The opinion of the court was delivered by: FOLLMER
Plaintiff as the Administratrix of the Estate of Charles V. Moss, Deceased, seeks to recover insurance premiums paid by the decedent during his lifetime on a War Risk term insurance policy.
It was stipulated by the parties 'that the insured, Charles V. Moss, entered the service on September 22, 1917; that on February 11, 1918, he obtained a $ 10,000 term insurance policy, and he paid premiums to include December, 1918; that he was honorably discharged on December 16, 1918; that on January 1, 1919, the policy lapsed; that on June 10, 1927, the insured made application for reinstatement of $ 5,000 term insurance; that simultaneously with the application for reinstatement, he applied for conversion to a twenty-year endowment policy, at a premium of $ 208.50 per year; that in that application, he named his mother as beneficiary; that he married on November 20, 1929, and on June 16, 1938, he changed the beneficiary to his wife; that on May 27, 1942, the insured filed a claim for disability compensation; that in connection with the application for disability compensation, the insured filed, on April 29, 1943, a statement by Dr. Barnhardt, his physician; that on August 4, 1942, the Veterans Administration denied the claim of the insured for service-connected disability; that compensation for service-connected disability was granted on August 14, 1943, to be effective May 26, 1943, the insured died.'; and that as shown by the Certificate of Death
the immediate cause of death was 'Heart Disease; Coronary arteriosclerosis; Cardiac enlargement; myocardial damage and myocardial insufficiency with Bundle Branch Block Thrombosis femoral artery right with gangrene right leg and foot.'
I also find that Charles V. Moss, the deceased veteran, in his application for reinstatement of yearly renewable term insurance
answered certain material questions as follows:
'10. Are you now in good health? Yes.
'11. Have you ever been treated for any disease of * * * heart or blood vessels no * * *.'
The application was accompanied by a medical report of Moss's physician, Dr. Barnhardt, that Moss was in good health and, inter alia, that he found no abnormality of the heart. In 1943, in connection with an application by Moss for disability compensation, Dr. Barnhardt made a statement
that he had treated Moss from 1919 to 1942 for a heard condition 'myocarditis and coronary sclerosis' with extensive treatment during 1920-1922 for a heart involvement, 'phlebitis of the right leg' also referred to by the doctor as 'thrombosis.'
While the doctor and the deceased were good friends, both members of a large chorus, and the deceased frequently dropped in to see the doctor on social calls, it is also admitted that he did during the period from 1919 to 1927 consult the doctor professionally on a paid basis 'one a month or something like that, or once in two months' for a checkup on his heart condition generally but principally for the thrombosis or blood vessel condition, and on the doctor's advice Moss wore an adhesive rubber stocking continuously.
The Veterans' Administration refused payment of the policy on the ground of fraud and also refused to return the premiums paid. Plaintiff is not contesting the cancellation of the policy but is seeking refund of the insurance premiums.
The policy of insurance having been secured by a fraudulent misrepresentation on the part of the insured, his estate cannot, after the fraud has been discovered and the policy avoided, maintain an action for the return of the premiums paid by him.
The statements of Moss, the insured, in his application for reinstatement that he had not been ill or consulted a physician in regard to his health since the lapse of the insurance, and that he had never been treated for any disease of the heart or blood vessels, were false and known by the insured to be false at the time they were made. The necessary elements of fraud in the making of such an application are '(1) a false representation (2) with knowledge of its falsity (4) and with the intent to deceive (5) with action taken in in reliance upon the representation.' 4 There can be no doubt that these were material facts. These were not slight or temporary ailments such as an ordinary cold or the like.
On facts such as in this case, it must follow that there was an intent to deceive and that action was taken in reliance upon the representation.
The answers were knowingly false, were made to be relied upon, and were relied upon.
In this posture of the case, the law is well settled that after the fraud is discovered and the policy avoided an action for return of the premiums may not be maintained.
A short comment on decisions cited and relied upon by plaintiff seems in order. In Cardwell v. United States, 5 Cir., 186 F.2d 382, a directed verdict for defendant was set aside, but the evidence, if believed would have negatived any false statement knowingly made as to a material fact. there was evidence that during the period of lapse of the policy insured had consulted a physician concerning an abdominal pain and had been told that it was due to nervousness and imagination and that there was nothing physically wrong with him; that the physician prescribed no treatment and that at the time insured made the application for reinstatement, the insured had every reason to believe that the ailments of which he complained to the doctor were of a minor inconsequential nature. That is not the situation here. Even if the testimony be accepted, that at the time of the application for reinstatement his doctor believed that his heart condition 'had cleared up', it is undisputed ...