White v. American Republic Ins. Co., 16719

• Decision Date: 25 October 1990
• Docket Number: No. 16719,16719
• Citation: 799 S.W.2d 183
• Parties: William T. WHITE, Plaintiff-Respondent, v. AMERICAN REPUBLIC INSURANCE COMPANY, Defendant-Appellant.
• Court: Missouri Court of Appeals

Page 183

799 S.W.2d 183

William T. WHITE, Plaintiff-Respondent, v. AMERICAN REPUBLIC INSURANCE COMPANY, Defendant-Appellant.

No. 16719.

Missouri Court of Appeals,

Southern District,

Division Two.

Oct. 25, 1990.

Motion for Rehearing or Transfer

Denied Nov. 14, 1990.

Application to Transfer Denied Dec. 18, 1990.

L. Dwayne Hackworth, Hackworth and Schuller, Piedmont, defendant-appellant.

Lawrence N. Koeln, Centerville, for plaintiff-respondent.

SHRUM, Judge.

This appeal is from a judgment entered in a court-tried case in favor of plaintiff against American Republic Insurance Company (hereafter defendant) for $10,258.50 on Count I and $4,200.00 on Count II for benefits claimed by plaintiff to be due him from defendant on two hospital insurance policies. Defendant's counterclaim seeking recision and cancellation of the policies and return of benefits paid out was not mentioned in the judgment. The defense and counterclaim by defendant were grounded upon the claim that plaintiff had numerous other insurance policies which he failed to disclose when application was made for insurance with defendant and that such misrepresentations were material and voided the policies.

The first policy was a hospital indemnity policy. It was applied for on March 26, 1985, and was issued May 1, 1985. The second policy was a major medical policy issued June 1, 1985.

Initial contact between plaintiff and defendant which led to issuance of the policies, was on March 26, 1985, and occurred as follows. James Collins and his wife were authorized agents for defendant. Plaintiff met Mr. and Mrs. Collins at a restaurant in Ellington, Missouri, at a time when Mr. and Mrs. Collins were visiting with plaintiff's brother and sister-in-law. Plaintiff was invited to sit at the table where plaintiff's brother and Collins were discussing business. Collins introduced himself as "an American Republic" agent. Collins told plaintiff he was a new agent and was going to build a business in Piedmont. He asked plaintiff, "[H]ow do you stand on your insurance?" Plaintiff replied, "I'm covered.... I've got insurance up to my pockets." He told Collins that he had a major medical policy with Medallion Insurance Company and had a "fist full" of supplementary insurance policies. Plaintiff testified he told Collins he didn't need any more insurance, but Collins replied he had just started selling insurance and wanted to "build a business." Plaintiff inquired about the cost. Collins gave him cost figures. Plaintiff then told him to "write it up." A written application for the hospital indemnity policy was prepared by Collins. "Part E" of the application read: "Present Health Insurance: Complete the following for each person on this application who has hospital, surgical, medical expense, Medicare supplement, or limited indemnity insurance in force or pending with American Republic Insurance Company or any other company ..." at the time of application. When the application for the hospital indemnity policy was completed, "Part E" listed only Medallion Insurance Company as other coverage in force or pending at that time. Plaintiff signed the application. Plaintiff testified that Collins told him it made no difference how many supplementary policies he had. Collins denied being told about any supplementary policies. Plaintiff did say that Collins made it clear he could not have two major medical insurance policies. Collins claimed to have asked plaintiff all questions on the application and afterwards plaintiff "glanced at it [the application] and looked it over" and signed it. When plaintiff made the initial application for indemnity hospital insurance with defendant, he had, in addition to the disclosed major medical coverage with Medallion, supplementary hospital insurance coverage with the following companies: CUNA; AARP; Fina; Texaco; Mark Twain; J.C. Penney; Mutual of Omaha; National Home Life; Beneficial Standard; Combined Insurance Company, and Physicians Mutual Insurance Company. These supplementary policies ¹ provided, in the aggregate, benefits exceeding $1,000.00 per day for each day of hospitalization.

On May 1, 1985, plaintiff made application to defendant for the second policy. Although he still had the supplementary policies above, only the Medallion policy and the supplementary policy purchased from defendant were listed on the application. Again, Collins filled out the application. Plaintiff signed the application. Plaintiff claimed to have again told Collins about the supplementary hospital insurance policies, a fact which Collins again denied. After making application for and receiving the major medical policy from defendant, the plaintiff did drop the major medical policy he had in force with Medallion Insurance Company.

On July 4, 1985, plaintiff was kicked by a horse in the right arm, left knee and stomach. He went to the Reynolds County Memorial Hospital where he was x-rayed and sent home. Over the course of the next four months, plaintiff was hospitalized four times at two different locations. His first hospitalization was at Missouri Baptist Hospital for knee surgery. Thereafter, plaintiff was hospitalized three times at Poplar Bluff Hospital.

Plaintiff filed claims with defendant for benefits under both policies for the hospital stays. Defendant paid the claim for the Missouri Baptist hospitalization but denied the claims on the three stays at Poplar Bluff Hospital. Defendant rescinded both policies upon learning plaintiff had multiple insurance coverages in effect. Plaintiff's lawsuit followed.

At trial, plaintiff testified he had received between $35,000.00 and $40,000.00 in benefits on the various hospital insurance policies for the four hospitalizations. When asked why he had so many policies, plaintiff replied that he had the hospital indemnity policies to pay his obligations if he became hospitalized; he had no disability insurance.

Michael Teas, underwriting manager for defendant, testified that applications of potential insureds are reviewed by underwriters to determine whether an applicant is an acceptable risk. He said there are written guidelines concerning persons who are over insured. He further testified that the application questions inquiring about other insurance coverage were material in considering whether or not to issue the policy because "the insurance business has experienced that someone who has multiple insurance policies or is over insured may often times be a professional claimant. It also entices malingering. We also are looking out for other policy holders [sic]. Someone who spends lengthy times in the hospital, the cost is passed on to our other policy holders [sic], and we also do it to protect people from buying policies they don't really need."

The trial court entered judgment ² for plaintiff and this appeal followed. In its first point, defendant claims trial error because the evidence was undisputed that plaintiff made false statements about other coverage in his application, and such false statements were material because, had the truth been known, defendant would not have issued the policies in question. In that same point, defendant claims the trial court misapplied and misinterpreted § 376.783.3, RSMo 1986. Defendant argues that plaintiff's claims should have been barred by that statute. In deciding the issue presented, it is necessary to examine the history of § 376.783.3 and the law of which it is a part. In 1959, the Missouri General Assembly adopted the "Uniform Individual Accident and Sickness Insurance Law," ³ effective July 1, 1960. Included as a part of that legislation was § 376.783.3, which reads:

3. The falsity of any statement in the application for any policy covered by sections 376.770 to 376.795 may not bar the right to recover thereunder unless such false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer.

It is this statutory provision upon which defendant relies, in part, in it's Point I, for the proposition that the trial court erred in its decision. However, § 376.783.3 was not the latest legislative action which addressed the subject of misrepresentations on health insurance applications. In 1967, the Missouri General Assembly, for the first time, added a "misrepresentation section" as a part of the "Uniform Individual Accident and Sickness Insurance Law." That section read:

Section 376.800. Misrepresentation made in obtaining individual accident and health policy no defense, exception.--Anything in the law to the contrary notwithstanding no misrepresentation made in obtaining or securing a policy of insurance covered by sections 376.770 to 376.795 shall be deemed material or render the policy void, or constitute a defense to a claim thereunder unless the matter misrepresented shall have actually contributed to the contingency or event on which any claim thereunder is to become due and payable, and whether it so contributed in any case shall be a question for the jury. (Emphasis added.)

This section is obviously patterned after and closely follows the language of the "misrepresentation statute" for life insurance, currently § 376.580, RSMo 1986. ⁴ First adopted in 1874, the so-called "misrepresentation statute" has continued to be a part of Missouri life insurance law without change since initial enactment. Laws of Missouri, 1874, p. 89, read:

Section 1. No misrepresentation made in obtaining or securing a policy of insurance on the life or lives of any person or persons shall be deemed material, or render the policy void, unless the matter misrepresented shall have actually contributed to the contingency or event on which the policy is to become due and payable; and whether it so contributed in any case shall be a question for the jury.

Also, see § 5976, RSMo 1879; § 5849, RSMo 1889; § 7890, RSMo 1899; § 6937, RSMo 1909; § 6142, RSMo 1919; § 5732, RSMo 1929; § 5843, RSMo 1939; and now § 376.580, RSMo 1986.

It...