Southern Farm Bureau Life Ins. Co. v. Reed

• Decision Date: 09 February 1978
• Docket Number: No. 5060,5060
• Citation: 563 S.W.2d 634
• Parties: SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Appellant, v. Curtis REED et al., Appellees.
• Court: Texas Court of Appeals

Page 634

563 S.W.2d 634

SOUTHERN FARM BUREAU LIFE INSURANCE COMPANY, Appellant, v. Curtis REED et al., Appellees.

No. 5060.

Court of Civil Appeals of Texas, Eastland.

Feb. 9, 1978.

Rehearing Denied March 9, 1978.

Charles R. Griggs, Nunn, Griggs & Beall, Sweetwater, for appellant.

Davis Scarborough, Abilene, for appellees.

WALTER, Justice.

We have considered appellant's other assignments in its motion for rehearing and find no merit in them. The motion is overruled.

This appeal involves a life insurance policy issued by Southern Farm Bureau Life Insurance Company on the life of Curtis Reed. Southern Farm sought cancellation of the policy because of several alleged fraudulent and material written representations made by Reed on which Southern Farm relied. Reed died before trial. His widow, Frances Reed, and two sons, Lee Reed and Scott Reed, intervened. Trial was before the court and judgment rendered against Southern Farm. Southern Farm appeals. We affirm.

Southern Farm brought this suit seeking to cancel life insurance policy # 605402 issued to Curtis Reed and life insurance policy # 605403 issued to Reed's employer, The Shoe Tree, Inc., and to annul the waiver of premium disability benefit endorsement to insurance policy # 599092 issued to Reed. Prior to his death, Reed agreed to set aside the waiver of premium disability benefit. A default judgment was rendered against The Shoe Tree, Inc. Policy # 605402 is the only policy in issue on this appeal.

Reed died of emphysema on October 28, 1976. Mrs. Reed testified her husband had pneumonia in 1972 and had shortness of breath for which he used a bronchial dilator. After moving to Abilene, Reed entered a hospital in January of 1973 for diagnostic tests conducted by Dr. Johnny B. French. Dr. French's diagnosis was that Reed was suffering from a severe obstructive ventilatory impairment with restricted flow rates, hyperinflation, wasted ventilation, elevated dead space and elevated airway resistance. Dr. French informed Reed of his condition and told him "our hopes with him would be mainly one of trying to stabilize his problem, that the chances of improving it would be minimal." Reed's condition was termed "chronic obstructive lung disease, primarily pulmonary emphysema, severe." Dr. French recommended Reed stop smoking, use a different bronchial dilator, take prescribed medication, and purchase a home intermittent positive pressure breathing machine if he could afford one.

Reed visited Dr. French in February of 1973 for a posthospital visit. Dr. French stated: "He (Reed) related that he was feeling better, had improved with his exercise regimen of walking and playing golf, and had not been smoking. I noted at this time that he was very encouraged as to how he was doing." After an examination in April, 1973, Dr. French stated: " . . . clinically the man was stable, subjectively improved, although clinically and laboratorily stable."

Mrs. Reed testified that Reed was a "real vivacious person" and that his shortness of breath "was more of an aggravation to him more than anything else. . . . " Reed played golf regularly with the son of the insurance agent, Maurice Newton, who sold Reed the policies. Reed also worked with Mr. Newton's son. Mrs. Reed said her husband never missed a day of work.

At the suggestion of Mr. Newton, Reed was examined by Dr. James Allen Crow. Dr. Crow was selected by Mr. Newton and had previously made medical examinations for Southern Farm. The examination was initially used by Southern Farm in issuing policy # 599092, but was later used in Reed and Dr. Crow signed a form entitled, "Statement to Medical Examiner" dated May 20, 1974. This form contains the representations on which Southern Farm has based its cause of action. Another form entitled, "Report of Medical Examiner" was signed by Dr. Crow only. In this report, Dr. Crow diagnosed Reed as "normal" and stated he had "clear" lungs.

issuing policies # 605402 and # 605403.

Southern Farm contended Reed answered the following questions in the "Statement to Medical Examiner" willfully and with the intent to deceive Southern Farm: (1) "Have you ever been in a hospital, clinic, sanatorium, or institution for observation, diagnosis, operation or treatment? " Reed answered "No." ; (2) "Have you ever had x-ray, electrocardiogram, blood studies, or other diagnostic tests? " Reed answered "No." ; (3) "To the best of your knowledge and belief, have you ever had or been told that you had: asthma, emphysema, hayfever In order to avoid a policy of insurance on the grounds of misrepresentation, the insurer must plead and prove (1) the making of the representation; (2) the falsity of the representation; (3) that the false representation was material to the risk; (4) that the insurer relied on the false representation in issuing the insurance policy; and (5) that the false representation was made willfully and with the intent to deceive or defraud the insurer or made willfully and with the intention of inducing the insurer to issue the policy. Clark v. National Life & Accident Ins. Co., 145 Tex. 575, 200 S.W.2d 820 (1947); Allen v. American National Insurance Company, 380 S.W.2d 604 (Tex.1964); Bynum v. Signal Life Insurance Company, 522 S.W.2d 696 (Tex.Civ.App. Dallas 1975, writ ref'd n. r. e.); First Continental Life & Accident Co. v. Bolton, 524 S.W.2d 727 (Tex.Civ.App. Houston (14th Dist.) 1975, writ ref'd n. r. e.). The insurer must prove each of these five elements. If it does not meet its burden on any one, the cause of action fails.

chronic cough, spitting of blood, tuberculosis, or any disease or disorder of the lungs or respiratory system? " Reed answered "No." ; (4) "Have you ever had high blood pressure, chest pains, shortness of breath, heart murmur, or any disease or disorder of the heart or circulatory system? " Reed answered "No." ; (5) "Have you consulted or been treated or examined by any physician or practitioner for any other causes in the past five (5) years? " Reed answered "No." ; and, (6) "Do you now have any abnormality, deformity, disease or disorder, or, are you receiving treatment or taking medication of any...