Uslife Credit Life Ins. Co. v. McAfee
| Decision Date | 15 June 1981 |
| Docket Number | No. 7261-7-I,7261-7-I |
| Citation | 29 Wn.App. 574,630 P.2d 450 |
| Court | Washington Court of Appeals |
| Parties | USLIFE CREDIT LIFE INSURANCE COMPANY; Uslife Life Insurance Company of California, a corporation; and Pacific Standard Life Insurance Company, a corporation, Respondents, v. Gerald D. McAFEE, et ux., Appellant, Commercial Bank of Seattle; Continental Bank of Federal Way, Respondents, and Hinton Oldsmobile & GMC Truck, Inc., and Rygmyr Lincoln Mercury, Inc., Defendants. UNIGARD OLYMPIC LIFE INSURANCE COMPANY, Respondent, v. Gerald D. McAFEE, et ux., Appellant, Bank of Everett, Respondent, and Granite Falls Bank, Defendant, and Skagit State Bank, Respondent. COMMERCIAL BANKERS LIFE INSURANCE COMPANY, Respondent, v. Gerald D. McAFEE, et ux., Appellant, and Commercial Bank of Seattle, Respondent. BANK OF EVERETT, Respondent, v. UNIGARD OLYMPIC LIFE INSURANCE COMPANY, Respondent, and Gerald D. McAfee, Appellant. Richard MARQUARDT, Washington State Insurance Commissioner, as Receiver for Rainier National Life Insurance Company, Respondent, v. Gerald D. McAFEE, Appellant, Granite Falls State Bank, Defendant, and Bank of Everett, Respondent. |
Thomas Zilly, Thomas Loftus, Jennings Felix, Seattle, Lewis Bell, Kenneth Rice, Everett, Richard Derham, Seattle, Hardwood Bannister, Mount Vernon, Joseph Mijich, John World, Richard Eadie, Seattle, for respondents.
Gerald D. McAfee, beneficiary of insurance on his late wife's life, appeals from a judgment rescinding certain insurance policies and certificates on her life on the basis of fraud.
McAfee, an insurance agent, learned that his wife was suffering from terminal cancer. Thereupon he bought a number of credit life insurance policies and certificates insuring her life (as well as his own) in insurance companies which did not require a good health statement or health information of any kind from prospective insureds. Two of the certificates were written in a company at a time when he was an insurance agent for the company.
Following a trial to the court, detailed findings of fact and conclusions of law were entered. In its findings, the trial court explained credit life insurance as follows:
Credit Life Insurance is life insurance issued on the life of the debtor. It is normally sold by a lending institution Finding of fact No. 33.
or a retail outlet. It requires that there be a valid debt, and that the debtor-insured has not reached his 65th birthday, and is generally issued up to the limits of between $12,500 and $15,000 without any medical questions or medical examination. The premium paid by the insured under a credit life policy is shared by the lending institution or retail outlet (which gets 40%) and the insurance carrier (which receives 60%). There would be no substantial cost or effort to credit life insurance carriers to have a written application include one question as to health which will allow complete protection to the carriers in the form of post-claim underwriting. A question of this type was in use at all material times in Washington by plaintiff Pacific Standard Life Insurance Company on its credit life insurance policies for amounts exceeding $15,000.
Between July 15, 1974 and February 21, 1975, Mr. and Mrs. McAfee were involved in a series of credit transactions, including vehicle leases, for which they obtained credit life insurance coverage. Premiums on this insurance were paid. Each policy was a joint level term policy under which payment was to be made on the death of either party. Mrs. McAfee died of cancer on June 30, 1975.
Most of the 17 transactions at issue in this case involved a loan of money by a bank to the McAfees, the immediate deposit by them of the loan proceeds in a blocked savings account in the same bank as security for the loan and their election of credit life insurance coverage on each loan transaction. Most of the credit life policies were group policies though a few were individual policies. One loan was covered by other collateral and there were three vehicle leases with credit life insurance coverage. Insurance totaling $188,459 was involved in the 17 policies here in issue.
Essentially it was the trial court's conclusion in this case that McAfee had a duty to disclose his wife's terminal illness at the time he purchased the credit life insurance policies and certificates and his failure to do so constituted fraud. On this basis, the monies paid to Mr. McAfee by one insurer were ordered repaid and he was denied the right to This appeal presents two principal issues.
recover from the other insurers.
ISSUE ONE. Does an applicant for life insurance have a duty to volunteer information to the insurer concerning the applicant's poor health?
ISSUE TWO. Where the applicant for life insurance is at the time an agent for the life insurance company to which application is made, does the applicant in that case have a duty to volunteer information concerning poor health to the prospective insurer?
ISSUE ONE.
CONCLUSION. Absent an insurer's request for health information or a statement of good health, a prospective insured is under no duty to volunteer it.
It is the general rule that "when the insurer asks no information in regard to a certain matter, it is a fair assumption that it regards the matter as immaterial." 43 Am.Jur.2d Insurance § 730, at 717 (1969). Accord, 45 C.J.S. Insurance § 473(3), at 153 (1946). While it might seem facetious to presume that a life insurer would regard a prospective insured's terminal illness as immaterial, it is not unreasonable to assume that a life insurer which does no underwriting of the risks it insures expects a certain percentage of such poor risks and has adjusted its premiums to compensate for insuring them. Indeed where, as here, the insurers insured any debtor up to age 65 who paid a premium (whether that person was personally seen by the agent or not), and where the premium is the same for everybody regardless of age or health, no other conclusion seems reasonable. Furthermore, it cannot be deemed particularly surprising that a person in poor health would seek out insurance companies that see fit to write life (or health) insurance without having good health requirements of some kind.
Here the trial court's findings are silent as to any health inquiries having been made to the insureds. Numerous authorities stand for the proposition succinctly stated in Graham v. Aetna Ins. Co., 243 S.C. 108, 132 S.E.2d 273, 275, 100 A.L.R.2d 1352 (1963):
Mere silence on the part of the assured as to a matter not inquired of is not to be considered such a concealment as to avoid the policy. Aliud est celare, aliud tacere.
See 9 G. Couch, Insurance § 38:72 (2d ed. 1962); 12 J. Appleman, Insurance § 7276 (1943); 43 Am.Jur.2d Insurance § 731 (1969).
In upholding coverage under a group insurance policy issued to a quadriplegic who died 14 months after his certificate was written, the Supreme Court of Wisconsin quoted with approval from 9 G. Couch, Insurance § 38:58 (2d ed. 1962):
The insured is not obligated to volunteer statements of every circumstance which anybody may subsequently deem important as affecting the risk upon his life, for it is requisite only that he answer all questions truly, make no untrue statements, and submit himself to a full examination.
Southard v. Occidental Life Ins. Co., 31 Wis.2d 351, 142 N.W.2d 844, 848 (1966).
A credit life insurance case in point is Greensboro Nat'l Life Ins. Co. v. Southside Bank, 206 Va. 263, 142 S.E.2d 551 (1965). In that case, as here, an insurer at the request of a husband issued a credit life insurance certificate on the wife's life without requiring or requesting any information as to her health. After she died, payment was denied by the insurer, Greensboro National Life Insurance Company, and suit was brought. The Supreme Court of Appeals of Virginia ruled that a life insurance company could not complain of a decedent's failure to answer questions which were never asked. In affirming a judgment against the insurer it stated:
Greensboro made a contract of insurance without requiring, or requesting, any information whatever relating to the health of the person insured. Its certificate of insurance contains no condition, limitation, or exception with respect to the health of the insured. Had Greensboro considered the health of the insured was material to the risk assumed, under the type of policy here issued, it could have required evidence of insurability, or a medical examination of the person to be insured, or a written application setting forth the physical condition of such person, ...
Greensboro, 142 S.E.2d at 555.
Similarly, in the credit life case of First Federated Life Ins. Co. v. Citizens Bank & Trust Co., 593 S.W.2d 97, 99 (Ky.Ct.App.1979), it was held:
Insofar as appellant required no statement of health condition, examination or application, it should therefore bear the greater of the risks of the debtor, being of unsound health at the time of issuance of the credit life policy. The policy of insurance issued in this case was absent a requirement as to the condition of health at the time of the delivery, absent a requirement for furnishing satisfactory evidence of insurability, and there is no policy provision affecting the validity of the policy in the event the insured was of unsound health at time the policy was issued.
Another instructive credit life insurance decision is Sellner v. Cuna Mut. Ins. Soc'y, 288 Minn. 408, 181 N.W.2d 342 (1970). In upholding the validity of the policy against the insurer's claim of fraud, the Supreme Court of Minnesota concluded:
It may well be, as the trial court suspected, that decedent used the mechanics of the loan transaction to procure additional insurance, but we do not think that this circumstance, if true, invalidated either contract. If the insurance...
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