Government Emp. Ins. Co. v. Chavis, 19092

• Decision Date: 04 August 1970
• Docket Number: No. 19092,19092
• Citation: 254 S.C. 507,176 S.E.2d 131
• Parties: GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellant, v. Bobby CHAVIS, Patsy Gantt Berry, John David Berry, Jr., Angelia Marie Berry, aminor under the age of fourteen (14) and Randall Keith Berry, a minor under theage of fourteen (14) years of age, and State Farm Mutual Automobile InsuranceCompany,Respondents.
• Court: South Carolina Supreme Court

Page 131

176 S.E.2d 131

254 S.C. 507

GOVERNMENT EMPLOYEES INSURANCE COMPANY, Appellant, v. Bobby CHAVIS, Patsy Gantt Berry, John David Berry, Jr. Angelia Marie Berry, aminor under the age of fourteen (14) and Randall Keith Berry, a minor under theage of fourteen (14) years of age, and State Farm Mutual Automobile InsuranceCompany,Respondents.

No. 19092.

Supreme Court of South Carolina.

Aug. 4, 1970.

Lumpkin & LaFaye, Columbia, for appellant.

W. Turner Klapman and Marshall B. Williams, Orangeburg, Nelson, Mullins, Grier & Scarborough, Columbia, for respondents.

MOSS, Chief Justice.

This action is one under the 'Uniform Declaratory Judgments Act' Section 10--2001 Et seq., 1962 Code of Laws. It is brought by Government Employees Insurance Company, the appellant herein, to have the court declare a policy of automobile liability insurance, dated October 7, 1966, issued by it to the respondent, Bobby Chavis, insuring a 1966 Ford automobile, void Ab initio, because of certain untrue, false and fraudulent misrepresentations made by Chavis in his application for said policy, dated October 6, 1966.

It is admitted that on June 11, 1967, during the policy period, that Bobby Chavis, while driving the 1966 Ford automobile collided with an automobile owned by John David Berry, Jr., being driven at the time by his wife, Patsy Gantt Berry, with John David Berry, Jr., Angelia Marie Berry and Randall Keith Berry as passengers in said car. All of the Berrys were injured as a result of the collision and claims are pending or suits have been filed against Chavis for their personal injuries. All of the Berrys are respondents in this action. State Farm Mutual Automobile Insurance Company was made a party to this action, because it had issued a policy of automobile liability insurance to John David Berry, Jr., which provided uninsured motorist coverage to the Berry family, and it would be liable under such provisions in the event that the policy issued by the appellant to Bobby Chavis was void Ab initio.

All of the respondents have filed answers containing qualified denials and alleging, Inter alia, that the actions and conduct of the appellant following the accident, by making an investigation and leading all parties to believe that its policy was in full force and effect, and representing to the Berrys that it would make settlement for their personal injuries, is now estopped to deny liability and has waived any rights which it may have had to deny coverage on account of the alleged untrue, false and fraudulent misrepresentations made by Chavis in his application for the liability insurance policy in question.

During the course of the trial, the respondents were granted leave, over the objection of the appellant, to amend their answers so as to allege that under the express provisions of an amendment to the policy the appellant had no right to rescind its policy for any untrue or false repesentations made by Chavis.

This case was, by consent, referred to the Honorable C. E. Summers, County Judge, as Special Referee, to take the testimony and to report his findings of fact and conclusions of law to the court. After taking the testimony, the special referee filed his report in which he found that the appellant was estopped to deny liability and had waived any right that it may have had to deny coverage on account of the false representations made by the insured in the application he submitted. He also found that under the express provisions of the policy and under the applicable statute the appellant could have cancelled the policy at any time, if it was procured through false representations which were relied upon by the appellant, but it had no right to rescind the policy and make it void Ab initio.

The appellant filed numerous exceptions to the report of the special referee. In due course, they came on to be heard before The Honorable Louis Rosen, Judge of the First Circuit, who, by an order dated August 15, 1969, adopted and affirmed the findings of fact and conclusions of law of the special referee. He directed that the complaint of the appellant should be dismissed and held that the policy issued to Chavis was valid and afforded coverage applicable to the claims made by the Berrys. This appeal followed.

The appellant is a direct writer of automobile liability insurance and solicits business by mailing advertising material to persons whose names and addresses have been secured from various mailing lists. An inquiry card is enclosed with such material. A person desiring information concerning insurance with the appellant fills out such a card, giving his name and address, occupation, type and use of automobile. Bobby Chavis mailed in an inquiry card and received an application blank. This application was filled out and signed by Bobby Chavis and mailed to the appellant. Bobby Chavis certified that the answers to the questions contained in the application blank were true and requested the appellant in reliance thereon to issue to him the policy of insurance applied for therein. Among the questions asked on the application were the following:

'8. Have you or any member of your household ever had any automobile driver's license, permit, or privilege suspended, revoked or refused?

'12. How many motor vehicle accidents of any type or any cause have you (or any operator of your automobile), either as an owner or operator, been involved in during the past five years?

'13. Have you or any member of your family ever been convicted, forfeited bail, or paid any fines fr any driving violations or citations (other than parking) during the past three years?'

Chavis answered each of the foregoing questions by writing at the end thereof 'No.'

Admittedly, the foregoing answers given by Chavis to the questions asked in the application were false and untrue.

The evidence shows, according to the South Carolina Highway Department records, that the driver's license of Bobby Chavis was suspended beginning August 4, 1966, and ending November 4, 1966, based on the point system for evaluating operating records of drivers. Section 46--195 Et seq., of the Code. The file of the Highway Department shows driving violations by Bobby Chavis on April 14, 1966, such being a motor vehicle accident, May 28, 1966, June 27, 1966, and September 24, 1966, and for each of said traffic violations he forfeited bail.

Chavis was not called as a witness and offers no explanation or reason for his failure to make a true and full disclosure of all of his driving violations. We do not see how any reasonable inference could be drawn from the record, other than it was the intent of Chavis, in making false and untrue answers to the questions asked, to deliberately deceive the appellant and, thereby, procure the liability insurance. The intent with which misrepresentations of fact are made in an application for automobile liability insurance, may be deduced from the facts and circumstances surrounding the making of the misrepresentations. The testimony on behalf of the appellant is that if Chavis had answered the questions propounded in the application truthfully, it would not have accepted the risk and issued the policy of insurance in question.

Representations in an application for a policy of liability insurance should not only be true but full. The insurer has the right to know the whole truth. If a true disclosure is made, it is put on guard to make its own inquiries and determine whether or not the risk should be assumed. A misstatement of material facts by the applicant takes away its opportunity to estimate the risk under its contract. Inter-Ocean Ins. Co. v. Harkrader 193 Va. 96, 67 S.E.2d 894. Where a fact is specifically inquired about, or a question so framed as to elicit a desired fact, a full disclosure must be made, and the insurer has the right to rely upon the answer. An applicant is required to make full answers without evasion, suppression, misrepresentation or concealment of material facts so that such statements will represent his knowledge of the hazards of loss. Appleman, Insurance Law and Practice, Vol. 12, section 7292, page 392. If an applicant undertakes to state the circumstances which can affect the risk, he must do so fully and faithfully. Stoney v. Union Ins. Co., 3 McCord 387. Southern Farm Bur. Cas. Ins. Co. v. Ausborn, 249 S.C. 627, 155 S.E.2d 902.

The burden was upon the appellant to show not only that the statements made by Chavis in his application for insurance were untrue but, in addition that their falsity was known to Chavis, that they were material to the risk, and relied on by the insurer, and that they were made with the intent to mislead and defraud the insurer.

Under the facts here, undisputed and unexplained by Chavis, we think the only reasonable inference warranted by the evidence is that the liability policy was procured under an application containing false, untrue and fraudulent misrepresentations and said policy never afforded any coverage to Chavis unless the appellant has waived its right to or has become estopped to assert a denial of coverage.

The special referee and the trial judge concluded that the appellant, by its conduct, had waived its right to and was estopped to rescind the policy and make it void Ab initio, on the grounds of fraudulent misrepresentations in the application for the said policy.

In the Ausborn case above-cited, we said:

'Technically, a distinction exists between 'waiver' and 'estoppel', and the terms are not convertible, since a waiver is an intentional relinquishment of a known right, and is a voluntary act, while the elements of estoppel are the misleading of a party entitled to rely on the acts or statements in question, and a consequent change of position to his detriment. Under the law of insurance, the distinction between estoppel and an express waiver is fairly easy to preserve, but it is otherwise when the distinction to be drawn is between estoppel and a...