Bankers Life & Cas. Co. v. Long

• Decision Date: 11 March 1977
• Parties: BANKERS LIFE AND CASUALTY COMPANY, a corp. v. Nell Davenport LONG. SC 1907.
• Court: Alabama Supreme Court

Page 1321

345 So.2d 1321

BANKERS LIFE AND CASUALTY COMPANY, a corp. v. Nell Davenport LONG.

SC 1907.

Supreme Court of Alabama.

March 11, 1977.

Rehearing Denied May 6, 1977.

Ollie L. Blan, Jr., Spain, Gillon, Riley, Tate & Etheredge, Birmingham, for appellant.

Leo E. Costello, Birmingham, for appellee.

EMBRY, Justice.

The question in this case is whether or not an application for issuance of a life insurance policy contained sufficient information about applicant's medical history to create a duty that the insurer inquire further Nell Long brought suit to recover the proceeds of a life insurance policy on her deceased husband. In her first action to recover, the jury awarded her $10,000, the stated value of the policy. The Court of Civil Appeals reversed and remanded for a new trial on the ground that the judgment rendered was so plainly contrary to the preponderance of the evidence as to be palpably erroneous. Bankers Life and Casualty Co. v. Long, 48 Ala.App. 570, 266 So.2d 780 (1972). On second trial, the insurer, Bankers Life, was granted summary judgment which was affirmed by the Court of Civil Appeals, Long v. Bankers Life and Casualty Co., 54 Ala.App. 604, 311 So.2d 324 (1974). This court reversed and remanded on the ground that the Appeals Court had applied the wrong standard of review in testing a motion for summary judgment in a retrial proceeding. Long v. Bankers Life and Casualty Co., 294 Ala. 67, 311 So.2d 328 (1975) and by that court remanded for new trial, 54 Ala.App. 729, 311 So.2d 331.

into applicant's medical history so the failure to do so would preclude insurer avoiding the policy on the ground of misrepresentation. We answer that there was sufficient information to put insurer on notice and therefore affirm judgment in behalf of the beneficiary.

Upon new trial, Mrs. Long was rendered a $13,000 verdict in her favor. Bankers Life filed motion for judgment notwithstanding the verdict or for new trial, which was denied. Bankers Life appealed.

Bankers Life contends the insured, William B. Long, failed to list on an application for life insurance, prior diseases, visits to doctors and hospitalizations which were material to and increased the risk of loss to the insurer, thereby entitling Bankers Life to rescind and avoid the policy.

The decedent made written application for the policy in 1968. By the terms of the policy, the application, executed by decedent, insured, and the policy constituted the contract of insurance. The alleged misrepresentations in the application appear as follows:

'2. Has this person been hospitalized or had any medical or surgical treatment or checkups in the past 5 years? Yes

'If answer is 'yes' give full details below

"Sickness or Date Duration Operation

Defect

"Hepatitis 1-12-66 6 mos. None

"Doctor's name and address

Dr. Arthur M. Freeman

c/o Medical Arts Bldg.

Birmingham, Ala.

'3. Is this person in good health and free from any physical or mental impairment or disease? Yes'

Title 28, § 6, Code of Ala. (1940), which was repealed January 1, 1972, but was in effect when this cause of action arose and is therefore applicable in this case, provided:

'No written or oral misrepresentation, or warranty therein made, in the negotiation of a contract or policy of insurance, or in the application therefor or proof of loss thereunder, shall defeat or void the policy, or prevent its attaching, unless such misrepresentation is made with actual intent to deceive, or unless the matter misrepresented increase the risk of loss.'

After Mr. Long's death, an investigation revealed that Mr. Long had been hospitalized and treated for cirrhosis of the liver during three visits to the hospital in 1966, totaling 93 days, and spread over an eight month period from January to August. Mr. Long died of cirrhosis of the liver.

Bankers Life contends that the evidence is undisputed that Mr. Long had cirrhosis of the liver at the time he made application for the policy; that he had been hospitalized and treated for cirrhosis prior to the application; had knowledge of the disease at the time of application; and that, had this information been listed in the application, Bankers Life would not have issued the policy.

The rule in Alabama is that to defeat an insurance policy on the ground of misrepresentations in the application it must appear; (1) the misrepresentations were false, (2) made with actual intent to An insurance company is entitled to all material information bearing upon the obligation it undertakes in issuing a policy. Liberty National Life Insurance Co. v. Hale, 285 Ala. 198, 230 So.2d 526 (1969).

deceive or the matter misrepresented increased the risk of loss and (3) the insurer relied on them to its prejudice. Liberty National Life Insurance Co. v. Trammell, 255 Ala. 1, 51 So.2d 174 (1949).

Our law on this subject is in accord with the general rule that an intentional misrepresentation by the applicant of material facts relied on by the insurer permits the insurer to avoid the policy. The well recognized exception to this rule is: the policy is not avoided if the insurer knows the true facts, or the falsity of the statements, or has sufficient indications that would put a prudent person on notice so as to induce an inquiry which, if done with reasonable thoroughness, would reveal the truth. New York Life Insurance Co. v. Strudel, 243 F.2d 90 (5th Cir.Fla. 1957); 43 Am.Jur.2d, Insurance, § 741, p. 727.

The application asked for Long to give any hospitalization, medical, or surgical treatment within the past five years preceding the application. He listed...