Chism v. Protective Life Ins. Co
| Decision Date | 11 June 2010 |
| Docket Number | No. 99,291.,99 |
| Citation | 290 Kan. 645,234 P.3d 780 |
| Parties | Karen CHISM, Appellant,v.PROTECTIVE LIFE INSURANCE CO. and Quality Motors of Independence, Inc., Appellees. |
| Court | Kansas Supreme Court |
COPYRIGHT MATERIAL OMITTED
Syllabus by the Court
1. In a civil case, when the Kansas Supreme Court grants a petition requesting review of a Court of Appeals' decision and obtains jurisdiction under K.S.A. 20-3018(b), only issues presented in the petition, or fairly included therein, will be considered.
2. Summary judgment is appropriate when the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law. The trial court is required to resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the party against whom the ruling is sought. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to dispute must be material to the conclusive issues in the case. On appeal, we apply the same rules and where we find reasonable minds could differ as to the conclusions drawn from the evidence, summary judgment must be denied.
3. Fraud is never presumed and must be established by clear and convincing evidence.
4. The existence of fraud is normally a question of fact.
5. An insurer has the right to rescind a policy ab initio for fraudulent misrepresentation in the application process.
6. To establish fraudulent misrepresentation in an action to rescind an insurance contract, the following elements must be established: (1) There was an untrue statement of fact made by the insured or an omission of a material fact, (2) the insured knew the statement was untrue, (3) the insured made the statement with the intent to deceive or recklessly with disregard for the truth, (4) the insurer justifiably relied on the statement, and (5) the false statement actually contributed to the contingency or event on which the policy is to become due and payable.
7. An insurer is estopped from setting up a defense of fraud on the part of the insured in the application process where such fraud was on the part of the insurer's agent. This rule applies with particular force where false answers are inserted by the agent without the knowledge of the applicant, regardless of whether such statements be considered representations or strict warranties. Thus, where an application is prepared without even consulting or interrogating the insured, and the insured had no knowledge of the making of such statements, much less their verity, an estoppel arises.
8. In cases where the truth of the representations or the facts surrounding the taking of an insurance application are in dispute, the questions presented are for a jury's determination.
9. The general rule is that an insurance applicant has a duty to understand the contents of a policy application before signing it and to answer all questions fairly and truthfully. A failure to read the application does not excuse a misrepresentation by an applicant absent fraud by the insurer's agent, undue influence, or mutual mistake.
10. An applicant for an insurance policy has no absolute duty to read a policy in anticipation of fraud or mistake of an insurer's agent.
11. Signing an application for insurance in good faith without reading it is not such negligence as would render the applicant responsible for the insurance agent's fraud or mistake.
12. Kansas courts have consistently recognized that an insurer may not rescind a policy on a mere negligent misrepresentation or omission in an application for insurance.
13. In the absence of an insurer's fraud or undue influence or of a mutual mistake, the failure to read an insurance application before signing it may be evidence of a reckless disregard for the truth and may estop the applicant from claiming to be ignorant of the document's content.
William J. Fitzpatrick, of Independence, argued the cause and was on the brief for appellant Karen Chism.
James P. Rankin, of Foulston Siefkin LLP, of Topeka, argued the cause, and Stephen M. Kerwick, of the same firm, was with him on the briefs for appellee Protective Life Insurance Company.
W. James Foland, of Foland, Wickens, Eisfelder, Roper & Hofer, P.C., of Kansas City, Missouri, argued the cause, and Rhonda K. Mason and John M. Brigg, of the same firm, were with him on the brief for appellee Quality Motors of Independence, Inc.
Past decisions of this court have held that an insurance company may rescind an insurance contract if an insured makes fraudulent material misrepresentations when applying for an insurance policy. A different rule applies, however, if the insurance company's agent completed the application and either knowingly entered false information or failed to ask the applicant for the information. Under those circumstances, the insurance company is estopped from rescinding the policy. This is true even if the applicant could have discovered the misrepresentation by reading the application form.
This appeal raises the question of whether the same estoppel principles apply if an insurance company's agent does not write a false answer on an insurance application but makes fraudulent misrepresentations that lead an applicant to sign an application without knowing that the signature represents there are no disqualifying health conditions. We conclude these circumstances are comparable to a situation where an insurance agent does not ask an applicant for information used to complete an application and an insurance company could be estopped from rescinding its policy. In this case, however, the insurance company disputes that the agent made misrepresentations. Because there is sharply conflicting evidence regarding the facts surrounding the completion of the application, we hold that the district court erred in granting summary judgment.
This appeal arises from Karen Chism's claim as the beneficiary on a life insurance policy issued by Protective Life Insurance Co. (Protective). The life insurance policy was offered to Karen and her husband Steve Chism during transactions related to the Chisms' purchase of a new vehicle from Quality Motors of Independence, Inc. (Quality Motors). As part of the transaction, the dealership's business manager, Dennis Urban (also referred to as “the agent”), explained that the Protective life insurance policy could be purchased and the insurance would pay off the remaining debt on the auto loan if either of them died.
According to Karen's deposition testimony, when Urban first discussed the life insurance he told them they qualified for the insurance because they were younger than 66 years of age. After the Chisms agreed to purchase the insurance, Urban used his computer to complete a portion of the insurance application form. Most of the information was data used in the paperwork relating to the sale and financing of the vehicle. This included basic biographical information about the Chisms (names, address, telephone number, age, gender, and Social Security numbers), details about the vehicle, and information about the loan. In addition, Urban filled in the amount of life insurance requested and the designated beneficiaries.
Urban printed out the application along with other documents relating to the purchase and financing of the vehicle. According to Karen, as Urban presented the life insurance application to the Chisms he “just told us how much the payments were going to be, how much the insurance was, and this is the Protective Life policy and sign down here.” She denied that Urban said anything about there being certain health conditions that disqualified an applicant or that he indicated there was a portion of the application regarding preexisting health conditions that they needed to review and complete.
Both Karen and Steve signed and dated the document, and Urban signed as the licensed resident agent for Protective. Karen testified at her deposition that she did not read the application before signing. In addition, when asked if Steve had read the application, she stated:
Urban's deposition testimony presents a sharply conflicting version of events. He testified it was not his practice to tell applicants they were qualified for insurance. In addition, according to Urban, Karen signed the documents at a different time than did Steve and both applicants had time to read the application before signing. Further, he testified he told both Karen and Steve they needed to review the application, initial where appropriate in the self-qualifying portion of the application, and then sign at the bottom.
Nevertheless, according to Karen's deposition testimony, the Chisms were not aware of the section of the application that related to health qualifications. That section began with the heading: “WARNING-YOU MUST BE ELIGIBLE TO APPLY FOR INSURANCE.” Below this heading the form stated:
“You are not eligible to apply for any insurance if you have attained age 66 as of the Effective Date, if you will have attained age 69 as of the Expiration Date of the insurance; or if you are not the named Debtor or Co-Debtor in the Schedule above.”
A paragraph followed that contained conditions of eligibility for disability insurance. Then, in a shaded box, another heading stated: “APPLICATION.” These instructions and text followed:
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