Serdenes v. Aetna Life Ins. Co.

• Decision Date: 29 May 1974
• Docket Number: No. 804,804
• Citation: 21 Md.App. 453,319 A.2d 858
• Parties: Theodore C. SERDENES v. AETNA LIFE INSURANCE COMPANY.
• Court: Court of Special Appeals of Maryland

Page 453

21 Md.App. 453

319 A.2d 858

Theodore C. SERDENES v. AETNA LIFE INSURANCE COMPANY.

No. 804.

Court of Special Appeals of Maryland.

May 29, 1974.

Richard D. Rosenthal, Baltimore, for appellant.

J. Snowden Stanley, Jr., Baltimore, with whom were Semmes, Bowen & Semmes, Baltimore, on the brief, for appellee.

Argued before MOYLAN, POWERS and GILBERT, JJ.

GILBERT, Judge.

Many insurance salespersons would have one believe that 'you cannot have too much insurance.' Unfortunately the appellant, Theodore C. Serdenes, had too much insurance coverage and the manner in which it was obtained led Aetna Life Insurance Company to seek a recision of its contract. Judge Solomon Liss, sitting in the Circuit Court for Baltimore City, granted Aetna's request that its policy issued to Serdenes be rescinded ab initio, and that Serdenes be required to refund disability payments made to him by Aetna, less the amount of premiums paid. Serdenes has appealed to this Court and bombards the judgment of the trial court with a legalistic salvo.

Serdenes says:

'I. The trial court erred in making a finding of fact that was inconsistent with the stipulation entered into between the parties.

II. The acceptance by appellee of the premium after the date on which they had actual notice of the correct answer to the insurance application constituted a waiver and/or estoppel as a matter of law.

III. The trial court was in error in not deciding whether appellant's limited ability in the English language coupled with the short period of time in which he had possession of the policy prior to his accident were sufficient extenuating circumstances as to excuse his inability in finding the wrong answers.

IV. The trial court erred in allowing Mr. George Foster (an employee of appellee) to testify as an expert as to applicable insurance industry standards.

V. Article 48A (s) 374 of the Maryland (Annotated) code does not allow rescission of an insurance contract when the misrepresentations do not result in an actual loss to the company and the assured's actual recovery is distinct from the risk the insurance company was attempting to prevent.'

On June 30, 1969, Serdenes made application to Aetna for an accident and disability income insurance policy. Aetna, acting upon the information contained in the application and in consideration of the annual premium of $291.00, issued its policy # SXB-52965 to Serdenes. The two questions in the application, the answers to which Aetna believes to be misrepresentation of material facts, are:

'5. What accident or disability insurance have you in force or applied for in all companies? (If non-cancellable so specify.)-Include Life Group and State disability income benefits. If none, please check here ( ).

6. (Answer only for income insurance):

a. What percentage of your average monthly earnings is the monthly benefit from all insurance in force or applied for in this or any other application? ( ) Less than 50%; ( ) 50% to 70%; ( ) Over 70%.'

An examination of the application shows that as to question number 5, the answer was 'None', thus indicating that Serdenes had no other accident or disability insurance in force at the timne of the completing of the application to Aetna. The answer given as to question number 6 was 'Less than 50%'. On September 11, 1969, Serdenes was injured in an automobile accident and made claim on November 1, 1969 upon Aetna for monthly indemnity of $600.00. Aetna paid the benefits for eleven months, or a total of $6,600.00. Thereafter Aetna determined that Serdenes was no longer disabled and payments ceased. The policy was not renewed. Following the cessation of payment benefits to Serdenes, Aetna discovered that contrary to the answer of Serdenes, to question number 5 of the application, Serdenes did, on June 30, 1969, have in force two accident and sickness income policies with American National Insurance Company on which the total benefits were $800.00 per month; a policy with American Home Assurance Company covering mortgage indemnity disability and providing a payment of $100.32 per month; a policy with Security Insurance Group of Hartford, for disability indemnity which provided for payment of $162.69 per month. Simple mathematics reveals that, exclusive of the Aetna policy benefits, Serdenes's total benefits were $1,063.01. Of course, with the addition of the Aetna benefit, Serdenes received the sum total of $1,663.01 monthly. Aetna further discovered that the disability benefits paid to Serdenes did, in fact, exceed 50% of his monthly income.

At the trial the agent, Sitaras, testified that he completed the application based upon information supplied to him by Serdenes, and that Serdenes did not tell him of other insurance policies that had been purchased from other carriers through another agent. Serdenes, on the other hand, averred that he did inform Sitaras relative to the other policies prior to the completion of the application although he concedes that the information pertaining to questions 5 and 6 is incorrect. While acknowledging that the policy contains an 'Important Notice' to the effect that the application is a part of the insurance policy, should be read to ascertain its correctness, and if in error Aetna should be notified within ten days from receipt of the policy, Serdenes sought in the trial court and here to excuse his failure to rectify the false information by alleging a limited knowledge of the English language. Serdenes emigrated from Greece and, though he can read and write English, he is admittedly more at ease with his mother tongue.

I.

In his 'Memorandum Opinion' the Chancellor, after pointing out the incorrect answers to questions 5 and 6 of the application, and observing the notice provision of the insurance policy, said:

'The insurer states that it did not learn of the existence of the additional policies until September 23, 1970 (a period of approximately five weeks after disability payments had ceased) at which time it thereupon tendered the return of the premiums paid and made demand for reimbursement of the disability payments wrongfully received by the assured; the assured refused to accept the return preminums and to repay the benefits received.

There is nothing in the course of conduct of the insurer which could lead the assured to believe that the company was not insisting on the strict compliance with the requirements of disclosure, as set out in the application.'

Serdenes argues that the Chancellor made a finding of fact that was contrary to a stipulation entered into between the litigants and that such a finding of fact is violative of the holding of the Court of Appeals, in McColgan v. Hopkins, 17 Md. 395 (1861). In that case, a replevin action, the case was submitted to the trial court on an agreed statement of facts, but the trial judge made a finding dehors the stipulation. The appellate Court in reversing said, 'In the way in which this case comes before us, (we are) compelled to confine (ourselves) to the statement of facts agreed on, and (are) not authorized to draw any inferences of fact from those stated.'

Serdenes, however, has read more into the 'stipulation' used in the instant case than the record supports, so that McColgan v. Hopkins, supra, fails to underpin his contention. At the hearing before Judge Liss the parties agreed 'that the claim form was signed and dated November 1st, 1969, and received by the company sometime during November of 1969.' Serdenes asserts that the quoted stipulation means that the '(a)ppellee, insurer, therefore, had actual notice in November of 1969 of the existence of the other disability insurance policies.' We think Serdene's averment to be erroneous. The mere recitation on the claim form that Serdenes had additional insurance with 'American National Ins. Co.' does not indicate that he had such insurance at the time of his completing the application for the Aetna policy, and we shall not read into the stipulation more than its natural meaning.

II.

Serdene's second contention is bottomed on the supposition that Aetna had actual notice of the existence of other disability benefit insurance policies at the time that it accepted from him a second annual premium. Serenes's contention is somewhat intertwined with that heretofore discussed in part I. He argues that inasmuch as he disclosed on the claim form that he had 'other accident, sickness or hospital insurance' with 'American National Ins. Co.', Aetna was placed on notice that he owned similar policies and that Aetna's payment of benefits to him constituted 'a waiver as a matter of law.' We have a different view. As we have stated in part I, the bare statement by Serdenes that he possessed a policy with the 'American National Ins. Co.' does not give rise to an inference that he owned that policy on June 30, 1969, the date of his application to Aetna. It is apparent from the record before us that Aetna did not know until September, 1970 that Serdenes had, in his application, furnished it with untruthful answers to questions 5 and 6. It cannot be said, therefore, that Aetna waived its right to rescind the policy simply because it accepted a second annual premium when it did so without either actual or constructive knowledge that the application upon which it had issued its policy contained material misrepresentations. Absent a showing that Aetna knew that the answers given by Serdenes were false and, nevertheless, made payment on the policy, it cannot be held to have waived its rights. Turnbull v. Home Fire Ins. Co., 83 Md. 312, 34 A. 875 (1896); Reynolds v. Mutual Fire Ins. Co., 34 Md. 280 (1871); Howard v. Carpenter, 11 Md. 259 (1857); Ijams v. Hoffman, 1 Md. 423 (1851). See also 45 C.J.S. Insurance § 716 (1946).

III.

Serdenes next argues that his limited understanding of the English language, together with the short time prior to the accident that he was in actual possession of the policy, excused the incorrect answers on...