Andrews v. American Health and Life Ins. Co.
| Decision Date | 23 September 1988 |
| Docket Number | No. 860001,860001 |
| Citation | 372 S.E.2d 399,236 Va. 221 |
| Parties | Richard L. ANDREWS, Executor of the Estate of Earl L. Ballenger, Jr. v. AMERICAN HEALTH AND LIFE INSURANCE COMPANY. Record |
| Court | Virginia Supreme Court |
James F. Pascal (John C. Ivins, Jr., Hirschler, Fleischer, Weinberg, Cox & Allen, Richmond, on briefs), for appellant.
A. James Kauffman (Clayton L. Walton, Taylor, Hazen & Kauffman, Richmond, on brief), for appellee.
Present: All the Justices.
In this appeal, we decide two issues, first, whether the phrase "nervous disorder," as used in a question contained in an application for a credit life insurance policy, is ambiguous and should be construed against the insurer; and second, whether the insured's executor is estopped from collecting the proceeds of the policy.
On September 10, 1979, Earl L. Ballenger, Jr., was admitted to Chippenham Hospital under the care of Dr. Charles A. Binford, a psychiatrist, for depression following his accidental fatal shooting of his wife on September 2, 1979. After four days, Ballenger was discharged from the Chippenham Hospital, and he had four subsequent therapy sessions with Dr. Binford. During one of those contacts, Ballenger said that he entertained the idea of suicide.
In February 1980, Ballenger borrowed $37,000 from Standard Federal Savings and Loan Association (Standard) to finance the purchase of his home. Ballenger executed a note evidencing the debt, which was secured by a first deed of trust upon the property.
As additional security for the payment of the loan, Ballenger applied for a decreasing term credit life insurance policy to be issued by American Health and Life Insurance Company (the insurance company). Question number four in the application was whether Ballenger had "consulted or been treated by a physician within the last five years for heart trouble, high blood pressure, chest pains, heart murmurs, cancer, diabetes, albumin or sugar in the urine, tuberculosis, epilepsy or nervous disorder, stomach trouble or any ailment of the kidney, gall bladder or liver." (Emphasis added.) Ballenger answered that question in the negative, and he did not disclose his September 1979 hospitalization and psychiatric treatments.
After reviewing Ballenger's application, the insurance company issued the policy on November 1, 1980, listing Standard as the applicant and the primary beneficiary. Ballenger's estate was the secondary beneficiary with respect to any remaining balance due on the insurance policy after the indebtedness on the house had been paid. Ballenger paid the required monthly premiums during his life.
On July 2, 1981, within the two-year contestability period of the policy, Ballenger was murdered. The insurance company declined to pay the proceeds of the policy to Standard because of Ballenger's failure to disclose his treatment by Dr. Binford. By a check enclosed in a letter dated November 18, 1981, the insurance company refunded all premiums paid during Ballenger's life to Standard. Standard cashed the insurance company's check and mailed its check for the same sum to Richard L. Andrews, Executor of Ballenger's estate, but Andrews did not cash the check. Andrews continued to make the monthly deed of trust payments to Standard until he sold the house on September 30, 1983. Andrews paid the balance due on Standard's deed of trust from the proceeds of the sale and brought this action to recover the amount he paid in discharge of the deed of trust.
After a bench trial, the trial court held that the term "epilepsy or nervous disorder," as used by the insurance company in the application, was ambiguous and could be construed reasonably not to include emotional or mental disorders. Accordingly, it concluded that Ballenger had not misrepresented his health by failing to report his treatment by Dr. Binford and, for that reason, the insurance company was not entitled to rescind the policy. At a later date, following receipt of memoranda, the trial court held that Ballenger's executor lacked "standing" to bring the claim against the insurance company. We granted an appeal to each party aggrieved by an adverse ruling.
The insurance company claims that Ballenger misrepresented his health in the application, giving it the right to rescind the policy within the contestability period. The insurance company contends that the phrase "epilepsy or nervous disorder" plainly and unambiguously includes a period of depression with "suicidal ideations" for which medical treatment was sought.
The question is whether the phrase unambiguously includes mental disorders as contrasted with physical disorders of the nervous system. If the term is ambiguous, it will be construed against the insurance company and in favor of coverage. United Services Automobile Assoc. v. Webb, 235 Va. 655, 657, 369 S.E.2d 196, 198 (1988).
There are a number of definitions of "nervous" in Webster's Third New International Dictionary 1519 (1986). One is "of, relating to, or made up of nervous tissues"; another is "of or relating to the nerves: originating in or affected by the nerves"; yet another is "tending to produce nervousness or agitation." Thus, we conclude that the phrase "nervous disorder," standing alone, is a general term which might include physical or mental disorders, or both.
We must, however, construe the phrase in accordance with the maxim noscitur a sociis. The principle instructs that "the meaning of a word takes color and expression from the purport of the entire phrase of which it is a part, and it must be read in harmony with its context." Turner v. Commonwealth, 226 Va. 456, 460, 309 S.E.2d 337, 339 (1983).
The phrase "epilepsy or nervous disorder" as used in question four in Ballenger's application was one of a series of questions contained in one sentence. Every other question in the sentence, including the question about epilepsy, 1 grouped together in the same phrase with nervous disorder, dealt with a general physical disorder. Given the ambiguity of the phrase and the associated words in the same sentence, we decide that the term could be construed reasonably only as an inquiry about a physical disorder of the nerves.
The case of Flannagan v. Mutual Ins. Co., 152 Va. 38, 146 S.E. 353 (1929), overruled in part, Gilley v. Union Life Ins. Co., 194 Va....
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