Preferred Risk Mut. Ins. Co. v. Anderson

• Decision Date: 04 August 1967
• Docket Number: No. 40236,40236
• Citation: 277 Minn. 342,152 N.W.2d 476
• Parties: PREFERRED RISK MUTUAL INSURANCE CO., Appellant, v. Harvey ANDERSON et al., Respondents.
• Court: Minnesota Supreme Court

Page 476

152 N.W.2d 476

277 Minn. 342

PREFERRED RISK MUTUAL INSURANCE CO., Appellant, v. Harvey ANDERSON et al., Respondents.

No. 40236.

Supreme Court of Minnesota.

Aug. 4, 1967.

Syllabus by the Court

1. Under Minn.St. 60.85, a motor vehicle liability insurance policy may be rescinded by the insurer where a material misrepresentation made by the insured, although without intent to deceive or defraud, increases the risk of loss.

2. Findings by the trial court that none of the alleged misrepresentations was made with intent to deceive and defraud, they were not, in fact, false, and they did not increase the risk of loss will not be disturbed on appeal where they are not clearly erroneous and are reasonably supported by the evidence.

Karlins, Grossman, Karlins & Siegel, and Thomas V. Firth, Minneapolis, for appellant.

James A. Fridland, Minneapolis, for Anderson.

Chester G. W. Gustafson, Minneapolis, for Fall.

Robert E. Zeck, Carroll, Cronan, Roth & Austin, King, MacGregor & Lommen, and Maurice H. Rieke, Nemerov, Perl & Hunegs, Minneapolis, for Gregorson.

OPINION

ROGOSHESKE, Justice.

On November 18, 1964, the Preferred Risk Mutual Insurance Company instituted a declaratory judgment action to have an auto insurance policy, issued to defendant Rev. Harvey Anderson in July 1962, rescinded because of alleged misrepresentations in the application for the policy. After a trial by the court, judgment dismissing the complaint was entered. This appeal is from that judgment.

The action was based upon Minn.St. 60.85, which provides:

'No oral or written misrepresentation made by the assured, or in his behalf, in the negotiation of insurance, shall be deemed material, or defeat or avoid the policy, or prevent its attaching, unless made with intent to deceive and defraud, or unless the matter misrepresented increases the risk of loss.'

In construing this statute, we held in Nielsen v. Mutual Service Cas. Ins. Co., 243 Minn. 246, 249, 67 N.W.2d 457, 459, that--

'* * * a material misrepresentation, made with intent to deceive and defraud, avoids the policy. A material misrepresentation, not made with intent to deceive or defraud, does not avoid the policy, unless by the misrepresentation the risk of loss is increased. If a material misrepresentation increases the risk of loss the policy is avoided, regardless of the intent with which it was made.'

The determination issue is whether there was sufficient evidence to support the findings of the trial court that none of the alleged misrepresentations were made with an intent to deceive and defraud, they were not, in fact, false, and they did not increase the risk of loss. ¹

It is well established that a trial court's findings of fact will not be disturbed on appeal, even though we might not agree with them, unless they are clearly erroneous in the sense that they are manifestly contrary to the weight of the evidence or not reasonably supported by the evidence as a whole. ²

Viewing the evidence ³ most favorably to uphold the findings, the trial court could have reasonably found the following facts: Defendant E. W. Fall is the brother-in-law of defendant Anderson. In October 1961 defendant Fall was in an accident. Prior to the accident and unknown to him, his liability insurance had been canceled because of nonpayment of a premium. As a result of this accident, a judgment was obtained against him and his driver's license was suspended until about November 1962 because of his failure to supply the required proof of his financial responsibility. His only auto was levied upon and sold in December 1961. Defendant Fall had a family of five to support and was in serious financial difficulty. Although it is not clear from the record, he apparently needed an automobile in his work, generally referred to as selling real estate and some products to farmers, operating a rubber stamp factory, and serving as a clergyman, all carried on part-time at various unspecified times.

In July 1962 defendant Anderson, a fulltime clergyman residing in Verndale, purchased a Chevrolet automobile. Seeking to aid his brother-in-law and his family, he loaned the vehicle to them. It was anticipated that their use would be temporary as the Anderson family could use another automobile. Defendant Anderson paid for the vehicle by trading in his old Studebaker, primarily used by his son, and paying $400 in cash. The title to the Chevrolet was registered in his name. For reasons not developed at trial, Mr. Fall gave Mr. Anderson a note for $400, on which two payments of $20 each, at some undisclosed time, may have been made. The Chevrolet was left in the possession of the Fall family in Albert Lea, some 250 miles from Verndale.

In July 1962, defendant Anderson, to secure insurance for the Chevrolet, executed and mailed the following form to plaintiff insurance company:

NOTE: OPINION CONTAINS TABLE OR OTHER DATA THAT IS NOT VIEWABLE

This form was accompanied by a letter, which requested:

'Until further notice, please include the following automobile with my present insurance (Policy #222--444): (See enclosed application card)

1955 Chevrolet, Bel-Aire

8 cylinder, 4 door sedan

Serial number C55J003208.

'Coverage should include liability A and B 25, 50 and 10 thousand (As my other policy) and E, Collision (Value $400) with 100 deductible. Effective immediately.

'Very truly yours,

/s/ Harvey A. Anderson

'P.S. There will be no drivers under 51 years of age. I am the owner.

'/s/ H. A. A.'

This form was styled a 'recommendation card' and was not an application, but designed to be used in recommending new applicants for insurance, plaintiff specializing in writing policies for 'nondrinking' drivers at reduced premium rates. Plaintiff merely added the Chevrolet to the coverage of the existing policies on the basis of the form and letter submitted, without requiring further application. Defendant Anderson was thereafter notified of coverage by way of a 'declarations sheet' made a part of the policy and declaring, among other things, that the Chevrolet would be used for pleasure and business, that it would be principally used and garaged in Verndale, and that no member of Anderson's household had had his insurance canceled within the last 3 years or ever had his driver's license revoked. The insurance policy was continuously kept in Anderson's name and paid for by him.

The Chevrolet remained in defendant Fall's possession and was used primarily by him until July 18, 1963, when it was demolished in a storm. Mr. Anderson submitted a claim to plaintiff and in a detailed letter reported the loss as well as the fact that the Chevrolet at the time of its destruction was being used by his brother-in-law, Fall, in Albert Lea. Thereupon he used $100 he received in settlement from plaintiff, $75 realized from salvage of the Chevrolet, and $195 contributed by another brother-in-law of Fall's to purchase a Pontiac to replace the Chevrolet. The Pontiac was registered in Mr. Anderson's name, and plaintiff substituted it for the Chevrolet on the insurance policy.

The Pontiac was kept by defendant Fall in Albert Lea until February 1964, when he and his family moved to Minneapolis, where he continued to use the Pontiac in his employment as a real estate salesman. On September 12, 1964, defendant Fall was involved in an accident while driving his daughter's friend home. At this time his driver's license was no longer suspended. Two weeks previously Rev. Anderson had had his first and only face-to-face meeting with an agent representing plaintiff. During their half-hour conference, they discussed plaintiff's records concerning the coverage and location of the 3 vehicles and added medical and uninsured motorist coverage to the family Rambler. On being told that defendant Fall had the Pontiac in Minneapolis, the agent said that was all right.

Whether as a matter of law the evidence required granting rescission, as plaintiff urges, must be considered in the light of the rule that the burden of proof on all issues of fact relevant to the alleged misrepresentation is on the insurer. ⁴ Moreover, the question whether there was a misrepresentation must be decided in relation to the facts in existence at the time the representations were made and not to the facts later developed. ⁵ Absent an express agreement, the insured is under no obligation to inform the insurer of future developments inconsistent with his prior declarations. ⁶

Although plaintiff does not argue the point in its brief, the complaint alleged that the claimed misrepresentations were made by defendant Anderson with intent to deceive and defraud. The trial court found no such intent, and there is ample evidence in the record to support this conclusion. ⁷

Plaintiff contends there was a misrepresentation as a matter of law when defendant Anderson stated he was the 'owner' of the Chevrolet in the letter accompanying his application for insurance. Plaintiff claims defendant Fall was the 'owner,' relying upon the following facts: The Chevrolet was purchased so it could be used by defendant Fall; he used it almost exclusively from the time of its purchase and kept it in his possession about 250 miles from where defendant Anderson lived; and defendant Fall signed a $400 note when he obtained possession and made payments thereon. On the other hand, the evidence considered as a whole reasonably supports a finding that defendant Anderson was the owner of the Chevrolet. He paid the entire purchase price; he held the legal title in his name and neither intended nor attempted to transfer title to his brother-in-law; he secured and paid for insurance coverage, sold the Chevrolet when it was demolished, and negotiated and settled and insurance claim; he retained ultimate control as to who could use the vehicle, had use for it by his family, and intended to make no disposition of it except to permit defendant Fall to use it temporarily.

We fail to see how statutory...