State Farm Fire & Cas. Co. v. Sevier

CourtSupreme Court of Oregon
Citation272 Or. 278,537 P.2d 88
PartiesSTATE FARM FIRE AND CASUALTY COMPANY, Appellant, v. Kenneth SEVIER et al., Respondents.
Decision Date12 June 1975

Robert H. Grant of Grant & Ferguson, Medford, argued the cause and filed the briefs for appellant.

James L. Sutherland, Medford, argued the cause for respondents Sutton and Mutual of Enumclaw Ins. Co. With him on the brief were Frohnmayer & Deatherage, Medford.

TONGUE, Justice.

This is an action by an insurance company for a declaratory judgment that it had 'validly rescinded' a policy of automobile liability insurance because of misrepresentations by the insured in his application for the policy. The named defendants included not only the insured, but also the personal representative of a person killed in a subsequent accident with the insured before the policy was rescinded. 1 The case was tried before the court, without a jury. Plaintiff appeals from an adverse judgment. We affirm.

The principal misrepresentations alleged were that the insured gave false answers to questions on the application asking whether, during the past five years, he had been convicted for a traffic violation or had his driver's license suspended, revoked or refused. The facts.

1. The policy issued in Arkansas.

From 1961 to 1970 Kenneth Sevier had been at the Veterans Administration 'Domiciliary' hospital at White City, near Medford, except for several months in California and occasional furloughs to his original home in Arkansas. During that entire period he had no Oregon driver's license, but he did have a California driver's license. In 1969 he was arrested and convicted in Oregon for driving under the influence of intoxicating liquor. A notice was then mailed to him by the Oregon Department of Motor Vehicles that his right to apply for an Oregon driver's license had been suspended. Sevier did not recall receiving that notice.

In December 1969 he returned to his 'home town' in Arkansas. On May 29, 1970, having purchased an automobile, he went to see Jack Henderson, one of plaintiff's insurance agents. Henderson filled out an application for a policy of automobile insurance which included a question asking whether, during the past five years, the applicant had been convicted for traffic violations and a question asking whether his license to drive was ever suspended, revoked or refused.

Sevier testified that Henderson did not ask him those two questions. He also testified that he had known Henderson 'for a long time' and that he told Henderson that he had been picked up and convicted for drunken driving in Oregon. He also testified that Henderson said 'to Hell with it, maybe they'll never find it out'; that he did not know that Henderson put a 'no' answer in the 'box' for that question, and that he signed the application as filled out by Henderson.

Henderson testified that he asked both questions. He also admitted that Sevier told him that he had been stopped by the police for drinking and driving and given a 'balloon' or 'breathalyzer' test, but said that he had not been convicted for DUIL. Henderson denied, however, that when Sevier told him about that incident he said 'to Hell with it, maybe they'll never find it out,' as testified by Sevier.

That application for insurance was then sent to plaintiff's office in Monroe, Louisiana, for consideration by its underwriting department. The application showed 'no' answers to both questions and made no reference to the 1969 DUIL arrest and conviction in Oregon.

Plaintiff's underwriting department then had a 'routine, general' investigation of Sevier made by the Retail Credit Company. That investigation included contacts at White City, apparently because his application indicated 'physical or mental defects' or limitations and because of further information from Henderson that Sevier had been at the Veterans 'Domiciliary' in White City for nine years No request was made, however, for a 'motor vehicle record check,' as would have been done by Retail Credit as a part of its investigation upon request at a cost of $1.40.

Plaintiff's witness testified that if plaintiff had been informed by its agent Henderson that Sevier had been stopped for drinking and driving and had been required to take a test (as admitted by Henderson), 'there is a good chance' that a motor vehicle check would have been requested. The same witness testified that if plaintiff had been informed by Henderson that Sevier had been convicted of DUIL it would not have issued the policy to Sevier. Other witnesses for plaintiff testified that the reason for an investigation is to 'double check' the applicant's answers because plaintiff does not always rely upon such answers.

In any event, after a delay of 40 days, plaintiff issued a policy of automobile liability insurance to Sevier in Arkansas for a period of six months, effective July 7, 1970. Meanwhile, Sevier had applied through Henderson for other insurance under an 'assigned risk pool,' which would have been available to him at a higher premium, but that application was withdrawn when plaintiff issued its policy to him.

2. Re-issue of policy in Oregon.

In September 1970 Sevier returned to White City. He was told by Henderson to re-apply for a policy in Oregon. According to plaintiff's witnesses, when a policyholder moves from another state to Oregon, a new application is then filled out and submitted to plaintiff's underwriting department, which then also has and reviews a file from the other state including the original application. The decision whether to re-issue a policy is then based upon both applications and upon a comparison of the information in both, as well as upon other information in the file from the other state, but without making 'the same type of investigation' of the insured as made on the original application. Also, once a policy is issued it is 'renewed automatically' upon billing the insured for the premium, and without further investigation, unless an accident or 'something like that' has been called to plaintiff's attention.

In November 1970, Sevier went to the office of one of plaintiff's agents in Medford, who filled out a new application. That agent considered his Arkansas policy to be 'a policy that was in force' and that 'all I was doing was taking a transfer * * * on the policy that was already in force.'

Sevier testified that he did not remember whether the woman who filled out the application asked him whether he had been convicted of any traffic violation or whether his driver's license had been revoked, suspended or refused. The trial court found, however, that he was asked those questions and answered them 'no.' At that time he said nothing of his prior arrest or conviction for DUIL or of the suspension of his right to apply for an Oregon driver's license.

That application was then signed by Sevier and sent to plaintiff's Oregon underwriting department and a new policy was issued for an additional six months, effective January 7, 1971. According to plaintiff's witnesses, that policy was issued based on the new application and on the information in the 'Arkansas file' with no additional investigation. Plaintiff's witnesses also testified, however, that if Henderson, the original agent, had made a notation on the file that Sevier had been stopped in Oregon for drinking they would have made a further investigation and that if it had appeared that Sevier had been convicted of DUIL the new policy would not have been issued and the original policy would have been rescinded. A witness for plaintiff also testified that if the application had been made as one for a new policy in Oregon a 'MOTOR VEHICLE CHECK' WOULD HAVE BEEN MAde; that a motor vehicle check is made in Oregon on 85 to 90 per cent of all new business and that the cost of such a check was $1 for an 'uncertified' copy and $2.50 for a certified copy.

Defendants offered the testimony of a witness with experience in underwriting to the effect that the underwriting practice of at least some other insurance companies doing business in Oregon would be, upon receiving a file from Arkansas in connection with a 're-application' for insurance under the circumstances of this case, to request an Oregon motor vehicle check and that this would have been done if it had appeared in the file from Arkansas that the insured had been stopped by the police in Oregon for drinking and driving and had been given a test.

3. Accident: termination and rescission of policy.

On March 15, 1971, Sevier was involved in the accident in which Mr. Sutton was killed and his wife injured. Within approximately two weeks after the accident, plaintiff's Oregon underwriting department superintendent learned from its claims department that there was a 'total loss,' with 'drinking involved,' and of the previous DUIL conviction. Sevier signed a statement on May 3, 1971, admitting that DUIL conviction. On May 7, 1971, plaintiff called the Oregon Department of Motor Vehicles by telephone to confirm that conviction.

On May 17, 1971 plaintiff mailed to Sevier a 'Notice of Intent Not to Renew' the policy on July 7, 1971, the date when the policy normally would have been 'automatically renewed.' In that notice the 'box' was 'checked' for 'Notice of Intent Not to Renew' and the 'box' for 'Notice of Cancellation' was not 'checked.' The underwriter responsible for that notice was aware of the difference between termination and rescission of an insurance policy. The 'rescission question' was then referred to an attorney.

On July 7, 1971, more than three months after learning in late March from its claims department of Sevier's DUIL conviction in 1969 and more than one year after its agent Henderson was informed of that fact by Sevier, plaintiff sent a letter to Sevier enclosing a check for the amount of all premiums paid by him in both Arkansas and Oregon and rescinding the policy. The tender of...

To continue reading

Request your trial
47 cases
  • In re American Continental/Lincoln S&L Sec. Lit., MDL No. 834.
    • United States
    • United States District Courts. 9th Circuit. United States District Courts. 9th Circuit. District of Arizona
    • June 18, 1992
    ...Elfstrom v. New York Life Ins. Co., 67 Cal.2d 503, 63 Cal.Rptr. 35, 432 P.2d 731 (1967); State Farm Fire & Casualty Co. v. Sevier, 272 Or. 278, 537 P.2d 88 The record generally does not support a finding that the adverse agent doctrine shields Bretonneau as a matter of law. SEB's agents did......
  • City of La Grande v. Public Employes Retirement Bd., 924
    • United States
    • Supreme Court of Oregon
    • January 31, 1978
    ...v. Irwin, 186 Or. 541, 558-59, 208 P.2d 330 (1949); Belleville v. Davis, 262 Or. 387, 400, 498 P.2d 744 (1972); State Farm Fire v. Sevier, 272 Or. 278, 299, 537 P.2d 88 (1975). See also Chaney v. Fields Chevrolet Co., supra n. 21, dissenting opinion, 258 Or. at 622-24, 484 P.2d 23 See, e.g.......
  • State ex rel. Juv. Dept. v. Pfaff
    • United States
    • Court of Appeals of Oregon
    • December 22, 1999
    ...v. Bretz, 285 Or. 507, 519, 592 P.2d 204 (1979); State v. Dowell, 274 Or. 547, 552 n. 4, 547 P.2d 619 (1976); State Farm Fire v. Sevier, 272 Or. 278, 298-99, 537 P.2d 88 (1975). Because our review in this case is de novo, Sevier is particularly "We are reluctant to reverse a trial court on ......
  • Outdoor Media Dimensions Inc. v. State
    • United States
    • Supreme Court of Oregon
    • March 8, 2001
    ...developed in the trial court support the ruling." State v. Rogers, 330 Or. 282, 295, 4 P.3d 1261 (2000). In State Farm Fire v. Sevier, 272 Or. 278, 537 P.2d 88 (1975), the court explained the principle in this "We are reluctant to reverse a trial court on grounds or theories other than thos......
  • Request a trial to view additional results

VLEX uses login cookies to provide you with a better browsing experience. If you click on 'Accept' or continue browsing this site we consider that you accept our cookie policy. ACCEPT