Williams v. State Farm Ins. Co.

• Decision Date: 27 August 1982
• Docket Number: No. 17496,17496
• Citation: 656 P.2d 966
• Parties: Melody WILLIAMS, Plaintiff, Appellant and Cross-Respondent, v. STATE FARM INSURANCE COMPANY, a corporation, Defendant, Respondent and Cross-Appellant.
• Court: Utah Supreme Court

Page 966

656 P.2d 966

Melody WILLIAMS, Plaintiff, Appellant and Cross-Respondent, v. STATE FARM INSURANCE COMPANY, a corporation, Defendant Respondent and Cross-Appellant.

No. 17496.

Supreme Court of Utah.

Aug. 27, 1982.

John L. McCoy, Salt Lake City, for plaintiff, appellant and cross-respondent.

Roger H. Bullock of Strong & Hanni, Salt Lake City, for defendant, respondent and cross-appellant.

OAKS, Justice:

This is an action by the beneficiary of life insurance against the insurer for the face amount of the policy. After the jury gave its verdict on special interrogatories, the court entered judgment for the defendant, no cause of action. Plaintiff's appeal presents a single issue having to do with an alleged misrepresentation the decedent-insured made on the "Medical History portion of Life Application" in applying for the policy. Plaintiff contends that this issue should not have been submitted to the jury (1) because under U.C.A., 1953, § 31-19-7(1), the Medical History form was not "part of the policy" and therefore was not "admissible in evidence in any action relative to such policy," and (2) because, in any case, the defendant insurer waived its right to rely on the medical form because its answer did not plead misrepresentation as an affirmative defense. ¹

The insurer issued a $38,000 policy of life insurance on plaintiff's husband in 1977. In 1979, he was killed in a head-on automobile collision under circumstances indicating that his intoxication was a principal cause of his death. The insurer denied plaintiff's claim on the basis "that there was a serious and material misrepresentation in obtaining the policy...." The insurer's letter explained: "We relied upon the representations made in the application and had we been aware of Mr. Williams' treatment for alcoholism with Dr. Jeppson and use of antabuse prior to our application, we would not have issued the policy." This action followed.

There was ample evidence at trial from which the jury could conclude that the decedent had a serious drinking problem and had been treated for excessive use of alcohol. Dr. Jeppson, his family physician, testified that he had treated decedent for alcoholism from 1974 to 1976, including prescriptions for antabuse, a drug used for patients otherwise unable to control their drinking. Dr. Jeppson also recommended consultation with a psychiatrist, Dr. Nielsen. Dr. Nielsen saw the decedent almost weekly through most of 1976 and several times in 1977 for treatment of various problems including drinking. While Dr. Nielsen concluded that the decedent was not an alcoholic, he did diagnose his problem as alcohol abuse, and encouraged him to continue taking antabuse. Dr. Nielsen testified that the decedent was a "binge" drinker, who drank impulsively without regard for the consequences. The blood alcohol level reported at the time of his death (.088%) indicated the ingestion of about five drinks in one hour's time.

In his signed "Life Application," dated Sept. 14, 1977, the insured answered the following question as noted:

                10.  Have you ever received treatment or
                     joined an organization for alcoholism
                     or drug habit?                         yes  no
                                                                 x
                                                            ---  ----
                

In the "Medical Examiner's Report-Adult, Medical History portion of Life Application," dated Sept. 29, 1977, which was also signed by the insured, he answered the following question as noted:

                2.    Have you ever been treated for or
                      ever had any known indication of
                                      * * *
                      1. Excessive use of alcohol, tobacco
                          or any habit-forming drugs?        yes  no
                                                                  x
                                                             ---  ----
                

So far as material to this appeal, the special verdicts of the jury found as follows:

1. That the decedent's answer to question No. 10 on the Life Application was not an omission, an incorrect statement, or a misrepresentation;

2. That the decedent's answer to question No. 2.1. on the Medical History was an omission, an incorrect statement, and a misrepresentation; and

3. That although the answer to question 2.1. was not fraudulent, it was material to the acceptance of the risk and material to the hazard assumed by the insurer; and

4. That the insurer would not have issued the policy and would not have issued the policy at the same premium rate or in as large an amount if the true facts had been made known as required in the application. ²

Consistent with these special verdicts, the district court entered judgment for the defendant insurer.

The jury's special verdict that there was no omission, inaccuracy, or misrepresentation on the question having to do with "alcoholism" disposes of that basis for the insurer's denial of plaintiff's claim. This appeal must therefore turn upon whether the jury could properly hear evidence and rely upon the decedent's false answer to question 2.1. of the Medical History that he had never been treated for excessive use of alcohol.

I. WAS THE MEDICAL HISTORY PART OF THE POLICY?

Plaintiff first argues that the Medical History, which contained decedent's false denial that he had ever been treated for excessive use of alcohol, is not part of the policy and was therefore inadmissible in evidence under U.C.A., 1953, § 31-19-7(1), which reads as follows:

No application for the issuance of any life or disability insurance policy or annuity contract shall be admissible in evidence in any action relative to such policy or contract, unless a true copy of such application was attached to, or otherwise made a part of the policy or contract when issued.

Plaintiff challenges the district court's specific finding "under our statute and the business practices of the carrier that this [Medical History] is a portion of the policy, it's included in the policy." As a result of this finding, the court permitted the Medical History to be introduced in evidence and later allowed the jury to consider the insured's answer to question 2.1. in their deliberations. Plaintiff attacks the trial court's ruling as contrary to plaintiff's testimony that she did not remember finding a copy of the Medical History with the insurance policy in the family financial papers. In support of the court's conclusion, the insurer refers to testimony that it was standard procedure for the insurer to attach a copy of the Medical History and Life Application to each policy when it was issued, that there was no evidence that this procedure varied in this case, and that the Medical History form that was introduced in evidence was in the insurer's file. In addition, the insurer points to the following language that appears just above the insured's signature on the Medical History: "this Medical History shall be a part of the application for life insurance on my life."

On appeal, the record is reviewed in the light most favorable to the findings and action of the trial court, which are entitled to a presumption of validity and will not be disturbed if they are supported by substantial, competent evidence. Search v. Union Pacific Railroad Co., 649 P.2d 48 (1982); Litho Sales, Inc. v. Cutrubus, Utah, 636 P.2d 487 (1981); Car Doctor, Inc. v. Belmont, Utah, 635 P.2d 82 (1981); Hutcheson v. Gleave, Utah, 632 P.2d 815 (1981). The evidence reviewed above provides the required support. We therefore decline to overrule the district court on this question.

Plaintiff cites numerous cases making an insurance application inadmissible if it is not physically "attached to" or "endorsed upon" the policy of insurance. E.g., Johnson v. Des Moines Life Association, 105 Iowa 273, 75 N.W. 101 (1898); Blatz v. Travelers Insurance Co., 272 App.Div. 9, 68 N.Y.S.2d 801 (1947); Sandberg v. Metropolitan Life Insurance Co., 342 Pa. 326, 20 A.2d 230 (1941). Also see Annot., 18 A.L.R.3d 760, 766-67 (1968), and cases cited therein, such as Economy Fire & Casualty Co. v. Thornsberry, 66 Ill.App.3d 225, 23 Ill.Dec. 13, 383 N.E.2d 780 (1978). But an examination of these cases reveals that with but one exception, which is not in point here, ³ all were based upon statutes that made the application form inadmissible if it was not physically attached to or endorsed upon the policy. In contrast, the inadmissibility dictated by § 31-19-7(1) of our statute does not apply where the application form is either "attached to, or otherwise made a part of the policy ...." (Emphasis added.) The district court's finding and conclusion that the Medical History was "included in" and "a portion of" the policy obviously relied on the emphasized language. Hence, plaintiff's cases, which apply statutes with more restrictive requirements, are distinguishable.

We therefore conclude that § 31-19-7(1) did not make the Medical History inadmissible in this action on the policy. ⁴

II. WAS THE DEFENSE PROPERLY PLEADED?

Second, plaintiff contends that the insured's misrepresentation that he had never been treated for excessive use of alcohol should not have been submitted to the jury because that affirmative defense was not properly pleaded under Utah R.Civ.P. 8(c), and was therefore waived under Rule 12(h). Pratt v. Board of Education, Utah, 564 P.2d 294, 298 (1977).

This issue turns on how specifically a defendant must plead an affirmative defense under U.C.A., 1953, § 31-19-8. That statute, on which the insurer relies, provides that all statements in any application for an insurance policy shall be deemed to be representations, and that omissions, incorrect statements, or misrepresentations "shall not prevent a recovery under the policy" unless they are (a) fraudulent, or (b) material either to the acceptance of the risk or to the hazard insured, or (c) the insurer would not have issued the policy if it had known the true facts.

The insurer's answer contained the following paragraph, whose adequacy is at issue here:

As a...