International Sec. Life Ins. Co. v. Finck

Citation475 S.W.2d 363
Decision Date27 December 1971
Docket NumberNo. 8200,8200
CourtCourt of Appeals of Texas. Court of Civil Appeals of Texas

Thompson, Coe, Cousins, Irons & Porter, Larry L. Gollaher, Dallas, for appellant.

Gibbins & Spivey, Broadus A. Spivey, Austin, for appellee.

REYNOLDS, Justice.

The proceeding that is the subject matter of this appeal concerns a policy of hospital and surgical insurance. C. F. Finck brought suit to recover indemnities, under a hospital and surgical policy of insurance issued by International Security Life Insurance Company, for hospital and surgical expenses incurred, interest, statutory penalty and reasonable attorney fees for nonpayment of the claim, and for actual and exemplary damages and reasonable attorney fees by reason of fraud and deceit in connection with the issuance of the policy. Reformed and affirmed.

Trial was before a jury. Plaintiff presented as witnesses Mrs. C. F. Finck, E. A. Buck, Sr., and attorneys Joe L. Cox, Jerome Kirby, Forrest Bowers, Broadus A. Spivey and Bob Gibbins. Defendant presented the testimony of its trial counsel, David Farris, whose direct testimony was directed to the elements to be considered in determining reasonable attorney fees. From the testimony of these witnesses, the instruments introduced in evidence and the pleadings, evolves the following statement of the case.

Mr. Finck was 81 years of age and partially blind when, on or about January 24, 1969, one David Cockrell, stipulated to be a soliciting agent for International Security acting within the course and scope of his employment, appeared uninvited at the Finck home. According to Mrs. Finck, Cockrell introduced himself and stated he was representing International Security. The Fincks never had heard of the company prior to this time. Cockrell 'said he had the best policy that was put out,' and that 'it would cover everything that Medicare didn't cover.' Further, Cockrell said 'they would always pay their claims' promptly, but he did not say anything about any pre-existing conditions, exclusions or limitations. Mrs. Finck said they never had secured and needed hospitalization insurance, relied upon the statements of Cockrell, and 'we wouldn't have taken out the policy if we didn't believe' Cockrell. She said if they had not received this policy, they would have taken out another one. Mr. Finck had returned from World War I with 'some stomach trouble,' but did not see a doctor or go to a hospital because of it; he 'was always very healthy and stout, he never was sick very much,' and 'did his own farming.' Cockrell completed the application for the policy for Mr. Finck, inserting the health information given him, including 'had stomach trouble' under the section asking for illnesses within the past seven years, but no date was entered in the space provided for recording the date of illness. Mrs. Finck signed Mr. Finck's name to the application. Cockrell collected the initial annual premium of $148.00.

The policy was issued on and effective February 5, 1969, and received by the Fincks through the mail. Mr. Finck did not read the policy, but Mrs. Finck read part of it. She noticed 'there was a whole lot of difference in there from what he (Cockrell) was representing it.' When asked if she read the notice on the policy that it could be returned within ten days and the premium paid would be returned, Mrs. Finck said, 'No. We supposed--we taken the policy. We intended to keep it.'

Mr. Finck entered the hospital because of 'stomach trouble, ailment' and was hospitalized from January 5 through January 24, 1970, incurring the amount of $1,087.40, stipulated to be reasonable and necessary, for hospital and medical expenses. Timely proof of loss was filed and International Security denied the entire claim on the basis that the illness originated prior to the effective date of the policy.

Suit was filed May 20, 1970, seeking recovery under the policy of insurance for the $1,087.40 hospital and medical expenses, the statutory penalty of 12% And interest thereon, and reasonable attorney fees of $2,500.00; and, alternatively, for actual damages of $1,087.40 and exemplary damages of $2,500.00 plus $2,500.00 attorney fees for misrepresentation, fraud and deceit in the issuance of the policy of insurance. The acts alleged to constitute the fraud were false representations that the policy of insurance would indemnify against all medical expenses without regard to pre-existing medical conditions; the concealment that International Security has the reputation of receiving money for insurance policies and then refusing to pay legitimate claims on spurious and technical grounds; that because of Mr. Finck's age and prior existing conditions, International Security, through its agent Cockrell, took his money and issued the policy, with the knowledge that he would not be able to collect under the policy, or he could collect such a minor amount that it would not be worthwhile to enforce his rights; and that the policy contained a statement that it was not necessary to employ an attorney to collect any benefits provided in the policy. By these means, it is alleged, International Security had the intention, express and implied, to induce Mr. Finck to rely upon the insurance policy, which he did, causing him to refrain from obtaining other insurance which he would have obtained 'had he known defendant's policy was not any good, and that defendant had the reputation of not paying legitimate claims,' and that he did refrain from obtaining other insurance, to his damage in the sum of not less than $1,087.40. Mr. Finck died on July 7, 1970, as the result of a heart attack, and upon Mrs. Finck's suggestion of his death and her motion that she was the surviving widow and heir, she was substituted as plaintiff. Thereafter, International Security answered the suit with special exceptions which were acted upon by the trial court, a general denial, and an alternative pleading that its liability under the policy was limited to $320.50.

Mr. Buck testified that he purchased one of International Security's policies through its agent Cockrell, he incurred medical expenses, and, over objection that the testimony was not material and was prejudicial, he was permitted to testify that Cockrell told him the policy would cover everything, that his claim was denied, that he was required to employ an attorney, and that his case was the one on the docket following this case. The attorney witnesses, each of whom was stipulated to be an expert in the area of hospitalization policy law, testified that they had represented numerous clients in the prosecution of insurance claims against International Security and that they never had heard of International Security paying one claim without the policyholder having to file suit; and, over objection that it would be hearsay, each testified that International Security's reputation in the area was that it would not pay claims at all.

After both parties had closed and prior to submission of the case to the jury, the parties stipulated that plaintiff was entitled to recover $320.50 under the policy, plus the 12% Statutory penalty and interest thereon, that International Security waived the defensive issues to the claim, and that no issue of liability or contract damages under the policy would be submitted to the jury, without prejudice to any other ground of recovery or defense. In answer to the special issues submitted, the jury found: (1A) International Security's agent represented it had the reputation of promptly paying claims, (1B) which representation was false, (1C) was relied upon in purchasing the policy, and (1D) was a material inducement in purchasing the policy; (2A) the agent represented the policy would be in effect as soon as it was received and would pay for everything Medicare did not pay, (2B) such representation was false, and (2C) was relied upon in purchasing the policy; (3A) International Security had the reputation of refusing to pay legitimate claims on similar policies, (3B) which reputation was concealed, and (3C) was a material inducement in purchasing the policy; (4A) such false representations or concealment was a proximate cause of damages, (4B) which were $1,217.88; (5) reasonable attorney fees were $2,500.00; and (6) exemplary damages should be awarded in the amount of $2,500.00. Judgment was entered in the total amount of $6,596.07, which included the stipulated contract recovery of $320.50, $19.23 as interest thereon, $38.46 as the 12% Statutory penalty thereon, $1,217.88 actual damages, $2,500.00 exemplary damages and $2,500.00 attorney fees. International Security has appealed from the judgment.

In bringing this appeal, appellant International Security prays for a reversal and remand for a new trial on eleven points of error. Mrs. Finck, as appellee, has responded with counterpoints, and one cross-point in which she requests this court to exercise its inherent power and authorize attorney fees of $1,000.00 for the appeal of this cause. In reaching the disposition we make of this appeal, we have confined our determination to the specific assignments before us. Rule 374. 1

Appellant has filed its motion to strike appellee's supplemental brief filed after submission and oral argument, or alternatively to extend permission for a reasonable time to file a reply brief. We have determined not to consider the supplemental brief in our disposition of this appeal, and have, therefore, effectively granted the motion to strike.

Our first consideration is given to appellant's point of error number nine, its final point, that the trial court erred in overruling its special exception to paragraph VIII of plaintiff's original petition, the paragraph containing the alternative pleading for actual and exemplary damages and attorney fees based on fraud. The special exception...

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