The plaintiff brought this action in the circuit court for Clatsop county, Oregon, as beneficiary of a policy by which the defendant had insured the life of her husband, Anton Stipcich. The case was removed for diversity of citizenship to the United States District Court for Oregon. The company defended principally on the ground that 'Stipcich, after applying for the insurance and before the delivery of the policy and payment of the first premium, had suffered a recurrence of a duodenal ulcer, which later caused his death, and that he failed to reveal this information to the company.
It was shown on the trial by uncontradicted evidence that after his application Stipcich consulted two physicians and that they told him that an operation for the removal of the ulcer was necessary. Plaintiff then made tender of evidence to the effect that Stipcich had communicated this information to Coblentz, the defendant's agent who had solicited the policy, and that the visit to the second doctor was made at Coblentz' request to confirm the diagnosis of the first.
The proffered evidence was excluded, and at the close of the whole case, and over plaintiff's objection, the court directed a verdict for the defendant (8 F.(2d) 285), stating that it did so because Stipcich was under a duty to inform the defendant of his knowledge of the serious ailment of which he had learned after making application for insurance, and that he had failed in that duty since his communication of the facts to Coblentz did not amount to notice of them to the insurance company. The case was taken on writ of error to the Circuit Court of Appeals for the Ninth Circuit. That court certified to this certain questions of law presented by the case. Judicial Code, § 239 (28 USCA § 346), Without answering, we ordered the entire record to be sent up and the case is here as though on writ of error (48 S.C.t. 205, 72 L. Ed. -).
An insurer may, of course, assume the risk of such changes in the insured's health as may occur between the date of application and the date of the issuance of a policy. Where the parties contract exclusively on the basis of conditions as they existed at the date of the application, the failure of the insured to divulge any later known changes in health may well not affect the policy. Mutual Ben. Life Insurance Co. v. Higginbotham, 95 U.S. 380, 24 L. Ed. 499. See New York Life Insurance Co. v. Moats (C. C. A.) 207 F. 481; Grier v. Insurance Co., 132 N. C. 542, 44 S. E. 28. Compare Gardner v. North State Mutual Life Insurance Co., 163 N. C. 367, 79 S. E. 806, 48 L. R. A. (N. S.) 714, Ann. Cas. 1915B, 652. But there is no contention here that the parties contracted exclusively on the basis of conditions at the time of the application. Here both by the terms of the application and familiar rules governing the formation of contracts no contract came into existence until the delivery of the policy, and at that time the insured had learned of conditions gravely affecting his health, unknown at the time of making his application.
Insurance policies are traditionally contracts uberrimae fidei and a failure by the insured to disclose conditions affecting the risk, of which he is aware, makes the contract voidable at the insurer's option. Carter v. Boehm, 3 Burrows, 1905; Livingston v. Maryland Insurance Co., 6 Cranch, 274, 3 L. Ed. 222; McLanahan v. Universal Insurance Co., 1 Pet. 170, 7 L. Ed. 98; Phoenix Life Insurance Co. v. Raddin, 120 U.S. 183, 189, 7 S.C.t. 500 (30 L. Ed. 644); Hardman v. Firemen's Insurance Co. (C. C.) 20 F. 594.
Concededly, the modern practice of requiring the applicant for life insurance to answer questions prepared by the insurer has relaxed this rule to some extent, since information not asked for is presumably deemed immaterial. Penn Mutual Life Insurance Co. v. Mechanics' Savings Bank & Trust Co. (C. C. A.) 72 F. 413, 435-441, 38 L. R. A. 33, 70. See Clark v. Manufacturers' Insurance Co., 8 How. 235, 248, 249, 12 L. Ed. 1061. Compare Phoenix Life Insurance Co. v. Raddin, 120 U.S. 183, 190, 7 S.C.t. 500 (30 L. Ed. 644).