Prudential Insurance Company of America v. Winans
| Decision Date | 28 March 1974 |
| Docket Number | No. 3-1272A103,3-1272A103 |
| Citation | 308 N.E.2d 727 |
| Parties | PRUDENTIAL INSURANCE COMPANY OF AMERICA, Plaintiff-Appellant, v. Duane L. WINANS, Defendant-Appellee. |
| Court | Indiana Appellate Court |
William E. Harris and Ronald L. Sowers of Torborg, Miller, Moss, Harris & Sowers, Fort Wayne, for plaintiff-appellant.
John C. Thrapp of Thrapp & Thrapp, Kendallville, Phil M. McNagny, Jr., of Gates, Gates & McNagny, Columbia City, for defendant-appellee.
This is an appeal by plaintiff-appellant The Prudential Insurance Company of America (Company) for reversal of a judgment against the Company on its amended complaint and in favor of defendant-appellee Duane L. Winans (Winans) on his counterclaim. The Company sued to rescind and cancel an insurance policy issued to Winans alleging that the application for the insurance contained certain material misrepresentations of fact.
The facts and inferences most favorable to Winans to be drawn from the evidence presented at trial are that Winans applied for medical insurance with the Company. In response to questions on the Company's application form, and after consultation with its agent while filing out the form, Winans answered that he had a history of stomach problems, including ulcer surgery, but that he had made a 'complete recovery.' He wholly omitted reference to a hospitalization for diagnostic tests and consultations with doctors relating to stomach discomfort, because he had been advised that he was not ill.
After the Company issued the insurance to Winans, he was found to be suffering from an ulcer which required surgery. Due to the nature of this malady, it is not possible to ascertain when it developed, according to the testimony of one doctor.
After an investigation of the circumstances of Winans' ill health, the Company made tender of premiums paid by Winans, and sought to rescind the insurance contract and recover benefits paid thereunder. Winans counterclaimed alleging additional benefits were due under the contract which had not been paid.
At the close of the Company's evidence a motion for summary judgment was denied. Also, its oral motion for judgment on the evidence at the close of Winans' case was denied. The jury returned a verdict in favor of Winans on his counterclaim and against the Company on its amended complaint, and the trial court entered judgment on the verdict.
The Company asserts that the trial court erred in allowing Winans to testify about conversations with its agent concerning his answers to the questions on the insurance application.
The Company's motion to correct errors did not contain the questions, objections, ruling of the court, and answers which it contends violate the parol evidence rule. However, this is not required by Rule TR. 59(B), Indiana Rules of Procedure, and the case law interpreting it. The Company set out the substance of the testimony, objections and rulings in its motion to correct errors and the same are set fourth verbatim in its brief. Thus, the case at bar is clearly distinguishable from Daben Realty Co., Inc. v. Stewart (1972), Ind.App., 290 N.E.2d 809, 34 Ind.Dec. 505, where the court held an issue waived because neither the motion nor the brief contained even the substance of the question or the objection thereto. Here the matter in controversy was presented both in substance and verbatim, and so properly presents an issue for appeal.
Winans contends that the Company made fraud an issue in the case through its pleadings, and thus made the content of the conversations between himself and the agent during the completion of the application form an issue in the case.
Although this issue was raised by the Company's pleadings, it was not an issue at trial. The issues are crystalized in the pretrail order. Kruss v. Sink & Edwards, Inc. (1970), 148 Ind.App. 183, 195, 264 N.E.2d 320, 328. A careful examination of the pretrial order in the case at bar discloses no reference to any issue of fraud. Although such order included the issue as to whether Winans furnished all the information requested by the Company's agent, this is not tantamount to an issue of fraud since there is no contention that the omissions were knowingly made. Thus, there was no question of actual fraud.
There also was no issue of constructive fraud. Certainly the Company could have introduced the issue of constructive fraud into the litigation. However, it did not do so. Winans cannot assert his own constructive fraud to make his own parol evidence admissible. To allow him to do so would be to permit a defendant to control a plaintiff's theory of his case. And, Winans alleged neither actual nor constructive fraud on the part of the insurance company in inducing him to enter into the insurance contract. The issue was not before the trial court. Therefore, the testimony objected to could not have been properly admitted as neither actual nor constructive fraud was an issue for the jury.
The actual purpose and effect of this testimony is revealed by a review of its content. Winans testified that he conferred with the agent in filling out the application, and volunteered all information requested by the agent. He further testified that this included information about his previous operation and the surgeon who performed it, the name of his family doctor, and that the agent made no other inquiries about his ulcer problems. Further, he was told he would be the tenth employee on the policy, which would lower the rates for the employer and the other nine employees. Winans also testified that he told the agent he already had medical insurance, and that the agent replied that the Company's insurance was 'a better coverage.'
The cumulative effect of this testimony was to improperly indicate to the jury that the Company, through its agent, had induced Winans to apply for insurance by encouraging him to change to their Company and by accepting less than the full and complete answers requested on its application form. Winans' testimony of this apparent alteration of the terms of the form by the agent amounts to an attempted variation of the terms of the written agreement by parol evidence. This evidence could have been introduced for no other purpose.
It is elementary that parol evidence is inadmissible in Indiana where, as here, it varies basic, easily understandable terms of a written instrument which becomes part of an insurance contract. Vernon Fire & Casualty Insurance Co. v. Thatcher (1972), Ind.App., 285 N.E.2d 660, 32 Ind.Dec. 112 (transfer denied), 292 N.E.2d 606; Wells v. Vermont Life Ins. Co. (1902), 28 Ind.App. 620, 62 N.E. 501, 63 N.E. 578.
Furthermore, Indiana provides by statute that an insurance contract and the application form must state that they alone 'constitute the entire contract between the parties.' IC 1971, 27-8-5-10, § 39-4260(B)(1), (Burns Cum.Supp. 1973). This requirement, coupled with the parol evidence rule, eliminates the evils caused by verbal representations by informing all applicants that they may rely only upon statements printed in the application form and insurance contract presented to them.
The application form which Winans signed stated immediately above his signature, 'I * agree that no agent has authority to waive the answer to any question in this application, * * * to modify this application or to bind the Company by making any promise or representation or by giving or receiving any information.' This statement is so explicit as to inform an ordinary man that the agent with whom he is dealing has no power or authority to vary the type or scope of information requested by the application.
Under the law of this State and the explicit terms of the insurance application he signed, Winans cannot be allowed to vary the terms of his insurance contract by testifying to the agent's representations. The admission of this testimony was, therefore, prejudicial error. The effect of its admission was so detrimental to appellant's case as to constitute reversible error.
Reversed and remanded for a new trial not inconsistent with this opinion.
I dissent from the majority opinion for two reasons:
REASON ONE: Constructive Fraud is an Issue:
Constructive fraud is...
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