Green v. Life & Health of America

• Decision Date: 22 January 1998
• Docket Number: No. 90747,90747
• Citation: 704 So.2d 1386
• Parties: 23 Fla. L. Weekly S42 Allen GREEN, Petitioner, v. LIFE & HEALTH OF AMERICA, Respondent.
• Court: Florida Supreme Court

Page 1386

704 So.2d 1386

23 Fla. L. Weekly S42

Allen GREEN, Petitioner, v. LIFE & HEALTH OF AMERICA, Respondent.

No. 90747.

Supreme Court of Florida.

Jan. 22, 1998.

Jerold Hart of Jerold Hart, P.A., Hollywood, and Shelley H. Leinicke of Wicker, Smith, Tutan, O'Hara, McCoy, Graham & Ford, P.A., Fort Lauderdale, for Petitioner.

Nancy W. Gregoire and Richard T. Woulfe of Bunnell, Woulfe, Kirschbaum, Keller & McIntyre, P.A., Fort Lauderdale, and Howard D. Scher and Howard J. Bashman of Montgomery, McCracken, Walker & Rhoads, LLP, Philadelphia, PA, for Respondent.

Jeff Tomberg of Jeff Tomberg, J.D., P.A., Boynton Beach, for Amicus Curiae Academy of Florida Trial Lawyers.

Rocco N. Covino and Thomas C. Dearing of LeBoeuf, Lamb, Greene & MacRae, LLP, Jacksonville, for Amicus Curiae American Council of Life Insurance.

ANSTEAD, Justice.

We have for review the decision in Green v. Life & Health of America, 692 So.2d 220 (Fla. 4th DCA 1997). In its opinion, the district court certified conflict with the opinion in Carter v. United of Omaha Life Ins., 685 So.2d 2 (Fla. 1st DCA 1996). We have jurisdiction. Art. V, § 3(b)(4), Fla. Const. For the reasons expressed below, we quash the decision under review, approve the opinion in Carter, and hold that an insured's truthful answers on an insurance application according to the best of the insured's "knowledge and belief," are not misstatements within the meaning of section 627.409, Florida Statutes (1993), and cannot provide the grounds for the insurer's rescission of the insurance policy.

MATERIAL FACTS ¹

In March 1991, Harold Green (Green) applied for a home health care benefits policy from respondent, Life & Health of America (Life & Health). The application contained a section requesting responses to a series of questions regarding the applicant's health. The questions focused on the diagnosis, or possible diagnosis, of nine particular medical conditions. Specifically, the application asked: "Have you or your spouse within the past 5 years had or been told you have the following conditions." Next to each condition listed, including "kidney failure" and "chronic obstructive lung disease," Green checked the box for "no." Above the signature line, to which Green affixed his name, the application contained the following language:

The answers given by me are full, true and complete to the best of my knowledge and belief. All statements made herein are deemed representations and not warranties.

Life & Health issued the policy. One year later, Green made a claim against the policy. After the claim was filed, Life & Health reviewed Green's medical records and discovered that he suffered from chronic renal failure. As a result, Life & Health rescinded the policy and returned all of the previously paid premiums.

Subsequently, Green filed suit against Life & Health, seeking reimbursement for the cost of his hospitalization pursuant to the policy. Life & Health answered, asserting that the policy had been properly rescinded due to material misrepresentations made in the application. Green died shortly after the initiation of the lawsuit and his personal representative, Allen Green, was substituted as a party and is the petitioner in this case. Thereafter, Life & Health moved for summary judgment asserting that it had issued the insurance policy based on Green's representations in the application that he did not suffer from kidney failure or chronic obstructive lung disease.

The deposition of Green's treating physician was submitted as support for Life & Health's motion. In the deposition, the doctor testified that Green had suffered from chronic obstructive pulmonary disease, as noted in Green's 1991 medical chart. However, the doctor further testified that it was his regular practice to use layman's terms, instead of medical terms, when informing patients of their conditions, and that he probably told Green that he had a "little asthma" or a "little bronchitis." Additionally, instead of using a term like "chronic renal failure," the doctor would have told Green that he had "some sluggish kidneys." Green's son also gave evidence, by sworn affidavit, that during the many doctors' appointments which he attended with his father, at no time did any doctor state that Green had kidney failure or suggest kidney dialysis. The only diagnosis Green received from his various doctors was that he had "slow kidneys" or "small kidneys."

The trial court entered summary final judgment in favor of Life & Health, finding that rescission was proper under section 627.409, Florida Statutes (1993), ² which provides that recovery under an insurance policy may be denied where there has been a material misrepresentation made in the insured's application. The Fourth District affirmed, in a two-to-one decision, based upon our decision in Continental Assurance Co. v. Carroll, 485 So.2d 406 (Fla.1986), "despite the undisputed evidence that Green had no knowledge of his condition and any misrepresentation was therefore unintentional." 692 So.2d at 221. ³ However, the Fourth District acknowledged a series of contrary holdings from the Eleventh Circuit Court of Appeals and certified conflict with the First District's opinion in Carter v. United of Omaha Life Ins., 685 So.2d 2 (Fla. 1st DCA 1996).

LAW AND ANALYSIS

In contrast to the Fourth District's holding here, the First District in Carter v. United of Omaha Life Insurance, 685 So.2d 2 (Fla. 1st DCA 1996), reached a different conclusion under similar facts, reasoning that the insurer should be held to the lower standard of accuracy created by the "knowledge and belief" language used in its own contract. The First District, citing several Eleventh Circuit decisions, concluded that "once the insurer sets its own standard by contract for judging misrepresentations and concealment, it cannot rely on a statute that imposes more stringent requirements on an insured." Id. at 6.

In Carroll, the parents of an infant boy applied for a life insurance policy on the child. 485 So.2d at 407. When the child was less than six weeks old, Mrs. Carroll was told by the pediatrician that the child had developed a heart murmur and needed both an EKG and x-rays. Id. Just one week later, the Carrolls filled out the child's life insurance application, representing that the infant was "to the best of [their] knowledge and belief, in good health and free from deformity or defect," that the doctor said his findings were "normal," and that the doctor did not prescribe any treatment or drugs. Id. Continental issued the life insurance policy approximately ten days later; and the Carrolls' baby boy died of congenital heart disease nine days thereafter. Id.

Continental denied the Carrolls' subsequent claim on the grounds that it never would have issued the life insurance policy had they answered the questions truthfully on the application. Id. Litigation then ensued, with the Carrolls prevailing in the trial court and on appeal. Id. On review, we addressed the narrow and discrete issue, certified in the form of a question of great public importance, of whether Justice Ervin's special concurrence in National Standard Life Insurance Co. v. Permenter, 204 So.2d 206 (Fla.1967), modified our strict rule enunciated in Life Insurance Co. of Virginia v. Shifflet, 201 So.2d 715 (Fla.1967), that pursuant to section 627.409's predecessor statute, "all misrepresentations material to the acceptance of risk will invalidate an insurance policy even if made in good faith." Id. at 406. In quashing the district court decision we reaffirmed our holding in Shifflet that a material misrepresentation, such as that made by the Carrolls, would justify rescission.

While the application in Carroll did contain the same "knowledge and belief" language as the application in this case, we did not consider the phrase's effect on the standard of accuracy required by the application in light of section 627.409. Instead, we applied a strict statutory interpretation analysis in finding that "[t]he plain meaning of the statute indicates that, where either an insurer would have altered the policy's terms had it known the true facts or the misstatement materially affects risk, a nonintentional misstatement in an application will prevent recovery under an insurance policy." Id. at 409. In short, our inquiry focused exclusively on the statutory scheme governing representations in applications and the Carrolls' specific misstatement, not the lesser knowledge standard provided in the parties' contract.

Judge Pariente, in her dissenting opinion below, contended that Carroll was distinguishable and its holding inapplicable to this case's factual situation. Relying on William Penn Life Ins. Co. v. Sands, 912 F.2d 1359 (11th Cir.1990), she asserted that even if an exception to section 627.409 is created, our holding in Carroll would remain intact and unchanged. In focusing on the knowledge standard issue, Judge Pariente, as did the First District in Carter, followed the reasoning of Sands to conclude that the "knowledge and belief" language creates a lower standard of accuracy than contemplated by section 627.409. Green, 692 So.2d at 223 (Pariente, J., dissenting). We agree with Judge Pariente's analysis.

In Sands, the Eleventh Circuit, applying Florida law, concluded that insurers cannot rely on a statute imposing more stringent requirements on the insured when its application employs a less rigid "knowledge and belief" standard. 912 F.2d at 1364. The Eleventh Circuit reasoned that:

The suggestion that "knowledge and belief" language is irrelevant to the interpretation of an insurance form is not only illogical but is not supported by Carroll 's narrow holding. The Carroll court never addressed the argument raised in this case that such language can affect the interpretation of the responses provided in a policy application. Additionally, in Carroll, the applicants' statements concerning the insured's health were...