American Income Life Ins. Co. v. Hollins, No. 1999-CA-00528-SCT.

• Decision Date: 21 November 2002
• Docket Number: No. 1999-CA-00528-SCT.
• Citation: 830 So.2d 1230
• Parties: AMERICAN INCOME LIFE INSURANCE COMPANY v. Deloise (Townsend) HOLLINS.
• Court: Mississippi Supreme Court

830 So.2d 1230

AMERICAN INCOME LIFE INSURANCE COMPANY v. Deloise (Townsend) HOLLINS.

No. 1999-CA-00528-SCT.

Supreme Court of Mississippi.

November 21, 2002.

Kenna L. Mansfield, Jr., Lana E. Gillon, Jackson, for appellant.

William Liston, III, William H. Liston, Winona, W. Noel Harris, Greenville, for appellee.

EN BANC.

ON MOTION FOR REHEARING

McRAE, Presiding Justice, for the Court.

¶ 1. The motion for rehearing is granted. The original opinions are withdrawn, and these opinions are substituted therefor.

¶ 2. American Income Life Insurance Company (AILIC) appeals the judgment of the Humphreys County Circuit Court entered on a jury's verdict of $400 in compensatory damages and $100,000 in punitive damages. We hold that the jury had before it evidence sufficient to support the finding that misrepresentations recorded in the hospital indemnity insurance application by AILIC's agent did not render the policy void and that the agent, acting within his apparent authority, bound AILIC to extend coverage to Deloise Hollins's preexisting condition of "female problems." Hollins's reliance on the agent's statement was reasonable and to her detriment, for it was approximately one year later that she filed a claim for surgery. The circuit court therefore did not err in failing to grant a directed verdict in favor of AILIC, or in failing to grant a jury instruction that was abstract and confusing.

¶ 3. Approximately one year after the claim was filed AILIC appeared to have done post-claims underwriting and rescinded Hollins's policy only after she sought to recover for her condition that AILIC claimed was preexisting. The circuit court was therefore within its discretion in placing the issue of punitive damages before the jury. AILIC has not demonstrated that the punitive damage award in this case falls within the exceptional circumstances required to disturb the jury's verdict. AILIC has not demonstrated that the punitive damage award in this case should be disturbed. For these reasons, the judgment entered on the jury's verdict is affirmed.

FACTS AND PROCEDURAL HISTORY

¶ 4. Deloise (Townsend) Hollins ("Hollins") filed suit against American Income Life Insurance Company ("AILIC") and Amos J. Jones, AILIC's agent, on November 22, 1994. After Hollins submitted an insurance claim form, AILIC responded with a letter dated March 3, 1993, in which it denied the claim, rescinded the policy, and returned Hollins's premiums because of "additional health history not recorded on your application for this policy." AILIC asserted that the insurance policy issued to Hollins was void ab initio because of material misrepresentations in the application and that the claim underlying this cause of action arose from a preexisting condition that was excluded by the policy terms.

¶ 5. Prior to trial, Amos Jones died, and Hollins dismissed the action against him. A jury trial on this cause began on November 2, 1998, at the conclusion of which the jury returned a verdict in favor of Hollins and awarded actual damages of $400. The case was then argued before the jury on the issue of tortious breach contract, and the jury awarded Hollins $100,000 in punitive damages. The Humphreys County Circuit Court entered judgment on the jury verdict on December 22, 1998, from which AILIC appeals.

¶ 6. Since the age of seventeen, Hollins has suffered from "female problems" consisting of lower abdominal pain, vaginal burning, and nausea. At the time of trial she was thirty-six. When these problems would flare up, she would seek treatment, and the problem would clear up for a while. On October 1, 1991, Hollins saw her regular physician, Dr. Walter Gorton, because her problems were worsening. On January 2, 1992, she sought treatment at the emergency room of South Sunflower County Hospital in Indianola, Mississippi. Thereafter, she saw Dr. Gorton on January 6, 10, and 14.

¶ 7. Hollins testified that she first met Amos Jones ("Jones"), an insurance agent for AILIC, several years prior to purchasing the policy underlying this action. According to Hollins, she contacted Jones several days prior to January 14 to inquire about purchasing hospital indemnity insurance in light of her worsening problems. Jones met with Hollins on the evening of January 14, 1992. Hollins's mother, Lillie B. Lee, her sister, Francine McClain, and her then-fiance, Louise Hollins, Jr., were present during this meeting and testified in accordance with Hollins.

¶ 8. Jones took charge of the hospital indemnity insurance policy application, asking Hollins the questions in the application and recording her responses. Hollins and her witnesses testified that she disclosed to him her current and past "female problems," i.e., that her ovaries and fallopian tubes were infected. Hollins's witnesses further testified that Jones told Hollins that her female problems would be covered by the policy as long as she had not undergone surgery for them, which she had not. No documents were left with Hollins at this time. She testified that Jones delivered the policy to her some time thereafter, on exactly which day she was not sure.

¶ 9. During the application process, Hollins was seated next to Jones. She testified that she did not look to see what he wrote on the application and that she signed it without checking it for accuracy and gave Jones the first month's premium. The application disclosed only one "checkup," performed on January 14. Amos Jones died on July 25, 1997, and therefore did not testify at trial, though he denied the allegations in a deposition.

¶ 10. On January 15, 1992, an ultrasound revealed fibroid tumors on Hollins's ovaries and bladder. Hollins was eventually required to undergo surgery for her condition, which had been diagnosed as pelvic inflammatory disease, on November 24, 1992. She was subsequently hospitalized for four days. On December 21, 1992, Hollins filed the claim form at issue, seeking benefits of $100 per day of hospitalization.

DISCUSSION

I. Whether Hollins's prior medical history rendered her insurance policy voidable due to a misrepresentation in the application, and her claim invalid based on the preexisting condition provision of the policy.

¶ 11. "We have said that in cases where the agent takes charge of the application or suggests the answers to the question, `the company shall not avoid the policy because they are false or untrue, if full disclosures were made by the applicant to him.'" McCann v. Gulf Nat'l Life Ins. Co., 574 So.2d 654, 657 (Miss.1990) (citing Nat'l Life & Acc. Ins. Co. v. Miller, 484 So.2d 329 (Miss.1985)) (quoting Planters' Ins. Co. v. Myers, 55 Miss. 479, 507 (1877)). Furthermore:

[W]here the insure[d] gives correct information to the company's agent who, in turn, fills out the application, leaving out or altering certain information, there has been no misrepresentation [by the applicant].

The fact that the applicant signs the application without reading it does not bar her from attempting to prove that the answers contained therein do not accurately reflect the information she gave the agent.

Pongetti v. First Continental Life & Acc. Ins. Co., 688 F.Supp. 245, 247 (N.D.Miss. 1988) (citing World Ins. Co. v. Bethea, 230 Miss. 765, 93 So.2d 624 (1957); Home Ins. Co. of New York v. Thornhill, 165 Miss. 787, 144 So. 861 (1932)).

¶ 12. Hollins's coverage began on January 14, 1992. Prior to purchasing the policy, between October 1, 1992, and January 14, 1992, Hollins sought treatment for her female problems five times. The insurance agent, Jones, took charge of the application process. He asked Hollins the questions set forth in the application and filled in the answers for her on the form. Hollins told him that she had experienced female problems since the age of seventeen, that she was currently experiencing them, and the she had seen and was continuing to see a doctor in regard to these problems. The only disclosure of this information on the application was a single "check-up" on January 14, 1992, the date of application. Hollins testified that she signed the application without doublechecking the information written on the form by Jones. She and three other witnesses testified to these events. AILIC was therefore not entitled to rescind this policy based on material misrepresentations in the application.

¶ 13. In addition, the record reveals that Hollins owned an additional policy with AILIC, and in 1990 submitted a claim form in which she divulged that she had experienced "female problems." She had also informed AILIC of her female problems when she purchased a policy from it in 1987. AILIC therefore had actual knowledge of Hollins's problems before issuing the policy sub judice in 1992. Only after the filing of the claim at issue was Hollins's medical information reviewed by AILIC's underwriting department, which determined that it "would have declined to issue until resolution of diagnosis of female problem." Based on this determination, Hollins's policy was then rescinded.

¶ 14. We have condemned this practice of post-claim underwriting and cautioned insurers to abstain from such practices in the future. "An insurer has an obligation to its insureds to do its underwriting at the time a policy application is made, not after a claim is filed." Lewis v. Equity Nat'l Life Ins. Co., 637 So.2d 183, 188-89 (Miss.1994).

¶ 15. After finding that the policy was not properly rescinded, we must next address whether Hollins's female problems were properly excluded from coverage by the policy as preexisting conditions. The front page of the insurance policy at issue contains a provision that expressly excludes conditions for which medical advice or treatment was received in the two years prior to the effective date of coverage.

¶ 16. AILIC's reliance on Pongetti v. First Continental Life & Acc. Ins. Co., 688 F.Supp. 245 (N.D.Miss.1988), however, is misplaced. It contends that an insurer is not bound by the statements of its...