Lowry v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 08 April 1988
• Docket Number: No. 86-425,86-425
• Citation: 228 Neb. 171,421 N.W.2d 775
• Parties: Linda J. LOWRY, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.
• Court: Nebraska Supreme Court

Page 775

421 N.W.2d 775

228 Neb. 171

Linda J. LOWRY, Appellant, v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY, Appellee.

No. 86-425.

Supreme Court of Nebraska.

April 8, 1988.

Syllabus by the Court

1. Summary Judgment. On ruling on a motion for summary judgment, a court is obligated to view the evidence in the light most favorable to the party against whom the motion is directed and to give that party the benefit of all reasonable inferences which may be drawn therefrom.

2. Summary Judgment. Summary judgment is to be granted only when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts and that the moving party is entitled to judgment as a matter of law.

3. Insurance: Fraud: Pleadings: Proof. In order for a misrepresentation by concealment to constitute a defense to an action on a contract of insurance, the insurer must plead and prove (1) that the misrepresentation was made knowingly with intent to deceive, (2) that the insurer relied and acted upon such statement, and (3) that the insurer was deceived to its injury.

4. Insurance: Fraud. A misrepresentation is material if the insurer would not have issued the policy had it been aware of the true facts.

5. Insurance: Fraud. An insurer need not make an independent investigation and may rely on the truthfulness of the answers in an application for insurance as long as there was nothing to put it on notice of the falsity of any of the answers.

6. Insurance: Fraud. An insurer is injured if it accepts an insured it normally would not have accepted but for the misrepresentation.

7. Insurance: Fraud. When an applicant for insurance makes an untrue statement with respect to a material fact peculiarly within the applicant's knowledge, the finder of fact may, from the mere occurrence of the false statement, conclude the false statement was made knowingly with intent to deceive.

8. Waiver: Words and Phrases. A waiver is a voluntary and intentional relinquishment of a known right; it may be established by acts and conduct from which an intention to waive may reasonably be inferred.

Robert F. Bartle and Tim O'Neill of Nelson & Harding, Lincoln, for appellant.

Patrick W. Healey of Healey, Wieland, Kluender, Atwood & Jacobs, Lincoln, for appellee.

BOSLAUGH, CAPORALE, SHANAHAN, and GRANT, JJ., and BURKHARD, District Judge.

CAPORALE, Justice.

Plaintiff-appellant, Linda J. Lowry, brought this action to recover a death benefit under a binder of automobile insurance issued by defendant-appellee, State Farm Mutual Automobile Insurance Company, to her and her deceased husband, James M. Lowry. State Farm moved for summary judgment, claiming it had rescinded the binder ab initio because in applying for the insurance, plaintiff's decedent misrepresented his driving history. Plaintiff appeals from the sustainment of that motion, claiming the district court erred in (1) determining that an insurer may unilaterally rescind a binder extending automobile insurance coverage, (2) determining as a matter of law that plaintiff's decedent made material misrepresentations in applying for the insurance, and (3) failing to determine that, by its dilatory and inconsistent conduct, State Farm waived any right it might otherwise have had to rescind the binder. We reverse and remand for further proceedings.

On January 3, 1985, plaintiff's decedent applied for automobile insurance coverage on two vehicles. As part of the application process, he was asked whether, during the last 5 years, the "applicant, any household member, or any regular driver: a. Had license to drive or registration suspended, revoked or refused? b. Had an accident or sustained a loss? c. Been fined, convicted or forfeited bail for traffic violations?" Decedent responded that he had received one citation for a speeding violation in April 1982. In reliance upon that response and the payment of the first month's portion of the 6-month premium, State Farm immediately bound coverage.

On January 9, 1985, the decedent, through no fault of his own, was killed while driving one of the insured vehicles.

As part of its underwriting investigation, State Farm, on January 11, 1985, obtained a report from the Nebraska Department of Motor Vehicles which revealed that decedent had speeding convictions in October 1981 and December 1982, a driving while intoxicated conviction in March 1983, and a stop sign violation conviction in June 1983. As a result of the intoxication conviction decedent paid a $200 fine, was placed on probation for 6 months, and had his driver's license "taken for 60 days." It also appears that at some time decedent had obtained "high risk" insurance coverage.

On January 23, 1985, plaintiff received a notice directed to her and the decedent advising that the second portion of the premium would become due on February 3, 1985. Plaintiff made timely payment of this portion of the premium. As noted earlier, the premium was established for a 6-month period of coverage; however, decedent had asked for and was granted the privilege of paying that premium in monthly installments, for which privilege State Farm added a service charge. Such notices are prepared 13 days before the date the premium is due and are mailed automatically even during the period State Farm views an application for coverage to be under consideration for acceptance or rejection.

On February 4, 1985, a State Farm claim committee reviewed the matter and caused a letter to be mailed to plaintiff on February 12, 1985, advising her that because of decedent's "material misrepresentation" concerning his driving record, State Farm was "rescinding" and would "treat as void from inception any and all insurance contracted for...." At the same time, State Farm returned to plaintiff all sums which had been paid on the premium.

The evidence discloses that State Farm normally does not, without prior underwriting approval, issue standard liability policies to individuals convicted of driving while intoxicated and that State Farm would not have bound the coverage in question had the fact of decedent's intoxication conviction been known to it.

Since this matter arises from the entry of a summary judgment, we are obligated to view the evidence in the light most favorable to the party against whom the motion is directed and to give that party the benefit of all reasonable inferences which may be drawn therefrom. Moreover, summary judgment is to be granted only when the pleadings, depositions, admissions, stipulations, and affidavits in the record disclose that there is no genuine issue as to any material fact or as to the ultimate inferences that may be drawn from those facts, and that the moving party is entitled to judgment as a matter of law. Schriner v. Meginnis Ford Co., 228 Neb. 85, 421 N.W.2d 755 (1988); Luschen Bldg. Assn. v. Fleming Cos., 226 Neb. 840, 415 N.W.2d 453 (1987).

Plaintiff's first assignment of error, which claims that an insurer may not unilaterally rescind automobile liability coverage, is without merit. In drawing a distinction between cancellation and rescission, we recently reaffirmed that, under appropriate circumstances, an insurer may rescind ab initio even the limited class of automobile liability insurance policies contemplated by Neb.Rev.Stat. §§ 44-514 through 44-521 (Reissue 1984). Glockel v. State Farm Mut. Auto. Ins. Co., 219 Neb. 222, 361 N.W.2d 559 (1985), on recertification 224 Neb. 598, 400 N.W.2d 250 (1987).

Thus, we confront the issue presented by the second assignment, Could the trial court determine as a matter of law that decedent's failure to reveal his intoxication conviction constituted a material...