Wardle v. International Health & Life Ins. Co.

• Decision Date: 25 June 1976
• Docket Number: No. 11914,11914
• Citation: 97 Idaho 668,551 P.2d 623
• Court: Idaho Supreme Court
• Parties: P. R. WARDLE and Alice Wardle, husband and wife, Plaintiffs-Appellants, v. INTERNATIONAL HEALTH & LIFE INSURANCE COMPANY, Defendant-Respondent.

Page 623

551 P.2d 623

97 Idaho 668

P. R. WARDLE and Alice Wardle, husband and wife, Plaintiffs-Appellants, v. INTERNATIONAL HEALTH & LIFE INSURANCE COMPANY, Defendant-Respondent.

No. 11914.

Supreme Court of Idaho.

June 25, 1976.

Karl Jeppesen, of Elam, Burke, Jeppesen, Evans & Boyd, Boise, for plaintiffs-appellants.

John L. King, of King, Wiebe & Morris, Boise, for defendant-respondent.

McFADDEN, Chief Justice.

P. R. Wardle and Alice Wardle, husband and wife, instituted this action to recover from International Health and Life Insurance Company under a health and accident policy for medical expenses resulting from her hospitalization and surgery to repair an atrial septal defect of the heart. The district court, sitting without a jury, concluded that the Wardles' misrepresentation omission, and concealment of material facts caused the company to provide coverage which it would not have provided had it known those facts. The court therefore denied recovery to the Wardles who then appealed to this court from the judgment and an order denying their motion for new trial. We reverse the judgment and order a new trial.

Mr. Wardle completed an application for a family health and accident policy with International Health and Life Insurance Company on May 24, 1971, listing Mrs. Wardle as one of his dependents. The written form of the application was drafted so that a 'Yes' or a 'No' answer could be made by checking an appropriate column next to the question. In the event of a 'Yes' answer being given, the form stated:

'If 'yes' to any part of No's 9, 10, or 11, state type of condition, treatment, dates, duration, results, doctors' and hospitals' names and names of person to whom information pertains.'

Question no. 9 on the application asked:

'Have you or any dependents named, ever been medically treated for or medically advised for any of the following:

C. Abnormal blood pressure, heart attack, stroke, or any other heart or circulatory disorder.'

Although this question was answered in the affirmative, no reference was made to any aspect of Mrs. Wardle's health. ¹ However, uncontroverted testimony at the trial revealed that she had long been aware she had a slight heart murmur and that she had taken medication for high blood pressure. The insurance company issued the Wardles a policy with coverage based on the information given on the application without requiring any physical examination. The policy bore an effective date of May 24, 1971, the application's date, but it was not delivered until later in the year.

Early in 1972, Mrs. Wardle became ill and began consulting doctors. Her condition caused her to be hospitalized in the following months, during which time considerable testing was done. The tests led to the diagnosis of the cause of her condition as an atrial septal defect of the heart. Suregery was performed to repair the defect, which was congenital, and further medical attention was required to complete her recovery.

As a result of this health problem, the Wardles incurred hospital, doctor, and other medical expenses totaling $11,888.45 for her care. The Wardles filed a claim with the insurance company for those medical expenses, but the company denied the claim on the ground that the Wardles failed to disclose in their application Mrs. Wardle's heart murmur and high blood pressure. The Wardles thereafter instituted this action to recover the medical expenses incurred, plus reasonable attorney's fees. The company defended the action on the ground of failure to disclose allegedly material facts about Mrs. Wardle's medical history, and on the ground that the loss arose out of a condition that existed prior to the issuance of the policy. The suit was tried to the court sitting without a jury. The trial court issued its initial memorandum decision, which by stipulation was accepted as its findings of fact and conclusions of law. Judgment was entered in favor of the insurance company and the Wardles moved for a new trial.

Following the filing of a motion for new trial by the Wardles, the trial court issued a second memorandum decision. The second decision and its accompanying findings of fact and conclusions of law concluded that the atrial septal defect was not a preexisting condition capable of diagnosis and that recovery would not be denied on that ground. However, the trial court focused upon the company's other affirmative defense and made findings of fact which may be summarized as follows:

On the effective date of the policy, Mrs. Wardle had the preexisting conditions of high blood pressure and systolic heart murmur. When the application was made for the policy, Mrs. Wardle was aware of those two conditions and 'had in fact been treated for the same by a physician and prescribed medication as treatment therefor.' Despite the known existence of those two conditions, Mrs. Wardle's atrial septal defect of the heart was not capable of diagnosis. High blood pressure and a heart murmur are matters that would affect the insurance company's risk and, had the company been advised of the existence of both the high blood pressure and the heart murmur, the company would not have issued the policy in its same form, but would have issued the policy with a rider precluding coverage for Mrs. Wardle's heart condition. The trial court, in its conclusions of law, held that I.C. § 41-1811 precluded the Wardles from recovery because of their misrepresentation, omission, and concealment of material facts. The Wardles appeal from the denial of a new trial and from the judgment in favor of the insurance company.

Whether the Wardles can recover her medical expenses from the insurance company is dependent upon I.C. § 41-1811 which provides:

'Representations in applications.-All statements and descriptions in any application for an insurance policy or annuity contract, or in negotiations therefor, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either:

(a) Fraudulent; or

(b) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or

(c) The insurer in good faith would either not have issued the policy or contract, or would not have issued it at the same premium rate, or would not have issued a policy or contract in as large an amount, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.'

Under I.C. § 41-1811, the crucial issue arises from the potential or actual effect that the failure to disclose Mrs. Wardle's heart murmur and high blood pressure had on the insurance company when it wrote the policy. This issue presents two separate questions. The first is whether the wording of the questions propounded in the application required disclosure of the two medical problems. If the form of the application required disclosure of such information, the second inquiry is what effect nondisclosure had on the contract. I.C. § 41-1811(b) and (c).

The first inquiry is whether, under the question proposed, Mrs. Wardle reasonably could be expected to understand that she was required to disclose her knowledge of her history of high blood pressure and heart murmur. An insurance company justifiably seeks information regarding an applicant's health to aid in its decision to provide or limit coverage under a health and accident policy. In the absence of a requirement of a physical examination, a company must rely upon the questions it prepares and directs to an applicant as the means of obtaining the necessary information. Since it frames the application questions, the company must keep them free from misleading interpretations and the consequence of its failure to do so is that all ambiguities in the application will be construed against the insurer. Purcell v. Washington Fidelity Nat'l Ins. Co., 141 Or. 98, 16 P.2d 639 (1932). An applicant, correspondingly, must act in good faith to truthfully answer direct questions that call for information within the applicant's knowledge. Brinkoetter v. Pyramid Life Ins. Co., 377 S.W.2d 560 (Mo.App.1964); Leigh v. Consumers Nat'l Life Ins. Co.,240 Or. 290, 401 P.2d 46 (1965); Purcel v. Washington Fidelity Nat'l Ins. Co., supra. When responding to general questions about medical history, however, an applicant is not required to list every physical indisposition that the applicant ever has experienced. Dean v. Nationwide Life Ins. Co., 96 Idaho 772, 536 P.2d 1122 (1975).

The application's question regarding high blood pressure was specific and direct, requiring Mrs. Wardle to recite the facts she knew about that aspect of her medical history. The application asked unambiguously: 'Have you * * * ever been medically treated for or medically advised for * * * (a)bnormal blood pressure * * *.' The uncontroverted testimony of Mrs. Wardle and her doctors at the trial demonstrates her awareness that she was diagnosed as having abnormally high blood pressure seven months before the insurance application was answered, and that she had been taking medication to control her blood pressure during that period. In justification for this nondisclosure, Mrs. Wardle urges that she was not taking medication at the very time of the application in May, 1971. The question does not ask whether the applicant is being treated for abnormal blood pressure at the time of the application; it instead askes if she has 'ever been medically treated for or...