Old Republic Ins. Co. v. Alexander

• Decision Date: 27 January 1969
• Docket Number: No. 5--4772,5--4772
• Citation: 436 S.W.2d 829,245 Ark. 1029
• Parties: OLD REPUBLIC INSURANCE COMPANY, Appellant, v. H. W. ALEXANDER, Appellee.
• Court: Arkansas Supreme Court

Page 829

436 S.W.2d 829

245 Ark. 1029

OLD REPUBLIC INSURANCE COMPANY, Appellant, v. H. W. ALEXANDER, Appellee.

No. 5--4772.

Supreme Court of Arkansas.

Jan. 27, 1969.

Rehearing Denied March 3, 1969.

Arnold, Hamilton & Streetman, Crossett, for appellant.

Drew & Holloway, Lake Village, for appellee.

FOGLEMAN, Justice.

Appellant seeks reversal of a decree refusing rescission of an accident insurance policy issued by it to appellee and granting judgment in favor of appellee for the accidental loss of a foot. Determination of the appeal depends on the propriety of the chancellor's finding that recovery was not barred by any misrepresentation, concealment or omissions by appellee. We find no reversible error in the chancellor's decree.

Appellee Alexander applied for the policy of accident indemnity insurance in October 1966. He suffered the loss of his left leg below the knee by reason of an accidental gunshot wound to the left foot in December 1966. When a claim was asserted, appellant instituted this action for rescission of the contract on the grounds that issuance of the policy was based on misrepresentation, misstatement and omission of facts in the application therefor. Appellee counterclaimed for benefits for loss of a limb as a result of an accidental gunshot wound.

Appellant contends that the decree of the chancellor should be reversed because of misrepresentation, omissions and concealment of facts, and incorrect statements by appellee which were material to the acceptance of the risk and because it would, in good faith, not have issued the policy if the true facts had been known to it. Appellant relies on the failure of Alexander to disclose previous diagnoses of heart disease and failure to mention exploratory heart surgery to support this contention.

The application was filled out by Alexander himself. The material portions thereof were as follows:

To the best of your knowledge and belief, have you ever had: (answer Yes or No to each question)--

An operation? YES Epilepsy? NO Syphilis? NO Ulcer? NO Diabetes? NO Rheumatism or Arthiritis? NO Rheumatic Fever? NO Disease of or injury to the Back? NO Heart Trouble? NO Hernia? NO Tuberculosis? NO Deformity? NO Loss of Eye or Limb? YES Goiter or any Thyroid Disturbance? NO Fainting Spells or Dizziness? NO High or Low Blood Pressure? NO Gall Bladder or Kidney Trouble? NO Mental or Nervous Illness? NO Give details of any of the above answered Yes--Date, duration, names and addresses of physicians and hospitals.

What claims, if any, have you ever made for injury or sickness? Specify dtates, companies, amounts, nature of illness or injury, degree of recovery--

United States Navy Department records indicate that an electrocardiogram given Alexander April 15, 1928, was essentially negative and that he had no heart lesion on June 7, 1928. Later, an electrocardiogram administered to Alexander suggested some myocardial changes. He was discharged on December 13, 1928, with a diagnosis of chronic myocarditis. Navy medical reports indicate that Alexander had been first treated on an original diagnosis of malaria, but that subsequent tests for this disease were repeatedly negative. These records also indicate that navy medical authorities believed Alexander had tuberculosis at the time of his discharge, in spite of repeated negative results of tests and x-ray examination.

It was also shown that Alexander had undergone surgery consisting of exploratory pericardotomy, exploratory thoracotomy, and biopsy of a lung, in Denver in September 1954, after a pre-operative or provisional diagnosis of constructive pericarditis. The postoperative diagnosis was 'undetermined,' and the final diagnosis was disseminated lupus erythematosus. A diagnosis of mild pulmonary emphysema was made from the lung biopsy. The medical reports indicate that the surgical exploration revealed no indication of pericarditis. Alexander testified that the surgeon had told him after the operation there was nothing wrong with his heart.

Other hospital reports record a previous diagnosis of myocarditis as medical history. An inference might well be drawn that Alexander furnished the information upon which these records were made.

Appellant relies heavily upon the failure of Alexander to respond affirmatively to the interrogatory in his application relating to heart trouble. We find no basis for their contention in this respect. The evidence does not disclose any misrepresentation, omission, concealment or incorrect statements on the part of Alexander in answering this question in the negative. The application required a 'yes' or 'no' answer to a question which asked the applicant to state, to the best of his knowledge and belief, whether he had ever had certain diseases including heart trouble. Although there is no doubt that previous diagnoses had indicated that Alexander might have had heart trouble of some nature, the evidence relating to this exploratory heart surgery and testimony of Dr. Allen Talbott, who had been Alexander's physician since 1951, justify a finding that the previous diagnoses were erroneous. The application form did not ask the applicant to state whether he had ever been examined for heart trouble, whether he had been subjected to tests for heart disease or whether any diagnosis of heart trouble had ever been made. See Reserve Life Ins. Co. v. Baker, 245 Ark. 853, 854, 435 S.W.2d 780. We take the term 'heart trouble' to be the equivalent of 'heart disease.' See Webster's New International Dictionary, Second Edition. Dr. Talbott's testimony, after he had been examined extensively with reference to previous diagnoses indicating Alexander had myocarditis or pericarditis and with reference to the surgery performed in Denver, was that Alexander had not ever had heart trouble, to his knowledge. He further testified that the reports of the heart surgeon in Denver indicated that Alexander's heart was perfectly normal, that there had been no evidence of heart disease since that surgery, and that it is very likely that Alexander would not have been living at the time of trial if he actually had had the heart condition suspected when the surgery was performed. In view of this testimony, the answer given by Alexander as to his knowledge and belief cannot be said to have been incorrect.

Where, as here, answers are not warranties, an applicant for insurance is not required to enlarge upon the interrogatories in an application nor to interpret them in any sense other than that which the language employed and the circumstance of the inquiry suggest. Federal Life Insurance Company v. Hase, 193 Ark. 816, 102 S.W.2d 841. In the opinion in that case, Cooley's Briefs on Insurance was quoted to the effect that a mere layman cannot be presumed to know the existence of a disease which a physician cannot discover, or about which physicians differ in opinion.

Another basis of appellant's argument that rescission should be granted is that Alexander's failure to disclose the surgery he underwent in Denver in 1954 was a concealment or omission, under provisions of Ark.Stat.Ann. § 66--3208 (Repl.1966). Furthermore appellant says that the concealment or omission was material to the risk assumed by it, and such that it in good faith would not have accepted the risk if correctly apprised of the facts.

The application does show that Alexander failed to disclose this surgery. In his testimony during the trial, he said that he did not notice the inquiry as to details relating to operations when he filled out the application. If we assume that this was a concealment or omission sufficient to constitute a defense to the counterclaim or justifying rescission, still we cannot say as a matter of law that the fact that Alexander had this surgery was material to the risk. The materiality to the risk of a fact misrepresented, omitted or concealed is a question of fact so long as the matter is debatable. It is a question of law only when so obvious that a contrary inference is not permissible. Union Trust Co. of Maryland v. Kansas City Life Insurance Company, 300 F.2d 606 (4th Cir. 1962); National Security Ins. Co. of Elba v. Tellis, 39 Ala.App. 445, 104 So.2d 483 (1958); Prudential Insurance of America v. Gourley, 267 F.2d 156 (5th Cir. 1959); Metropolitan Life Ins. Co. v. Milton, 74 Ga.App. 160, 38 S.E.2d 885 (1946); Blazek v. North American Life & Casualty Company, 251 Minn. 130, 87 N.W.2d 36 (1957); Sullivan v. John Hancock Mutual Life Insurance Co., 342 Mass. 649, 174 N.E.2d 771 (1961); Mooney v. Underwriters at Lloyd's, London, 33 Ill.2d 566, 213 N.E.2d 283 (1966). This principle is applied to questions pertaining to acceptance of the risk as well as to those relating to the hazard assumed. National Casualty Co. v. Johnson, 219 Miss. 1, 67 So.2d 865 (1953).

The burden was on appellant to sustain its contentions that the facts not disclosed were material to the risk assumed by it, or that, it in good faith, would not have issued the policy. To sustain this burden, appellant offered the testimony of the underwriter for its general agent. This underwriter stated that he had responsibility for acceptance or rejection of all health and accident insurance applications submitted to appellant since 1963. He stated that if Alexander's application had shown that he had been treated for heart trouble in the navy for myocarditis or operated on in 1954 for suspected constricted pericarditis, it would not have been accepted. The witness's answers to questions relating to materiality to the risk and underwriting practices were as follows:

Q. With specific reference to heart conditions, what is the--does the company, and do you, as its underwriting agency, have any policy with respect to the acceptance of heart cases, or suspective heart cases, for health and accident insurance?

A. Yes, we do.

Q. What is that policy?

A. We do not issue the policy.--On applications, where there is suspective or heart conditions...