Reliance Life Ins. Co. v. Everglades Discount Co.

• Decision Date: 12 June 1953
• Docket Number: No. 14258.,14258.
• Citation: 204 F.2d 937
• Parties: RELIANCE LIFE INS. CO. OF PITTSBURGH v. EVERGLADES DISCOUNT CO. et al.
• Court: U.S. Court of Appeals — Fifth Circuit

204 F.2d 937 (1953)

RELIANCE LIFE INS. CO. OF PITTSBURGH v. EVERGLADES DISCOUNT CO. et al.

No. 14258.

United States Court of Appeals Fifth Circuit.

June 12, 1953.

COPYRIGHT MATERIAL OMITTED

James A. Dixon, Miami, Fla., Dixon, DeJarnette & Bradford, Miami, Fla., of counsel, for appellant.

Miller, Miller, & Hewitt, West Palm Beach, Fla., and Wareing T. Miller, of West Palm Beach, Fla., for American Nat. Bank & Trust Co. of Mobile.

Clarence J. Brown, Jr., Miami, Fla., Elwyn L. Middleton, West Palm Beach, Fla., Gus Feuer, Miami, Fla., Morehead, Forrest, Brown & Gotthardt, Miami, Fla., Burns, Middleton & Rogers, West Palm Beach, Fla., of counsel, for other appellees.

Before BORAH, RUSSELL and STRUM, Circuit Judges.

STRUM, Circuit Judge.

This suit was instituted by appellant, Reliance Life Insurance Company, to rescind a life insurance policy because of alleged material misrepresentations, knowingly made, in the application for the policy. Named as defendants were Everglades Discount Company, beneficiary of the policy, also a bank to whom the policy had been assigned to secure a loan, and the administratrix of the insured's estate, the insured having died prior to suit.

Asserting that the application was made in good faith, and without conscious intent to deceive, the beneficiary and the assignee bank cross-claimed for the amount of the policy. After two jury trials, the first jury having disagreed, there was a verdict for the cross-plaintiffs (original defendants), upon which judgment was entered, and this appeal followed. The trial judge submitted all issues to the jury, including the issues of misrepresentation and intent to deceive. There was a general verdict for cross-plaintiffs, without special findings.

The policy in question was applied for May 6, 1948. It was issued May 11, 1948, and the insured died from gunshot wounds, November 26, 1948. The application contained the following questions and answers, upon which the insurance company alleges that it relied in issuing the policy:

"Q. Have you any reason to suspect you are not now in good health? A. No.

"Q. Have you ever had any disease, injury or operation not mentioned above? A. No.

"Q. Have you been under the care of, or consulted a physician concerning yourself for any cause within five years? A. No."

The evidence discloses that during 1941 and 1942, more than five years prior to the application, the insured had consulted an osteopathic physician and had received treatment for a condition of "general malaise," and occasional heart flutters upon exertion; also for venereal disease, "low back" complaints, and varicose veins.

On August 30, 1943, within five years of the application, X-rays were taken of the insured's chest which showed tubercular lesions and a bone tumor, called an osteochondroma, on the inside of one of the upper ribs. Mr. Bacon was shown the X-ray films, told of the existence of the tumor, and that it had malignant possibilities. He was advised to keep it under periodic observation by X-ray, but was also told by his physician that the tumor was benign, not malignant. He was further advised, however, that if he experienced any pain or unusual symptoms, he should consult a specialist. Other X-rays were taken on July 27, 1944, and on April 16, 1945, the latter about three years prior to the application for the policy. These X-rays showed no change in the size or texture or condition of the tumor, and nothing was done about it. None of these matters was disclosed in the application for the policy.

Two other physicians, who examined the X-rays during the trial, interpreted them as showing an osteochondroma, having definite malignant possibilities. These physicians testified that after age thirty about 5 to 10 per cent of this type become malignant, and when they do become malignant they have a definite effect upon the life expectancy of the individual suffering from the condition. One of these physicians testified that there was competent medical opinion that only about 2.6 per cent become malignant. Other witnesses testified that had the insurance company known of this condition, it would not have issued the policy.

On behalf of the cross-plaintiffs below, another physician examined the X-rays and testified that he could find no evidence of tuberculosis, but that osteochondroma was present. He testified that there was competent medical authority that only about 2 per cent become malignant.

The policy is a Florida contract, to be interpreted according to Florida law. Barnett v. New England Mutual Life Ins. Co., 5 Cir., 123 F.2d 712. By its express terms, the statements made in the application are representations, not warranties. In Metropolitan Life Ins. Co. v. Poole, 147 Fla. 686, 3 So.2d 386, the Supreme Court of Florida held that false answers, made by an insured in good faith in an application for a life insurance policy, do not necessarily vitiate the policy. This decision followed an earlier Florida decision, New York Life Ins. Co. v. Kincaid, 122 Fla. 283, 165 So. 553, 557, where it was also held that a failure to make full disclosure with reference to insurability in an application for reinstatement of a life insurance policy will not vitiate the reinstatement where the statements in the application are in good faith. It was there said: "Even if he the insured failed to make a full disclosure with reference to his insurability, it does not necessarily vitiate his reinstatement. The test is whether or not his answers to the questionnaire were made in good faith, and * * * this question * * * was for a jury to determine."

The questions asked in the Kincaid case are comparable to those here involved.¹

In Madden v. Metropolitan Life Ins. Co., 5 Cir., 138 F.2d 708, 709, 151 A.L.R. 984, this court in interpreting the Poole case said: "In so ruling, the Florida Supreme Court, expressly rejected the distinction made in the Madden case on a prior appeal, and accepted by most of the courts in the country, between a statement of opinion as to whether the insured had suffered from particular ailments and of fact as to whether he had or had not consulted a physician.² * * * It was taking its place with courts which hold that, where a statute or policy, as here, provides that all statements made by the insured shall, in the absence of fraud, be deemed representations and not warranties, a representation, though false, does not avoid the policy unless it was made with conscious intent to deceive; that whether it was so made is normally for the jury; and that * * * unless the evidence admits of no other conclusion than that there was an intent to deceive, it is for the jury to determine whether the answer was fraudulent in fact, that is, made with intent to deceive, or whether it was given in good faith, that is, without conscious intent to defraud." See also Pan-American Life Ins. Co. v. Fowler, 5 Cir., 174 F.2d 199.

The rule stated in the above cited cases is applicable here. We can not say this evidence admits of no other conclusion than that there was a conscious intent to deceive, so as to require a directed verdict in favor of the insurer. Nor can we say that the evidence, as a matter of law, requires a jury verdict in favor of the company, nor a judgment to that effect by the court sitting as a court of equity. On the contrary, the evidence is susceptible of the view that the answers, though false, were without intent to deceive.

There is evidence that the insured appeared generally to be in good health. He had been told by his physician that the tumor was benign, not malignant. There is no evidence that the presence of the tumor inconvenienced or hampered the insured in his business or other activities. He was active in his business as president of a discount company, and went about his business and...