Title: Herdman v. National Reserve Life Insurance Co.
Citation: 209 N.W.2d 364
Docket Number: 11151, 11154
State: south-dakota
Issuer: south-dakota Supreme Court
Date: July 12, 1973

209 N.W.2d 364 (1973) Lucille HERDMAN, Plaintiff, Respondent and Cross-Appellant, v. NATIONAL RESERVE LIFE INSURANCE COMPANY, Defendant, Appellant and Cross-Respondent. Nos. 11151, 11154. Supreme Court of South Dakota. July 12, 1973. Rehearing Denied August 15, 1973. Thomas E. Simmons, Bangs, McCullen, Butler, Foye &amp; Simmons, Rapid City, for plaintiff, respondent and cross-appellant. Robert C. Heege, Davenport, Evans, Hurwitz &amp; Smith, Sioux Falls, for defendant, appellant and cross-respondent. MILLER, Circuit Judge. Plaintiff commenced this action to recover the proceeds of a life insurance policy issued on the life of her husband in which she was the named beneficiary. The defense was that the deceased insured, in his application for said policy, had given false and misleading answers to the questions therein, which were material to the *365 risk and which induced defendant to issue the policy which it would not have done had it known the true facts. Defendant appeals from a judgment entered upon a jury verdict in favor of plaintiff, claiming primarily that the trial court erred in denying its motions for directed verdict and judgment n. o. v. on the grounds that as a matter of law the misrepresentations, omissions, misstatements and concealments of fact by the insured were material to the risk and a reasonable insurer would not have issued the policy at all, or if at all, then at a higher premium rate, if it had known the full, complete and true facts. Plaintiff has filed a cross appeal arguing first that the trial court erred in refusing to instruct or submit to the jury the question of whether the defendant's refusal was either vexatious or without reasonable cause, and, secondly, that the trial court's determination as a matter of law that such refusal was neither vexatious nor without reasonable cause (and as a result refusing to allow plaintiff a reasonable sum for attorney fees as part of her costs) was erroneous. Ansel S. Herdman, the insured, died February 19, 1970, of "congestive heart failure due to probable coronary occlusion", some four months after making application for the life insurance policy which is the subject of this suit. He had been married to plaintiff on two occasions. They were first married in 1943, which marriage terminated by divorce in 1958. In 1960 he married his second wife, Reba, who was a laboratory technician in the clinic of Dr. Janss, whose testimony will be alluded to later in this opinion. The marriage to Reba terminated by divorce in 1966, and later that year he remarried plaintiff and remained so married until the time of his death. Dr. Janss first saw Herdman as a patient in September 1962, when Reba thought he should have an electrocardiogram (EKG). The EKG was taken and was diagnosed by Dr. Janss as a "suspicio[n] of a posterior myocardial infarct, old", of which Herdman was informed. In addition Dr. Janss determined Herdman's blood pressure was "running rather high" and prescribed diuril, plexonal and phenobarbital, and explained the reasons for the drugs. On July 5, 1963, Reba again thought an EKG was appropriate and upon the same being taken it was diagnosed the same as before, with the addition of an ectopic beat (on that date the blood pressure was still quite high). On July 16, 1963, a repeat EKG was run, revealing the absence of the ectopic beat. Dr. Janss examined EKG's of Herdman again in October 1963, May 1964, and January 1965, all with the same diagnosis as previously made, and each time with an apparent elevated blood pressure. In January 1965, Dr. Janss specifically told Herdman that he did have "heart disease" and told him to limit his activities. In February 1965, he was hospitalized for suspicion of influence of alcohol and, among other things, was given medication to reduce high blood pressure. In December 1965, he was hospitalized because of drinking. Dr. Janss later saw him in April 1966, because of his drinking, at which time he had elevated blood pressure. In April 1967, another EKG revealed no change. In March 1968, Dr. Janss gave him a thorough physical and determined no change in his EKG and further determined that the blood pressure was well controlled. The apparent last time he was seen by Dr. Janss was in August 1969, in the hospital with alcohol problems. During all of the period material herein Herdman was prescribed medications and encouraged by Dr. Janss to take the same, although it would appear that he was not taking them regularly. Some two months after the hospitalization in September 1969, Herdman made application for the insurance policy which is the subject of this suit. Part of the application was a physical examination by a Dr. Dzintars, and it involved the completion of a questionnaire which was signed by Herdman *366 as being "full, complete and true to the best of [his] knowledge" and wherein he agreed that it would be a part of any policy issued. The answers thereto were given by Herdman and inserted by Dr. Dzintars after the physical examination. The portions thereof which are material to this appeal are as follows: Dr. Dzintars upon his examination made a cardiac diagnosis of "Normal heart" (no EKG was taken). His blood pressure readings were apparently borderline elevated and therefore the defendant required a follow-up examination which was conducted by Dr. Dzintars three weeks later. The written form providing for the follow-up exam required a blood pressure check (which revealed it to be normal) and asked whether applicant had or was taking medication to control hypertension. Dr. Dzintars at that time obtained the information from Herdman that he was not now taking such medicines but that he only had done so "For 2 or 3 mos, 6 years ago. Name &amp; dosage not known". Prior to the issuance of the policy, and during the period between the initial and follow-up exams by Dr. Dzintars, defendant requested and received a confidential life report from the Retail Credit Company. The first question therein was, "ANY REASON FOR NOT RECOMMENDING APPLICANT?", to which the answer, "YES Past habits." was given. In explanation of the above, the following comment was made: *367 In a letter to plaintiff's former counsel refusing to make payment under the policy, an assistant actuary of defendant advised that: Said actuary testified that the information regarding prior knowledge of the high blood pressure was from the examination by Dr. Dzintars. A vice president in the underwriting department of defendant testified that it was defendant's policy to treat a diagnosis of "suspicio[n] of a myocardial infarct" as an actual diagnosis of a myocardial infarct and that if such diagnosis was made within one year of the application, coverage would be denied, and if it were within a ten-year period the premium would be rated up. He further testified that their procedure with persons with a reading of high blood pressure on the initial exam was to obtain supplemental readings, such as was done on the follow-up exam here with Dr. Dzintars, and inquiries would be made if there were current medications being taken. He further testified that his company would wait two years after an alcoholic cure before issuing a life insurance policy at standard premiums. Defendant denied payment of the proceeds under the policy and tendered return of the premium paid, and defended this lawsuit under the authority of SDCL 58-11-44, which provides: Defendant makes no claim that fraud was an issue in the case and, in fact, specifically conceded that it was not. Plaintiff argues that defendant should be estopped from claiming the benefit of SDCL 58-11-44, contending that by virtue of the Retail Credit Company report defendant had actual knowledge of true facts or sufficient information therefrom to put it on notice, or placed it under a duty of further inquiry. Plaintiff has cited 43 Am.Jur.2d, Insurance, § 742, which states: We do not reject this principle of law, however, it is our opinion that the facts in this case do not warrant its application here. Several cases similar to this have been before this Court on previous occasions. Perhaps the most prominent of these are: Ivory v. Reserve Life Insurance Co., 78 S. D. 296, 101 N.W.2d 517; Bushfield v. World Mutual Ins. Co., 80 S.D. 341, 123 N.W.2d 327, and Norwick v. United Security Life Co., 82 S.D. 640, 152 N.W.2d 439. In the Norwick case we held that: In the Ivory case we reiterated the proposition that an insurance policy may be voided when an applicant makes material misrepresentations in reliance upon which the policy is issued. Therein we said: In the Bushfield case we said: In the case of Lindlauf v. Northern Founders Insurance Company, 1964, N.D., 130 N.W.2d 86, that court summarized a previous decision relating to the question of when the issue of materiality of the misrepresentations become one of law for the court. Therein the court quoted from a previous case as follows: In the case at bar the answers made to the questions above quoted were false and did not reveal to the insurer that the insured had a diagnosis of heart disease and high blood pressure nor that he had taken medication for the same. Further, they did not even reveal the several examinations and EKG's by Dr. Janss nor the various hospitalizations. The application was the basis of the insurance contract and was made a part of it by its terms. The insurer testified that had it known the true facts it would have either refused to issue the policy or would have issued it at higher premiums. *369 Our review of the evidence indicates that reasonable minds could not differ that there were misrepresentations, omissions and concealments in the application and that the matters so misrepresented increased the risk of loss. The court erred in refusing to grant the motion for directed verdict and the motion for judgment notwithstanding the verdict. The action as to appeal # 11151 is remanded to the circuit court with directions to enter judgment for the defendant and provide that plaintiff is entitled to a return of the premiums paid. In view of the foregoing opinion as to appeal # 11151, the plaintiff's cross appeal, # 11154, is rendered moot and the appeal is dismissed. All the Justices concur. MILLER, Circuit Judge, sitting for DOYLE, Justice, disqualified.