Honor that I don't think the words add anything.
I will say that if I had written that receipt, I would said initial coverage rather than immediate coverage, because I think that makes it a little clear.
But if the receipt was either a binding receipt, which gave him temporary insurance (Inaudible) or it was a conditional receipt which didn't take effect unless the provisos were complied with.
But if it did take effect, because the provisos were (Inaudible) it took effect from its date which was immediate coverage.
So, that adding the words immediate coverage didn't add a thing to it.
Now, if he had meant to say that he had attempted to write a binding receipt, there would have been no reason for his putting that right under that amount on the top (Inaudible) provisos.
He didn't think he was changing the terms of the receipt, he thought he (Inaudible)
Justice Felix Frankfurter: You are arguing -- your answer is so this is a general question of law.
What's the significance of those words (Inaudible)?
Mr. Phineas M. Henry: I say that.
Yes sir, I say that, that is the answer --
Justice Felix Frankfurter: (Inaudible)
Mr. Phineas M. Henry: I say its answered by the (Inaudible) and as to the immediate coverage, that of course was not covered and the district court, said that, that adding nothing to the receipt and that he submitted to the jury on that point.
Now, just for the sake of the record, I want to say that the words, that mean to the instruction, but they were not preserved because we thought we were entitled for a directed verdict under these decisions in the Reynolds case.
Now I have been -- there are several other things I mentioned -- my time is about up but there are several constitutional questions raised, I don't know -- of course what the members of the Court had in mind in planning the writ.
I can't believe that they are very important.
He talks about being prior to the writ, filed by jury under the Seventh Amendment and he raises the question if the Federal Court ever had any jurisdiction at all, although it was stipulated that they did, and I don't know how it's worthwhile wasting any of my short time on those points.
But there were 300 questions raised in the motion for directed verdict and under our rule in Iowa if a motion for directed verdict is based on with say foreground and the District Court chooses to pick out one of them and say I will sustain it on number one, and I'll overrule two, three and four then I come to an Appellate Court even though the Appellate Court may not agree with him on number one, if either two, three or four were good, the motion is upheld.
Now we raised the additional points which the court specifically did not pass on.
But we said that this was a -- this was issued in connection with an application.
It ought to be read with the application.
But the application was never completed by a medical examination and there was -- never came to the Home Office of the company and therefore under the general contract law, the meeting reminds that there never was a complete identification upon which the (Inaudible) could meet.
We said that this question of immediate coverage was explained by the testimony but if it was thought to vary the terms in the receipt we put it that the agent had no authority to bind the company to a contract of insurance because of limitations of his authority.
And the Circuit of Appeals referred to that as a serious of question of law which we will not consider.
And fourth we refer to an Iowa statute which says that no contract of insurance shall be issued in Iowa in excess of $10,000 without a medical examination.
And we say that the applicant was bound to know that and without a medical examination this company couldn't meet a contract of insurance and the Court of Appeals again said that that was a serious question.
Now then as to the two cases in the Gaunt case and the Liberty and National case against Jones in Tennessee, the Liberty National case receipt, instead of saying insurance applied for said in the receipt itself it two places, and this is underlying the opinion by the Court of Appeals, the insurance granted here under making the receipt itself a contract of insurance, the insurance granted here under, and the court held that that was a binding receipt.
The -- Judge Hand in the Gaunt case held under the law of the Connecticut where he could not find any law but on the general law that he felt the contract was ambiguous.
No plea of that ambiguity was made in this case, and the court held that we think the Iowa court would not find the contract ambiguous.
But there are, we submit the case, that the (Inaudible) case which my opponent referred to, the Fire Insurance case, the powers of fire insurance agents and life insurance agents are entirely different.
You ensure your house against fire, you want to (Inaudible) so your house doesn't burn down at night, that night and general agents and agents of insurance of fire and causality companies are authorized to bind their companies by -- I will, I think Your Honors will find that the -- we'll know that a life insurance company does not consider its underwriters, as its agents as underwriters.
Its applications have to be approved, and its Home Office after being gone over by it's underwriting department, and I think Your Honors will fail to find a case, my research and research of my opponent has to failed to find it where they said that a man was insured one of these conditional receipts, when the conditions had not been complied with and the insured was not insurable.
In both the Gaunt case and the Liberty National case, the Court found that each one of those men was insured, and to link with the Liberty National case they pointed out in that case that they had refused a liability under similar contract which came up from Michigan because they were bound by the law of Michigan, but they found no law in Tennessee and they held that, that contract which was a much broader contract than this, did create a binding contract of insurance.
Chief Justice Earl Warren: Mr. Forrest.
Rebuttal of Leland S. Forrest
Mr. Leland S. Forrest: May it please the Court.
If the Court will (Inaudible) in answer to this thing that this judge, who is quoted (Inaudible) who is who is -- knows the Iowa law let me read to what he said.
I know he knows the Iowa law, because here it is, (Inaudible) now he turned around got his (Inaudible).
He says here we believe the Iowa court would not find the conditional receipt before us ambiguous.
Well if it wasn't ambiguous how could they introduce this evidence here to bury the terms of this immediate coverage?
If immediate coverage doesn't means immediate coverage then you can't introduce the evidence, so they wanted to prove it was ambiguous, now he is wrong about that, it is ambiguous.
They are the ones who claimed (Inaudible) and that their evidence wasn't admissible to bury the terms because it wasn't ambiguous.
Now in the printed brief they claim now that this case isn't like Judge Hand's (Inaudible) one in the Sixth Circuit because those were ambiguous and this wasn't and I've got -- sure to explain that if the (Inaudible) see it, because it is clearly fallacy.
Anyhow he said that I believe the Iowa court would construe this contract as providing insurance from the date of this receipt subject to the condition that if the insurer rejects the application in good faith for valid reasons and upon the ground that the applicant is not insurable, the amount (Inaudible) applied for, and the premium is returned, no liability would exist if that occurs before notice of rejection.
Now that is what the Reynolds case says, then he goes ahead and he say that they did reject it and that's the thing I complain about, in the two Iowa cases one says if they are assigned a different reason before they -- even if they had rejected it, they signed some other reason for refusal to pay before they rejected it, then under what we call in Iowa the mending this whole (Inaudible) doctrine they can't mend the whole and go and reject it afterwards and the evidence in their own pleading, they plead that they notified the attorneys for this woman that the reason they wouldn't pay is because he never had physical examination and under the Iowa doctrine amending this whole, they are limited to that defense and that's the reason I think the trial judge instructed that if he didn't have a physical examination he would have passed it if he is in good health.
Therefore if he is in good health, it's immaterial whether they had a physical examination or not and that's what the American Law Institute says about excusing conditions.
That if the condition would have occurred, if it had gone ahead and do it, the fact that he was prevented from doing it by death or they prevented it from doing it but putting it off to Monday, and if he was in good health, then he didn't need a physical examination, and that's the Iowa law, and I cite the case in there on that.
Now fallacy (Inaudible) is in applying their facts they think or they go ahead and show that they did reject it, but here is where they rejected.
The case I cite says it has to be rejected by the committee in the office and Mr. Arnold their Vice President testified and here was their theory, we have never accepted this offer.
An offer can't be accepted except by our committee that passes on this, and we do not take the doctor's report alone and then to corroborate it he brought in a Mr. Mustard who is the head agent of the detective agency who testified that he had (Inaudible) business and they all just turned it over to detective agency and that no man is insurable until the detective agency gets through with it and then he is still not insurable till they pass on and in this colloquy he complains about with the judge, the judge was trying to help him out.
He was trying to say, at least I understood it, (Inaudible) if you're claiming that a man is not insurable until you have passed on his insurability, then you are just making your contract void because you're contradicting the first term and that's what they did in the Reynolds case.
There was a clause in the Reynolds contract says and provided an insurance policy is issued and delivered to the insured or to his representatives and the Iowa court took that out, they didn't say why, but it's obvious.
It contradicted the first clause and the Iowa law is that a contract must be interpreted (Inaudible) against the man who drew it, and I have got the answer to this, or give you these cases, because in his brief he says, the Judge Hand's case in the Sixth Circuit says the local law wasn't the same, and I want to show you that the local law in Iowa was exactly what Judge Hand said the law is.
Where one drafts a document, uses ambiguous language or failure to admit to more than one construction, the meaning to be given in which they are under is the way in which they are understood by the other party, and that's Minnesota Linseed Oil Co. against Montague & Smith, 65 Iowa 67, and it isn't in my brief and I believe that somebody write down the citation, 21 Northwestern 141.
Under the well recognized rule, if a right is to be construed against the author of it, rather than in his favor, now that's just what Judge Hand was saying when he said -- he read the way that other party understands; Central Northern Fire Insurance Company against Omaha Life Company, 194 Iowa 205, 189 Northwest 723.
The Court should interpret -- here is another one, the Court should interpret a contract in the light of the purpose of the buy and entering into it, and then it goes into pricing, that the interpretation, if they want to put on it, would defeat the purpose of the contract, they shouldn't interpret it, so as to defeat it's purpose.
Now his whole argument there was the insurability, means the willingness of the insurance company to insure, and that is never determined according to him until the insurance company sort of adopts the policy.
Now the court here said it rejected.
That the only time they ever rejected was in the attorney's office when they prepared the answer.
They did plead in the answer, but they were rejected, but the Iowa is too long, they attorneys after they are sued to do the rejecting, it's the board of directors or the committee that passes it on that has to do it under the Iowa cases, and they never did it.
So he has got his facts completely wrong.
They got their law, and I just quote he is right, but they got the facts wrong.
Now there is one question they didn't -- they said that it was a serious question, it wasn't answered and that's when Mr. Henry just raised, I want to give you the Iowa case that will answer that.
The Iowa court has never construed this particular statute that he refers to which is in the chapter on the regulation of insurance companies, and it does say the commissioner of insurance should not approve the contract for over $10,000 that doesn't contemplate a physical examination.
And then it says that no insurance company shall issue a contract that doesn't contemplate or it doesn't have an examination, but it doesn't say it's void.
Now that is analogous to the same old thing as to old, than in the days when corporations were prohibited from doing business in Iowa unless without a permit, it's the same thing, they were told not to do it and they went and did it.
Then they come in and want to claim the benefit of their own wrong and say we did wrong in issuing this policy, but we want the court to hold this for us, because we are wrong, (Inaudible) on that night here is where I made a mistake, I assumed that this Iowa judge knew that, but apparently he didn't.
Anyhow the Iowa cases, there are plenty of them, we have a corporation, takes advantage and goes and does something that the statute says it should do, that can't take the benefit of their own wrong, I think that's another estoppel, another case on that in Iowa is Spinney against Miller, 114 Iowa 210 or 86 Northwestern 317, now those aren't very recent cases, but I got them out in a hurry and I think the earlier they are the more (Inaudible) and now I wanted to make one remark about the logic of this thing, in other words the -- I have been arguing here merely on the policy of Iowa, that he said that this man was not insurable for the amount and plan and rates applied for, and I say absolutely if you follow these odd rules here, if you interpret the contract the way the insurance company wants to interpret it, and in their motion for directed verdict, they didn't say he wasn't, they said he isn't according to our underwriting rules and practices, well the contract doesn't say he has to be insurable according to our underwriting rules and practices, then to bury the terms of this contract, they brought on these two witnesses to prove what their underwriting words and practices were.
Now if they have to prove what their practices are, in order to prove that these details didn't happen, well that is certainly a question for the jury, whether that was correct about the underwriting rules and practices.
But even with that end, here is the way they interpret it the fact that he wasn't insured when it says satisfactory evidence of insurability, they say that means conclusive proof, now that's their argument, that satisfactory evidence means conclusive proof.
Now I don't claim that he could send in conclusive proof, it doesn't say he had to, and they testify also that what they meant by that clause, they meant the medical examination.
Now if that medical examination had gone in, and I think this was time of Judge (Inaudible), the medical examination had gone in and he was of good health, the medical examination would have shown it and if the medical examination showed he is in good health then they did have satisfactory evidence with their own doctor saying that he had satisfactory evidence that he was insurable and the testimony is that even with these airplane activities he still was insurable for every amount they had -- well I did use the word eligible but I don't see any difference, he was eligible for insurance for every plan they had and for every amount they had, but they said it will cost him a little more money.
Now they want to define this word rating, and I think judge, the judges wrote in their knowledge, their guess as to what it really means.
I looked at the dictionary and this is what rating says to me, it means a financial standing that an American field agency assigns to a man and then there is other definitions.
Now if there are two definitions to a word you can adopt a definition, even one that doesn't exist, assume their definition exists, you can't adopt the definition that's most favorable to an insurance company.
You got to adopt a definition that at least would mean to the average man and if the dictionary gives two definitions certainly a court can't say as a matter of law which definition he likes the best.
Now they -- here is another thing to show due process of the law.
I haven't got this means to turn up the history and the pedigrees of the judges, but he tried to talk about in his brief, the (Inaudible) brief, he writes up a glorious statement about judge, one from South (Inaudible) and he says in there, I didn't know it, maybe it's not true but I like to concede that it is that for years he was Commissioner of Insurance in Missouri and therefore he found them all what insurance companies think.
Now if that's true he should qualify his expert witnesses during the trial, not try to qualify him on a (Inaudible) and if that did what he says he did and used his knowledge as Commissioner of Insurance, Minnesota as to what insurance companies think he should have let me cross examine him because all he is doing is qualifying here as an expert witness and I don't think it's due process of law for an Appellate Court to substitute himself as an expert witness and then after he does his own testifying they are indirectly by putting in this and pass on the truth of his own expert testimony and that's what they did here.
Justice Charles E. Whittaker: Did you know that judge (Inaudible) at one time was British Commissioner?
Mr. Leland S. Forrest: No, I did not, I didn't know anything about it and I had no means and I don't think that it's proper for them to bring in here because we are not having any insurance investigator.
We can't go out and check up on the judges to make any points in their arguments and to me it doesn't make any difference what the judges are.
I assume that they are going to decide according to the law.
I know there maybe some human nature of the Commissioner of Insurance, they are trying to get a case and slanted the way his sympathies are.
I don't know what the sympathies of an insurance commissioner are, in Minnesota I know what they are in Iowa.
I can tell you this (Inaudible) insurance commissioner unless the attorneys for the insurance companies approved them and sought they get a point.
If I tried -- if I tried to be commissioner of insurance, especially after this case that every insurance lawyer overseeing the governor (Inaudible) getting the point.
Now, well that's true in Minnesota -- not that I don't know.
But another great many things and of course I am obviously excited to type -- making oral argument without that -- is consistent and he says I didn't plea the (Inaudible) please read his record, he pointed it and I didn't, pages 21 to 43, there is my (Inaudible), please read and please read my written argument because it's got more kind of noise into it than my oral.
And then there is also, he says, that he doesn't want to impose on your patience by calling attention to the many misstatements of the record and when he says that, I would like to respectfully ask you to please let me impose upon your patience to please read it and see if I did mistake right because I think as I am entitled to that when he insinuates that I did.
Please read the record carefully and please protect my statements, now if I am wrong (Inaudible)
Justice Hugo L. Black: (Inaudible) statement about the –
Mr. Leland S. Forrest: I beg your pardon.
Justice Hugo L. Black: I want to ask you one statement about the --
Mr. Leland S. Forrest: Yes.
Justice Hugo L. Black: The court there relied in part (Inaudible) on Section 1750, Code of 1897 (Inaudible).
Does that related to all insurance or simply the fire insurance, do you know --
Mr. Leland S. Forrest: Well I wouldn't, I wouldn't be prepared to answer except this.
There are separate chapters in our code on fire insurance and life insurance and if it was a fire insurance case it's possible.
But where I have checked the code, they have done almost identically the same thing in each chapter especially on insurance companies that is where it would be applicable.
So it very likely has the same thing, but there are two chapters, one on life insurance, one on fire insurance and several other different type of insurance et cetera.
But they are very likely it says the same thing.