Jarvis v. Modern Woodmen of America

Decision Date27 June 1991
Docket NumberNo. 19794,19794
Citation185 W.Va. 305,406 S.E.2d 736
CourtWest Virginia Supreme Court
PartiesLorna D. JARVIS, Plaintiff Below, Appellee, v. MODERN WOODMEN OF AMERICA and Charles Lewis Webb, Defendants Below, Appellants.

Syllabus by the Court

1. " 'If the facts regarding the risk are correctly stated to the agent of an insurance company, but erroneously inserted by him in the application, the company is chargeable with his error or mistake....' Syllabus, Bays v. Farmers' Mutual Fire Association of West Virginia, 114 W.Va. 164, 171 S.E. 253 (1933)." Syllabus Point 1, McDonald v. Beneficial Standard Life Ins. Co., 160 W.Va. 396, 235 S.E.2d 367 (1977).

2. "In determining whether there is sufficient evidence to support a jury verdict the court should: (1) consider the evidence most favorable to the prevailing party; (2) assume that all conflicts in the evidence were resolved by the jury in favor of the prevailing party; (3) assume as proved all facts which the prevailing party's evidence tends to prove; and (4) give to the prevailing party the benefit of all favorable inferences which reasonably may be drawn from the facts proved." Syllabus Point 5, Orr v. Crowder, 173 W.Va. 335, 315 S.E.2d 593 (1983), cert. denied, 469 U.S. 981, 105 S.Ct. 384, 83 L.Ed.2d 319 (1984).

3. " 'An agent or employee can be held personally liable for his own torts against third parties and this personal liability is independent of his agency or employee relationship. Of course, if he is acting within the scope of his employment, then his principal or employer may also be held liable.' Syllabus Point 3, Musgrove v. Hickory Inn, Inc., 168 W.Va. 65, 281 S.E.2d 499 (1981)." Syllabus Point 2, Harless v. First Nat'l. Bank in Fairmont, 169 W.Va. 673, 289 S.E.2d 692 (1982),

4. " 'Courts must not set aside jury verdicts as excessive unless they are monstrous, enormous, at first blush beyond all measure, unreasonable, outrageous, and manifestly show jury passion, partiality, prejudice or corruption.' Syl. pt. 1, Addair v. Majestic Petroleum Co., 160 W.Va. 105, 232 S.E.2d 821 (1977)." Syllabus Point 3, Reager v. Anderson, 179 W.Va. 691, 371 S.E.2d 619 (1988).

Carl F. Stucky, Jr., Steptoe & Johnson, Charleston (Orton A. Jones, of counsel), Hedges, Jones, Whittier & Hedges, Spencer, for appellants.

Alan H. Simms, Elizabeth, for appellee.


Modern Woodmen of America, a life insurance company and Charles L. Webb, an agent for Modern Woodmen, appeal a Roane County jury verdict awarding Lorna D. Jarvis $625,000, including $100,000 for economic losses, $25,000 for non-economic losses and $500,000 in punitive damages. The case arose from Modern Woodmen's refusal to pay Mrs. Jarvis death benefits under a Modern Woodmen's policy issued on her late husband, Harley Jarvis. On appeal, Modern Woodmen and Mr. Webb argue that Mrs. Jarvis is barred from recovering under the life insurance policy because she knew of and failed to correct the wrong information on her husband's insurance application. However, Mrs. Jarvis maintains that Mr. Webb, the agent who took Mr. Jarvis' insurance application, was told the correct information, but advised Mr. Jarvis to submit incorrect information in order to get the insurance. Because we find no error in the jury's resolution of a basic factual question and their determination of damages, we affirm the decision of the circuit court.

In May 1985, Mr. Webb approached Mr. Jarvis and made an appointment to discuss life insurance. Mr. Webb had known Mr. Jarvis for several years and was a substitute mailman for Mr. and Mrs. Jarvis. In May 1985, Mr. Jarvis had an incontestable life insurance policy from Peoples Life Insurance Co. for $50,000. According to Mrs. Jarvis, during the meeting with Mr. Webb, Mr. Jarvis informed Mr. Webb that he wanted a less expensive life insurance policy because he had stopped working in September 1984 due to mental problems. During the meeting, Mr. Jarvis, a heavy smoker who carried cigarettes in his shirt pocket, was told by Mr. Webb that it would be better if the application said Mr. Jarvis was a non-smoker, had no serious health problems, and was currently working. Mrs. Jarvis also claims that Mr. Webb did not explain that the Peoples Life policy was noncontestable and that the Modern Woodmen's policy would be contestable for a period of two years.

Also present at various times during the May 1985 meeting with Mr. Webb were Mr. and Mrs. Watson, the son-in-law and daughter of Mr. and Mrs. Jarvis. Both Mr. and Mrs. Watson testified that Mr. Jarvis, a chain smoker, smoked during the meeting and carried cigarettes in his shirt pocket. They also testified that Mr. Jarvis explained he wanted cheaper insurance because he was not working due to a mental breakdown. Mr. and Mrs. Watson also testified that Mr. Webb said he was not putting the information on the insurance application because it would "look bad" and that Mr. Jarvis acquiesced. Mrs. Watson testified that Mr. Webb was shown the Peoples Life insurance policy and told Mr. and Mrs. Jarvis that the policy could be surrendered for cash. 1

Mr. Webb denies that Mr. Jarvis told him that he smoked, had mental health problems and was no longer working. Mr. Webb also said that Mr. Jarvis told him that the Peoples Life policy had lapsed. The insurance application, dated May 18, 1985 containing the incorrect information, was completed by Mr. Webb and was signed by Mr. Jarvis. Although Mr. and Mrs. Jarvis had a checking account and Mrs. Jarvis paid the first month's premium, Mr. Webb used his personal check to set up an automatic deduction to pay the premiums on Mr. Jarvis' policy from his (Webb's) personal checking account. This was to assure that the premiums would be paid long enough for Mr. Webb to get his commission. After Modern Woodmen notified Mr. Webb that he could not use his personal checking account to pay the premiums on Mr. Jarvis' policy, the automatic deduction was then switched to Mr. and Mrs. Jarvis' checking account.

Mrs. Jarvis knew that the application contained wrong information but did nothing. On May 28, 1985, Mrs. Jarvis, based on Mr. Webb's advice, cashed in the Peoples Life policy for $933.18.

Mr. Jarvis died on December 6, 1986 of cardiopulmonary arrest and, because Mr. Jarvis' death occurred within the two-year contestability period, Modern Woodmen investigated the claim. The investigation showed that Mr. Jarvis' application contained substantial misrepresentations concerning Mr. Jarvis' health, employment and smoking. Modern Woodmen, by letter dated January 28, 1987, denied the claim and refunded the premiums paid, $655.72.

Mr. Webb asked to present personally the benefit check and he knew that payment on the claim was delayed because of an investigation. Mr. Webb was, indeed, the mailman on the day the denial letter was sent and he asked Mrs. Jarvis if he could stay with her when she opened the letter from Modern Woodmen. After Mrs. Jarvis read the denial letter and started to cry, Mr. Webb, after receiving Mrs. Jarvis' permission, read the denial letter.

On February 9, 1987, Mrs. Jarvis contacted Modern Woodmen and told them that Mr. Webb knew of and encouraged the wrong information on Mr. Jarvis' application. Mrs. Jarvis also informed Modern Woodmen that Mr. Webb was telling potential customers that the $50,000 benefit had been paid. 2 According to a telephone memo taken by Modern Woodmen, the person who received the information "will pass this on to the proper person who will contact her [Mrs. Jarvis]." Modern Woodmen sent a questionnaire to Mr. Webb, in which Mr. Webb denied any knowledge of the application's misrepresentations. Modern Woodmen's investigation stopped with the questionnaire and Mrs. Jarvis was never contacted. Mr. Webb continued to sell insurance for Modern Woodmen until he was fired in April 1989 for insufficient sales.

The case was submitted to the jury, which returned a verdict in favor of Mrs. Jarvis awarding her $100,000 for economic losses, $25,000 for non-economic losses and $500,000 in punitive damages, for a total award of $625,000. Modern Woodmen and Mr. Webb appealed to this Court claiming that: (1) Mrs. Jarvis is barred from recovering under the policy because she knew of and acquiesced to the misrepresentations in Mr. Jarvis' application; (2) Mrs. Jarvis should not have been awarded economic damages based on the Peoples Life insurance policy; and, (3) the evidence did not justify the award of punitive damages.

Because the errors claimed by the defendants are primarily based on factual questions, we affirm the judgment as the jury's resolution of the factual questions. We also find that the actions of the insurance agent that were acquiesced in by Modern Woodmen (infra Section III) justify the jury's award of punitive damages.


Mr. Webb and Modern Woodmen's first assignment of error is based on their version of the disputed facts concerning the completion of Mr. Jarvis' insurance application. According to Mr. Webb and Modern Woodmen, Mr. Jarvis gave incorrect information to Mr. Webb, who merely transcribed the incorrect information on the application. Mrs. Jarvis knew that the information was wrong and because she failed to correct the misrepresentations, she should be barred from receiving the benefits of her deception.

In support of their version of the facts Mr. Webb and Modern Woodmen cite to W.Va.Code, 33-6-7 [1957] and a line of cases holding that fraudulent or material misrepresentations will render a policy void. 3 See Powell v. Time Ins. Co., 181 W.Va. 289 , 382 S.E.2d 342, 348 (1989) (discussing the statute and overruling cases following "the common law concept of warranties with regard to statements by an insured in an application for insurance"); Christian v. State Farm Mut. Auto Ins. Co., 144 W.Va. 746, 753, 110 S.E.2d 845, 849-50 (1959) (holding "[f]raud on the part of the insured in the procurement...

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