Ward v. Durham Life Ins. Co.

• Decision Date: 26 July 1989
• Docket Number: No. 309A88,309A88
• Citation: 381 S.E.2d 698,325 N.C. 202
• Parties: Hazel M. WARD v. DURHAM LIFE INSURANCE COMPANY.
• Court: North Carolina Supreme Court

Page 698

381 S.E.2d 698

325 N.C. 202

Hazel M. WARD v. DURHAM LIFE INSURANCE COMPANY.

No. 309A88.

Supreme Court of North Carolina.

July 26, 1989.

Stephen A. Graves, Washington, for plaintiff-appellant.

Young, Moore, Henderson & Alvis, P.A. by Robert C. Paschal and Theodore S. Danchi, Raleigh, for defendant-appellant.

EXUM, Chief Justice.

This is an action to recover proceeds allegedly due under a life insurance policy issued by defendant on the life of plaintiff's deceased husband. Refusing to pay the proceeds, defendant relies on what it contends are material misrepresentations made in the application for the policy. The question is whether on the factual showing made at the hearing defendant is entitled to summary judgment on the material misrepresentation defense. The Court of Appeals concluded it was not. Ward v. Durham Life Ins. Co., 90 N.C.App. 286, 292, 368 S.E.2d 391, 395, disc. rev. granted, 322 N.C. 838, 371 S.E.2d 284 (1988). We affirm.

I.

In support of its motion for summary judgment defendant offered three affidavits, one from each of three vice-presidents. These affidavits tended to show the following:

On 5 October 1985 plaintiff and her husband, Vernon J. Ward, agreed to apply for a life insurance policy through defendant's agent and Mr. Ward's first cousin, Brenda W. Ward. After advising the Wards that she was an agent for defendant, Brenda asked the Wards to answer questions from an insurance application form. After the Wards answered the questions orally, Brenda recorded their answers on the application form. After all questions had been asked and answered and recorded by Brenda on the form, Mr. Ward signed the application and paid the requested premium.

Apparently "Question 30.k" on the form asked whether the applicant had ever been "arrested for the use of alcohol," and "Question 32.d" asked whether applicant had ever been treated for high blood pressure. The form as signed by Mr. Ward showed negative answers to these questions. ¹

On 15 October 1985 defendant issued its policy insuring the life of Mr. Ward in the amount of $10,000 with an additional accidental death benefit of $10,000. The policy designated plaintiff as beneficiary.

On 26 January 1986 Mr. Ward was killed in a single car accident on the Pamlico Beach Road in Beaufort County. Thereafter Mrs. Ward submitted to defendant a timely notice of Mr. Ward's accidental death and claimed the benefits allegedly due her under the policy.

Because Mr. Ward's death occurred within the two-year contestable period provided for in the policy, defendant investigated Mr. Ward's medical history. Mr. Ward's medical records showed that on 29 September 1983 Mr. Ward was diagnosed by a local physician as having high blood pressure for which the physician prescribed medication. Because his death resulted from an automobile accident, defendant obtained a copy of the investigative report of the accident from the Division of Motor Vehicles. The accident report indicated that at the time of the accident Mr. Ward was traveling at an excessive speed and had been using alcohol. Prompted by this information defendant checked local court records, which showed that Mr. Ward had pled guilty to "driving under the influence on October 5, 1982."

Claiming that Mr. Ward had not provided truthful answers on his insurance application form with regard to his high blood pressure and his arrest relating to alcohol use and that had truthful answers been given defendant would not have issued its policy, defendant on 5 June 1986 denied Mrs. Ward's claim for benefits and offered a full refund of premiums paid. This action followed.

Mrs. Ward offered in opposition to defendant's motion for summary judgment her own affidavit. In it she swore essentially as follows: When in October 1985 defendant's agent, Brenda Ward, reached question 30(d) on the application form, she asked Mr. Ward if he had ever been convicted of driving under the influence. ² Mr. and Mrs. Ward informed Brenda that he had been so convicted in October 1982. Brenda responded that since the conviction was more than two years old it would not prevent him from obtaining insurance with her company. As to question 32(d), Brenda asked Mr. Ward if he had ever been treated for high blood pressure. Mr. Ward informed Brenda that: he had been treated for high blood pressure in 1983; medication was prescribed and taken according to the prescription; the prescription was not refilled; and Mr. Ward, who had reduced his intake of salty and fatty foods, had had no symptoms of high blood pressure since that time. Brenda responded that since the treatment had occurred more than two years ago it "was all right" and would not prevent Mr. Ward from obtaining insurance with her company.

Mrs. Ward swore in her affidavit that "my husband and I truthfully and completely answered the questions on the application taken by Ms. Brenda Ward, the agent for Durham Life Insurance Company.... That Brenda Ward said that these things were no problem and would not prevent us from obtaining insurance and she marked the application accordingly." After Brenda completed marking the application, Mr. Ward signed it and paid the initial premium.

Defendant moved to strike the following four quoted portions of plaintiff's affidavit as inadmissible evidence:

That as to question 30(d) and (k), my husband and I advised Ms. Ward that he had in fact been convicted of driving under the influence in the District Court of Beaufort County in October of 1982 and that he had obtained a limited driving privilege.

My husband advised her that he had been treated by Dr. Boyette for high blood pressure in 1983. Then she asked whether or not this had occurred within two years. My husband and I then conferred and advised her that it had been more than two years since he had been treated by Dr. Boyette and he had not had any problems since that time.

That as a result of the responses that were given by my husband and I to Ms. Brenda Ward, Durham Life Insurance Company had notice of my husband's medical treatment for high blood pressure and his conviction for driving under the influence of alcohol in 1982.

My husband signed the application based on this representation.

The trial court allowed the motion and granted summary judgment in favor of defendant.

A majority of the Court of Appeals concluded that the trial court erred in striking portions and from plaintiff's affidavit but that it properly struck portions and . Id. at 289, 368 S.E.2d at 393. The majority then held "that the pleadings and affidavits present a material issue of fact on whether the knowledge of the misrepresentation [in the application] should be imputed to the insurer." Id. at 292, 368 S.E.2d at 395. The majority reversed the order of summary judgment and remanded for further proceedings. Id. The dissenting opinion disagreed, concluding in part that there was no forecast of evidence at the summary judgment hearing sufficient to show under any legal theory that the agent's knowledge of misrepresentations on the application should be imputed to defendant. Id. at 292-94, 368 S.E.2d at 395-96 (Parker, J., dissenting). Defendant appealed on the basis of the dissenting opinion in the Court of Appeals, and we allowed defendant's petition for discretionary review of the additional issue regarding the motion to strike portions of plaintiff's affidavit.

II.

As to the trial court's order striking portions of plaintiff's affidavit, we hold the Court of Appeals correctly affirmed as to those portions of the affidavit designated above as and inasmuch as those portions are conclusions rather than statements of fact. See 1 Brandis on North Carolina Evidence § 130 (3d ed. 1988); see also Singleton v. Stewart, 280 N.C. 460, 467, 186 S.E.2d 400, 405 (1972) (holding an affidavit statement referring to the notice required for a binding contract was inadmissible as a legal conclusion). We also hold the Court of Appeals correctly reversed the order as to those portions designated and .

Those portions of plaintiff's affidavit designated and are not hearsay as the trial court apparently thought and defendant argues. " 'Hearsay' is a statement, other than one made by the declarant while testifying at the trial or hearing, offered in evidence to prove the truth of the matter asserted." N.C.R.Evid. 801(c); accord State v. Sidden, 315 N.C. 539, 551, 340 S.E.2d 340, 348 (1986). Hearsay is not admissible except as provided by statute or by the rules of evidence. N.C.R.Evid. 802; accord 1 Brandis on North Carolina Evidence § 138 (3d ed. 1988); see also State v. Adcock, 310 N.C. 1, 37, 310 S.E.2d 587, 608 (1984) (affidavit offered by defendant was found "clearly hearsay and inadmissible"). If a statement is offered for any purpose other than that of proving the truth of the matter stated, however, it is not objectionable as hearsay and therefore may be admissible. State v. Irick, 291 N.C. 480, 498, 231 S.E.2d 833, 844-45 (1977) (quoting 1 Stansbury's N.C. Evidence, § 141 (Brandis Rev.1973) at 467-71); 1 Brandis on North Carolina Evidence § 141 (1988); see N.C.R. Evid. 801(c). As one example, "[t]he declarations of one person are frequently admitted to prove a particular state of mind of another person who heard or read them--e.g., to charge him with knowledge or notice of the facts declared." 1 Brandis on North Carolina Evidence § 141 (3d ed. 1988); accord State v. Foster, 293 N.C. 674, 683, 239 S.E.2d 449, 455 (1977). Such statements are admissible since they are offered to show knowledge or notice rather than to prove the truth of the matter stated. 1 Brandis on North Carolina Evidence § 141 (3d ed. 1988).

The statements made to defendant's agent by Mr. and Mrs. Ward, as related by Mrs. Ward's affidavit, were not, as the Court of Appeals correctly concluded, offered to prove the truth of the matters contained in the statements. They were offered to prove simply that defendant's agent had notice of...