National Sav. Life Ins. Co. v. Dutton

Decision Date17 September 1982
Citation419 So.2d 1357
CourtAlabama Supreme Court

Robert H. Harris of Caddell, Shanks, Harris, Moores & Murphree, Decatur, for appellant.

A. P. Reich, II of Speake, Speake & Reich, Moulton, for appellees.

SHORES, Justice. *

This is an action in which damages were claimed for breach of a contract of health and accident insurance issued to plaintiff Eula Dutton by defendant National Savings Life Insurance Company (National), and the bad faith refusal by National to pay a claim made under the policy.

National denied any liability and charged that Mrs. Dutton had, in her application, materially misrepresented matters relating to her previous health condition. For this reason, National denied the claim, rescinded the policy, and returned all premiums.

The case was tried to a jury, which returned a verdict in favor of the plaintiff for $14,000. National filed a motion for new trial or, in the alternative, a judgment notwithstanding the verdict, contending:

(1) That the court erred in denying National's motion for a directed verdict on the tort claim of bad faith refusal to pay Mrs. Dutton's claim; and

(2) That the court erred in its instruction to the jury that the policy was subject to cancellation or rescission only if Mrs. Dutton intentionally or deliberately furnished false information to National in her application for insurance.

The trial court denied National's motion, and National appealed. We reverse and remand.

The policy was solicited by Wendell Eddy, Mrs. Dutton's son-in-law, who was a soliciting agent for National and other companies. In completing the application for the policy, he asked Mrs. Dutton a series of questions which appeared on the printed application form. He testified that he recorded her response to each question, one of which inquired of her whether she had ever had: "High or low blood pressure, pain in chest, varicose veins, disease of heart or circulatory system." To this she responded "no." Dr. Paul P. McCain, Decatur, was shown on the application as her physician.

After completing the application, Eddy forwarded it to National to be processed. When the policy was returned to Eddy for delivery to Mrs. Dutton, he reviewed it with her and pointed out to her the "NOTICE" contained in the policy, advising that it could be voided if the application contained incorrect information.

The policy became effective on September 20, 1977. On November 6, 1978, Mrs. Dutton, for the first time, consulted Dr. Tony Williams, a medical practitioner in Moulton. A medical history was taken by his nurse, which, according to Dr. William's testimony, included a statement that Mrs. Dutton "was having pain in her right side of her back and under the right shoulder," and this pain had been experienced "at intermittent intervals for two or three years."

At trial, Dr. Williams described the pain as radiating "from the right side around into the right upper quadrant, the lower part of the chest right upper quadrant." He also testified that, because of the vagueness of the symptoms and his being not quite sure what the cause was, he sent her to the hospital for further examination that same day.

As part of the admitting process, a further medical history was taken by hospital personnel, who are not medically trained. This hospital record contains the following entry:

"NAME: Dutton, Eula NMN Date: 11-7-78

"Sex: Female

"No. 46624


"PRESENT ILLNESS: This 57 year old WF was admitted complaining with having chest pain in left side at intervals for approximately three years. Patient states this continued and became worse one month ago. Patient states this was very severe one day prior to admission. Patient states takes medication for high blood. Patient admitted for further evaluation and treatment."

Dr. Williams testified that he admitted Mrs. Dutton to the hospital and ordered laboratory tests "to rule out the cause of chest pain." He also testified, and the hospital record reflects, that the patient had some high blood pressure readings in the days following her admission to the hospital, and Dr. Williams started her on high blood pressure medication "shortly thereafter." The patient's chart contains this entry on the night she was admitted:

"9:30 P.M. Dr. Williams visits patient, ordered medicines .... Shaking and complaining of chest pain, blood pressure 180/100, pulse 100."

The patient was dismissed after several days, and the hospital discharge summary, as reflected in the record, is as follows:


"Patient: Dutton, Eula NMN Age: 57

"Sex: Female Case No: 46624

"Admitted: 11-6-78 Discharged: 11-10-78

"Physician: Dr. Tony Williams

"Provisional Diagnosis: Back Pain

"Final Diagnosis: Ulcer Disease

"Hospital Course: This 57 yr. old WF was admitted with two months history of pain in the back which radiated into the right upper quadrant. On questioning it was difficult to differentiate what the patient was calling back pain from right upper quadrant pain. I suspect this patient might possibly have gallbladder disease although the gallbladder series was within normal limits. BE was also within normal limits. Upper G. I. Series did reveal some deformity of the duodenal area. There was no noted active ulcer at the present time. EKG was essentially within normal limits except for some mild or minimal ST segment changes. SMA 12, CBC, Urinalysis were all within normal limits.

"Final Disposition: Patient was discharged from the hospital in good condition on Tagamet and Antacid."

Following her discharge from the hospital, a claim for benefits was filed with National by the hospital and Dr. Williams. The claim indicated that Mrs. Dutton's hospitalization was for an ulcer disease. Upon receipt of the claim, National sought and received, with Mrs. Dutton's authorization, the medical records relating to her hospitalization. After reviewing these records, the company denied the claim with the following letter:

"March 2, 1979

"Eula Dutton

"Route 3, Box 316

"Moulton, AL 35650

"RE: Policy No. 312252

"Mrs. Dutton, we now have the medical information we needed to complete your file ... thank you for your patience.

"According to this information, you have been experiencing chest pains in the left side for approximately three years. The information also indicates that you have been taking medication for high blood pressure. This information was not on your application for insurance. If our Underwriters had known about this past history at the time they were considering your application, they could not have issued the policy as applied for. In view of this, we must now void your policy as of the date of issue ... I'm sorry. The enclosed check represents a refund of the premiums you have paid us.

"This action, Mrs. Dutton, is based upon the information we have in file. If for any reason you feel this to be inaccurate or incomplete, we will be glad to review anything additional you might want to present us.

"Fount W. Bertram, Manager

"Claims Department"

Mrs. Dutton asked Dr. Williams to respond to this letter, which he did, he said, to document that he "was not aware that Mrs. Dutton had previous outstanding hypertension." His letter follows:

"March 8, 1979

"National Savings Life Insurance Company



"Re: Eula Dutton

BD: 1-7-21

Pol. # 312252

# 2177-AL

"Dear Sir:

"Mrs. Dutton was first seen in my office approximately two and one-half months ago on routine examination and was found to be moderately hypertensive. Patient had had no previous history of hypertension or previous medications. Patient returned and repeat B. P. continued to be moderately elevated and patient was started on B. P. medicines approximately two months ago. Patient had also had some intermittent pain which was located in the posterior cervical area on the left side. Patient had not had medical care for this. This pain became progressively worse and patient was hospitalized on 11-6-78 and was seen in the office on the day of admission with moderately severe pain in the left posterior cervical region radiating into chest. Examination was essentially negative except for some epigastric tenderness. Patient has had no previous medications for this pain, but I felt that patient should be evaluated for this problem.

"If there is any further information needed, will be happy to send copies of records, etc.


"Tony L. Williams, MD."

The record also discloses that subsequent to the cancellation of the policy, Mrs. Dutton was again admitted to the hospital, complaining of chest pains. When the company declined Mrs. Dutton's request to reinstate the policy, she cashed the premium refund check and filed this lawsuit.

On appeal, National presents the same two issues on which its motion for new trial or JNOV was based. It argues that the trial court erred in its instruction to the jury that the policy was subject to cancellation or rescission only if Mrs. Dutton intentionally or deliberately furnished false information in her application for insurance.

The trial court addressed the issue of National's right to cancel the policy several times in its instruction to the jury, and the following is representative of the substance of the trial court's charge:

"The question in the first instance that the Jury has got to answer is, whether or not the Plaintiff, Mrs. Dutton, was truthful in her answer. She might have had a heart condition; if she knew about it and if she failed to answer, then the insurance company is entitled to have the contract rescinded, but the fact that it turns out later on that she has a heart condition or she has some heart condition, that is not the question; the question is, was at the time and place that she filled out this application did she truthfully answer to the best of her knowledge all the questions as specified in that application. And once you have...

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