Equitable Life Ins. Co. of Iowa v. Mann

• Decision Date: 19 January 1943
• Docket Number: 46022.
• Citation: 7 N.W.2d 566,233 Iowa 293
• Parties: EQUITABLE LIFE INS. CO. OF IOWA v. MANN.
• Court: Iowa Supreme Court

7 N.W.2d 566

233 Iowa 293

EQUITABLE LIFE INS. CO. OF IOWA v. MANN.

No. 46022.

Supreme Court of Iowa

January 19, 1943

Rehearing Denied April 9, 1943.

Phineas M. Henry, of Des Moines, and Ross, Everest Geiser & Johnson, of Council Bluffs, for appellant.

Kimball Peterson, Smith & Peterson, of Council Bluffs, for appellee.

OLIVER Justice.

A previous appeal from a dismissal upon the pleadings is reported in 229 Iowa 945, 295 N.W. 461. On October 15, 1938, decedent, Ida E Michener, a business woman, made written application to appellant for $5,000 life insurance. Because of her age, 64 years, appellant required a trial application by its agent, which was made October 25. In the meantime appellant secured from the Retail Credit Company a general report concerning applicant's occupation, finances, reputation, apparent health and such personal and family health history as the reporter learned. On November 14, decedent completed her application and took her medical examination. The policy was issued November 15, 1938. In her application, decedent reported injury in an auto accident, pneumonia, uterine fibroid, later adhesions, and an appendectomy, all more than five years prior to 1938.

Insured died of cerebral hemorrhage September 26, 1939. Thereafter, appellant instituted this action to cancel the policy, based upon the following questions and answers in the application,

"13 a. Have you ever been told that you had any ailment or disease of the (3) liver, gall bladder, stomach or intestines? A. No.

"13 (f). Have you within the past five years consulted a physician or other practitioner or received medical or surgical advice or attention for any reasons other than that stated in your foregoing answers? A. No."

In its petition appellant pled:

"That in truth and in fact the said Ida E. Michener consulted Dr. Harriett Hamilton of Council Bluffs, Iowa, several times in the year 1935 because she had been vomiting blood, and the said Dr. Hamilton diagnosed her ailment as an ulcer of the stomach, and that the said applicant consulted Dr. A. A. Johnson of Council Bluffs, Iowa, several times in the year 1935 because of an intestinal hemorrhage and because of a fainting spell."

The petition asserted the policy was issued in reliance upon said statements, that had appellant known they were untrue it would not have issued the policy and that by reason thereof the policy never took effect.

Appellee, by answer and cross-petition, alleged the policy was in full force and effect and demanded recovery thereon. The answer to said cross-petition asserted the policy never took effect because of the facts set forth in the petition.

I. Section 8770 Code of Iowa 1939 provides that in any case where a medical examiner or physician of any life insurance company shall issue a certificate of health or declare the applicant a fit subject for insurance, or so report to the company, "it shall be thereby estopped from setting up in defense of the action on such policy or certificate that the assured was not in the condition of health required by the policy at the time of the issuance or delivery thereof, unless the same was procured by or through the fraud or deceit of the assured."

We have frequently held that to establish the affirmative defense of fraud required by this section, the proof must be clear, satisfactory and convincing and must show (1) a material representation of an existing fact, (2) its falsity, (3) scienter, (4) intent that it be relied upon, (5) that the examining physician relied and acted thereon, and (6) that the company was thereby defrauded. Ley v. Metropolitan Life Ins. Co. of New York, 120 Iowa 203, 94 N.W. 568; Bohen v. North American Life Ins. Co., 188 Iowa 1349, 177 N.W.

706; Olson v. New York Life Ins. Co.,229 Iowa 1073, 295 N.W. 833.

Among authorities holding intentional fraud must be proved to establish such defense are: Colver v. Continental Assurance Co., 220 Iowa 407, 262 N.W. 791; Sargent v. Modern Brotherhood, 148 Iowa 600, 127 N.W. 52; Peterson v. Des Moines Life Association, 115 Iowa 668, 87 N.W. 397; Boos v. Mutual Life Ins. Co. of New York, 205 Iowa 653, 216 N.W. 50; Stewart v. Equitable Mut. Life Ass'n of Waterloo, 110 Iowa 528, 81 N.W. 782.

On behalf of appellant, Dr. Johnson testified that on September 9, 1935, deceased called at his office and stated she had a hemorrhage of the bowels on August 18, 1935, with a five minute fainting spell, and that her attending doctor had prescribed one tablespoon of cream every hour for 48 hours. Dr. Johnson analyzed a specimen of urine and found it normal. Her blood pressure was normal, hemoglobin blood count above average and white corpuscle count normal. The examination disclosed her to be a normal person. From the blood count the doctor concluded she could not have had a hemorrhage on August 18.

Decedent called at the doctor's office about a month later and again on November 14. He gave her no dietary instructions and no treatment for hemorrhage. His only prescription was elixir of luminal, a mild sedative. From the doctor's testimony it is apparent he was satisfied decedent had no ailment which required treatment.

Another witness for appellant was Dr. Harriet Hamilton by whom the tablespoons of cream had been prescribed. Decedent called at this doctor's office one day and the doctor called at decedent's home the following day. This doctor made no diagnosis of decedent's complaint but advised decedent to remain in bed. Decedent did not again consult Dr. Hamilton.

The examining physician for the insurance company testified that had appellee told him in 1938 of her alleged symptoms and consultations with Dr. Johnson and Dr. Hamilton, in 1935, he would have made a note of it upon the application.

Appellee's evidence showed that between August 1933, and May 1939, when she was stricken with the cerebral hemorrhage which caused her death, decedent had not lost a single day's work and had shown no indication of any illness in connection with her work.

In argument appellant states: "We assume that the opposing counsel will argue that she did not answer the question as to an ailment or disease of the stomach or intestines falsely, and we will concede that it has not been conclusively proven that she did have any such disease."

It is well established that failure to report a mere temporary disability or indisposition, not amounting to a disease, and treatments therefor by physicians, does not necessarily constitute fraud or deceit. In construing questions and answers relating to prior attendance by physicians the courts insist upon a reasonable or even a liberal construction in favor of the assured. Sargent v. Modern Brotherhood, supra; Colver v. Continental Assurance Co., supra; Olson v. New York Life Ins. Co., supra.

The decree of the trial court refers to the negative findings of Dr. Johnson in 1935, the inference that he advised decedent her condition was that of a normal person, and that she so believed and understood. The decree then recites:

"The evidence in this case wholly fails to show any thing that even remotely suggests intentional fraud on the part of the insured in making application for policy of insurance more than three years thereafter, and when, according to the evidence she had been working every day at her job. * * *.

"The whole record appears to the court to reflect the thought that it was of such minor importance that when asked as to whether she had consulted a physician or had suffered from named stomach disorders, that she merely forgot to mention the same."

The record supports these findings of the trial court and we concur in them.

II. However, appellant contends the estoppel provided by Code, Section 8770 is not here applicable because the statute states only "it shall be thereby estopped from setting up in defense of the action on such policy * * *." Appellant points out that this is not a defense but is an affirmative action by it to cancel the policy. Appellant also contends that since its action is in equity to cancel the policy, proof of intentional fraud is unnecessary. Therefore, appellant asserts it was not required to allege and prove that the report of the medical examiner was obtained by fraud or deceit. We quote from appellant's argument.

"The petition for cancellation in the case at bar did not contain any such allegations. The omission was intentional because it was our opinion that Section 8770 does not apply to an equitable action to rescind."

The language "in...