National Life Ins. Co. v. Harriott
| Decision Date | 08 November 1972 |
| Docket Number | No. 70--602,70--602 |
| Court | Florida District Court of Appeals |
| Parties | The NATIONAL LIFE INSURANCE COMPANY of Florida and Central Plaza Bank and Trust Company, Appellants, v. Robert J. HARRIOTT, Appellee. |
John T. Allen, Jr., and Harrison, Greene, Mann, Davenport, Rowe & Stanton, St. Petersburg, for appellants.
Gerald R. Colen, St. Petersburg, for appellee.
We must determine whether fraudulent concealment of a factor material to the risk is a defense to an action on a credit life insurance policy under any circumstances, and, if so, under what circumstances. The cases are legion holding that the carrier may plead in defense or mitigation the insured's fraudulent concealment of factors affecting the risk as to most forms of insurance coverage. 1 But credit life is no ordinary form of insurance. Our sister court in the Third District has recently held that an insured who had had a previous heart attack from which he had apparently recovered was fully protected under a credit life policy, although he died ten days after the policy was issued of a 'sudden cardiac arrest.' 2
Carolyn Harriott died of cancer 68 days after her husband had purchased, in their joint names, a new Oldsmobile, financing nearly five thousand dollars of the debt with Central Plaza Bank & Trust Company. She did not appear at the bank, and did not sign the note. Harriott's deposition indicated that she had undergone an operation two years earlier, at which time the cancer was discovered. The carrier asserted as a defense that 'At the time of securing the alleged credit life insurance policy, Robert J. Harriott and Carolyn B. Harriott knew that Carolyn B. Harriott was suffering from a serious terminal disease and fraudulently concealed and misrepresented such fact to the defendant.' This defense was stricken.
We think the defense as phrased was inadequate, but that the trial court should, in the order striking the defense, have allowed a sufficiently stated defense to have been pleaded. This is the procedure outlined by the learned trial judge, sitting as associate judge of this court, in Drady v. Hillsborough County Aviation Authority. 3 In Drady, the complaint was defective, but the factual contentions disclosed by the record showed that an opportunity should be afforded the plaintiff to amplify his allegations once the legal principles were settled. Here, the defense is defective, but the record shows that the insurer ought to be given an opportunity to assert a defense under the principles herein set forth.
Credit life insurance is different from other types of insurance in several respects material to this case. Its history and growth are amply traced in the literature. 4 It has been a great boon to the expansion of consumer credit, affording a means of extending credit safely to those who enjoy steady employment but suffer the same mortality all of us do. Experience has shown that many wage earners are good credit risks, and may reasonably be loaned what they wish to borrow for the purchase of automobiles and other personal property needed in any household. Death or disability, threatening termination of the paycheck, is a serious risk, easily insured against. Credit life insurance is customarily written for declining amounts equal to the debt at time of death. It is normally written without medical examination, and without inquiry into health. In fact, the Florida Insurance Commissioner (after the transaction involved here, and neither affecting nor affected by it) issued Bulletin Number 421, stating that some companies were requiring a statement of good health or inserting in the policy allowing a defense after claim on the ground that the insured was not in 'good health' or 'sound health' at the time the policy was issued. These practices were forbidden. The Commissioner did state that this bulletin would 'in no way interfere with the company's right to underwrite the insurance according to the normal procedures,' but there is no clarification of the meaning of that proviso. We mention Bulletin 421 to show that, in general, the credit life insurer must take the borrowers as they come, and the prevalence of credit life insurance in consumer finance--estimated to be written in at least 85% Of the transactions 5--makes the business statistically safe.
But if the law is as the trial court has held in this case, the possibility is open to spouses of terminally ill persons, whose imminent death is reasonably certain, to make purchases substantial in amount which would not otherwise be made, and shift the cost of these purchases on to credit life policyholders generally. On the other hand, permitting insurance companies to avoid claims on the ground of concealment of any health factor affecting the individual risk ignores the fact that credit life is written on the basis of aggregate, and not individual, risk and for sound reasons of public policy must be. What we must determine here is whether there are any circumstances under which a duty to disclose attaches to the borrower, and, if so, what these circumstances are.
Florida law affecting insurance contracts generally provides that
'Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either:
(a) Fraudulent; or
(b) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or
(c) The insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate, or would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.' 6
The insured in Carner Bank of Miami Beach v. Block was under no duty to disclose his previous heart trouble, because in the normal case medical history is irrelevant to the credit life risk. But the case before us may not be a normal case. There is evidence of a prior transaction at the same bank, but we know...
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