Franklin Life Ins. Co. v. William J. Champion and Co., 15753.

• Decision Date: 27 August 1965
• Docket Number: No. 15753.,15753.
• Citation: 350 F.2d 115
• Parties: The FRANKLIN LIFE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellant, v. WILLIAM J. CHAMPION AND COMPANY, a Michigan corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

350 F.2d 115 (1965)

The FRANKLIN LIFE INSURANCE COMPANY, an Illinois corporation, Plaintiff-Appellant, v. WILLIAM J. CHAMPION AND COMPANY, a Michigan corporation, Defendant-Appellee.

No. 15753.

United States Court of Appeals Sixth Circuit.

August 27, 1965.

COPYRIGHT MATERIAL OMITTED

David G. Barnett and Thomas F. Shea, Detroit, Mich., for appellant, Fischer, Sprague, Franklin & Ford, Leon R. Jones, Detroit, Mich., on the brief.

Richard F. Newton, Detroit, Mich., for appellee, Cross, Wrock, Miller, Vieson & Kelley, Glen R. Miller, David H. Patton, Detroit, Mich., on the brief.

Before MILLER and PHILLIPS, Circuit Judges, and McALLISTER, Senior Circuit Judge.

McALLISTER, Senior Circuit Judge.

The issue in this case, involving life insurance, may be stated as follows: Whether, when an insured is asked if he is in good health at the time of reinstatement of a policy and he answers that he is, the policy, then reinstated, can be rescinded by the insurance company when it appears that the insured was, at the time of his answer, suffering from a serious disease from which he thereafter died, but did not know, at the time, that he was suffering from such disease and did not have reason to suspect it. Upon suit on the policy, the district court found that at the time the application for reinstatement was submitted, the insured did not believe, nor did he have any reason to believe, that he was suffering from a serious disease; that the insurance company could not subsequently rescind the contract of insurance; and, accordingly, the district court entered a judgment against the insurance company for the full amount of the insurance then due. From this judgment, the insurance company appeals.

The background of this case is as follows: William J. Champion and Company, Realtors, on June 18, 1959, took out a life insurance policy on the life of William J. Champion, Jr., of Grosse Pointe Farms, Michigan, its President. The policy was in the face amount of $100,000, and was issued by The Franklin Life Insurance Company. Quarterly payments of premiums were then made until June 18, 1960, when a default occurred. The defaulted payment was not made within the grace period of one month thereafter. Subsequently, defendant tendered payment of the defaulted premium by check, which was received by the insurance company on July 30, 1960. In response to the tender, defendant was advised that the insurance had lapsed and that reinstatement would be considered upon submission of a completed application therefor. The check which had been tendered for reinstatement was retained by the insurance company. On August 4, 1960, the insurance company furnished William J. Champion and Company, the defendant-appellee, a form for application for reinstatement, and on August 10, 1960, it received from defendant-appellee, the application for reinstatement of insurance on the life of Mr. Champion, which contained the following statements in answer to certain of the company's questions:

"5. What physicians or practitioners have you consulted or been treated by during the past? (Give all dates and details.)

Answer — DR. NELSON TAYLOR — Routine Check-up 1960;

DR. ALLARGE — For Heel Injury No. 1957."

"7. Are you now in good health? (If not, give details.)

Answer — YES."

The application was signed by William J. Champion, Jr., and by Catherine Wood Champion, his wife, who was Vice-President of defendant company and who signed on its behalf.

Upon receiving the application for reinstatement, appellant company sent its Family Physician's Blank to Dr. Nelson Taylor, requesting that it be completed and returned. Dr. Taylor stated that he did not give Mr. Champion a complete examination on July 1, 1960, but, in reply to the insurance company's request, he filled out the form under date of August 25, 1960, and returned it to defendant. Dr. Taylor stated in the form that he had found "No organic pathology" and that an analysis of the urine, a complete blood count, a chest X-ray, and a Kahn test had negative results. Under the heading "Predominant symptoms and physical findings, including blood pressure," Dr. Taylor wrote: "Request for complete examination." Thus, the physician's statement contained no information inconsistent with the statements of the insured in the application for reinstatement.

On August 29, 1960, plaintiff insurance company received this completed medical form from Dr. Taylor. Relying upon the information contained in the application form and in the medical form, Doris Smith and Willard O'Connor, underwriters in the employ of plaintiff, approved the application for reinstatement; the policy was reinstated as of August 30, 1960; and the check which had been received on July 30, 1960, was deposited by the insurance company. For some months prior to the time the application for reinstatement was submitted, Mr. Champion had experienced recurrent headaches and some visual difficulties. He attributed the headaches to an allergy, and his opinion was confirmed by medical advice that he received. The visual difficulties he attributed to bifocal glasses he first wore in May 1960.

On the afternoon of August 31, 1960, the day after the policy had been reinstated, Mr. Champion experienced a particularly severe and disabling headache. On September 1, 1960, he consulted Dr. Taylor and had a complete physical examination; and on September 2, 1960, he was admitted to St. John Hospital, Detroit, Michigan, for tests. The evidence shows that an appointment for a complete physical had, strangely enough, been made two months in advance. In the meantime, Dr. Taylor had gone to Europe. In any event, after the examination by Dr. Taylor on September 1, 1960, and the admission of Mr. Champion to St. John Hospital for tests on September 2, 1960, those tests indicated the existence of a lesion of the brain. Mr. Champion was transferred to Grace Hospital on September 4, 1960, and remained in that hospital until September 21, 1960; was readmitted as a patient to Grace Hospital on November 14, 1960, where he remained until January 6, 1961. Dr. Gurdjian was the attending physician. Mr. Champion was then readmitted to Grace Hospital on January 16, 1961, and remained there until January 20, 1961; was readmitted to Grace Hospital on February 21, 1961, where he remained until his death on March 30, 1961. Death was due to a malignant meningioma, whose growth had not been arrested by surgery, or by subsequent cobalt treatment.

The answer to the fifth question of the application for reinstatement, above quoted, inquiring as to what physicians had been consulted by Mr. Champion, was incomplete in that it omitted the name of Dr. James E. Coyle, whom Mr. Champion had consulted on August 4, 1960, with reference to headaches. Dr. Coyle, a specialist in diseases of the ear, nose, and throat, gave Mr. Champion a complete ear, nose, and throat examination. His diagnosis was allergic rhinitis, an inflammation of the nose, with nasal and sinus congestion, caused by an allergy, for which the physician prescribed medicine to open the nasal passages and to relieve pain. The answer to the fifth question of the application for reinstatement was incomplete with regard to another item, in that it failed to disclose that Mr. Champion had also consulted Dr. Taylor on July 1, 1960, with reference to headaches, although he did disclose that in 1960 he had consulted Dr. Taylor, and at that time had what Mr. Champion referred to as a "routine checkup," but which Dr. Taylor refers to as an office visit for some complaint but not a complete physical examination. We are not informed as to what the "routine checkup" was for.

Mr. Champion was suffering from a malignant meningioma at the time the application for reinstatement was submitted. The existence of the disease was discovered only upon his admission to the hospital. Proof of Mr. Champion's death was submitted to plaintiff by defendant in accordance with the terms of the policy.

On March 15, 1961, two weeks prior to Mr. Champion's death, plaintiff gave notice of the rescission of the policy and rescission of reinstatement by letter delivered to William J. Champion and Company; and the insurance company tendered refund of premium payments made subsequent to the reinstatement with interest to the date of tender.

In his findings of fact, the district judge found that at the time the application for reinstatement of the life insurance policy was submitted to the insurance company, Mr. Champion made the application in good faith, and did not believe, nor did he have any reason to believe, that his headaches and visual defects were symptoms of a serious disease; that Mr. Champion continued to be active in the conduct of his business; that he personally cared for the rather extensive grounds and gardens about his house; that he personally painted a considerable portion of his large house in the summer of 1960; that on August 27, 1960, Mr. Champion, with his wife, attended the wedding and subsequent reception of his secretary's daughter. He drove to the wedding, danced, and he and his wife were among the last to leave, departing about 1:30 A.M. of August 28, 1960; and he led an active business and social life, and participated with his family in a vigorous swim meet at the Grosse Pointe Hunt Club on August 28, 1960, which he won for his team by making a very fast swim. On this day he posed for a photograph with his wife and eight children at the side of a pool. In this photograph, he is erect, smiling, and the the picture and personification of vigor and good health. This was the day before the insurance company received the completed medical form from Dr. Taylor, and two days before the reinstatement of the policy.

With regard to the phrase "routine checkup," used by Mr. Champion in his answer to question 5 on the application for reinstatement of insurance, the trial court found that while the phrase might not have an accepted meaning, it...