John Hancock Mutual Life Insurance v. Yates

Background

In May 1932, a life insurance company issued a $2,000 policy on Harmon H. Yates in New York, where he and his wife lived. He died a month later, and his widow moved to Georgia and sued the company there to collect under the policy. The insurer said the written application contained false answers about recent medical treatment and relied on a New York law that makes the application part of the contract and voids policies for material misstatements.

Reasoning

The Court considered whether Georgia courts must recognize the New York statute as a substantive rule of contract law. It held that the statute, as interpreted by New York’s highest court, became a term of the parties’ contract because the policy was made and the events occurred in New York. That rule is not merely a local procedure but a substantive condition affecting liability. Under the Constitution’s requirement that states give full faith and credit to each other's public acts, Georgia had to apply New York’s rule, so the insurer could rely on the false answer to avoid the policy.

Real world impact

The decision requires courts to honor another state’s substantive insurance rules when the contract was made there. Insurers can invoke the issuing state’s statute to deny claims for material misstatements in written applications, even if the applicant says he told the agent the truth orally. The ruling resolved this widow’s claim in favor of the company and prevents Georgia law from overriding the New York rule.

Dissents or concurrances

The Georgia courts were divided below, with some judges treating the issue as a jury question about materiality and procedure; the Supreme Court rejected that view as inconsistent with the Constitution.