Sanford v. Federated Guar. Ins. Co., 57456
| Decision Date | 17 February 1988 |
| Docket Number | No. 57456,57456 |
| Citation | 522 So.2d 214 |
| Parties | Robert Gary SANFORD v. FEDERATED GUARANTY INSURANCE COMPANY. |
| Court | Mississippi Supreme Court |
David L. Valentine, Adams, Valentine & Edens, Brandon, for appellant.
W. Swan Yerger, Sam S. Thomas, Heidelberg, Woodliff & Franks, Jackson, for appellee.
Before HAWKINS, P.J., and SULLIVAN and ZUCCARO, JJ.
Robert Gary Sanford filed a complaint against Federated Guaranty Insurance Company, Inc. (FGIC) in the Circuit Court of the First Judicial District of Hinds County. From summary judgment in favor of FGIC, Sanford appeals, claiming that summary judgment was inappropriate because genuine issues of material fact existed.
On March 15, 1984, Sanford and FGIC entered into an insurance contract covering Sanford's 1983 Mazda truck. Subsequently, on April 1, 1984, Sanford submitted a claim for damages to the truck resulting from an accident which occurred March 18, 1984.
While investigating the claim, FGIC discovered that a statement on Sanford's application was false. When the FGIC agent completing Sanford's application asked whether he had been charged with speeding in the past twelve (12) months, Sanford replied that he had not. The agent then checked "no" to that question on the application, and Sanford initialed the portion of the application containing that question along with eleven (11) others. In fact, Sanford had received two (2) speeding tickets in the preceding twelve (12) months. Sanford admits that he had received those tickets within the twelve (12) months preceding his application, but claims that he had forgotten them at the time he applied for the policy.
There are two (2) points needing clarification. First, there is a discrepancy as to the time frame involved in the question about speeding. The question on the application is, "Has the applicant ... been charged with speeding ... in the past five (5) years." The agent stated in her deposition that she asked Sanford whether he had been charged with speeding in the past five (5) years. Yet Sanford stated that he was asked whether he had been charged with speeding in the last twelve (12) months. Any dispute as to this fact is immaterial. Regardless of whether he was asked about five (5) years or one (1) year, Sanford's answer was false, since he had received two (2) speeding tickets within the twelve (12) month period immediately preceding his application.
The second point needing clarification is this. FGIC makes much ado about another alleged misrepresentation in Sanford's application. Although Sanford stated on his application that he had not been in an automobile accident in the past five (5) years, his deposition indicates that he had an accident approximately three (3) years before applying for the FGIC policy. This alleged misrepresentation is of little consequence for two (2) reasons: 1) FGIC did not know about it, and therefore could not have relied on it, when they denied coverage; and 2) if the accident occurred more than three (3) years prior to application (which cannot be determined from the record), then it would not have required denial of coverage, according to FGIC's underwriting standards, although any accident was considered a "red flag" which, in combination with other factors, might render an applicant ineligible.
Based on the misrepresentation about speeding, FGIC denied coverage, rescinded the insurance contract, and refunded Sanford's premiums. Sanford filed suit, claiming breach of contract and bad faith. He sought $157,000.00 in actual and punitive damages. After discovery and on motion of FGIC, the trial court entered summary judgment in favor of FGIC. Sanford appeals, arguing that summary judgment was inappropriate because there were genuine issues of material fact.
If, in answering the question about speeding, Sanford was making a warranty, then the materiality of his false answer is of no consequence, since "a warranty must be literally true and its materiality cannot be inquired into...." Colonial Life & Acc. Inc. Co. v. Cook, 374 So.2d 1288, 1291 (Miss.1979). If, on the other hand, Sanford was making a mere representation when he answered the question, then the materiality and the substantial truth of the statement become very important, because "a representation, if substantially true and not material to the risk, will not invalidate the policy in the absence of fraud." Id.
The language of Sanford's policy is inconsistent as to whether the answers on the application are warranties or representations. On the application form itself, the following language appears above Sanford's signature:
I hereby warrant that the answers to the questions above and on the reverse side hereof are complete and true and it is agreed that any untrue statements or answers contained therein or any facts concealed intentionally or otherwise will render any insurance issued on this application void. I further agree to be bound by the proxy on the reverse side hereof. (emphasis added)
Although the above-quoted language is actually in the application rather than the policy, there is language in the policy incorporating the application, thereby making the application a part of the contract. Interstate Life and Accident Insurance Co. v. Flanagan, 284 So.2d 33, 35 (Miss.1973). It is in the incorporation provision that the following language appears, contradicting the application's reference to warranties:
By acceptance of this policy the insured named in the declarations agrees that the statements in the declarations are his agreement and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the Company or any of its agents relating to this insurance. (emphasis added)
Thus, what is referred to as a warranty in the application, is referred to as a representation in the policy. Although this Court has never been presented with a case involving this particular ambiguity, the leading treatise on insurance is very clear on this point:
To constitute a warranty, the language of the policy must be definite and unambiguous. If there is doubt, arising from the contract, as to whether the provisions are to be treated as warranties or as representations, the courts will regard them as representations only. Thus, if there are contradictory or inconsistent terms used in different parts of the policy so that statements are termed warranties in one place, and qualified in another, or the term "representation" is also employed in describing the statements, the courts will resolve any such ambiguity in favor of recovery. Similarly, where there is any ambiguity or doubt about the statement...
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