Rayford v. New York Life Insurance Company

• Decision Date: 08 May 1973
• Docket Number: Civ. A. No. 70-2266.
• Citation: 359 F. Supp. 139
• Parties: Mrs. Addie RAYFORD, widow of Henry W. Batiste, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Louisiana

359 F. Supp. 139

Mrs. Addie RAYFORD, widow of Henry W. Batiste, Plaintiff, v. NEW YORK LIFE INSURANCE COMPANY, Defendant.

Civ. A. No. 70-2266.

United States District Court, E. D. Louisiana.

May 8, 1973.

James F. Mulla, Jr., New Orleans, La., for plaintiff.

Eugene R. Preaus, Phelps, Dunbar, Marks, Claverie & Sims, New Orleans, La., for defendant.

CASSIBRY, District Judge:

This case involves a $17,000 life insurance policy issued by the insurer, New York Life Insurance Company, to decedent, Henry Batiste. Upon Mr. Batiste's untimely death from an acute heart attack, his widow sought to recover the benefits of the policy from New York Life. The insurer refused to make payment, claiming that in filling out the pre-policy physical the decedent had given materially false answers to a number of questions, with the intent to deceive the insurer, so that the policy was void. See, e. g., Gay v. United Benefit Life Ins. Co., 233 La. 226, 96 So.2d 497 (1957). First Federal Savings & Loan Ass'n v. National Old Line Ins. Co., 254 So.2d 497 (La.App. 3d Cir. 1971); Lane v. Life Ins. Co. of Virginia, 176 So.2d 202 (La.App. 4th Cir. 1965).

The applicable law with respect to this insurance defense is set out in LSA-R.S. 22:619:

A. Except as provided in Sub-section B of this Section and R.S. 22:692, no oral or written misrepresentation or warranty made in the negotiation of an insurance contract, by the insured or in his behalf, shall be deemed material or defeat or avoid the contract or prevent it attaching, unless the misrepresentation or warranty is made with the intent to deceive.

B. In any application for life or health and accident insurance made in writing by the insured, all statements therein made by the insured shall, in the absence of fraud, be deemed representations and not warranties. The falsity of any such statement shall not bar the right to recovery under the contract unless such false statement was made with actual intent to deceive or unless it materially affected either the acceptance of the risk or the hazard assumed by the insurer. (emphasis added)

The burden of pleading and proving this defense is on the insurer. First Federal S & L Ass'n v. National Old Line Ins. Co., 254 So.2d 497 (La.App. 3d Cir. 1971).

The interpretation of this statute has caused no small amount of confusion in Louisiana jurisprudence. The language of Section 619(B) seems clear enough, and appears to give an insurance company a defense either when the applicant made a false statement with "actual intent to deceive" or when he made such a statement and it "materially affected either the acceptance of the risk or the hazard assumed by the insurer," without regard to the insured's intent to deceive. A number of Louisiana decisions have adopted this position Pearce v. Union Bankers Life Ins. Co., 259 So.2d 81 (La.App. 1st Cir. 1972); Lane v. Life Ins. Co. of Virginia, 176 So.2d 202 (La. App. 4th Cir. 1965); Lamark v. Lincoln Life Ins. Co., 169 So.2d 203 (La.App. 4th Cir. 1964); Radosta v. Prudential Ins. Co. of America, 163 So.2d 177 (La. App.4th Cir. 1964).

But while the language of the statute would seem to require that an insurance company be afforded two distinct defenses on the basis of false statements, the Supreme Court of Louisiana held otherwise in the landmark decision of Gay v. United Benefit Life Ins. Co., 233 La. 226, 96 So.2d 497 (1957). In Gay, the Court reviewed the jurisprudence which interpreted the source provisions of the present Section 619(B) and held that prior statutes had required both intent to deceive and materiality in order that a misrepresentation effectuate an avoidance of the policy. The Court in Gay then concluded that Section 619(B) was only a codification of this prior jurisprudence; and on that basis it held that the disjunctive "or" in Section 619(B) in fact means the conjunctive "and." The great preponderance of authority in the Louisiana inferior courts subsequent to the Gay decision have adhered to its rationale. See, e. g., Murphy v. Continental Cas. Co., 269 So.2d 507, 511-513 (La.App. 1st Cir. 1972); Bamburg v. Reserve Life Ins. Co., 259 So.2d 408, 410 (La.App. 2d Cir. 1972); First Federal S & L Ass'n v. National Old Line Ins. Co., 254 So.2d 497, 499 (La.App. 3d Cir. 1971); Hendricks v. Connecticut General Life Ins. Co., 244 So.2d 249, 250-251 (La.App. 3d Cir. 1971); Knight v. Jefferson Standard Life Ins. Co., 205 So.2d 485 (La.App. 1st Cir. 1967); Fruge v. Woodmen of World Life Ins. Society, 170 So.2d 539, 543 (La.App. 3d Cir. 1965). The leading federal authority on this subject, Lentz v. Metropolitan Life Ins. Co., 428 F.2d 36 (5th Cir. 1970), has adopted the majority approach embodied in the above-cited cases as the proper one for Erie purposes,¹ and I believe that it is proper to follow it here.

In this case then, the insurance company has the burden of showing that in applying for the policy of insurance at issue, the decedent (1) made a false statement (2) which was material to either the acceptance of the risk or the hazard assumed by the insurer, and (3) which was made with intent to deceive the insurer. To discharge its burden as to intent, the insurer need not prove actual fraud on the part of the insured. Murphy v. Continental Cas. Co., 269 So. 2d 507 (La.App. 1st Cir. 1972); Lane v. Life Ins. Co. of Virginia, 176 So.2d 202 (La.App. 4th Cir. 1965). It is enough, in the words of Gay, supra that the insured made the statement "knowing it to be untrue and believing it to be material to the risk (or of such a nature that it would only be reasonable to assume that he must have believed it was material)." 96 So.2d at 499. This determination is to be made in light of all the attending circumstances on a case by case basis. Murphy, supra at 269 So.2d 512; Lentz v. Metropolitan Life Ins. Co., 428 F.2d 36 (5th Cir. 1970).

The facts, as developed in the trial held before Judge Comiskey, are these. The defendant's agent, Mr. Vybiral, went aboard plaintiff's vessel to solicit business among the crew. Plaintiff, among others, indicated his willingness to purchase a policy, and a Dr. Centanni, who regularly performed pre-insurance physical examinations for the defendant, was summoned aboard the vessel that same afternoon by Mr. Vybiral. Dr. Centanni examined the decedent and asked him a number of questions concerning his past medical history. This entire procedure, according to Dr. Centanni, consumed about forty-five minutes.

Among the questions asked by Dr. Centanni and answers given by decedent² were the following:

QUESTION 2(b): Have you ever consulted a physician or practitioner for or, so far as you know, ever had or been treated for rheumatic fever, heart murmur, heart attack, angina pectoris, stroke, chest pain, shortness of breath, palpitation, irregular pulse, elevated blood pressure, varicose veins or any other disorder of the heart or blood vessels?

ANSWER: No.

QUESTION 3(c): Have you within the last 5 years, had any x-ray, electrocardiogram or other diagnostic procedure ordered by a physician or practitioner?

ANSWER: Yes. General check-up; x-ray of disc, EKG, etc. Found O.K.

QUESTION 4(c): Other than as stated in your answers to the preceding questions, have you, within the last five years, so far as you know, consulted any physician or practitioner for any reason, including routine or checkup examination?

ANSWER: Yes. 4-5 years ago: V. A. Hospital, N.O. Also Oct. 15, 1969: Browne-McHardy Clinic, 2223 Carondelet St., N.O., La. Simple physical exam — pre-employment for Lykes Bros. S.S. Co.

The evidence developed at trial, however, revealed that the decedent had entered the V.A. Hospital in February of 1967 for a period of about three weeks, complaining of chest pain and shortness of breath, and at that time his condition was diagnosed as due to hypertension and angina pectoris. In addition, Mr. Batiste was treated for hypertension on a number of subsequent occasions and had mentioned to his family that he had "high blood." Thus, the insurer argues, plaintiff had knowledge of his infirmities, but deliberately withheld this information from it. Failure to enumerate these conditions, defendant argues, was not only false, but also clearly material, because New York Life would not have issued any kind of a life insurance policy to Mr. Batiste had it known of just the hypertension, not to mention the angina pectoris. Thus, the defendant contends that it has met the requirements of Section 619(B) and is entitled to void the policy in question.

I believe that it is quite clear on the record before me that Mr. Batiste did make false statements to Dr. Centanni, and that these misrepresentations were material to the insurer's acceptance of the risk. But I do not think that these false statements were made with the intent to deceive the insurer, so that the policy defense must fail. In reaching this decision I am influenced by a number of factors which in their entirety convince me that the insured either was not aware of the omissions in his medical history at all, or else was unaware of their materiality, so that under Louisiana law he lacked the requisite intent to deceive. Gay v. United Benefit Life Ins. Co., 233 La. 226, 96 So.2d 497 (1957).

First, defendant's agent solicited the decedent aboard ship to sell insurance to him, or to any other seaman who might be interested. The decedent did not seek out the company. The entire transaction was negotiated and completed in less than a day, and it strains credibility to suppose that Mr. Batiste suddenly concocted a scheme to obtain insurance from New York Life that it might not otherwise have given him. The whole application process seems to have been completed in great haste — and the alacrity was occasioned not by Mr. Batiste but by the defendant — in an atmosphere conducive to innocent error or misrecollection.³

Second, the decedent declared all hospitals where he had been examined and treated and, further, gave the insurance...