Strong v. State Farm Mut. Ins. Co.

• Decision Date: 22 October 1956
• Docket Number: No. 9589,9589
• Parties: Wesley M. STRONG, Plaintiff and Respondent, v. STATE FARM MUTUAL INSURANCE COMPANY, Defendant and Appellant.
• Court: South Dakota Supreme Court

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78 N.W.2d 828 76 S.D. 367 Wesley M. STRONG, Plaintiff and Respondent,
v.
STATE FARM MUTUAL INSURANCE COMPANY, Defendant and
Appellant. No. 9589. Supreme Court of South Dakota. Oct. 22, 1956.

[76 S.D. 368] Whiting, Lynn & Freiberg, Rapid City, for defendant and appellant.

Bangs & McCullen, Joseph Butler, Rapid City, for plaintiff and respondent.

HANSON, Judge.

The plaintiff's automobile was accidently damaged on March 20, 1955. This is an action to recover that loss under a policy of automobile insurance issued by the defendant, State Farm Mutual Insurance Company, to the plaintiff. The case was submitted on stipulated facts upon which verdict was directed in favor of plaintiff. The defendant appeals.

The defendant disclaims liability by reason of an alleged false representation made

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in the application for insurance. The defendant claims the plaintiff falsely answered the following question 17 in the negative:

'Has any insurer cancelled or refused to renew any kind of automobile insurance for any driver?'

The plaintiff applied for insurance in the defendant company on January 21, 1955. Prior thereto he had received and read the following letter from his then insurer, the Farmers Mutual Automobile Insurance Company:

'Expiration Date 1-24-55

'Circumstances will not permit us to continue your insurance in the Farmers Mutual Insurance Company.

'Therefore, the protection extended under the above numbered policy will lapse on the expiration date shown above'.

The plaintiff's policy with the Farmers Mutual Company was originally issued for a period of six months commencing on January 24, 1952. In accord with the above letter the policy expired on January 24, 1955. The policy had been automatically renewed every six months by payment of premiums in response to notices sent out by the company. No new applications or requests were necessary to effect the renewals and the policy was so renewed at least five times.

This is not the case of an insured attempting to avoid the implications of an insurance application for failure to read or understand the same. Here the plaintiff stipulated [76 S.D. 369] he signed the application with knowledge of its contents; that question 17 was material to the risk assumed by the defendant; and that the policy was issued in reliance upon the application.

The sole question presented is whether or not the plaintiff's negative answer to question 17 of the application for insurance was false. If so, defendant's policy is voidable under the rule that a misrepresentation of a material fact, in reliance upon which a contract of insurance is issued, avoids the contract. Smith v. Federal Surety Co., 60 S.D. 100, 243 N.W. 664.

The plaintiff principally relies upon the case of Erickson v. Allstate Insurance Co., D.C., 126 F.Supp. 100, to sustain his position. This case was later affirmed. See also 9 Cir., 227 F.2d 755. However, we do not consider the facts of that case sufficiently similar to be controlling.

In deciding this question we are mindful of the well-established principle that a contract of insurance is to be construed liberally in favor of the insured and strictly against the insurer. Ehrke...