Drouillard v. Metropolitan Life Ins. Co., Docket No. 45233

• Decision Date: 08 July 1981
• Docket Number: Docket No. 45233
• Parties: Arnold R. DROUILLARD, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

Page 15

310 N.W.2d 15

107 Mich.App. 608

Arnold R. DROUILLARD, Plaintiff-Appellant, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

Docket No. 45233.

Court of Appeals of Michigan.

July 8, 1981.

Released for Publication Sept. 9, 1981.

Robert E. Butcher, Southgate, for Arnold R. Drouillard.

Philip M. Frost, Detroit, for Metropolitan Life Ins. Co.

Before RILEY, P. J., and HOLBROOK and BREIGHNER, ^* JJ.

RILEY, Presiding Judge.

Plaintiff commenced suit in Wayne County Circuit Court alleging fraud, malicious prosecution, and intentional infliction of emotional distress. These claims arose following a dispute over an insurance policy issued by defendant and covering the life of plaintiff's mother. A lengthy jury trial culminated in a verdict of no cause of action. Plaintiff's motion for a new trial was denied on April 27, 1979, and he appeals as of right.

On September 25, 1972, plaintiff's mother, Mildred Drouillard, applied for an endowment insurance policy with defendant. The policy, having a face value of $1,000, was issued on November 1, 1972, and named plaintiff as its beneficiary. At the time at which she applied for the policy, Mrs. Drouillard signed an authorization form permitting "any physician, hospital, clinic or insurance company" to furnish defendant with medical information. Mrs. Drouillard subsequently died on April 28, 1973.

Plaintiff was appointed executor of Mrs. Drouillard's estate and surrendered the policy in question to defendant for payment. Defendant denied liability on the policy on June 26, 1973, claiming that Mrs. Drouillard failed to admit in her application past treatment for serious health problems. A representative of defendant insurance company indicated that the application would not otherwise have been approved but for the "misrepresentation".

In October, 1973, plaintiff commenced suit on the policy in district court. Defendant filed an answer and affirmative defense, alleging that the policy was void because of Mrs. Drouillard's misrepresentation. Following a bench trial, the district court judge awarded plaintiff the value of the insurance policy, plus interest and costs. The judge considered defendant to have been negligent in failing to have investigated initially the state of Mrs. Drouillard's health.

Plaintiff commenced the instant suit shortly thereafter. At trial plaintiff contended that (1) defendant's agent, Stephen Manley, fraudulently obtained plaintiff's authorization to inspect decedent's health records, (2) the fraud and defendant's claim that decedent misrepresented her health constituted an intentional infliction of emotional distress upon plaintiff, and (3) defendant maliciously prosecuted plaintiff by asserting an affirmative defense in the district court action. Plaintiff has raised a plethora of alleged legal errors on appeal which we shall consider in turn.

I.

Plaintiff first contends that the trial court erred in refusing to instruct the jury that defendant waived the right to contest the policy by issuing the policy without requesting a physical examination of Mrs. Drouillard and without otherwise investigating the state of her health. Plaintiff's theory was that defendant could have uncovered any misrepresentations by the insured with an earlier investigation and that defendant thereby elected not to hold the insured to those representations by not immediately investigating.

Pursuant to statute, ¹ a false statement in an application for insurance may bar the right to recovery if it materially affected either the acceptance of the risk or the hazard assumed by the insurer. As plaintiff points out, the doctrine of estoppel or waiver may be asserted by the insured in certain instances to estop an insurer from denying liability on a policy. For example, fraud is waived when the truth is communicated to the insurer before the policy is actually issued. New England Mutual Life Ins. Co., v. LeVey, 264 Mich. 282, 249 N.W. 854 (1933). In the context of misrepresentation of an insurance contract, waiver occurs when the insurer, with knowledge of pertinent facts, acts or fails to act so as to induce the insured to believe himself entitled to rights under the policy. See 14 Callaghan's Michigan Civil Jurisprudence, Insurance, §§ 348-349, pp. 388-390.

Plaintiff would have us greatly expand the waiver doctrine by removing the element of knowledge. According to plaintiff, waiver occurs whenever an insurer has the opportunity to investigate an insured's health but does not. Following this reasoning, whether defendant was aware of Mrs. Drouillard's health problems or put on notice that they existed would be irrelevant.

We reject plaintiff's contention. Unless put on notice or apprised of special facts, an insurer is under no duty to investigate an applicant's health.

"As a general rule, an insurer is entitled to rely upon representations as to the applicant's health and prior medical attention and treatment and is not under any duty to question his veracity." 7 Couch on Insurance, 2d, § 37.250, p. 583.

In addition, the Michigan incontestibility statute ² recognizes that an insurer has the right, within the statutorily prescribed time, to assert any available defense against the insured. The fact that an insurer may raise the issue of misrepresentation as to health within two years from the date on which the policy is issued conclusively refutes plaintiff's contention.

II.

Following the insured's death, defendant obtained plaintiff's authorization to inspect the insured's medical records. Plaintiff contends that the signing of the authorization form induced him to believe that the policy would be considered valid. He argues that the trial court erred in refusing to instruct the jury that defendant was estopped from denying the validity of the policy after its agent, Stephen Manley, obtained plaintiff's signature on the authorization form.

We reject this argument. We fail to see how the tendering of an authorization form for execution could constitute a representation that an insurance policy is valid. To the contrary, the very nature of such a form implies that an investigation may be undertaken and that payment under the policy may hinge on the outcome of that investigation. In addition, by statute in Michigan: ³

"a life or disability insurance company does not incur the penalty of waiver or estoppel of defenses against a claim under a policy by receipt or acceptance of notice under the terms of the policy, or by the investigation of the claim." 14 Mich. Law & Practice, Insurance, § 393, p. 271.

III.

Plaintiff's next contention is that the trial court erred in ruling that a life insurance beneficiary may waive the doctor-patient privilege of a deceased insured. In Michigan, the doctor-patient privilege exists pursuant to statute. ⁴

Although the privilege continues in effect after the patient's death and although an insurance policy which purports to create an anticipatory waiver of the privilege to become effective at the insured's death is ineffective, Gilchrist v. Mystic Workers Of The World, 188 Mich. 466, 154 N.W. 575 (1915), it is nevertheless true that the privilege may be waived by a personal representative of the deceased. New York Life Ins. Co., v. Newman, 311 Mich. 368, 18 N.W.2d 859 (1945). In the context of insurance disputes:

"(t)he view generally taken is that the privilege as to communications between a physician and the insured may be waived by the beneficiary in an action on the policy or certificate of insurance." 19 Couch on Insurance, 2d, § 79:63, p. 440.

This is also the rule adhered to in Michigan. Johnson v. Fidelity & Casualty Co. of New York, 184 Mich. 406, 411-412, 151 N.W. 593 (1915).

Plaintiff attempts to distinguish Johnson on the basis that there the waiver occurred during trial while in the instant case the waiver occurred prior to trial. We have found no case law to support the notion that judicial supervision is necessary to effectuate a waiver. To the contrary, most of the reported cases have dealt with waiver prior to trial, and the practice has been approved. See Newman, supra. See also, cases collected at Couch, supra, § 79:63, fn. 2, pp. 440-441. We elect to adhere to this well-accepted rule. Waiver in such cases effectuates concepts of judicial economy since the practical result will often be settlements in lieu of trials. In addition, adopting plaintiff's position would further only marginally, if at all, the purpose of the privilege, which is to encourage free discussion between doctors and their patients, while at the same time it would tend to encourage the perpetration of frauds upon insurance carriers. We, therefore, affirm the lower court's ruling that plaintiff's pretrial waiver is valid.

IV.

In the district court suit, the defendant answered and defended the action by asserting the affirmative defense that the insured had not presented all relevant medical information in her application for insurance. During trial in the instant suit, plaintiff contended that defendant "maliciously prosecuted" him by its assertion of the affirmative defense. The lower court ruled that such a cause of action could not be predicated on the defendant's prior assertion of an affirmative defense. Plaintiff attacks this ruling as being erroneous.

In Michigan, malicious prosecution is both a common law and statutory action. ⁵ The language of the statute requires that the tortfeasor must have "in any way proceeded against (the tort victim), by any process or civil or criminal action * * * ". The phrase "proceeded against" would seem to require that the tortfeasor actually initiate an action. By asserting its affirmative defense in the district court, defendant neither instituted nor continued a proceeding against plaintiff. See Wilson v. Yono, 65 Mich.App. 441, 237 N.W.2d 494 (1975). Although we have found cases from other jurisdictions permitting actions based on malicious counterclaims or...