Mutual Ben. Life Ins. Co. of New Jersey v. Chisholm

• Decision Date: 14 January 1983
• Docket Number: No. 44521,44521
• Citation: 213 Neb. 301,329 N.W.2d 103
• Parties: MUTUAL BENEFIT LIFE INSURANCE COMPANY OF NEW JERSEY, Appellant, v. Richard CHISHOLM, Appellee.
• Court: Nebraska Supreme Court

Page 103

329 N.W.2d 103

213 Neb. 301

MUTUAL BENEFIT LIFE INSURANCE COMPANY OF NEW JERSEY, Appellant, v. Richard CHISHOLM, Appellee.

No. 44521.

Supreme Court of Nebraska.

Jan. 14, 1983.

Syllabus by the Court

1. Insurance: Estoppel. An insurer that gives one reason for its conduct and decision as to a matter involved in controversy cannot, after litigation has begun, depend upon another and different ground.

2. Summary Judgment. Under Nebraska law the primary purpose of the summary judgment statute, Neb.Rev.Stat. § 25-1332 (Reissue 1979), is to pierce sham pleadings and to dispose of, without the necessity and expense and delay of trial, those cases where there is no genuine claim or defense.

3. Summary Judgment. Summary judgment should be rendered forthwith if the pleadings, depositions, and admissions are on file, together with the affidavit, if any, showing that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law.

4. Insurance. The issuance of a life policy is dependent upon the health of the applicant, and a willful and intentional failure of an application to disclose, in response to direct and clear inquiry, that which the company had the right to know for the purpose of determining the true state of health of the applicant, and whether or not it would accept the risk, cannot be considered other than fraudulent.

Raymond M. Crossman, Jr., of Crossman & Norris, Omaha, for appellant.

Everett Inbody of Haessler, Sullivan & Inbody, Wahoo, and John Haessler, Lincoln, for appellee.

Before KRIVOSHA, C.J., and BOSLAUGH, McCOWN, CLINTON, HASTINGS, and CAPORALE, JJ.

PER CURIAM.

This is an action by plaintiff-appellant, Mutual Benefit Life Insurance Company of New Jersey (Mutual Benefit), for rescission of a group life insurance contract on the life of Freddie R. Long (insured) on the ground of fraudulent misrepresentation by the insured in his application for insurance. Defendant-appellee, Richard Chisholm (Chisholm), generally denied the allegations and cross-petitioned to recover the proceeds as beneficiary of the life insurance policy. Chisholm then filed a motion to strike portions of Mutual Benefit's petition and also filed a motion for summary judgment. The trial court sustained both motions and entered judgment for the defendant on the cross-petition. This appeal followed, with Mutual Benefit making the following assignments of error: (1) The trial court erred in sustaining Chisholm's motion to strike paragraph 6 of Mutual Benefit's second amended petition; and (2) The trial court erred in entering a summary judgment, dismissing Mutual Benefit's second amended petition and awarding Chisholm $102,000 plus interest and attorney fees. We affirm.

Chisholm is the beneficiary of a group life insurance policy issued on March 6, 1978, by Mutual Benefit on the life of Freddie R. Long. The insured was 27 years old at the time the policy was issued and was eligible for group coverage by virtue of his active status in the Nebraska National Guard.

In the application for group life insurance question 13 asked if the applicant "ever had heart trouble, chest pain, high blood pressure, cancer, diabetes, kidney trouble, stomach trouble, a nervous or mental disorder or other chronic trouble? " (Emphasis supplied.) The insured answered "No."

Question 15 asked if the applicant "in the past five years, had any surgery, treatment, observation or routine examination in doctor's office, hospital, clinic, or sanitarium?" The question further provided instructions which stated: "For routine physical examinations indicating only good health for you ... state 'routine exams' beside your 'yes' answer." The applicant checked a box beside the word yes, and stated "Routine Exams."

The insured died in an automobile accident on July 30, 1978. The beneficiary, Chisholm, provided Mutual Benefit with proof of death on August 28, 1978. Mutual Benefit began an investigation and on November 10, 1978, denied Chisholm's claim and attempted to rescind its coverage under the policy. The sole reason advanced for Mutual Benefit's refusal to pay over the proceeds of the policy was the insured's answer to question 15 on the application. The letter of declination set forth the following: "When Mr. Long signed his application 2/17/78, he indicated only routine exams. Information now on file indicates that Mr. Long received treatment at York General Hospital in November, 1976. Our Medical Underwriting Department advises had we known of this medical history at the time of application we would have not issued group term life coverage in his behalf."

On February 14, 1979, Mutual Benefit filed its original petition in an action to rescind the policy issued to Freddie R. Long on the ground of misrepresentation. The only allegation of misrepresentation contained in the petition was the failure of the insured to disclose the treatment he received at York General Hospital as stated in the declination letter. Mutual Benefit maintained this single theory of misrepresentation throughout discovery, as evidenced by its answers to interrogatories. After minor amendments were made to the petition by Mutual Benefit, Chisholm filed an answer and cross-petition, generally denying the allegations and, in addition, alleging that Mutual Benefit was estopped to raise any defense other than that set forth in its declination letter.

Mutual Benefit filed its second amended petition on September 8, 1980, which contained a new allegation of misrepresentation by the insured. The new paragraph 6 alleged that the insured had falsely answered question 13 because he did not disclose alcoholism "as evidenced by his convictions for 'driving while under the influence of alcohol' " and an "Order of Probation from the District Court of York County, Nebraska."

Chisholm moved to strike paragraph 6 on the grounds that Mutual Benefit was raising a new issue that it was estopped to raise and also that the allegations were based on convictions that would not be admissible in a nonrelated civil matter. The District Court granted the motion to strike. Mutual Benefit chose not to replead and Chisholm answered and cross-petitioned to the second amended petition as stricken.

Chisholm then filed a motion for summary judgment. The record considered by the trial court consisted of Mutual Benefit's second amended petition as stricken, appellee's answer and cross-petition, certain answers to interrogatories, and portions of depositions. The court found that, based upon the pleadings and evidence submitted on the motion, there was no genuine issue as to any material fact and Chisholm was entitled to judgment as a matter of law. It is from these rulings by the trial court that Mutual Benefit appeals.

Mutual Benefit argues that although it may have changed its allegations of misrepresentation, it has not taken a position contradictory or inconsistent with its original position and, therefore, should not have been estopped from raising the issue of the insured's alleged alcoholism in its second amended petition. Mutual Benefit maintains that its investigation indicated that alcohol may have been a causative factor in the insured's November 1976 accident and also in the July 1978 accident which claimed his life. Therefore, its added allegation concerning the misrepresentation of alcoholism on question 13 of the application constituted the same material misrepresentation as the insured's failing to report the automobile accident on question 15 of the application in which alcohol may have been involved.

We believe that Mutual Benefit is estopped from mending its hold by the raising of any defense other than that upon which it rejected Chisholm's claim in its declination letter of November 10, 1978. Our reason for so holding is that on no occasion prior to the second amended petition did Mutual Benefit ever state that the insured's misrepresentation of alcoholism was a basis for its denial of the claim. Rather, what appears from the record is that Mutual Benefit was relying solely on the failure of the insured to report the treatment he received at York General Hospital as a result of the November 1976 automobile accident. Mutual Benefit stated in its declination letter that had its medical underwriting department "known of this medical history at the time of application we would have not issued group term life coverage in his behalf." It is obvious that Mutual Benefit stood on this theory for denial of the claim until...