Pacific Mut. Life Ins. Co. v. Arnold

• Decision Date: 11 December 1935
• Citation: 90 S.W.2d 44,262 Ky. 267
• Parties: PACIFIC MUT. LIFE INS. CO. v. ARNOLD.
• Court: Kentucky Court of Appeals

90 S.W.2d 44

262 Ky. 267

PACIFIC MUT. LIFE INS. CO. v. ARNOLD.

Court of Appeals of Kentucky

December 11, 1935

Rehearing Denied Feb. 25, 1936.

Appeal from Circuit Court, Daviess County.

Action by James Ernest Arnold against the Pacific Mutual Life Insurance Company. Judgment for plaintiff, and defendant appeals.

Affirmed.

La Vega Clements, Clements & Clements, and Ben D. Ringo, all of Owensboro, and Leo T. Wolford, Wm. Marshall Bullitt, and Eugene B. Cochran, all of Louisville, for appellant.

E. B Anderson, of Owensboro, for appellee.

STANLEY Commissioner.

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 total 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 1922-33. 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 feeling and the taking of laxatives, but says he was convinced at the sanitarium that he did not have constipation and need not take laxatives, and that he had not done so since that time. He denied having had piles, although perhaps had suffered a little discomfort. He had never had asthma, and can only account for the record by perhaps having a cold or congested condition in his chest and might have said that it acted like asthma. The report is discredited, for it shows Arnold to have artificial teeth, when such is not the case; a condition which could not be the subject of controversy.

Dr. O. W. Rash, Arnold's family physician for many years, testified Arnold had never consulted him for any of the ailments or conditions reflected by the record of the sanitarium; nocturia, asthma, piles, constipation, or colitis. He made the examination for this policy as representative of the appellant and found the applicant to be as represented, and recommended him because he was a good risk. Two of Arnold's business associates for many years testified that he had worked hard and his health had been excellent until he was stricken in 1931.

We now look to the opinion evidence. The vice president and the general medical director of the appellant testified to the reliance put upon the answers in the application and medical examiner's report; that much greater care is exercised by insurers in issuing noncancelable health policies than ordinary life and accident insurance and to the various conditions and principles considered in passing upon an application; that the practice is to require full and complete disclosure, and conditions are regarded material in this kind of risk which would not be in other classes. Giving reasons why, these witnesses testified that, had the facts appearing in the record of the sanitarium been disclosed, the company, acting in accordance with the general practice of insurers issuing this character of policy, would never have issued it to Mr. Arnold.

On the issue of materiality of the representations, the plaintiff introduced three witnesses. Dr. Spears, of Louisville, who had been an examiner for insurance companies for 25 years and who at the time was making examinations for nine companies, two of which issued noncancelable health policies, testified that, while he had had no experience in an underwriter's office and his work and opportunity for learning the prevailing custom and practice of insurance companies generally had been confined to the medical examinations, yet he was familiar with that custom. He realized that, in accepting a risk on a contract of this kind, greater care and more particular attention is given to the medical history. Nevertheless, upon consideration of a hypothetical question presenting the claimed conditions, the answers given in the application, and medical examination, the doctor expressed the opinion that Arnold would have been accepted even though complete disclosure had been made; giving his reasons therefor. Dr. Barr, of Owensboro, for some time had been medical examiner for seven or eight companies, including the appellant and two others which wrote insurance of this kind. Dr. Atherton, of Louisville, was the medical director of the Income Life Insurance Company of Louisville (which however, did not write a noncancelable income policy), and was an examiner for several other companies. The evidence of these two physicians is like that of Dr. Spears.

It is quite apparent that the conflict of evidence raised an issue for the jury upon that phase of the law as established by section 639 of the Statutes and our decisions construing it, that false representations in regard to a material matter (within the rule as to what constitutes a material fact) will, if relied upon, avoid the contract, even though not fraudulently made. Metropolitan Life Ins. Co. v. Hutson, 253 Ky. 635, 69 S.W.2d 742. This issue was submitted to the jury and in this particular the form of the instruction is not criticized.

2. We turn to the arguments that the defendant was entitled (1) to a peremptory instruction under the complementary rule that if the applicant for insurance knowingly and intentionally made misrepresentations, they are deemed fraudulent and will defeat recovery, regardless of their materialty to the assumption of the risk; or (2) to have had the instruction submit the issue...