Bade v. Badger Mut. Ins. Co.

• Decision Date: 10 May 1966
• Citation: 142 N.W.2d 218,31 Wis.2d 38
• Parties: Daniel BADE, Respondent, v. BADGER MUTUAL INSURANCE COMPANY, Appellant, Roy William Jones, Defendant.
• Court: Wisconsin Supreme Court

Page 218

142 N.W.2d 218

31 Wis.2d 38

Daniel BADE, Respondent, v. BADGER MUTUAL INSURANCE COMPANY, Appellant Roy William Jones, Defendant.

Supreme Court of Wisconsin.

May 10, 1966.

Hoffman, Cannon, McLaughlin & Herbon, Louis W. Staudenmaier, Jr., Milwaukee, of counsel, for appellant.

Phillips, Hoffman & Phillips, Milwaukee, for respondent.

BEILFUSS, Justice.

On this motion for summary judgment the material facts are not in dispute nor are the reasonable inferences to be drawn therefrom doubtful.

In McWhorter v. Employers Mut. Casualty Co. (1965), 28 Wis.2d 275, 277, 278, 137 N.W.2d 49, 50, 51, the court stated:

'The rules governing summary judgments are well known and have been frequently stated and explained by this court. Under the rule of Hyland Hall & Co. v. Madison Gas & Electric Co. (1960), 11 Wis.2d 238, 105 N.W.2d 305, and Dottai v. Altenbach (1963), 19 Wis.2d 373, 120 N.W.2d 41, we first examined the moving papers and documents to determine whether the moving party has made a prima facie case for summary judgment under sec. 270.635(2), Stats., and if he has, we then examine the opposing party's affidavits and other proof to determine whether facts are shown which the court deems sufficient to entitle the opposing party to a trial. If the material facts are not in dispute and if the inferences which may reasonably be drawn from the facts are not doubtful and lead only to one conclusion, then only a matter of law is presented which should be decided upon the motion. Voysey v. Labisky (1960), 10 Wis.2d 274, 103 N.W.2d 9; Rabinovitz v. Travelers Ins. Co. (1960), 11 Wis.2d 545, 105 N.W.2d 807; Bond v. Harrel (1961), 13 Wis.2d 369, 108 N.W.2d 552 (98 A.L.R.2d 330).'

The legal issues are: (1) Were the misrepresentations sufficient as a matter of law to permit Badger to void the policy, and (2) do the doctrines of waiver, estoppel or laches prevent Badger from asserting the invalidity of the policy.

Sec. 209.06(1), Stats., provides:

'No oral or written statement, representation or warranty made by the insured or in his behalf in the negotiation of a contract of insurance shall be deemed material or defeat or avoid the policy, unless such statement, representation or warranty was false and made with intent to deceive, or unless the matter misrepresented or made a warranty increased the risk or contributed to the loss.'

In our consideration of this statute in Stockinger v. Central National Ins. Co. (1964), 24 Wis.2d 245, 253, 128 N.W.2d 433, 437, we stated:

'Under this statute, there are three grounds for avoiding a policy: (1) If the statement was false and made with intent to deceive; (2) if the statement increased the risk; or (3) if the statement contributed to the loss. Polar Mfg. Co. v. Integrity Mut. Ins. Co. (1959), 7 Wis.2d 443, 447, 96 N.W.2d 822. If the misrepresentation increases the risk or if it contributes to the loss, that is sufficient to defeat recovery even if there is no actual intent to deceive. Olson v. Herman Farmers' Mut. Ins. Co. (1925), 187 Wis. 15, 18, 203 N.W. 743; Polar Mfg. Co. v. Integrity Mut. Ins. Co., supra, (7 Wis.2d) page 446, (96 N.W.2d 822).'

This initial question to be decided is whether the false statements made by William Wesley Jones are material to the risk assumed by Badger. The court in Haas v. Integrity Mut. Ins. Co. (1958), 4 Wis.2d 198, 203, 90 N.W.2d 146, 149, stated:

'A similar question was decided by the United States court of appeals in Allstate Insurance Company v. Moldenhauer, 7th Cir., 193 F.2d 663. At page 665 of the opinion the court said:

"The question of materiality is a question of fact to be determined by the trier of facts. Olson v. Herman Farmers' Mutual Ins. Co., 187 Wis. 15, 19, 203 N.W. 743. The test is not that the insurer was influenced, but that the fact, if truthfully stated, might reasonably have influenced the insurer in deciding whether it should reject or accept the risk. Compare Kline v. Washington National Ins. Co., 217 Wis. 21, 258 N.W. 370, and Spray v. Order of United Commercial Travelers of America, 221 Wis. 329, 267 N.W. 50. And the courts of Wisconsin have said that if a question material to the risk is answered falsely, the risk is necessarily increased. Demirjian v. New York Life Ins. Co., 205 Wis. 71, 74, 236 N.W. 566.'

'That is a correct analysis and summarization of the law.' ¹

In most cases the question of the materiality of a false statement is a question of fact to be determined by the trier of the fact. However, in this instance, we have no hesitancy in concluding as a matter of law, under the undisputed facts, that the false statements were material and, in addition thereto, that they were made with an intent to deceive. William Wesley Jones knew he had attempted on several occasions to get a driver's license and that he was refused. Certainly if his driving capabilities were so deficient as to deny him a license it cannot be said that this deficiency was not material to the risk undertaken in the policy. Likewise there is no question that William Wesley Jones and his father intentionally attempted to deceive Badger by representing he was his deceased brother, Roy W. Jones, and representing he had a valid driver's license. Under these facts we hold, as a matter of law, that the statements were false and made with intent to deceive and that they were material to and did increase the risk.

As between Badger, the insurer, and William Wesley Jones, the insured, the policy is void pursuant to sec. 209.06(1), Stats. The question remains whether Badger can assert the invalidity of the insurance contract against the injured third party, the plaintiff Bade.

Counsel for Bade asserts that the doctrines of waiver, estoppel and laches prevent Badger from asserting the invalidity of the policy.

"'Waiver' is defined as voluntary and intentional relinquishment of a known right. As said in Nolop v. Spettel (1954), 267 Wis. 245, 249, 64 N.W.2d 859:

"'A waiver is the intentional relinquishment of a known right.' Swedish American Nat. Bank v. Koebernick, 136 Wis. 473, 479, 117 N.W. 1020 (1023). 'Since an intention to relinquish an existing right or advantage is generally regarded as an essential of a waiver, it follows that it must be shown by the party claiming a waiver that the person against whom the waiver is asserted had at the time knowledge, actual or constructive, of the existence of his rights or of the facts upon which they depended. Ignorance of a material fact negatives a waiver. Waiver cannot be established by a consent given under a mistake of fact.' 56 Am.Jur. (Waiver), p. 114, sec. 14.' Davies v. J. D. Wilson Co. (1957), 1 Wis.2d 443, 466, 467, 85 N.W.2d 459 (470).' ²

There is nothing in the pleadings, affidavits or other moving papers to show that the agents or officers of Badger knew of tha false representations or that they knowingly or intentionally relinquished any right to assert the defense. The doctrine of waiver is not available to the plaintiff under these undisputed facts.

The plaintiff argues the doctrine of estoppel and laches together and they will be so treated in this opinion.

"* * * An estoppel in pais consists of action or nonaction on the part of the one against whom the estoppel is asserted which induces reliance thereon by another, either in the form of action or non-action, to his detriment. Dixon v. Davidson (1930), 202 Wis. 19, 231 N.W. 276; Callaway v. Evanson (1956), 272 Wis. 251, 75 N.W.2d 456; Eau Claire Dells Imp. Co. v. (City of) Eau Claire, supra (172 Wis. 240, 179 N.W. 2)." ³

The equitable doctrine of laches is a recognition that a party ought not to be heard when he has not asserted his right for unreasonable length of time or that he was lacking in diligence in discovering and asserting his right in such a manner so as to place the other party at a disadvantage.

It is the position of the plaintiff that Badger was not diligent and in fact made no effort to discover the fraud until three years had passed; that because of our direct action statute ⁴ he could bring the action against Badger even though the principal defendant was not served; and that to allow the policy defense t be asserted after the expiration of the three-year statute of limitations for personal injuries places him in a completely disadvantageous position and that because of this delay, in the manner of laches, Badger should now be estopped from raising the policy defense.

Whether the plaintiff is foreclosed from bringing any action against William Wesley Jones is not before us and we do not opine upon it except to point out that actions based upon fraud are governed by a six and not a three-year statute of limitations. ⁵

Did Badger fail to use reasonable diligence in discovering the fraud? There is nothing on the face of the application nor any other facts in the record before us that should have reasonably alerted Badger to the fraudulent representations. The policy was issued in October of 1960; the accident occurred in January of 1961,--a period of about four months. The plaintiff's cause of action against the driver of the vehicle arose at that time. He commenced his action at...