Scott v. State Farm Mut. Auto. Ins. Co.

• Decision Date: 06 March 1961
• Docket Number: No. 5205,5205
• Citation: 118 S.E.2d 519,202 Va. 579
• Court: Virginia Supreme Court
• Parties: ELIZABETH A. SCOTT, ET AL., ETC. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY. Record

Page 519

118 S.E.2d 519

202 Va. 579

ELIZABETH A. SCOTT, ET AL., ETC. v. STATE FARM MUTUAL AUTOMOBILE INSURANCE COMPANY.

Record No. 5205.

Supreme Court of Appeals of Virginia

March 6, 1961.

Stuart A. Barbour, Jr. (T. Warren Messick, on brief), for the appellants.

Robert J. Rogers and John H. Thornton, Jr. (Woods, Rogers, Muse & Walker, on brief), for the appellee.

JUDGE: I'ANSON

I'ANSON, J., delivered the opinion of the court.

This is an appeal from a declaratory judgment in a suit filed by State Farm Mutual Automobile Insurance Company, the appellee, hereinafter referred to as State Farm, against George E. Bower, Robert W Bower, Paul M. Herndon, administrator of the estate of Robert M. Herndon, DeWitt Francis Swanson, Elizabeth A. Scott and Roy E. Scott, praying that a certain automobile liability insurance policy issued to George E. Bower be declared void from its inception because a representation made by Bower in the application for insurance that he was the sole owner of the automobile was untrue and material to the risk assumed. The automobile was involved in a noncollision accident in which the driver, Robert M. Herndon, was killed and Roy E. Scott and DeWitt F. Swanson, passengers in the car, were injured. Immediately after the accident State Farm cancelled the policy and returned the premium paid to George E. Bower.

After hearing the evidence ore tenus and considering briefs filed on behalf of the parties, the chancellor held that the insurance policy was null and void because of the representation made by Bower that he was the sole owner of the automobile when in fact the evidence showed he was a joint owner; that such misrepresentation was material to the risk assumed, and that State Farm had no obligation under the policy to any of the defendants. The appellants, Elizabeth A. Scott, mother and next friend of Roy E. Scott, and Roy E. Scott, an infant, two of the defendants in the court below, are here on appeal from the chancellor's decree.

The undisputed evidence shows that during the month of July, 1957, George E. Bower and his son Robert, who was 19 years of age and resided with his father, purchased a 1949 Plymouth automobile from a used car dealer in the city of Roanoke for $250 cash. The father paid $50 on the purchase price and Robert paid the balance of $200. The automobile was titled in the name of George E. Bower because of his son's minority.

On August 3, 1957, George E. Bower applied to State Farm through its Roanoke agent for liability insurance on the vehicle. The application signed by Bower disclosed that the purpose for which the automobile was to be used was pleasure; that it was the only automobile owned in the household; that the applicant was the principal driver of the automobile; and that he represented that he was the sole owner of the described automobile.

Mr. Bower's work generally took him out of town from Sunday through Friday but he usually used the car for his family's pleasure on week-ends. Robert Bower did not have an operator's permit but he had his father's permission to use the automobile at any time as long as he got someone else to drive it. One of Robert's friends, Robert M. Herndon, who was 18 years of age, sometimes drove the car, either with or without the presence of Robert. On the night of February 4, 1958, Herndon drove Robert to Blue Ridge, Virginia, to see a basketball game, and after he put Robert out the car was involved in an accident, which gave rise to this suit.

Sometime prior to the accident Herndon had agreed to purchase the car from Robert for $100, and had paid $10 on the purchase price. None of this amount was received by Robert's father, and all of the negotiations with respect to the sale were between Herndon and Robert. Herndon kept the car at his home for about a week immediately prior to the accident but the title to the car had not been transferred to him.

The principal issue presented is: Does the evidence support the finding of the chancellor that the representation of George E. Bower, in his application for insurance, as to his sole ownership of the automobile was untrue and that it was material to the risk assumed and thus voided the policy?

The statutory law applicable to the issue involved is found in § 38.1-336, Code of 1950, 1953 Replacement Volume, which reads as follows:

'When answers or statements of applicant not to bar recovery on policy. -- All statements, declarations and descriptions in any application for a policy of insurance or for the reinstatement thereof shall be deemed representations and not warranties, and no statement in such application or in any affidavit made before or after loss under the policy shall bar a recovery upon a policy of insurance, or be construed as a warranty, anything in the policy to the contrary notwithstanding, unless it be clearly proved that such answer or statement was material to the risk when assumed and was untrue. ' (Italics supplied.)

In the note of the revisors of Code of 1919, under § 4220 (later § 38-7, Code of 1950; § 38-336, Code of 1950, as amended, Acts of Assembly, 1952, ch. 317, p. 499; and now § 38.1-336 Code of 1950, 1953 Replacement Volume) the following is said:

'The revisors were of opinion that if the answer or statement was MATERIAL to the risk when assumed and was untrue, that no recovery should be had; but that if IMMATERIAL, although false or fraudulently made, that it should not bar recovery for the reason that such a statement could not have affected the risk, being immaterial to it. If the statement was material, although innocently made, of course no recovery should be allowed.'

We have dealt with the application of § 38.1-336 on many occasions and have uniformly held that a misrepresentation of facts material to the risk when assumed voids an insurance contract. Inter-Ocean Ins. Co. v. Harkrader, 193 Va. 96, 100, 67 S.E.2d 894, 897; Flannagan v. Northwestern Mut. Life Ins. Co., 152 Va. 38, 146 S.E. 353; North River Ins. Co. v. Atkinson, 137 Va. 313, 119 S.E. 46.

The evidence clearly shows that George E. Bower, the insured, was a joint owner of the automobile with his son Robert, and his statement that he was the sole owner of the automobile was untrue. While it is true that the title certificate showed George E. Bower to be the owner of the automobile, it was not conclusive but only prima facie evidence of ownership. United States Cas. Co. v. Bain, 191 Va. 717, 720, 62 S.E.2d 814, 815.

The appellants here contend, as they did in the court below, which is shown by their brief filed with the manuscript record, that, even if it should be found that the ownership of the car was misrepresented, State Farm did not prove, pursuant to the requirement of § 38.1-336, Code, that the misrepresentation was material to the risk assumed. Thus the point relied on here was raised in the lower court. See Sawyer v. Blankenship, 160 Va. 651, 654, 655, 169 S.E. 551, 552.

State Farm argues that once it has shown that the representation is untrue, then as a matter of law it is material to the risk assumed by the insurer. It relies on an annotation in 33 A.L.R.2d 948, citing Royal Indemnity Co. v. Hook, 155 Va. 956, 157 S.E. 414; Didlake v. Standard Insurance Co. (10 Cir. 1952), 195 F.2d 247, 33 A.L.R.2d 941. It also relies on Western States Mutual Automobile Insurance Co. v. May (1958), 18 Ill.App.2nd 442, 152 N.E.2d 608, which followed the holding in the Didlake case.

In Royal Indemnity Co. v. Hook, supra, a 17-year-old boy purchased an automobile and the title to the vehicle was placed in the name of his mother. In the application for insurance his mother represented that she owned the care. The agent who wrote the insurance knew the facts and actually suggested the arrangement himself. In an action on the policy the insurer contended that it was relieved of liability by reason of the false representation. This Court held that the insurer was charged with the agent's knowledge of the falsity of the representation at the time it was made, and was estopped from questioning the truth of such representation. There is, however, dictum in the case (155 Va. at p. 964, 157 S.E. at p. 417) that the false representation as to ownership of the automobile was material to the risk assumed and would have voided the policy except for the agent's knowledge of the facts. The language used was not necessary to the decision and we do not adhere to the statement in the absence of evidence clearly proving that the false statement as to ownership was material to the risk assumed.

In the Didlake case, supra, a 19-year-old boy purchased an automobile and in order to obtain a deferred payment arrangement he induced an adult to assume the role of owner. The latter applied for an insurance policy, representing that he was the sole owner of the automobile. In an action brought by an injured party as a result of the negligence of the youth, the Court held that the misrepresentation was material and summary judgment was entered for the insurance company. However, evidence was introduced on behalf of the insurance company that it would not have issued the policy if it had known that the true owner of the car was a minor, unmarried, and away from home on duty with the army, since he would have been considered a bad risk.

In Western States Mutual Automobile Insurance Co. v. May, supra, a 20-year-old youth owned an automobile but the insurance policy was issued to the youth's father on the basis of a representation in the application that the father was the owner of the vehicle. The court held the policy void on the grounds that the representation in the application was made with intent to deceive, and materially affected the risk assumed. The court took judicial notice that:

'It is a matter of common knowledge that the rate frequency of accidents for drivers between the ages of sixteen and twenty-four is substantially greater than that for all drivers who are twenty-five...