No. 89-574 

IN THE SUPREME COURT OF THE STATE OF MONTANA 

1991 

DARLENE SCHNEIDER, 

Plaintiff and Respondent, 

MINNESOTA MUTUAL LIFE 

INSURANCE COMPANY, a ~innesota 

corporation, 

Defendant and Appellant. 

APPEAL FROM: District Court of the Sixteenth Judicial District, 

In and for the County of Carter, 

The Honorable Nat Allen, Judge presiding. 

COUNSEL OF RECORD: 

For Appellant: 

Thomas M. Monaghan, Lucas & Monaghan, P. C. , Miles 

City, Montana 

For Respondent: 

Gary A. Ryder, Forsyth, Montana 

Filed: 

Submitted on briefs: August 9, 1990 

Decided: February 28, 1991 
Justice William E. Hunt, Sr. delivered the Opinion of the Court. 

Following a bench trial, the District Court of the Sixteenth 

Judicial District, Carter County, found defendant and appellant, 

Minnesota Mutual Life Insurance Company, liable on a life insurance 

policy sold to plaintiff and respondent, Darlene Schneider, and her 

husband, Jock Schneider. Minnesota Mutual appeals. We affirm. 

The following issues are raised on appeal: 

1. Did the District Court err in failing to enter judgment 

in favor of Minnesota Mutual? 

2. Did the District Court err in allowing expert testimony? 

On March 7, 1983, Jock Schneider renewed his existing loans 

at the First National Bank of Ekalaka and borrowed an additional 

$1,500, increasing the total amount of his debt to the Bank to 

$28,600. At the same time, he applied for insurance coverage in 

the amount of $20,000 under Minnesota Mutual's Protection Plus 

program, a group life plan sold through financial institutions to 

protect the debt of the borrower. At the time of the application, 

Jock had existing life insurance coverage with Minnesota Mutual in 

the amount of $30,000. 

Dean Parks, vice president of the Bank and a partner in the 

Ekalaka Insurance Agency, assisted the Schneiders in completing the 

application by asking Jock questions and typing his responses on 

the form. Parks had known Jock all of his life and had done 

business with the Schneiders over the years. 

The insurance application contained two questions relating to 

health: 

2 
1. During the last three years, have you been 

hospitalized or have you consulted a physician or 

physicians for any reason? 

2. Have you ever been treated for or advised that you 

had any of the following: heart, lung, nervous or kidney 

disorder, high blood pressure, cancer or tumor, diabetes? 

The application requested additional information if the applicant 

answered "yes" to either question. Jock answered "no8' to both 

questions. His wife, Darlene, answered l'yesll to the first question 

and provided information regarding the removal of a cyst in 1983. 

On March 23, 1983, Jock died of a gunshot wound to the head. 

A coroner's jury determined that the death was accidental. The 

District Court in the present civil case found that the death was 

not related to alcohol. 

Minnesota Mutual promptly paid the claims on the life 

insurance policies procured by Jock prior to the 1983 policy at 

issue in this case. It did not, however, automatically pay on the 

1983 protection Plus Policy. Instead, because the effective date 

of coverage on the 1983 policy was within two years of the date of 

death, the insurance company invoked the contestability clause in 

the policy and conducted a routine investigation of Jock's medical 

history. 

During the investigation, Minnesota Mutual obtained the 

medical records of Dr. Stephen Shaub of Ekalaka. The records 

showed that Dr. Shaub had seen Jock several times between December 

2, 1981 and June 21, 1982. On December 2, 1981, Dr. Shaub 

diagnosed Jock as suffering from alcoholism and depression. He 

prescribed medication for the ailments. Follow-up visits occurred 

3 
on January 4, January 18, and February 16, 1982 to check 

medication. On April 26, 1982, the doctor once again assessed 

Jock's condition as alcoholism and depression. Medication was 

refilled on June 21, 1982. 

On June 20, 1983, Minnesota Mutual sent Darlene a letter 

rejecting her claim for benefits under the $20,000 policy because 

Jock had failed to disclose the visits to Dr. Shaub in the 

insurance application. Minnesota Mutual wrote: 

After careful consideration, we have determined that if 

this additional information [the visits to Dr. Shaub] had 

been available to our underwriters at the time they were 

considering your husband's application for this 

insurance, they would have declined to insure him. 

Darlene instituted this action against Minnesota Mutual, 

alleging breach of contract for failing to pay the claim. She 

additionally sought punitive damages on several theories. The 

District Court bifurcated the action and a bench trial proceeded 

on the contract issue only. Following trial, the court entered 

findings of fact, conclusions of law and judgment in favor of 

Darlene. The court then certified the judgment as final pursuant 

to Rule 54(b), M.R.Civ.P. This appeal followed. 

I. 

Did the District Court err in failing to enter judgment in 

favor of Minnesota Mutual? 

Minnesota Mutual argues that § 33-15-403, MCA, allows it to 

deny Darlene's claim because Jock incorrectly completed the 

insurance application by failing to reveal the visits to Dr. Shaub. 

Section 33-15-403, MCA, provides: 
(1) 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. 

(2) Misrepresentations, omissions, concealment of facts, 

and incorrect statements shall not prevent a recovery 

under the policy or contract unless either: 

(a) fraudulent ; 

(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 

a policy or contract in as large an amount or at the same 

premium or rate 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. 

Minnesota Mutual contends, and Darlene concedes, that this 

statute should be read in the disjunctive. Thus, a 

misrepresentation, omission, concealment of fact or incorrect 

statement will prevent recovery under an insurance policy if one 

of the three factors listed in subsection (2) is present. 

Both parties agree that Jock's failure to notify Minnesota 

Mutual of his visits to Dr. Shaub constituted a misrepresentation, 

omission, concealment of facts or incorrect statement as specified 

in the statute. Darlene maintains, however, that Jock's false 

answer on the insurance application does not prevent recovery 

because it was neither fraudulent nor material nor would Minnesota 

Mutual in good faith have denied the policy had Jock revealed the 

consultations with the doctor. Minnesota Mutual, on the other 

hand, argues first that its denial of the claim was justified under 
5 33-15-403 (2) (a) , MCA, because Jockls concealment of the facts 

constituted fraud. 

The District Court found that Minnesota Mutual did not carry 

its burden of proving that Jock fraudulently completed the 

application. We hold that this finding is not clearly erroneous. 

Minnesota Mutual next argues that the information Jock omitted 

on the application was material. 

The requirement that a misrepresentation on an insurance 

application be Itmaterial either to the acceptance of the risk or 

the hazard assumed by the insurer8* in 5 33-15-403 (2) (b) , MCA, 

overlaps a great deal with the condition in 5 33-15-403 (2) (c), MCA, 

that allows an insurer to deny coverage for a misrepresentation if 

the insurer in good faith would not have 1) issued the policy; 2) 

issued the policy in as large an amount; 3) issued the policy at 

the same premium; or 4) provided coverage with respect to the 

hazard resulting in the loss. 

An omission or misrepresentation may be material if, had the 

truth been known, the reasonable and prudent insurer would not have 

issued the policy or would have issued it at a higher premium. 

Cummings v. Prudential Ins. Co. of America, 542 F. Supp 838, 840 

(S.D. Ga. 1982); Prudential Ins. Co. of America v. Anaya, 428 P.2d 

640, 644 (N.M. 1967). This definition of materiality incorporates 

the idea of subsection (2) (c), that is, that the policy would not, 

among other things, have been issued had the insured revealed the 

true state of affairs. The primary difference between the two 

subsections is that (2) (b) deals with an objective standard of 
materiality, reasonableness, while (2) (c) refers to a subjective 

standard, good faith. 

Minnesota Mutual contends that it justifiably denied coverage 

under subsection (2) (b) because the diagnosis of alcoholism was 

material to the risk assumed. The materiality of an insured's 

misrepresentation is determined by the extent the false answer 

"initially influenced the insurer to assume the risk of coverage 

. . . . [Tlhe misrepresentation in the insurance application may 

be material if it diminishes the insurer's opportunity to determine 

or estimate its risk." Berger v. Minnesota Mut. Life Ins. Co. of 

St. Paul, Minn., 723 P.2d 388, 391 (Utah 1986). Thus, the 

materiality of a misrepresentation generally is measured at the 

time the insurer issues the policy rather than at the time of the 

insured's death. Beraer, 723 P.2d at 391. 

The question of materiality is a question of fact. Beraer, 

723 P.2d at 392. In this case, the District Court found that 

Jock's incorrect statement on the insurance application was not 

material. This finding is not clearly erroneous. 

As the District Court pointed out, the Protection Plus group 

life insurance application failed to ask any specific questions 

about either alcoholism or alcohol use. The court surmised that 

the prudent insurer would have specifically requested information 

about all critical underwriting factors. Thus, if alcoholism was 

indeed material to Minnesota Mutual's acceptance of the risk, it 

would have expressly asked questions about alcohol use, just as it 

specifically requested information about heart, lung, nervous or 
kidney disorders, high blood pressure, cancer and diabetes. Other 

courts have reached a similar conclusion. Botway v. American Int'l 

Assurance Co. of New York, 543 N.Y.S.2d 651, 652 (N.Y. App. Div. 

1989) ; Kampfe v. Minnesota Mut. Life Ins. Co., C.V. 82-21-BLG, slip 

op. at 11-12 (E.D. Mont. 1983). 

Minnesota Mutual's employees testified that alcohol use was 

material to the decision to accept the risk because the company 

automatically denied coverage to any applicant who had been 

diagnosed as an alcoholic and had been drinking within the five 

years preceding the application. This practice, however, was not 

reduced to writing in the underwriters1 manual, although other 

procedures regarding alcohol habits were included in the manual. 

Substantial credible evidence supported the District Court's 

finding that alcohol use was not material to the risk assumed by 

Minnesota Mutual in this case. The District Court did not err in 

concluding that Minnesota Mutual's denial of coverage was not 

warranted under § 33-15-403 (2) (b) , MCA. 

Minnesota Mutual also argues that it legitimately denied 

coverage under subsection (2) (c) because it would not in good faith 

have insured Jock if it had known that he had been diagnosed as an 

alcoholic. 

Like the question of materiality, the question of good faith 

is a question of fact. The District Court concluded that Minnesota 

Mutual did not exercise good faith in reviewing the claim because 

it conducted only a limited investigation of the facts regarding 

Jockls alcohol use and that this investigation was conducted for 
the sole purpose of denying the claim. It also found that 

Minnesota Mutual failedto follow its own underwriting criteria for 

applicants who use alcohol. These findings are not clearly 

erroneous. 

Minnesota Mutual's underwriting manual provided: 

A history of current acute alcoholism, delirium tremens 

and/or alcoholic psychoses is usuallv RNA [risk not 

acceptable]. (Emphasis added.) 

Despite this provision in the manual, a Minnesota Mutual 

underwriter testified that the company automatically rejected the 

application of anyone who had been diagnosed as an alcoholic. 

In addition, the underwriting manual required underwriters to 

ll[l]ook for the effects on business reputation and acumen, 

financial standing, home environment, social behavior and alcohol 

dependence" when investigating an applicant's drinking habits to 

determine insurability. Minnesota Mutual neglected to conduct such 

an inquiry. Instead, it relied solely on Dr. Shaubls medical 

records to deny coverage. Dr. Shaub, however, in his deposition 

introduced at trial admitted that he was not an expert on 

alcoholism and that Jock did not exhibit any of the physical 

symptoms of the disease. A chemical dependency counselor testified 

that there was not enough information in the medical records to 

determine whether Jock was an alcoholic. From this evidence, the 

District Court could have properly concluded that had Minnesota 

Mutual followed its own manual it would have discovered the extent 

of Jock's problem and may have issued the policy in spite of his 

alcohol use. 
The District Court did not abuse its discretion in concluding 

that Minnesota Mutual could not deny coverage under the good faith 

provision of 5 33-15-403 (2) (c) , MCA. Substantial credible evidence 

supported the finding that Minnesota Mutual conducted only a 

limited investigation before rejecting Darlene's claim, an 

investigation that did not comply with the insurer's own written 

procedures. 

Did the District Court err in allowing expert testimony? 

At trial, Darlene offered the expert testimony of Russell 

Mann, a chartered life underwriter with 23 years experience in the 

life insurance industry and past president of the Montana State 

Association of Life Underwriters. Minnesota Mutual objected 

several times to the testimony, arguing that Mann was not qualified 

to comment on home-office underwriting practices in general or the 

practices of Minnesota Mutual in particular. The District Court 

overruled the objections. 

The trial court retains broad discretion to determine whether 

a witness qualifies as an expert in a particular field. The degree 

of those qualifications "affects the weight rather than the 

admissibility of [the expert's] testimony." Little v. Grizzly 

Mfg., 195 Mont. 419, 427, 636 P.2d 839, 843 (1981). 

In this case, the District Court did not abuse its discretion 

in allowing Mannls testimony. Mannls qualifications and testimony 

demonstrated that he had worked with many types of products sold 

by the life insurance industry and that he was familiar with the 
factors considered by an underwriter when determining the 

insurability of an applicant for life insurance. Under these 

circumstances, the fact that he had never been a home-office 

underwriter went to the weight rather than to the admissibility of 

the evidence. 

An expert need not have been employed by the defendant 

insurance company before he can comment on the practices of that 

company. As long as the testimony indicates that the expert has 

knowledge of the standards and practices of the insurance industry 

in general, his testimony is admissible to explain the custom of 

the industry. John Hancock Mut. Life Ins. Co. v. Conway, 240 

S.W.2d 644, 646 (Ky. 1951). 

Darlene requests an award of attorney fees incurred on this 

appeal under either Rule 32, M.R.App.P., or Rule 33, M.R.App.P. 

We decline to grant such an award. 

Rule 32, M.R.App.P., allows damages for appeals taken without 

merit. Damages are not warranted, however, whenever a reasonable 

ground for appeal exists. Tope v. Taylor, 135 Mont. 124, 132, 768 

P.2d 845, 850 (1988). In this case, Minnesota Mutual had 

reasonable grounds for appeal. The questions presented on the 

appeal were not clear cut but delved into an area in which there 

is very little Montana decisional law. 

Rule 33, M.R.App.P., provides for costs on appeal to the 

prevailing party. The costs allowed under this rule, however, do 

not include an award of attorney fees unless the fees are based on 
a contract, Poulsen's, Inc. v. Wood, 232 Mont. 411, 417, 756 P.2d 

1162, 1166 (1988), or a specific statute. In this case, no 

contract or statute granting attorney fees exists. 

The judgment of the District Court is affirmed and Darlene's 

request for attorney fees on appeal is enied. P 

4 4 r+/*c 

chief J stice 
Schneider v. Mbnesota Mutual Life Ins. Co. 

48 St-Rep. 224 

DARLE*'JE SCrnTEIDER, 

Plaintiff and Respondent, 

v* 

MINNESOTA MUTUAL LIFE 

ISSCRL'L'CE COMPANY, a Minnesota 

corporation, 

Defendant and AppelIant. 

Wiad Feb. 28.1991. 

IPc'Sm4,YCE, Apd from finding that insurance 

company wes liable on policy sold to p!aintiff where 

dd wec later found to have unreprted \isits to 

doctrr ad suqwted alcoholism. The Supreme Court 

held: 

1. An omidon or misrepresentation may be 

material if, had the truth kn known, the rezsonable 

and prudent insurer would not have issued the policy 

I or would have issued it at a higher premium. 

2. An expert need no have been employed by the 

defendant insurmce company &fore he can comment 

on the practices of that company. 

3. Dmzges are not wm+d where 8 reasonable 

ground for appeal exists. 

Appeal from the District Court of Carter County. 

Sirhenth Judicial District. 

Honorable Sat Allen, Judge presiding. 

For Appllmt: Thomas M. Blonaghan, Luczs & 

Momghan, P.C., Miles City 

For kpndent: Gaq k Rj-der, Forq-th 

JUSTICE HUYT delivered the Opinion of the 

Court. 

Following a bnch trial, the District Court of the 

Sixteenth Judicial District, Cater County, found 

defendant md ap~llant, Minnesota hlutual Life Insurance Company,lia.bleon a life irsuransepliqsold 

to plaintiff and respondent, Darlene Schneider, and 

her husband, Jock Schneider. Minnewta 3futual ap 

PAS. U'e afEr7.n. 

The following issues are raked on appeal: 

1. Did the District Court err in fiiling to enter 

judgment in favor of Minnesota Mutual? 

2. Did the District Court en in allo~icg expert 

testimony? 

On Ahhrch 7, 1983, Jock Schneider renewed his 

existing loans at the First 3ationa.I Bd of EkRlakIl 

and bornwed an additional $1,500, increzsing the 

total amount of his debt to the Bsnlr to $28,600. At 

the same time, he applied for ran^ coversge in 

the amount of $20,000 under Minnesota Mutual's 

Protection Plus program, a group life plan sold 

through find institutions toprotect the debt ofthe 

borrower. At the time of the application, Jock had 

existing life. insurance coverage with Minnesota 

Mutual in theamount of $30,000. 

Dean Parks, \-ice president of the Bank and a 

partner in the Ekalaka rrsurance Agency, misted 

the Schneiders in completing the application by asking Jock questions and t-vping his resporses on the 

f~rm. Parks had bourn Jock all of his life and had 

done business with the Schneiders ova the years. 

The irsurance application contained two questions 

re!ating to health: 

"1. During the 1st three yars, have you been 

hospitalized or have you corsuJted a physician or 

physicians for any rezson? 

"2. Have you ever kn treated for or advbd tbt 

you had any of the following. heart, lung, n- ~YVOU or 

kidney disorder, high blood pmure, cancer or tumor, 

diabetes?" 

The application requested additional inf~rrnation if 

the applicant arswered 'yes" to either question. Jock 

answered "non to both questions. His wife, Darlene, 

arswered '>esn to the Arst question and provided 

information ~gording the removal of a qst in 1983. 

On Mmh 23,1983, Jock died of a gurshot wound 

to the head. A coroner's jury determind that the 

dath was accidental. The District Court in the 

present chi1 -found that the death wsnot related 

to alcohol. 

Minnesota Mutual promptly paid the claims on the 

life insurance policies procured by Jock prior to the 

1983 policy at kue in this case. It did not, however, 

autonatjcally pay on the 1983 Protection Plus Policy. 

Irskad, the efkctive date of coverage on the 

1983 policy ~izs within two years of the date of death, 

the insurance company invoked the con4atability 

clauw in the pljcy and conduc!! a routine investigation of Jock's mdical history. 

During the investigation, Minnesota Mutual obtained the medical rmrds of Dr. Stephen Shaub of 

STATE REPORTER VOLUlE 48 -- 28 Feb. 1991 
.225 .. . Sehneider v. Minnesota Blutuq Life Ins. Co. 

48 StStep. 224 

Ekakh The ncords showed that Dr. SFaub had 

seen Jock xveral times letwen Decembr 2, 1981 

and June 21,1982. On December 2,1981, Dr. Sbub 

diagnosed Jock as surering from almholkm and 

depression. He p-rxd medication for the ailments. Follow-up visits oacurred on Jan- 4, 

January 18, and February 16,1982 to check mediation. On April 26, 1982, the doctor once again assesd Jock's condition as alcoholis and depression. 

1. Medication was refilled on June 21,1982. 

. . -. 5. On June 20,1983, ,&nnesota Mu td sent Darlene ' 

a letter rejecting her claim for benefits under the 

$20,000 policy because Jock bad failed to dklase the 

visits to Dr. Shaub in the insurance application. bfinnwta hlu tual wmte: . - ? - .i - 

>.' "After carefbl consideration, we have determined 

that if this additioral information [the visits to Dr. ' Shaub] had been available to our underw~iters at the 

time they were mrsidering your husband's applimtion for this insurance, they would have declined to 

irsure him." 

Darlene instituted this action against Minnesota 

2clutual, alleging breach of contract for failing to pay 

the claim. She additionally mught punitive damzges 

on several thsories. The District Court bifurca!d the 

action and a bsnch trial procdad on the contract 

issue only. Following trial, the court entered findings 

of fact, conclusiors of law and judgment in favor of 

Dulene. The court then ertified the judgment as 

6nal pusuant to Rule 54@), 3t.R.Civ.P. This appal 

fo!lowed. 

Did the District Court en in failing to enter judgment in favor of Minnesota Mutual? 

bfinnessta Mutual argues that § 33-15-403, MCA, 

allows it to deny Dulene's claim because Jock inmrredly completed the imumnce application by failing 

to reveal the visits to Dr. Shaub. Section 33- 15-403, 

MC.4, provides: 

"(1) All statements and descriptions in any applimtion for an in-curance policy or mnuity contract or in 

negotiatiors therefor by or in beFdf of the irsured or 

annuitant sFdl be deemed to be represe~tatiors md 

not wmanties. 

"(2) Iifisrepresentations, omissions, condment of 

facts, end incorrect staf.ements shall not prevent a 

reanvery under the policy or contract un!-Q either: 

"(a) fraudulent; 

"(b) material either to the accepknce of the risk or 

to the hazard ==urnad by the irsurer; or 

"(c) the irsurer in good faith would either not have 

kued the policy or amtract or would not have issued 

a policy or contract in as kgs an amount or at the 

same premium or mte or would not have provided 

covere with respect to the haad resulting in the 

loss if the true hcts had keen rrade known to the 

insurer as required eitber by the application for the - .- policy or contract or otherwise." 

Minnesota Mutual contends, and- Darlene conceds, that this statute should be red in the dsjune 

tive. Thus, a misrepresentation, omission, 

concealment of fact or incorrect,statement will 

prevent recc\qry under an insurance policy if one of . the three factors listed in subsaction (2) is pmnt. 

Both hies agree that Jwk's fa&& to notify 

Minnesota .Mutual of his visits to Dr. Shaub constituted a mkrepmntation, omission, concealment 

of hds or incorrect statement es spwified in'the 

statute. Darlene maintains, however, that Jock's 

&be arswer on the irsurance application dw not 

prevent ravery because it was neither fraudulent 

nor material nor would Mirnmta Mutual in good 

faith Fave denied the policy had Jock revealed the 

corsultations with the dxtor. ftlinnesota Mutual, on - 

The District Court found that ftfinnesta Mutual 

did not carry its burden of proving that Jock 

fraudulently completed the application. U'e hold that 

this finding is not clearly erroneous. 

.1 

~inn&ta Mutual next mgus that the infomation Jock omitted on the application was ma!erial. 

The requinment that a misrepresentation on an - 

"materia! either to the 

assumed by the 

a great deal with 

the condition in 3 33-15-403(2) (c), IiICA, that allows 

an irsurer to deny cove- for a misrepresentation if 

the irsurer in gmd faith would not have 1) &ued the 

policy; 2) issued the policy in as lage an mount; 3) 

issued the policy at the same premium; or 4) provided 

coverage with respct to the hazard resulting in the 

lass. . 

[I] An' omission or misreprsentation may be 

material if, had the truthbsen known, the rezsonable 

and prudent irsurer would not bve hued the policy 

or would have it at a higher premium. Cumminp v. Prudentid Ins. Co. of berica, 542 F. Supp. 

838, 840 (S.D. Ga. i982); Prudential Ins. Co. of 

America v. Amla, 428 P.2d 640, 644 (N.M. 1967). 

This definition ofrnakriality incorporates the idea of 

subsextion (2)(c), tbat is, that the policy wou;d not, 

VOLCME 48 -- 28 Feb. 1991 STATE REPORTER 
Schneider v. Minnesota MUM Lile Ins. Co. 

48 St&p. 224 

timongother things, have ken issud had the ir-sured to tbe risk =msd by Minn 

retdd the true state of af?Xrs. The primary dif- The Di-trict Court did no 

f~rence between the two subsections is that (2)(b) hlinnmta Mutual's denial of coverage 

deals with an objective standard of materiality, rated under O 33-15-403 (2) (b), MCA. - ,-&- -:;f r-ndleness, while (2)(c) =fers to a subjective Mimwta a?so argvej tht it legitimatelj stmhd, gd faith. denied covenge under suktion (2)(c) bezw it 

Minnesota Mutual contends that it justifiably would not in gcod fajth Fave irsured Jock if it had 

denied coverage under subsection (2) (b) because the known that he Fad bsen diegnd es an alcoholic. 

diagnmis of alcoholism wes material to the risk assumed. The materiality of an irsured's mkrepresen- Like the qwstion of makridity, the question of 

tation is determined by the extant the &he =wer good faith is a question of fact. The District Court 

the risk of concluded that Minnemta Mutual did not exercise 

in the irsurance good raith in reviewing the claim becaw it mnducted 

material if it diminishes the only a limited investigation of the facts regarding 

opportunity to dekmine or estimate its hk's alcohol use and that this investigation was 

Berger v. *Wnnesota Mute Life Ins. Co. of St. conducted for the ale purpose den~ing the 

pa,,], M~~,, 723 p.2d 388,391 wt& 1986). ~h~, the It also found that Minnesota Mutual failed to follow 

materiality of a misrepresentation generally is its oan underwriting criteria for applicants who use 

mezsured at the time the irsurer issues the ~olicv alcohol. These finding are not clearly erroneous. 

rather than at the time ofthe insured's death. ~.&e;, Minnesota Mutual's underwriting manual 723 P.2d at 391. pro\idzd: . 

The quetion of materiality is a question of fact. 

Berger, 723 P.2d at 392. In this case, the District 

Court found that Jock's incormt statement on the 

insurance application was not matzrial. This finding 

is not clear13 erroneous. 

As the District Court pointed out, the Protection 

Plus group life insurance application failed to ask any 

specific questions about either alcoholism or alcohol 

we. The court surmised that the prudent in= -urer 

would hive s~ifically ques!.sc? inf~rmation about 

all critical underwriting factors. Thus, if alcoholism 

was indd rna!erial to .wnnmta Mutual's amp 

tance of the risk, it would have expm-ly sked quest iors about alcohol use, just as it specifically requested 

information about heart, lung, nervous or kidney discirders, high blood pressure, czncer and diabe4a. 

Other courts have reached a similar conclusion. Botway v. .herim Intl hurmce Co. of Xew York, 543 

N.Y.S.2d 651, 652 (N.Y. App. Div. 1989); Kampfe v. 

Minnewta Mut. Life Ins. Co., C.V. 82-21-BLG, slip op. 

at 11-12 (E.D. Mont. 1983). 

Minnesota Mutual's emplo~ees !stifid that alcoho1 use ~-2.s material to the decision to acept the 

risk because the company automatically denied 

covere to my applicant who had kn diagnd as 

an alcoholic and had been drinking within the five 

yeas pding the applimtion. Thic practice, however, wzs not reduced to writing in the underwriters' 

rcmual, although other pdures regarding alcohol 

habits were includsd in the rcmual. 

Substantial credible evidence supported the District Court's finding that alcohol cse was not material 

"A history of current acute alcoholism, delirium 

tremers and/or alcoholic pqchases is usually RVA 

[risk not acceptable]." (Empbzsis added.) 

Dspite this provision in the manual, a Minnesota 

Mutual underwriter testified that the mmpany aute 

matically rejected the application of anyone who had 

been dizgnozd as an alcoholic. 

In addit ion, the underu-riting manual required underu-riters to "[l]wk for the efCi?cts on busines: reputation and acumen, finslncial standing, home 

environment, social beha~j~r and alcohol depndence" 

when investigating m appliant's drinking habits to 

determine irsurability. Minnesota Mutual neglected 

to conduct such an inquiry. Irstsad, it relied solely on 

Dr. Shaub's medical rxords to deny covenge. Dr. 

Shaub, however, in his deposition introduced at trial 

admitted that he wesnot an expert on alcoholism and 

that Jock did not exhibit any of the ph~simlspptoms 

of the disezse. A chemical depndency coursel~r testified that there wzs not enough information in the 

medical records to determine whether Jock was an 

alcoholic. From this erida-ice, the District Cowt could 

haw properly concluded that had Minnesota Mutual 

follow& its cwn manual it would have discovered the 

extent of Jock's problem and may have issued the 

policy in spite of his alcohol use. 

The District Court did not abuse its discretion in 

concluding that Minnesota Mutual could not deny 

co~~rzge under faith pro\+sion of § 33-15- 

credible e\<dence 

pried the 

only a limit4 irrcstigation before rejecting~srlene1s\ 

STATE REPORTER VOLL9IE 48 -- 26 Feb. 1991