Jackson v. Prudential Ins. Co. of America, 83-1773

• Decision Date: 03 July 1984
• Docket Number: No. 83-1773,83-1773
• Parties: Kay B. JACKSON, Appellee, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant.
• Court: U.S. Court of Appeals — Eighth Circuit

Page 450

736 F.2d 450

Kay B. JACKSON, Appellee, v. The PRUDENTIAL INSURANCE COMPANY OF AMERICA, Appellant.

No. 83-1773.

United States Court of Appeals Eighth Circuit.

Submitted Dec. 12, 1983.

Decided May 31, 1984.

Rehearing and Rehearing En Banc

Denied July 3, 1984.

John R. Eldridge, III, Burke & Eldridge, Fayetteville, Ark., for appellant.

John R. Elrod, Elrod & Lee, Siloam Springs, Ark., for appellee.

Before McMILLIAN, JOHN R. GIBSON and BOWMAN, Circuit Judges.

BOWMAN, Circuit Judge.

Kay B. Jackson, the widow of Jerry A. Jackson, sued the Prudential Insurance Company of America (Prudential) after Prudential refused to pay death benefits in the amount of $42,000 pursuant to a temporary life insurance agreement. Prudential claimed that Mr. Jackson failed to disclose material information about the state of his health at the time he applied for the insurance. The jury, in response to an interrogatory, found that Mr. Jackson's application contained no misrepresentations, omissions, concealment of facts, or incorrect statements. Prudential appeals from the verdict and judgment in favor of Mrs. Jackson, contending that the District Court should have granted either its motion for a directed verdict or its motion for a judgment notwithstanding the jury's verdict. We reverse the judgment of the District Court, 564 F.Supp. 229.

Facts

On September 8, 1981, James R. Hartley, a Prudential agent, met with the Jacksons at their request. Mr. Jackson wanted to obtain life insurance because he and his wife recently had incurred a $42,000 indebtedness. Mr. Hartley filled in the answers to questions on the insurance application as Mr. Jackson provided the answers. Depending on Mr. Jackson's answers to certain questions concerning his health, Mr. Hartley was authorized to issue temporary insurance. The temporary insurance agreement provided insurance in the amount applied for, $42,000, until the permanent insurance policy was issued or until sixty days had elapsed if Prudential neither issued nor gave notice of its decision not to issue a permanent policy. After the application was signed by both Mr. Hartley and Mr. Jackson, Mr. Hartley accepted an initial premium payment and completed and signed the temporary insurance agreement.

During the month prior to the meeting with Mr. Hartley, Mr. Jackson had experienced shortness of breath, chest pain, and a tingling sensation and numbness in one arm during his regular evening walks with his wife. His wife testified that he complained of a tingling sensation in his left arm and of a burning sensation in his throat. Concerned, his wife called a fellow church member who had had heart problems and by-pass surgery. This friend recommended that her husband see Dr. Robert Lynch, a Tulsa, Oklahoma cardiologist. Mr. Jackson promptly saw Dr. Lynch on August 31, 1981. According to Dr. Lynch, Mr. Jackson complained of chest pain. Dr. Lynch reviewed Mr. Jackson's medical history and performed a physical examination, including a resting electrocardiogram and a stress electrocardiogram in conjunction with a treadmill tolerance test. Dr. Lynch then advised Mr. Jackson and his wife that Jackson probably had coronary artery disease and recommended that he undergo an arteriogram.

Mr. Jackson was admitted to the hospital on September 10, 1981 for the arteriogram. Following this procedure, Dr. Lynch concluded that Mr. Jackson had severe coronary artery disease and would have to undergo coronary artery by-pass graft surgery. Mr. Jackson had the surgery on September 14, 1981. Although the surgery appeared to go well, he died on September 24, 1981 following post-operative complications. At that time, Prudential had neither rejected his application nor issued a permanent insurance policy.

Discussion

Appellate review of the grant or denial of motions for directed verdicts and judgments notwithstanding the verdict is governed by the same standards that govern the trial court in its rulings on these motions. See, e.g., Kropp v. Ziebarth, 601 F.2d 1348, 1352 (8th Cir.1979); Polk v. Ford Motor Co., 529 F.2d 259, 267 (8th Cir.) (en banc), cert. denied, 426 U.S. 907, 96 S.Ct. 2229, 48 L.Ed.2d 832 (1976); 9 C. Wright & A. Miller, Federal Practice and Procedure Sec. 2524 (1971). The evidence must be viewed in the light most favorable to the party opposing the motions--here, Mrs. Jackson--and that party must be given the benefit of all favorable inferences which reasonably may be drawn from the facts proved. See, e.g., Sanders v. St. Louis County, 724 F.2d 665 (8th Cir.1983); Rogers v. Allis-Chalmers Credit Corp., 679 F.2d 138, 140 (8th Cir.1982); Farner v. Paccar, Inc., 562 F.2d 518, 522 (8th Cir.1977). The motions should not be granted if reasonable persons could differ as to the conclusions to be drawn from the evidence. See, e.g., Rogers, supra; Farner, supra. Thus, these motions test the sufficiency of the evidence. The trial court has not erred if there is substantial evidence--more than a mere scintilla of evidence--to support a verdict in favor of the party opposing such a motion. See, e.g., Tackett v. Kidder, 616 F.2d 1050, 1052-53 (8th Cir.1980).

Under Ark.Stat.Ann. Sec. 66-3208, an insurer can establish an affirmative defense to recovery under a policy by showing that there has been a misrepresentation, omission, concealment of facts, or incorrect statement in the insurance explication. But the misrepresentation, omission, concealment of facts, or incorrect statement will not prevent recovery under a policy unless it is (a) fraudulent, (b) material to the acceptance of the risk or to the hazard assumed by the insurer, or (c) the insurer in good faith would not have issued the policy at all or would have changed the terms of the policy if the true facts had been made known to it as required by the application. In the instant case, the jury found that there was no misrepresentation, omission, concealment, or incorrect statement made by Mr. Jackson in the application. Our task is to review this finding under the standards set forth supra.

The controversy centers on Mr. Jackson's answer to one question on the insurance application concerning his health. That question asked:

19. Has any person named in 1a or 6, within the last 12 months: Yes No

a. been treated by a doctor for or had a know heart attack, stroke ____ ____

or cancer other than of the skin

b. had an electrocardiogram for chest pain or for any other ____ __-

physical complaint, or taken medication for high blood pressure __

Mr. Hartley testified that Mr. Jackson answered question 19.b. as follows: "As it is written there it would have to be no. I have had an electrocardiogram, but it was in a routine physical." Mr. Hartley then checked question 19.b. "no." It was undisputed that Mr. Jackson answered "no" when asked whether or not he had had an electrocardiogram for chest pain or for any other physical complaint. Both Dr. Lynch and Mrs. Jackson, however, testified that physical discomfort prompted Mr. Jackson's visit to Dr. Lynch on August 31, 1981. Because of Mr. Jackson's complaints of physical discomfort, Dr. Lynch administered both resting and stress electrocardiograms. Mrs. Jackson argues that her husband thought he had an ulcer and therefore was not having an electrocardiogram for chest pain. But even if Mr. Jackson believed that his physical discomfort was due to an ulcer, this belief would not change the fact that he incorrectly answered question 19.b. on the application. See Findley v. Time Insurance Co., 269 Ark. 257, 599 S.W.2d 736 (1980) (even though insured believed she was experiencing menopause her negative answer to application question concerning health problems was false where she had experienced vaginal bleeding and menstrual irregularity). Mr. Jackson never revealed that physical discomfort prompted his visit to Dr. Lynch and the resultant electrocardiograms. This should have precluded a jury finding that Mr Jackson answered question 19.b. correctly. See, e.g., Marshall v. Prudential Insurance Co. of America, 253 Ark. 127, 484 S.W.2d 892 (1972) (dispute over whether agent correctly recorded application answers); Union Life Insurance Co. v. Davis, 247 Ark. 1054, 449 S.W.2d 192 (1970).

In denying Prudential's motions for directed verdict and judgment notwithstanding the verdict, the District Court reasoned that Mr. Hartley's additional knowledge about Mr. Jackson's health provided evidence from which the jury could conclude that the application did not contain a "misrepresentation, omission, concealment or an incorrect statement." Mr. Hartley knew, for example, that one of the Jacksons' friends who had heart problems recommended the cardiologist, Dr. Lynch. Mr. Hartley also was aware of the fact that Mr. Jackson's father and brother had had heart problems. Mr. Jackson told Mr. Hartley that resting and stress electrocardiograms had been run by Dr. Lynch. Mr. Jackson also advised Mr. Hartley that his electrocardiogram results had been abnormal and that he had to return for more tests.

The District Court's opinion seems to suggest that Mr. Hartley's knowledge was relevant to two separate questions--the existence of an incorrect statement and the existence of grounds for estoppel. Mr. Hartley's knowledge, however, would have been relevant to the question of the existence of an incorrect statement only if his accurate recordation of Mr. Jackson's answers had been disputed. No one disputes, however, that Mr. Hartley correctly recorded Mr. Jackson's answers. The remaining inquiry is whether Prudential may be estopped to deny coverage because Mr. Hartley had other information that affected the risk.

The District Court found, and we agree, that Mr. Hartley was a soliciting agent and not a general agent. He had authority only to solicit insurance and, in limited circumstances, to issue temporary insurance coverage. He did not have the authority to accept risks, to agree upon the terms of insurance contracts, to issue...