Grosse v. Protective Life Ins. Co.
| Decision Date | 24 March 1994 |
| Docket Number | No. 91-0382,91-0382 |
| Citation | 182 Wis.2d 97,513 N.W.2d 592 |
| Parties | Sharon GROSSE, Plaintiff-Appellant, v. PROTECTIVE LIFE INSURANCE COMPANY, Defendant-Respondent-Petitioner. |
| Court | Wisconsin Supreme Court |
For the plaintiff-appellant there was a brief by Briony Jean Foy, Larry I. Hanson and Jenswold, Studt, Hanson, Clark & Kaufmann, Madison and oral argument by Briony Jean Foy.
The plaintiff Sharon Grosse is seeking to collect life insurance proceeds from a policy issued to her deceased husband by defendant Protective Life Insurance Company (Protective Life). Protective Life denied coverage, claiming that there was a material change in the health of Mr. Grosse (a previously undiagnosed lung cancer) between the time of his application and the time he paid his first premium, a fact which for purposes of this review is undisputed. At trial, Ms. Grosse attempted to stop Protective Life from putting this fact into evidence, asserting that the statutes preclude Protective Life from doing so. The court of appeals agreed with Ms. Grosse, concluding that Protective Life was statutorily bound by the medical examination that Protective Life directed Mr. Grosse to undergo before it decided whether to offer him insurance. 174 Wis.2d 598, 501 N.W.2d 469. In that exam, the medical examiner concluded that he knew of no reason why Mr. Grosse should not be accepted for insurance. Protective Life appeals. We agree with the court of appeals. We interpret the statute to mean that unless an insurance company adopts rules specifically providing that its medical examiners are not authorized to declare the proposed insured acceptable for insurance, the company cannot assert the defense of a subsequent medical condition. Protective Life did not adopt such formal rules. Accordingly, we affirm the court of appeals and remand for a new trial.
The following facts are relevant to this appeal. Michael Grosse applied for life insurance with Protective Life on October 19, 1987. Protective Life requested that he submit to a medical examination from an independent medical examiner obtained by Protective Life. The results of the examination were reported to Protective Life on a standard medical examination form provided by the company. The form consisted of three sections. The first section required the examiner to ask the applicant various questions regarding the applicant's medical history, and to record the answers with explanation if needed. The questions included inquiries as to tobacco, alcohol and other drug use, personal and family medical history, and physical exercise habits. In this section Mr. Grosse revealed that he had quit smoking a pipe and cigars in 1985.
The second section required the medical examiner to report on the physical characteristics of Mr. Grosse including his height and weight, his blood pressure, and a urinalysis. Two portions of this section were crossed out and left unanswered without explanation.
The third section of the exam was titled, "Examiner's Confidential Report." This section required the examiner to give the name of the applicant and the name of the agent requesting the exam. In addition, two questions were presented to the examiner with regard to the applicant's insurability. The first question read, "[g]ive your confidential opinion of person examined as an insurance risk with reference to reliability of medical history as given, appearance, etc. (Write supplementary letter if necessary)." In response to this question, it appeared that the medical examiner entered only a dash. The second of the two questions read, To this question, the medical examiner answered "No."
On March 30, 1988, following the exam, Mr. Grosse was informed by Protective Life that a policy could be issued. Mr. Grosse did not communicate his acceptance at this time.
On April 11, Mr. Grosse saw a pulmonary specialist for a recurring cough and shortness of breath. The medical records indicate that the doctor made a preliminary diagnosis of lung cancer. There is nothing in the record, however, to indicate that the doctor informed Mr. Grosse of this preliminary diagnosis.
On April 12, the same day a biopsy was performed on Mr. Grosse's lung, Mr. Grosse accepted the policy.
The next day, April 13, Mr. Grosse was informed that he suffered from small cell cancer of the lungs. He did not inform Protective Life of this diagnosis, and the policy was issued on that day. On April 20, Protective Life delivered the policy to Mr. Grosse and on April 25, Mr. Grosse paid the first premium.
Mr. Grosse died of lung cancer on December 13, 1988. Protective Life denied Sharon Grosse's claim for the proceeds of her husband's insurance policy claiming that Mr. Grosse underwent an undisclosed, significant change of health between the date of his medical exam on February 13, 1988, and the date his first premium was paid, April 25, 1988. Protective Life based its denial on the following declaration which appeared in the application that Mr. Grosse had completed:
(c) No insurance shall take effect unless: (1) a policy is delivered to the Owner; (2) the full first premium is paid while the proposed insured(s) (are) alive; and (3) there has been no change in health and insurability from that described in this application.
Ms. Grosse subsequently brought an action against Protective Life. During the jury trial, Ms. Grosse made a motion in limine to estop Protective Life from introducing evidence as to Mr. Grosse's change in health. She did this pursuant to sec. 632.50, Stats., which states in full:
If under the rules of any insurer issuing life insurance, its medical examiner has authority to issue a certificate of health, or to declare the proposed insured acceptable for insurance, and so reports to the insurer or its agent, the insurer is estopped to set up in defense of an action on the policy issued thereon that the proposed insured was not in the condition of health required by the policy at the time of issue or delivery, or that there was a preexisting condition not noted in the certificate or report, unless the certificate or report was procured through the fraudulent misrepresentation or nondisclosure by the applicant or proposed insured.
In opposition to this motion, Protective Life asserted that sec. 632.50, Stats., was not applicable because the medical examiner's report was used for information purposes only, and that he had no authority to bind the company or declare Mr. Grosse acceptable for insurance. In support of this assertion, Protective Life cited to declaration (b) of the application:
(b) No agent or medical examiner can make, alter or discharge any contract, accept risks, or waive the Company's rights or requirements. No information or statement made available or given by or to the agent or examiner shall bind the Company unless put in writing in this application.
In addition, Protective Life's chief underwriter testified that Protective Life had an unwritten company policy prohibiting anyone other than an underwriter from binding the company or declaring an applicant fit for insurance.
The circuit court denied Ms. Grosse's motion in limine finding conclusive the chief underwriter's testimony that the medical examiner did not have authority to declare insurability or issue a certificate of health. Protective Life was therefore allowed to introduce evidence at trial of Mr. Grosse's change in health. Following the testimony and closing arguments, the jury affirmatively answered the special verdict question, "[d]id Michael Grosse fail to fulfill the declarations made by him in his insurance application?" The judge then entered judgment dismissing the plaintiff's action and awarding costs to the defendant.
Ms. Grosse subsequently appealed on the grounds that the circuit court erred in allowing Protective Life to introduce evidence regarding Mr. Grosse's change in health in violation of sec. 632.50, Stats. The court of appeals reversed. In its analysis, the court examined how a 1975 amendment affected the statute's intended purpose. The court concluded that the effect of the change was to protect an insurance company from estoppel under the statute if its medical examiner issued a certificate of health or declaration of insurability without having been authorized by the company. The court held, however, that Protective Life had authorized its medical examiner to declare Mr. Grosse fit for insurance by soliciting the medical examiner's opinion in Mr. Grosse's medical report.
Further, the court of appeals held that Mr. Grosse's alleged fraud in failing to disclose his change in health did not vitiate coverage under the policy. The court concluded that under sec. 632.50, Stats., Mr. Grosse's alleged fraud would only relieve Protective Life of coverage if the fraud was done to procure the medical examiner's certificate of health or declaration of insurability. Since no such claim had been made, the court found that fraud was not a defense. Based on these determinations, the court held that sec. 632.50 was applicable, and it remanded so that the statute could be applied at trial.
The issue we are confronted with is whether Protective Life is estopped under sec. 632.50, Stats., from asserting as a defense Mr. Grosse's change of health between the time of his medical exam and payment of his premium. In resolving this issue, we must answer three questions: first, whether the medical examiner had the authority to issue a certificate of health or declaration of insurability; second, if so, whether the medical examiner's report constituted such a certificate; and, third, whether Mr. Grosse's alleged fraud in paying the premium without disclosing his change in health vitiates Protective Life's coverage.
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