Baker v. Pilot Life Ins. Co., 20443

• Decision Date: 26 May 1977
• Docket Number: No. 20443,20443
• Citation: 268 S.C. 609,235 S.E.2d 300
• Court: South Carolina Supreme Court
• Parties: Gloria P. BAKER, Respondent, v. PILOT LIFE INSURANCE COMPANY, Appellant.

Page 300

235 S.E.2d 300

268 S.C. 609

Gloria P. BAKER, Respondent, v. PILOT LIFE INSURANCE COMPANY, Appellant.

No. 20443.

Supreme Court of South Carolina.

May 26, 1977.

J. Munford Scott, Jr., of Wright, Scott, Blackwell & Powers, Florence, for appellant.

Wylie H. Caldwell, Jr., Florence, for respondent.

LITTLEJOHN, Justice.

The plaintiff sued the defendant insurance company for disability benefits provided under a policy issued to her, and obtained a favorable jury verdict. Thereafter the trial judge awarded attorney fees to plaintiff's counsel as permitted by Sec. 37-167.1 of our Code of Laws. The defendant has not appealed the jury verdict, but has appealed the order awarding attorney fees. We reverse.

This code section permits the trial judge to award attorney fees when an insurance company's refusal to pay ". . . (is) without reasonable cause or in bad faith".

A review of the evidence is necessary in determining the issue submitted to the court.

The plaintiff was an insurance agent and ran the insurance office of the Peoples Bank at Florence. She admitted that she knew that the insurance application was an important part of the insurance contract. She had been dealing with insurance for a number of years. Notwithstanding her knowledge of insurance, she falsified the application on August 12, 1974, by withholding from the company the fact that she had seen Dr. Blackwell on five comparatively recent occasions:

1. On March 22, 1971, she went to see Dr. Blackwell because of an anemic condition. She was referred to Dr. Blackwell by another doctor, not named. The visit with the other doctor was not disclosed to the company on the application.

2. In November of 1973, she saw Dr. Blackwell for a chest cold and ". . . complaining of some dizziness with sudden head movements."

3. On December 10, 1973, she saw Dr. Blackwell, complaining of soreness in the left chest with deep breathing.

4. On June 3, 1974, she saw Dr. Blackwell again, because of cramps and abdominal pain. It was on this visit that the doctor observed a swollen lymph node on her neck, which later developed to be a cancer.

5. On July 30, 1974, she saw the doctor, complaining of a knot in her stomach.

The policy became effective on or about September 15, 1974. She went to see Dr. Blackwell on October 15, 1974, and found that she had a cancerous condition.

The policy insured the plaintiff for loss resulting from sickness, which ". . . means sickness or disease contracted and commencing after the effective date of this policy (or prior to the effective date provided the insured did not have any knowledge of its existence or receive any medical advice or treatment for said sickness or disease) and causing loss of time commencing while this policy is in force.

The company defended, first, on the ground that she had received medical advice relative to a lymph node on her neck when she visited the doctor on June 3, 1974. Describing that visit, the doctor testified as follows "(S)he mentioned that she had noted a minor swelling in a lymph node, which I checked.

"My advice as I recall to her was that these were not significantly enlarged and that it was associated with the viremia that she had and that it would regress, but that if it persisted should be checked."

This is the lymph node which was proved to be cancerous in October. The lower court directed a verdict as to this first defense, in effect holding that the only reasonable inferences to be drawn from the whole of the testimony was that she had not received medical advice from the doctor about the preexisting condition. There is no appeal from this ruling.

The insurance company next defended on the ground that the plaintiff "knowingly concealed material facts from the defendant, to the damage of the defendant, thus defrauding the defendant and rendering the contract voidable." The issues involved in this defense were submitted to the jury, which found in favor of the plaintiff.

We find no justification in the record for the plaintiff's concealment of the important fact that she had visited Dr. Blackwell on several occasions. The company was entitled to this information. Mr. Marsh, a special representative of the insurance company, testified that the application is a part of the contract. He testified: "If we had received any information concerning any treatment by any additional doctors then our underwriter would have written the doctor direct to determine how many visits were made and what was the diagnosis on each individual visit." He further testified that if the company had been given the information that the plaintiff had been to Dr. Blackwell, there would have been additional investigation to determine whether or not the policy would be issued.

Clearly, it was not the intent of the legislature to require payment of attorney fees in every contested case won by the insured. Attorney fees may be allowed the plaintiff only when the refusal to pay is ". . . without reasonable cause or in bad faith, . . . ." Every case must be determined on its own facts.

The plaintiff would not necessarily be entitled to have his attorney's fees paid by the company merely because a verdict was directed in favor of the plaintiff. For example, the case might hinge on the interpretation of an ambiguous statute and the company might be justified in refusing to pay because the statute has never been interpreted. The interpretation of the statute might be so questionable as to justify a refusal to pay.

On the other hand, the fact that...