Pacific Mut. Life Ins. Co. v. Arnold

• Citation: 262 Ky. 267
• Parties: Pacific Mut. Life Ins. Co. v. Arnold.
• Decision Date: 11 December 1935
• Court: United States State Supreme Court (Kentucky)

262 Ky. 267

Pacific Mut. Life Ins. Co. v. Arnold.

Court of Appeals of Kentucky.

Decided December 11, 1935.

1. Insurance. — In action on policy insuring against disability resulting in continuous total loss of business time, evidence of misrepresentations as to previous health of insured in application for policy held for jury under rule that false representations as to material fact will avoid policy, even though not fraudulently made (Ky. Stats., sec. 639).

2. Insurance. — Under statute providing that all statements in application for policy shall be deemed representations and not warranties and will not avoid policy unless material or fraudulent, representations need only be substantially, and not literally, true (Ky. Stats., sec. 639).

3. Insurance. — Under statute providing that no misrepresentation in application should avoid policy unless material or fraudulent, misstatement to avoid policy must be material misstatement and not merely misstatement on material subject; word "material" meaning substantial, important, or of consequence as distinguished from trivial or minor representation which would affect determination of acceptance or rejection of applicant, as determined from standpoint of the ordinary, honest man (Ky. Stats., sec. 639).

4. Insurance. — To invalidate policy on ground of fraudulent statements or representations, facts must be shown from which intention to deceive and defraud insurer can be reasonably deduced (Ky. Stats., sec. 639).

5. Insurance. — Misrepresentation willfully made under circumstances and in such way as to induce insurer to accept application will

avoid policy even though not material to risk, but misrepresentations must have related to fact which might reasonably have influenced insurer in making contract (Ky. Stats., sec. 639).

6. Fraud. — In actions involving fraud where facts present double aspect, one consistent with fair dealing and the other involving dishonesty of purpose, court will strike balance in favor of honesty unless scale decidedly predominates toward dishonesty.

7. Insurance. — In action on policy insuring against disability resulting from accidental injury or sickness and resulting in continuous total loss of business time, evidence of fraudulent misrepresentations through statements in application that insured had not consulted a physician since childhood and that he had not been afflicted with designated minor infirmities held insufficient for jury (Ky. Stats., sec. 639).

Evidence showed that insured periodically visited health resort; that on one of such occasions as matter of precaution insured underwent physical examination disclosing minor infirmities having no causal relation to disability resulting 12 years later.

8. Insurance. — Evidence as to practice of insurers with reference to rejection of risks when insurers have knowledge of facts misrepresented in applications is admissible on issue of materiality of representations to assumption of risk, where witness is experienced in such transactions and familiar with practice, but such evidence is inadmissible to prove materiality of a fact or practice of defendant insurer alone.

9. Evidence. — Physicians who have acted for some time as medical examiners for insurance companies are qualified to express opinions as to whether, in accordance with custom usually prevailing among insurers, particular applicant would have been accepted if representations in application had been substantially true as against contention that only those who have had experience in passing upon applications for particular type of insurance involved are competent.

10. Insurance. — In action on policy insuring against disability resulting from injury or sickness resulting in continuous total loss of business time, evidence that during entire period for which disability benefits were claimed insured had received monthly salary from company of which he was president held inadmissible, since policy did not indemnify insured against loss of income or salary, but against loss of business time.

11. Insurance. — Under policy insuring against disability resulting from "continuous loss of business time," quoted phrase refers to occupation of insured and not to whole range of business pursuits, and is equivalent to total disability or loss of capacity to do work, but does not import permanency.

12. Insurance. — In action on policy insuring against disability resulting from injury or sickness resulting in continuous total loss

of business time, evidence of disability resulting in continuous loss of business time held for jury.

13. Insurance. — Under noncancelable income policy insuring against disability resulting from injury or sickness resulting in continuous loss of business time, insured to recover indemnity held not required to work at peril of health or life if ordinary prudence required otherwise.

Appeal from Daviess Circuit Court.

LA VEGA CLEMENTS, CLEMENTS & CLEMENTS, BEN D. RINGO, LEO T. WOLFORD, WM. MARSHALL BULLITT and EUGENE B. COCHRAN for appellant.

E.B. ANDERSON for appellee.

OPINION OF THE COURT BY STANLEY, COMMISSIONER.

Affirming.

On March 18, 1921, the appellant issued to the appellee, James E. Arnold, its "Non-cancelable Income Policy" by which it insured him against disability resulting from accidental injury or sickness; "such disability in both cases to be such as will result in continuous loss of business time." The indemnity was at the rate of $500 a month during the continuance of the disability "until such time as the insured engages in a gainful occupation," except during the first three months of disability.

The insured was then president and general manager of a department store in Owensboro and actively engaged in conducting it. On September 8, 1931, Mr. Arnold suffered a severe attack of angina pectoris. He was confined to his bed and home until some time in December, when he went to Florida and remained there under the care of physicians until May, 1932. He returned to Owensboro for a few days and then went to Atlantic City. In the fall he visited Battle Creek, and thence returned to Florida for the winter of 1932-33. The stipulated indemnity was paid from December 8, 1931, until August 8, 1932, when the company declined further payments, as Arnold was advised, because he had misrepresented the condition of his health and prior medical treatment in order to procure the policy. Several suits were subsequently filed to recover the accrued sums claimed by the insured. The defenses raised were the alleged false and fraudulent misrepresentations and the cessation of disability. A judgment for $7,000 was returned in favor of the plaintiff on the trial of the consolidated cases.

On the appeal it is contended that there was error of the court in overruling the defendant's motion for a directed verdict based upon both of the defenses pleaded. The request for reversal of the judgment is also based upon the claim of erroneous instructions and admission of incompetent evidence.

1. In applying for the insurance, Arnold filled out the conventional form relating to the present and past condition of his health. He represented that he had never had, and did not then have, any bodily infirmity or deformity, and was in no respect maimed or in an unsound physical condition. The following questions and answers were asked and given:

"Have you now or have you ever had any of the following complaints, symptoms or diseases?

                Asthma or Shortness of Breath ................. No
                Any disease of the stomach or bowels .......... No
                Any disease of the Rectum ..................... No
                Difficult or frequent urination ............... No
                Any Bladder or Kidney disease ................. No
                

Have you ever consulted or been treated by a physician or any other practitioner for any ailment or disease? (If so, give dates and full particulars.) (Ans) Not since childhood."

Mr. Arnold testified that for 10 or 12 years before this time he had been going to Battle Creek Sanitarium every year or so for rest and recreation for 10 days or 2 weeks. Sometimes he went through the clinic for examination, but was never treated for any ailment or disease. The basis of the claim of misrepresentation is a paper on file at the sanitarium purporting to give a history of Arnold's physical condition in September, 1919. Dr. M.A. Mortesen, of the sanitarium staff, testified that in September, 1919, Arnold was there for treatment and rest, and that he had him under observation. The foregoing history of the case had been made by him or under his direction. It showed: "Patient applies for examination and treatment for returned constipation." and "returned for examination and treatment." There are a number of negative statements of symptoms. Stress is laid upon the statements: "Tired and run down feeling," "bowels very sluggish; takes laxatives every night," "has some piles which cause not very much discomfort or bleeding," "has occasional nocturia; about once or twice a night," "has a little touch of asthma, but seldom has colds or sore throats." But the report of the examination by the doctor does not show any of those conditions. It shows a sound heart. It is endorsed: "Tentative diagnosis: constipation with colitis." Dr. Mortesen testified that Arnold stated to him he had a pain in his back and a tired, run down feeling. He was not asked specifically whether he had made the other statements to him as recorded. The doctor pronounced his condition to have been temporary. He specifically testified that he did not know of his own knowledge whether or not Arnold was then suffering from piles or asthma or any disease of the heart, but he remembered to have looked for asthma and told him he had a little touch of it.

In contradiction, Arnold testified that the history of the case, to be distinguished from the examination, was based upon questions asked by a stenographer, as he remembered. He might have made the statements concerning his tired...