Seidel v. Time Ins. Co.

Decision Date09 December 1998
Citation157 Or.App. 556,970 P.2d 255
PartiesKim SEIDEL and Holly Seidel, Respondents, v. TIME INSURANCE COMPANY, a Wisconsin corporation, Appellant. 960402696; CA A97650.
CourtOregon Court of Appeals

Richard Baroway, Portland, argued the cause for appellant. With him on the briefs were David L. Canary, Lisa T. Murphy, and Garvey, Schubert & Barer.

Willard E. Merkel, Portland, argued the cause for respondent. With him on the brief was Popick & Merkel.

Before LANDAU, P.J., and DEITS, C.J., * and WOLLHEIM, J.


Plaintiffs initiated this action for breach of an insurance contract, alleging defendant's failure to pay medical bills. Defendant counterclaimed for rescission, alleging that plaintiffs made material misrepresentations or omissions in their application for insurance. Defendant unsuccessfully moved for summary judgment and for a directed verdict. The jury found in favor of plaintiffs, and the trial court entered judgment in favor of plaintiffs. Defendant appeals, assigning error to the denial of the motions and to the trial court's failure to deliver requested jury instructions. We affirm.

The evidence, viewed in the light most favorable to plaintiffs, shows that plaintiffs' 16-year-old son, Bryan, was in a car accident on May 11, 1995, and that he went to the hospital emergency room after the accident, complaining of chest and neck pain. Tests were conducted, and Bryan was diagnosed with neck strain and post-concussion syndrome. Bryan experienced head and neck pain after the accident. He was released from medical care without restriction on July 17, 1995, with a diagnosis of "Post-concussion syndrome--Resolving."

On July 26, 1995, plaintiffs met with defendant's agent, Harris, to discuss purchase of a family health insurance policy from defendant. Harris asked plaintiffs each of the questions on the application form and recorded their answers. The application contained these questions:

"Within the last 10 years * * * has any person to be insured:

"15. Had any diagnosis, or treatment of:

" * * * * *

"d) The nervous system including epilepsy, convulsions, headaches, paralysis, Parkinsonism or stroke?

" * * * * *

"h) The muscular or skeletal system including arthritis, gout, rheumatism, any back or spine disorder, or treatment of any muscular or neuromuscular disorder?

" * * * * *

"19. Had an electrocardiogram, chest x-ray, blood study or any other diagnostic testing of any kind or been hospital confined in the last 10 years * * *?

" * * * * *

"23. Is any person to be insured currently taking or taken within the past 3 months, medication or receiving medical treatment of any kind?"

Plaintiffs described Bryan's accident and treatment to Harris, but Harris advised them that the matter was not significant and did not need to be mentioned on the application. Harris recorded the answer "no" to each of the foregoing questions. Plaintiffs signed the application, and defendant issued a policy effective August 15, 1995.

Shortly thereafter, Bryan began to have more serious headaches. An MRI scan performed on September 11, 1995, revealed that he had a brain tumor unrelated to the earlier injury, for which he underwent hospitalization and surgery. Defendant preauthorized the treatment and requested Bryan's medical records as part of the preauthorization process. Upon receipt of the medical records, defendant's underwriter learned of Bryan's motor vehicle accident, declined to cover the treatment of Bryan's brain tumor, and immediately declared the policy rescinded.

Plaintiffs sought damages for breach of the insurance agreement, and defendant filed a counterclaim for rescission, asserting that it would not have issued the policy had it known of Bryan's injury. Defendant moved for summary judgment on both plaintiffs' claim and its counterclaim. Defendant argued that it was entitled to rescind, because plaintiffs made material misstatements or omissions that induced it to provide insurance coverage that it otherwise would have declined. Plaintiffs opposed the motion, arguing that genuine issues of material fact existed as to whether they made any material misstatements or omissions. The trial court denied defendant's motion.

At trial, defendant offered the testimony of one of its senior underwriters, who testified that the alleged misrepresentations concerning Bryan's health history were material to defendant's decision to issue a policy and that, at the time of the application, Bryan was uninsurable. The trial court also admitted into evidence defendant's guidelines for the underwriting of individuals who have suffered head injuries, including "suggested actions" for head injuries when there has been complete recovery with no residuals and head injuries with residuals. The guidelines suggest that for head injuries with complete recovery, the underwriter should decline an application if recovery was less than three months before the time of the application. For incomplete recovery, with a residual of post-concussion syndrome, the guidelines suggest that the matter be referred to the medical director. Defendant moved for a directed verdict, once again asserting that it had established as a matter of law that it was entitled to rescind its policy of insurance. The trial court denied the motion. Defendant then asked the court to deliver two jury instructions to the effect that misrepresentations and omissions may be material even if unrelated to the specific claim for which coverage was denied and that the misrepresentations or omissions need not have been intentional to form the basis for rescission. The court declined to deliver the instructions.

The jury found in favor of plaintiffs. It rejected defendant's rescission counterclaim by a special verdict finding that the alleged misrepresentations were not material, and the trial court awarded a stipulated amount of damages to plaintiffs.

On appeal, defendant first contends that the trial court erred in denying the motion for summary judgment. An order denying summary judgment is not reviewable unless it rests on a "purely legal contention" that does not require the establishment of any predicate facts. Payless Drug Stores v. Brown, 300...

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