Tsosie v. Foundation Reserve Ins. Co.

• Decision Date: 01 May 1967
• Docket Number: No. 8137,8137
• Parties: Albert TSOSIE, Plaintiff-Appellee, v. FOUNDATION RESERVE INSURANCE COMPANY, Inc., Defendant-Appellant.
• Court: New Mexico Supreme Court

Page 29

427 P.2d 29

77 N.M. 671

Albert TSOSIE, Plaintiff-Appellee, v. FOUNDATION RESERVE INSURANCE COMPANY, Inc., Defendant-Appellant.

No. 8137.

Supreme Court of New Mexico.

May 1, 1967.

[77 N.M. 673] Leslie D. Ringer, Santa Fe, for appellant.

Palmer & Frost, Farmington, for appellee.

OPINION

MOISE, Justice.

On February 10, 1964, defendant insurance company issued its policy insuring a 1959 Chevrolet pick-up truck owned by plaintiff-appellee against loss exceeding $100.00 on account of collision or upset. The policy term was for one year from its date.

On or about May 17, 1964, the insured vehicle was involved in an accident while being driven by plaintiff and was seriously damaged. A claim having been made by plaintiff, the defendant denied liability asserting that the issuance of the policy had been induced by fraud.

The court made the following findings in connection with the dealings between the parties:

'3. That defendant's agent, Jim Hum, asked plaintiff certain questions at the time of the issuance of the policy which questions were answered verbally by the plaintiff and were then reduced to writing by the defendant's agent, Jim Hum.

'4. That defendant's agent, in reducing the plaintiff's answers to writing did not accurately or completely reduce plaintiff's answers to writing.

'5. That plaintiff gave to defendant substantially accurate answers to questions asked by defendant's agent and gave a substantially accurate driving history to defendant.

'6. That the questions were asked and answers given for the sole purpose of determining the amount of premium to be charged for the policy and no actual reliance was placed thereon by defendant, in issuing the policy.

'7. That plaintiff, in answering the questions of the defendant, had no intention of deceiving the said defendant or its agent.'

The court concluded that plaintiff had not been guilty of actionable fraud and that the policy of insurance was in effect and insured plaintiff against the damages to his pick-up.

Defendant appeals and attacks findings 5, 6 and 7, quoted above. It is defendant's position that when defendant's agent asked plaintiff whether his driver's license had been revoked or suspended within the preceding three years, plaintiff replied in the negative, whereas in fact the license had been suspended for one year on March 18, 1963, and that finding No. 5 of the court that plaintiff's answers in the application were substantially accurate was accordingly not supported by the evidence.

Next, defendant attacks, as not supported by substantial evidence, finding No. 7 that plaintiff did not intend to deceive defendant or its agent. It is defendant's position that since plaintiff certainly knew of his license suspension, any assertion by him to the contrary which induced defendant to issue the insurance for which he was applying was fraud and the intention of plaintiff not to deceive is immaterial, citing Ham v. Hart, 58 N.M. 550, 273 P.2d 748 (1954) and Bennett v. Finley, 54 N.M. 139, 215 P.2d 1013 (1950).

Defendant further contends that the court erred in its finding No. 6, supra, and argues that the fact the inquiry concerning suspension of the driver's license was only for the purpose of arriving at the correct premium rate made the false answer no less material than if it had influenced the actual acceptance of the risk.

We are impressed that the issue which we are here called upon to determine is whether or not the failure of plaintiff to advise that he had no driver's license, it having been revoked, was a misrepresentation as to a fact material to the insurer's decision to accept the risk, or in its appraisal of the degree or character of the risk involved, or in fixing the rate of premium. Wallace v. World Fire & Marine Ins. Co., 70 F.Supp. 193 (S.D.Cal.1947) aff'd 166 F.2d 571 (9th Cir. 1948); Maryland Indem. & Fire Ins. Exch. v. Steers, 221 Md. 380, 157 A.2d 803 (1960); Fidelity & Cas. Co. of New York v. Middlemiss, 103 Utah 429, 135 P.2d 275 (1943); Inter-Ocean Ins. Co. v. Harkrader, 193 Va. 96, 67 S.E.2d 894 (1951). We recognize the correct rule of law applicable in insurance cases to be no different than we apply in other mercantile transactions as announced in Ham v. Hart, supra, and Bennett v. Finley, supra. See 12 Appleman, Insurance Law and Practice § 7294 (1943); Ivory v. Reserve Life Ins. Co., 78 S.D. 296, 101 N.W.2d 517 (1960).

The difficulty with defendant's position arises out of the fact situation presented. As already noted, in finding No. 3 the court found that defendant's agent did not accurately reduce plaintiff's answers to writing. This finding is not attacked. There is testimony that the agent was told by the plaintiff that he had been refused insurance; that he had been cited for reckless driving, driving while intoxicated, and reckless driving while participating in a speeding contest; that he had been involved in an accident with his employer's car. He signed the application for insurance, in blank, and also signed a 'supplementary rating statement' which was not properly completed by defendant's agent, as required by defendant thereby not conveying any information. Moreover, the 'declarations' in the policy do not conform to what plaintiff testified he told defendant's agent in response to his questions. In addition to the execeedingly had driving record which plaintiff testified he detailed to defendant's agent, the only item which admittedly he did not tell about was the revocation of his driver's license. There is nothing in the record to indicate the materiality of this single item. Plaintiff stated he had been cited for driving while intoxicated for which the penalty upon conviction is mandatory revocation of the driver's license (See N.M.Stat.Ann. § 64--13--59 (Repl. 1960)). It does not appear that any additional inquiry was made as to whether plaintiff had been convicted, or concerning the penalty imposed. Even though it is claimed that a truthful answer would have altered the premium, no assertion is made that the policy would not have been written but, to the contrary, it would have been. Nor does it appear that any note was taken of, or the premium increased because of, any of the plaintiff's other violations except one of reckless driving or careless driving for which a fine of over $25.00 was paid.

Aside from any question which may be present as to the effect of the failure of defendant's agent to make further inquiry to avoid being misled (Columbian Nat'l Life Ins. Co. v. Rodgers, 116 F.2d 705 (10th Cir. 1940) cert. denied, 313 U.S. 561, 61 S.Ct. 838, 85 L.Ed. 1521 (1941)) the agent's disregard of the information that was given could properly be considered by the court in determining the issue of materiality and reliance.

It is not clear that if the agent had been told that plaintiff's license had been suspended any different premium would have been charged. The uncertainty arises because the agent failed to note and increase the premium as required under defendant's method of operation, upon being advised of various citations and arrests. Under the circumstances can we say that suspension of the driver's license would have been considered any more important than the other matters about which the agent was told and which he failed to note, as found by the court? As stated by the Supreme Court of Maryland in Maryland Indem. & Fire Ins. Exch. v. Steers, supra, 'It is difficult to believe that a misstatement with regard to a matter as to which the insurer was so indifferent could constitute a material misrepresentation.'

The trial court made no finding on the question of materiality or reliance by the defendant. There can be no question that ordinarily such issues are for the trier of the facts, and that the burden of proof is on the defendant insurance company. See cases cited from many jurisdictions in Annot., 89 A.L.R.2d 1027, 1028 (1963).

The defendant requested the court to find misrepresentation in failing to disclose suspension of the license, and that the same was material. However, the court did not do so, and made no finding on the issue. In such a situation the rule comes into play that failure to make a finding on a fact material to determination of an issue in the case will be regarded as a finding against the party having the burden of proof of that issue. Hopkins v. Martinez, 73 N.M. 275, 387 P.2d 852 (1963). When it is thus determined that the insurer's conduct would not have been altered in either accepting the risk, or in the premium that would have been charged, the conclusion follows that the policy should not be cancelled for fraud. See Mayflower Ins. Exch. v. Gilmont, 280 F.2d 13, 89 A.L.R.2d 1019 (9 Cir. 1960) where judgment in favor of an insured was reversed, but the cause was remanded so that a determination could be made on the question of the materiality of the false representations to the issuance of the policy. See also, Annot., 89 A.L.R.2d 1027, 1028.

The instant case is similar to Moseley v. Nat'l Bankers Life Ins. Co., 66 N.M. 330, 347 P.2d 755 (1959), wherein we recognized the rule here being applied and determined that there was an absence of proof upon which to base a determination that false statements in insured's application materially affected acceptance of the risk or the hazard assumed by the insurer.

The rule announced in Sauter v. St. Michael's College, 70 N.M. 380, 374 P.2d 134 (1962) is applicable in fraud actions seeking damages. It does not apply in a case such as we are here considering where liability under a contract is sought to be avoided because of claimed fraudulent misrepresentations. The controlling rule here is that announced in Ham v. Hart, supra. The trial court erred in applying the actionable fraud rule of Sauter, supra, as it is evident it did in conclusion No. 4. However, this does not alter the result reached as pointed out above. A court will not be reversed when it has arrived at the correct result...