Reserve Life Ins. Co. v. McGee
| Decision Date | 14 December 1983 |
| Docket Number | No. 53825,53825 |
| Citation | 444 So.2d 803 |
| Parties | RESERVE LIFE INSURANCE CO., et al. v. Henry McGEE. |
| Court | Mississippi Supreme Court |
Arthur F. Jernigan, Jr., James H. Gabriel, Bacon, Jernigan & Martin, Jackson, for appellants.
James W. Nobles, Jr., Jackson, J. Hal Ross, Brandon, for appellee.
Before the court en banc.
The primary question involved in this appeal from the Circuit Court of Rankin County is whether or not appellee's evidence was sufficient to make a jury question on liability of appellant, Reserve Life Insurance Company, for punitive damages for failure to pay appellee's claim for medical and hospital benefits under the policy of insurance issued to appellee. Appellee received a jury verdict of $2,416 as actual expenses owed under the policy and a verdict of $158,000 as punitive damages. As is often the case, the Court is required to apply applicable legal principles to the particular facts of a particular case. As usual, those facts are different from any other case previously considered.
Mr. and Mrs. Henry McGee resided in Rankin County, Mississippi. For approximately five years Mrs. McGee had a policy of what is commonly known as "hospitalization insurance" with appellant, Reserve Life Insurance Company. Mr. McGee had his insurance with Blue Cross-Blue Shield Company. This policy with Blue Cross-Blue Shield was approaching the renewal date and Mr. and Mrs. McGee discussed the fact that Mr. McGee's policy did not provide for adequate room charge payments and, for this reason, the Jackson office of appellant [hereinafter referred to as Reserve] was requested to have someone contact them about insuring McGee with that company.
On the night of February 18, 1980, Mr. Bill Nunn came to the McGee home for the purpose of discussing Mr. McGee's insurance and a possible application to Reserve. Mr. Nunn was the agency director for Reserve and also actively solicited and secured applications for policies. The main conflict in the evidence, which is important in the disposition of the cause, was the testimony of Mr. and Mrs. McGee and that of Nunn regarding the completion of the application for insurance. A copy of this application is attached hereto as Appendix "A". There are seven questions on the application. Four of these have sub-questions. After each question and sub-question there were two blocks, one under "yes" and one under "no." All of these questions refer to the physical conditions of the applicant Mr. McGee and most of them list specific medical conditions, requesting whether or not the applicant was suffering from any of those physical infirmities. Mr. McGee, who has a third grade education, testified positively that Nunn did not read each question to him, but asked in general terms regarding Mr. McGee's health. McGee testified that he told Nunn that he was in "good" health. McGee testified that as shown under question 10(b) of the application, Nunn was told that McGee's physician was Dr. Bobo of Pearl and that Nunn could secure any information needed from Dr. Bobo pertaining to McGee. Nunn was advised that McGee had not been confined to a hospital in the past five years, but had been seen by Dr. Bobo. At Nunn's request, McGee executed a written authority for the appellant company to contact Dr. Bobo and secure any medical information from him regarding McGee's prior record before the policy was issued. It was the McGees' understanding that this would be done. Their sworn testimony was that Nunn told them it would be done. It is noted, as shown on the attached copy of the application, that Nunn in the blanks at the bottom of the application under the response to question 10(b) wrote "complete physical by Dr. Bobo." In the next blank Nunn wrote "ex. health." We digress here and state that Nunn in his Appellee and his wife gave Nunn a check for the first month's premium. Nunn's testimony was that for the first year a policy is in force, he receives something around fifty percent of the premiums and thereafter a lesser percentage during the life of the policy. McGee executed a form that gave appellant company authority to draw a draft on the McGee account each month for the monthly premiums.
testimony agreed that McGee stated he was in "good health" and Nunn was the one who wrote "excellent health."
The appellant company issued Mr. McGee the policy of insurance dated March 16, 1980, approximately a month after the application was secured, but in time for the Blue Cross-Blue Shield policy to be cancelled.
In September 1980 appellant McGee began having some trouble with his urinary tract. He conferred with Dr. Bobo, who referred him to Dr. Charles Jackson, a specialist in Jackson. Jackson examined McGee and found a lesion on his bladder. McGee was admitted to the St. Dominic's Hospital in Jackson on September 16, 1980, and by using special instruments, the lesion was removed. An examination determined that the lesion was a transitional cell carcenoma of a low grade and short prior existence. Appellee was in the hospital nine days and was discharged with a good prognosis. After discharge, the proper forms were completed for benefits under the policy discussed above and the forms forwarded to appellant company. McGee heard from appellant company by receiving a form dated December 3, 1980, in which the company representative stated that they needed more information and "we will appreciate your courtesy while your file is being completed."
On December 14, 1980, McGee again was hospitalized by Dr. Jackson for a period of five days. He had noted some irregularity in the bladder that was suspicious and wanted to check this situation. As a result of that hospitalization, Dr. Jackson was of the opinion that the trouble was inflammatory and there was no evidence of residual tumor. He was treated and at the time of the trial on November 4, 1981, there had been no further evidence of bladder tumor regarding Mr. McGee. According to Dr. Jackson, there was no connection between McGee's bladder problem and any transient ischemic attack he might have had in the past.
By letter dated January 12, 1981, McGee was informed by appellant company that their file still was incomplete with respect to the September 16, 1980, hospitalization and that their representative was still investigating his medical history. This letter ended with "Thank you again for your continued patience and cooperation." Understandably, Mr. McGee's patience by that time was somewhat tested. He, therefore, employed an attorney to represent him in his claim for hospitalization benefits. This culminated in a letter dated February 12, 1981, to McGee's attorney advising:
We have learned of ten separate dates of office visits to Dr. Bobo during 1977, 1978 and 1979, some of which were for treatment of a condition which would have been pertinent to our acceptance of Mr. McGee for coverage with this Company.
Had the Company known of Mr. McGee's history of transient ischemic attack, which dates back to at least June 1978, coverage would not have been issued to him. The initial premium submitted with the application would have been returned along with a letter of explanation.
Although we have only recently learned of this history, our obligation remains the same as it was initially, and is limited to a refund of premiums paid to date. The policy should be attached to the enclosed draft before taking the draft to the bank for payment.
The check included payments for five months' premiums that the company had been issuing a draft for and collecting thereon during the time of their "investigation." The evidence revealed that during that period of time, appellant company had employed a large investigation firm named Introduced in evidence was a memo dated February 3, 1981, from a Mr. Rowland [a witness at the trial] to the underwriting manager relating that he would have declined the original application and gave as a reason under the heading "claim history developed" the following: "History of TIA with office visits, June 16, 1978, and July 2, 1979, as well as checks and prescriptions."
Equifax Services to investigate McGee's medical history. In addition to that of McGee's personal physician for five years prior to the application, as hereinbefore discussed, the Equifax investigation was directed to hospitals and doctors, including a Dr. Lee of Forest and local hospitals. No hospitalization was found in this extensive investigation. It was ascertained that there were two Dr. Lees in Forest, Mississippi. According to Equifax Services, "A thorough search of Dr. John Paul Lee's records" was made and no record was found on a Henry McGee. A search of the records of Dr. Charles David Lee revealed that he had seen a Henry McGee four times: October 13, 1959; April 5, 1965; November 15, 1965; and December 15, 1966. All four of these visits during the seven year period were for such things as bronchitis. The last visit in December of 1966 was for treatment of a cough.
We, therefore, find that after giving up on the wide-spread investigation of McGee, appellant relied solely on the record of Dr. Bobo of Pearl, whose name McGee had given Nunn the night the original application was taken and when McGee signed the authority at the request of Mr. Nunn for Dr. Bobo to give any information to appellant company prior to the issuance of the policy. This record of Dr. Bobo is as follows:
2-13-76 infection behind left ear
2-7-77 flu syndrome
2-10-77 re-check
2-14-77 re-check
6-16-78 tia
6-20-78 re-check
6-19-78 headache and bronchitis
12-13-78 contusion of nose
12-19-78 flu syndrome
6-2-79 headache and tia
7-11-79 re-check
5-2-80 bronchitis
12-19-80 flu syndrome
For the two TIA diagnoses, Dr. Bobo prescribed nicotonic acid, the same medication used to treat inner ear trouble that causes dizziness.
Referring to the pleadings, the declaration was filed on April 1,...
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