Gouldin v. Inter-Ocean Ins. Co.

• Decision Date: 09 April 1958
• Docket Number: INTER-OCEAN,No. 235,235
• Citation: 248 N.C. 161,102 S.E.2d 846
• Court: North Carolina Supreme Court
• Parties: Jonn M. GOULDIN, 111, Non Compos Mentis, by Robert M. Wiley, Guardian, v.INSURANCE COMPANY.

Page 846

102 S.E.2d 846

248 N.C. 161

Jonn M. GOULDIN, 111, Non Compos Mentis, by Robert M. Wiley, Guardian, v. INTER-OCEAN INSURANCE COMPANY.

No. 235

Supreme Court of North Carolina.

April 9, 1958

Battle, Winslow & Merrell, Rocky Mount, for plaintiff, appellant.

Robert M. Wiley, Rocky Mount, Guardian, in pro. per.

Gardner, Connor & Lee, Wilson, for defendant, appellee.

JOHNSON, Justice.

The two insurance policies in suit were issued in 1955, one in January, the other in June. On 31 August, 1955, the plaintiff was injured by a gunshot blast which ranged upward through the front of his forehead. As a result of the injury he has been declared non compos mentis. The claim filed by his guardian was denied on the ground the shooting was an attempted suicide. The policies exclude suicide or any attempt thereat. The guardian instituted this action, alleging that the injury was of accidental origin. The issue raised by the defendant's denial and plea of attempted suicide was resolved by the jury in favor of the plaintiff. As to this issue, the first one, no question is raised by the appeal.

The second issue relates to the question of false representations in the applications for the policies. The defendant by supplemental answer alleged, and at the trial evidence was offered tending to show, that the plaintiff failed to disclose in the applications that he was hospitalized in 1952 for treatment for barbiturate intoxication. The defendant set up and relied on plaintiff's failure to disclose this and other previous illnesses as misrepresentations materially affecting the insurance risk, and on the issue raised by the plaintiff's denials, the trial court gave the jury a peremptory instruction in favor of the insurance company. To this instruction no error is assigned. In fact, no phase of the trial relating to the second issue is challenged by the appeal.

The case was fought out below over the third issue, that of waiver. All assignments of error brought forward by the plaintiff relate to that issue.

The plaintiff moved the court for a peremptory instruction in his favor on the issue of waiver. The motion was denied. This ruling is the subject of the first assignment of error.

The plaintiff contends that the evidence shows conclusively that the insurance company by its acts and conduct in dealing with the plaintiff waived its right of forfeiture. He insists that the evidence discloses that the company had knowledge of the misrepresentations before he suffered the gunshot wound now in suit; and that after receiving such knowledge the company had dealings with the plaintiff in processing a claim filed by him for a previous sickness and hospitalization and paid the claim, thus treating the policies as still being in effect and leading the plaintiff to regard himself as still insured, thereby waiving the company's right to cancel the policies. As further evidence of waiver, the plaintiff points to the fact that when the instant claim was later filed, the company denied liability on the sole ground of attempted suicide, without mention of any right it may have had to cancel the policies for previous misrepresentations.

The insurance company contends, on the other hand, that the evidence was insufficient to justify the action of the court in submitting the issue of waiver, and for that reason the company insists that any error committed by the court in the trial of the issue of waiver should be treated as harmless.

These, in summary, are the essential principles of law applicable to the issue of waiver:

'In general, any act, declaration, or course of dealing by the insurer, with knowledge of the facts constituting a cause of forfeiture * * * which recognizes and treats the policy as still in force and leads the person insured to regard himself as still protected thereby will amount to a waiver of the forfeiture * * * and will estop the insurer from insisting on the forfeiture or setting up the same as a defense when sued for a subsequent loss. Such waiver may be inferred from acts as well as from words. Acts of an insurance company in recognizing a policy as a valid and subsisting contract, and inducing the insured to act in that belief and incur trouble or expense, is a waiver of the condition under which the forfeiture arose.' 29 Am.Jur., Insurance, Sec. 832.

In Hicks v. Home Security Life Insurance Co., 226 N.C. 614, at page 617, 39 S. E.2d 914, at page 916, it is said: 'Waiver of the forfeiture provision in a policy of insurance is predicated on knowledge on the part of the insurer of the pertinent facts and conduct thereafter inconsistent with an intention to enforce the condition. In Coile v. Order of United Commercial Travelers, 161 N.C. 104, 76 S.E. 622, quoted in Paul v. Reliance Life Ins. Co., 183 N.C. 159, 162, 110 S.E. 847, and in Arrington v. Continental Life Ins. Co., 193 N.C. 344, 137 S.E. 137, it is said [161 N.C. 104, 76 S.E. 623]: 'A course of action on the part of the insurance company which leads the party insured honestly to believe that by conforming thereto a forfeiture of his policy will not be incurred, followed by due conformity on his part, will estop the company from insisting upon the forfeiture, though it might be claimed under the express letter of the contract.' Ins. Co. v. Eggleston, 96 U.S. 572, 577, 24 L.Ed. 841; Ins. Co. v. Norton, 96 U.S. 234, 24 L.Ed. 689. ' See also Robinson v. Brotherhood, 170 N.C. 545, 87 S.E. 537.

'As a general rule, in order to waive a policy provision or a forfeiture, there must be a prior knowledge of the circumstances, a waiver being the intentional relinquishment of a known right and requiring both knowledge of the existence of the right and an intention to relinquish it. Although the courts are quick to protect an insured or beneficiary, the element of knowledge is considered a fair element to impose for the protection of the insurer.' 16 Appleman, Insurance Law and Practice, p. 613.

'Knowledge of facts which the insurer has or should have had constitutes notice of whatever an inquiry would have disclosed and is binding on the insurer. The rule applies to insurance companies that whatever puts a person on inquiry amounts in law to 'notice' of such facts as an inquiry pursued with ordinary diligence and understanding would have disclosed.' 16 Appleman, Insurance Law and Practice, p. 817.

Ordinarily, an insurance company is presumed to be cognizant of data in the official files of the company, received in formal dealings with the insured. Hicks v. Home Security Life Ins. Co., supra, 226 N.C. 614, 39 S.E.2d 914; Robinson v. brotherhood, supra, 170 N.C. 545, 87 S.E. 537.

'An adjustment of a loss with knowledge of grounds of forfeiture has been deemed a waiver of the forfeiture, in the absence of any provision to the contrary.' 29 Am. Jur., Insurance, Sec. 784, p. 670. See also Blue Bird Cab Co. v. American Fidelity & Casualty Co., 219 N.C. 788, 15 S.E.2d 295.

'Thus, if the company pays certain small losses on a policy, it waives any defense of which it has knowledge and is estopped thereafter to rely upon such defense in future losses.' 16 Appleman, Insurance Law and Practice, p. 945.

In 29 Am.Jur., Insurance, Sec. 871, p. 667, it is stated: 'There are many cases asserting the rule that where an insurer denies liability for a loss on one ground, at the time having knowledge of another ground of forfeiture, it cannot thereafter insist on such other ground if the insured has acted on its asserted position and incurred prejudice or expense by bringing suit, or otherwise. ' See also Parker & Co. v. Continental Ins. Co., 143 N.C. 339, 55 S. E. 717.

Waiver is a mixed question of law and fact. When the facts are determined, and are all one way, it becomes a question of law. Hicks v. Home Security Life Ins. Co., supra, 226 N.C. 614, at bottom page 619, 39 S.E.2d at page 917.

As previously pointed out, when the policies here sued on were applied for in January and May, 1955, the plaintiff failed to disclose that he had been hospitalized for barbiturate intoxication in 1952. It was this nondisclosure of facts that the insurance company relied on at the trial and urged as its chief ground for forfeiting and cancelling the policies. And it appears from the judge's charge on the issue of forfeiture that the jury's verdict in favor of the insurance company was based on the plaintiff's failure to disclose the facts in respect to his hospitalization in 1952.

The evidence on which plaintiff relies to show that the company waived its right of forfeiture may be summarized as follows:

1. After the policies were issued to the plaintiff in January and June, 1955, he was hospitalized at the Medical College of Virginia Hospital, Richmond, from 22 July until 11 August, 1955. When he was discharged at the end of this period, he filed claim with the company for hospital benefits under the policies. In the claim papers the plaintiff furnished to the defendant a statement of his physician, Dr. Foster, that the plaintiff had been treated during the stated period of hospitalization for '(1) Psychoneurosis, anxiety reaction, (2) acute brain syndrome, drug intoxication,' and that his first symptoms appeared 'several weeks prior to July 22, 1955. ' On the blank filled in and signed by the plaintiff as a part of the proof of claim, he answered questions as follows:

'8. Have you ever had this disease before? Yes. Give dates. 1952 (?). Check claim records with your company.

'9. What medical attention have you had during the past five years? Above.'

It is admitted in the plaintiff's pleadings that he filed no claim for the 1952 hospitalization. The plaintiff, in explanation of the foregoing statement, '1952 (?) Check claim records with your company,' offered evidence that he had previously been insured by the defendant under a similar...