Rael v. American Estate Life Ins. Co.

• Decision Date: 12 August 1968
• Docket Number: No. 8565,8565
• Citation: 79 N.M. 379,1968 NMSC 126,444 P.2d 290
• Parties: Liberato RAEL, Plaintiff-Appellant, v. AMERICAN ESTATE LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: New Mexico Supreme Court

Page 290

444 P.2d 290

79 N.M. 379

Liberato RAEL, Plaintiff-Appellant, v. AMERICAN ESTATE LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 8565.

Supreme Court of New Mexico.

Aug. 12, 1968.

Joseph B. Zucht, Albuquerque, for appellant

Modrall, Seymour, Sperling, Roehl & Harris, Allen C. Dewey, Jr., James A. Parker, Albuquerque, for appellee.

OPINION

CARMODY, Justice.

This declaratory action was instituted seeking the reinstatement of an insurance policy previously cancelled as null and void. Based upon the pleadings and the affidavits in the file, the trial court granted summary judgment in favor of the defendant company '* * * because the plaintiff withheld information called for on the application for insurance that was material to the insurance contract, * * *.'

We will refer to the parties as they appeared below.

Plaintiff claims that there are two related questions, i.e., whether plaintiff falsely or fraudulently answered certain questions in the application, and, secondly, the materiality of the false statements, if such occurred. However, we do not so view the case and only determine if the omitted or withheld information materially affected the acceptance of the risk assumed by the defendant.

The facts are relatively simple: On September 22, 1966, plaintiff mailed an application for a family group insurance policy to the defendant. Certain questions related to prior medical illnesses or accidents, and medical or surgical advice or treatment. Plaintiff marked these questions with a 'No' and furnished none of the requested information. An agent was concerned with these answers and made an appointment to interview plaintiff at his home. Thereafter, on September 26th, the agent discussed the application with the plaintiff and his wife, and prepared a new application which disclosed that certain members of the family had been treated by doctors in the past and had had certain operations and illnesses. However, another question was still answered in the negative. This question was:

'Have you or any family member listed above ever had any of the following:

'* * *

'(c) Any other medical or surgical advice or treatment or operations in the past 5 years.'

The policy was issued on October 10, 1966, and provided that it was issued in consideration of the statements made in the application. Within less than two months following the issuance of the policy, both the wife and the daughter of the plaintiff were hospitalized and incurred substantial hospital, medical and surgical expenses. Defendant declined to pay and affirmatively cancelled the policy on the basis that, if the information sought by the above question had been furnished, the policy would not have issued.

It must be specifically noted that we are not considering fraud, but merely whether the failure to give or the withholding of the information, intentionally or inadvertently, vitiated the policy. The affidavits which were filed by defendant showed the following: Elijia Rael, plaintiff's wife, was treated by her doctor in April of 1964 with respect to pain between her shoulders and her middle upper abdomen, which the doctor diagnosed as a spasm of the duodenum. On December 9, 1966, after the policy was issued, Mrs. Rael was admitted to the hospital, at which time she stated that she had been having episodes of abdominal pain for approximately one year. It was following this admission that she was operated upon for removal of gall stones. One of plaintiff's daughters, Adelina, had been treated in the emergency room at a hospital on December 8, 1965, for a sore throat and headache and, on the following two days, received office treatment from her doctor. On October 20, 1966, after the policy was issued, she was treated for headaches and told the doctor that they were of two months' duration. The following month, she was treated in the hospital for a similar complaint and again told two doctors that the headaches had persisted since August of 1966.

The only response by the plaintiff was his own affidavit, which attempted to explain the failure to give the information originally, and claimed that his wife's pain, for which she was operated upon, was not the same kind of a pain as she had had earlier. Plaintiff also stated that he did not know, until after her hospitalization, of his daughter Adelina's headaches and that her December 1965 illness was of a minor nature.

Also in support of the motion for summary judgment, defendant filed an affidavit by the secretary of the defendant company. The affidavit related the aforementioned examinations and treatments of both Mrs. Rael and the daughter Adelina, and closed with the statement that, if the information with respect to these two members of the family had been submitted with the application, the company would have rejected the offer and a policy would not have issued.

The problem is whether the failure to advise the defendant of the health information, known to plaintiff and his wife at the time of the application, materially affected the issuance of the policy.

Plaintiff relies on language appearing in Mosely v. National Bankers Life Insurance Company, 66 N.M. 330, 347 P.2d 755 (1959), but to no avail because there the entire issue related to the question of fraud. In Mosely, we affirmed the trial court's finding that there was no fraud in the application for insurance. As stated, we are not here dealing with fraud, intentional or otherwise, but rather a failure to disclose in the application information that was material to the insurance contract. This is the issue as to which there was 'not one word of proof' in Mosely. Here, the rule to be applied is that stated in Modisette v. Foundation Reserve Insurance Co., 77 N.M. 661, 427 P.2d 21 (1967), as...