Fireman's Fund Ins. Co. v. Knutsen

• Court: Vermont Supreme Court
• Writing for the Court: Before SHANGRAW; DALEY; Before BARNEY, C. J., SMITH, KEYSER and DALEY, JJ., and SHANGRAW; DALEY
• Citation: Fireman's Fund Ins. Co. v. Knutsen, 324 A.2d 223, 132 Vt. 383 (Vt. 1974)
• Decision Date: 22 April 1974
• Docket Number: No. 92-73,92-73
• Parties: FIREMAN'S FUND INSURANCE COMPANY v. John K. KNUTSEN et al.

Page 223

324 A.2d 223

132 Vt. 383

FIREMAN'S FUND INSURANCE COMPANY v. John K. KNUTSEN et al.

No. 92-73.

Supreme Court of Vermont.

April 22, 1974.

Rehearing Denied Aug. 8, 1974.

Dick, Hackel & Hull, Rutland, for plaintiff.

Philip A. Angell Jr., Randolph, for John K. Knutsen.

Monte & Monte, Barre, for Arlene Knutsen.

Before SHANGRAW, C. J., and BARNEY, SMITH, KEYSER and DALEY, JJ.

DALEY, Justice.

The plaintiff insurance company issued to John K. and Arlene Knutsen an automobile liability policy upon application made by them to the Brown Insurance Agency in Montpelier, Vermont, on July 31, 1970. Both Knutsens were named insureds, and the vehicle covered by the policy was a 1970 Oldsmobile, registered in Vermont to Arlene Knutsen. On December 31, 1970, John K. Knutsen was involved in an accident in Connecticut while operating the insured automobile. As a result of the accident, the defendant Walter E. Howard, suffered personal injuries. Liability actions have been brought by Walter E. Howard of Lorene Howard, his conservator, in the states of Connecticut and Texas, against the defendants Knutsen based on this accident.

The plaintiff company, by a petition for declaratory relief in the Orange County Court, requested the court to declare the policy issued the Knutsens void ab initio on the ground of fraudulent misrepresentation made by the named insured in the application for insurance. Because of the claim made by the Howards, they were joined as parties defendant. The trial court, sitting without a jury, denied the plaintiff's request for an order declaring the plaintiff is not obligated to defend any claim against the Knutsens or to pay any judgment that may be rendered against them or either or them arising out of the accident on December 31, 1970. It also denied the plaintiff's request that the policy be declared null and void, and dismissed the action on the merits. The plaintiff appeals.

I.

The lower court found that both Mr. and Mrs. Knutsen were asked the following questions in the course of their application for the policy on July 1, 1970:

(a). Have you ever had your license suspended or revoked?

(b). Have you ever had insurance refused or cancelled by any company?

(c). Have you been cited for traffic violations other than parking in the last five years?

The answers given by both were in the negative. The answers given by Mr. Knutsen were admitted by him at the hearing below to be untrue. Mrs. Knutsen's answers were apparently true as to her. The application, a part of the policy issued by the Brown Agency and the appellant, also contains statements made by the defendants relating to present address, length of time in Vermont, and previous address, as well as standard questions relating to use of the automobile by each of the insureds.

The record, briefly summarized, discloses the following. Mr. and Mrs. Knutsen at all times material were residents of the state of New York. They were married in 1969 and later that year purchased undveloped real estate in Brookfiled, Vermont. In January, 1970, Mr. Knutsen came to Vermont, applied for and obtained a Vermont motor vehicle operator's license. He is employed as chief engineer on an oceangoing tug.

Mr. Knutsen has had various difficulties in the state of New York relating to his operation of motor vehicles. His New York motor vehicle license was revoked on March 4, 1967, after several previous suspensions, for failure to submit to a chemical test, and again on June 8, 1968, for having been involved in an automobile accident while driving uninsured. He applied for a driver's permit in New York on May 21, 1968, and his application was denied on July 29 of that year for failure to answer an outstanding summons. Late in 1968, he obtained an operator's permit in Rhode Island, listing as his address his employer's headquarters in Rhode Island. He had no valid operator's license from March 4, 1967, until January 19, 1970, when he obtained his Vermont license, except for the Rhode Island permit, which, he testified, lapsed in September of 1969, when the Knutsens took up residence in New York following their marriage and honeymoon. Mr. Knutsen's New York insurance was cancelled on December 17, 1966. There is no evidence that he carried any other automobile insurance from that time until July 31, 1970.

On July 28, 1970, Mr. Knutsen purchased the 1970 Oldsmobile in New York as an anniversary gift for his wife. The bill of sale for the automobile was taken in the name of Arlene Knutsen, and three days later this same vehicle was registered in Vermont in her name alone. Mrs. Knutsen also owned at this time, and for as long as they had known each other, a 1963 Pontiac. Another automobile, a 1969 Triumph convertible, which was purchased and registered in her name before they were married, was sold when the Oldsmobile was purchased. Mrs. Knutsen testified that the Triumph, and later the Oldsmobile, was her pleasure car, and that Mr. Knutsen only used it once in a while. However, she also testified that Mr. Knutsen drove the Triumph to the shipyard and parked it there and that it was the car he drive when he took her out during their courtship.

On his January 19, 1970, application for a Vermont operator's license, Mr. Knutsen answered 'no' to the question, 'Is your operating privilege restricted, suspended, revoked or refused in any state?' His New York revocation was in effect at that time. He had responded in the affirmative to a similar question asked on his New York driver's permit application of May 21, 1968. Although his Rhode Island permit application was not in evidence, his testimony indicates that he probably answered a similar question, if there was one on the Rhode Island application, in the negative, on the assumption that in each case the question related only to the status of his license in the state in which he was applying.

Mr. Knutsen gave a similar explanation of his responses to the crucial questions in the interview with Ashley Hudson of the Brown Insurance Agency, which is cited in Finding 23 of the findings of fact: 'Mr. Knutsen explained his failure to answer the questions . . . correctly by asserting he thought the questions pertained only to his Vermont license.' It should be noted that the court, by merely reciting this testimony without comment, made no finding as to the credibility of the explanation as would constitute in a legal sense a finding of fact. Krupp v. Krupp, 126 Vt. 511, 236 A.2d 653 (1967).

In the present instance, the record as a whole, in light of the applicable case law, supports only one inference as to intent; namely, that Mr. Knutsen misrepresented his motor vehicle and insurance background to the applicant's agent with actual intent to deceive.

It is a general rule of Vermont law that material or fraudulent misrepresentations in applications for life insurance are grounds for declaring the policy void ab initio. New York Life Insurance Co. v. McLaughlin, 112 Vt. 402, 26 A.2d 108 (1942); Pellon v. Connecticut General Life Insurance Co., 105 Vt. 508, 168 A. 701 (1933). Although we have no decision of this Court applying the above rule to applications for automobile liability insurance, we see no reason why the same principle should not apply, as codified in 8 V.S.A. § 4205, which reads:

The falsity of a statement in the application for a policy covered by such provisions shall not bar the right to recovery thereunder unless such false statement was made with actual intent to deceive or unless it materially affected either the acceptance of the risk or the hazard assumed by insurer.

It has long been recognized that, because of the element of intent, positive proof of fraudulent misrepresentation is seldom to be had, and the law will allow consideration of a wide range of circumstantial evidence. Circumstances inconclusive in themselves if separately considered may, by their number and joint operation, be sufficient to constitute conclusive proof in matters involving fraudulent intent. Castle v. Bullard, 23 How. (64 U.S.) 172, 187, 16 L.Ed. 424 (1859). No evidence will be considered irrelevant, so long as that evidence, by itself or in conjunction with other evidence, contributes something to the establishment of a rational basis for inferring the ultimate fact. Westlund v. O'Bryan Construction Co., 123 Vt. 301, 187 A.2d 507 (1962).

Similar fraudulent acts, if committed sufficiently near in time so that the same motive may reasonably be supposed to exist, are admissible to establish intent, on the sound logical principle that such similar acts diminish the possibility that an innocent mistake was made in an untrue and misleading statement. Eastman v. Premo, 49 Vt. 355 (1877); Morrison v. United States, 4 Cir., 270 F.2d 1 (1959). When a representation is made and its falsity not denied, an intent to deceive will be inferred in the absence of explanation. New York Life Insurance Co. v. McLaughlin, 112 Vt. 402, 26 A.2d 108 (1942).

The lower court's conclusion that 'the misrepresentations made by Mr. Knutsen, and the manner in which they were made, do not support a finding that they were made with an actual intent to deceive', is the equivalent of a finding of fact on the question of intent. Such a finding must stand if it is not clearly erroneous but is fairly and reasonably supported by the evidence. Wells v. Village of Orleans, 132 Vt. 216, 315 A.2d 463 (1974).

The trial court's appraisal of the credibility of witnesses is entitled to due respect. However, this Court has a greater latitude to come to its own conclusions from the facts when such facts are not in substantial dispute. State Farm Mutual Automobile Insurance Co. v. Wall, 92 N.J.Super. 92, 222 A.2d 282 (1966).

Mr. Knutsen's actions speak louder than his testimony in seeking to justify his misrepresentations by saying that he believed the questions related only to his Vermont activities. The undisputed facts of the record disclose a...