THE POLICY CONTRACT. The Application : The application or, as it is called in Great Britain, the proposal contains the representations, warranties, promises, consents and agreements of the applicant for the policy. The statements to the company's medical examiner, signed by the applicant, are also made a part of his application by reference. These statements and promises are usually made a consideration for and a part of the policy. Sometimes copies are also attached to the policies, and in some States copies must be fur nished the insured in order that the statements may have the effect of warranties instead of the effect of repre sentations merely.
The distinction between warranties and representations may be illustrated as follows : If a company desires to contest a claim on the ground of misrepresentation, it must prove that the misrepresentation was fraudulent. To prove this, it must establish these things : The repre sentation was untrue. The maker knew it to be untrue when made, or should have known it. It was material. It was fraudulently made, i. e., with intent to deceive, and did, in fact, deceive and was relied upon. These are all matters of fact to be determined by the jury. If the other three are established, fraud is inferred. If the statements have been warranted, however, the case stands thus : No proof is required as to knowledge of the facts, as to intent to deceive or actual deception, or as to ma teriality. It is now only requisite to prove that the state 147 ment was made and was untrue, in order to defeat the claim and render the policy utterly void.
As to promises, the only distinction is that when per formance is warranted and this promise is accepted as part of the consideration, it must be carried out to the letter; while if a mere promise not so warranted and not a part of the consideration, it might be necessary for a company to prove its materiality. Thus, if the insured warrants that he will not engage in naval or military service, to do so will avoid the insurance, although his death be in no way occasioned by such service; but it might perhaps be otherwise if it were a mere promise.
It is rare nowadays that promises are warranted, and in virtually all such cases the purpose is to conceal re strictions and conditions.
Breaches of warranty were at one time much relied upon as defenses against death claims, and it was not so uncommon as it should have been, for payment to be refused on that ground though the breach were unim portant. The idea was that the company ought not to pay unless the contract firmly held it to do so. Even at this time, the statements of the applicant usually have the effect of warranties when made. Thus, reference to them, making them a part of the policy or a part of the consideration for the policy, gives them this effect. In most cases, however, this is waived after one, two or three years by an "incontestable" provision; and in some States the statutes require a copy of all statements that are made warranties to be attached to the policy, and failure to do so destroys their warranty character.
Wherever statements have the effect of warranties, if a dispute about a death claim reach the courts, the com pany's attorneys are pretty nearly certain to defend on the groufid of breach of warranty, even when fraud could be proved; because it is easier to show that some state 148 ment is not strictly true or that some engagement has not been strictly performed than to convince a jury that fraud has been practiced.
The Promise to Pay : A life insurance policy is usually what is known as a unilateral contract; that is, a contract calling for performance on one side only, viz., by the company. It may be objected that to keep it in force requires the payment of premiums on the part of the in sured. But the insured does not engage to pay the pre miums; he may do so or not, as he pleases, and he is not bound to do so. If he does pay them, the company has engaged that it will insure him. Payment, therefore, is a condition subsequent; and a life insurance policy is a uni lateral contract, of the form of a promise to pay, condi tioned upon a certain consideration being paid. Whether the words "promise to pay" or the word "insure" is em ployed, the meaning is the same.