Opinion ID: 2511841
Heading Depth: 1
Heading Rank: 5

Heading: Intent/Duty to Read

Text: The first issue relates to Karen's argument that an intent to deceive cannot be implied from a mere failure to read an insurance application. In making this argument, Karen appears to interpret the Court of Appeals' decision as adopting a simple negligence standard for fraud. We do not read the Court of Appeals' decision in this way. Nevertheless, her arguments raise the question of what level of intent is required to establish a misrepresentation or omission that would justify the rescission of an insurance contract. Several states have adopted the rule that an insurance policy may be rescinded based on a negligent misrepresentation. See, e.g., John Hancock Mut. Life Ins. Co. v. Weisman, 27 F.3d 500, 504 (10th Cir.1994) (New Mexico law); Munroe v. Great American Ins. Co., 234 Conn. 182, 188 n. 4, 661 A.2d 581 (1995); Curtis v. American Community Mut. Ins. Co., 610 N.E.2d 871, 874 (Ind.App.1993). Kansas has not adopted this rule, however. Rather, Kansas courts have consistently recognized that an insurer may not rescind a policy on a mere negligent misrepresentation or omission, except where contracting, sophisticated commercial entities agree that standard should apply. E.g., National Bank of Andover v. Kansas Bankers Surety Co., 290 Kan. 247, 257, 225 P.3d 707 (2010); Scott v. National Reserve Life Ins. Co., 143 Kan. 678, 680, 56 P.2d 76, modified on other grounds 144 Kan. 224, 58 P.2d 1131 (1936). On the other hand, Kansas has recognized that an insurer may rescind a life insurance policy after a misrepresentation is made on the insurance application with reckless disregard for the truth. See Alires v. McGehee, 277 Kan. 398, Syl. ¶ 3, 85 P.3d 1191 (2004); Waxse v. Reserve Life Ins. Co., 248 Kan. 582, 586-87, 809 P.2d 533 (1991); Tetuan v. A.H. Robins Co., 241 Kan. 441, 467, 738 P.2d 1210 (1987); Scott, 143 Kan. 678, 56 P.2d 76; Sharrer v. Insurance Co., 102 Kan. 650, 652, 171 P. 622 (1918); see also St. Amant v. Thompson, 390 U.S. 727, 731, 88 S.Ct. 1323, 20 L.Ed.2d 262 (1968) (stating that reckless disregard for the truth in libel claims requires that defendant in fact entertained serious doubts as to the truth of the statement made); Restatement (Second) of Contracts § 164 (1981) (when party induced to enter contract by fraudulent or material misrepresentation upon which party justified in relying, contract voidable). In addition, Karen argues the Court of Appeals, whether using a simple negligence or reckless disregard for the truth standard, erred in holding the standard is met if an insurance applicant signs an unread application. She argues this holding is contrary to Schneider and Cooley. While Schneider and Cooley hold an insurance company cannot rely on the failure to read as a defense to an agent's fraud, they do not excuse an applicant from reading an application if there is no fraud, undue influence, or mutual mistake. Indeed, this court has previously stated the failure to obtain a reading and explanation of [a contract before signing] is such gross negligence as will estop him from avoiding it on the ground that he was ignorant of its contents. Maltby v. Sumner, 169 Kan. 417, Syl. ¶ 5, 219 P.2d 395 (1950). This holding is consistent with cases from other courts establishing that signing a document without reading it is evidence of a reckless disregard for the truth of statements contained in the document. See United States v. Thomas, 484 F.2d 909, 912-13 (6th Cir.), cert. denied 414 U.S. 912, 94 S.Ct. 253, 38 L.Ed.2d 151 (1973) (suggesting that defendant could be convicted of knowingly making false statement on firearms registration application, even if he did not actually read the form he signed and no questions were read to him, if by signing statement without reading it he acted with reckless disregard of whether the statements made were true or with conscious purpose to avoid learning the truth); United States v. Squires, 440 F.2d 859, 864 (2d Cir. 1971) (defendant can be convicted of `knowingly' making false statement by signing form without reading it, if he deliberately avoided reading it and, if he had read it, he would have been `aware of a high probability' that he was prohibited from obtaining firearm). Hence, if the jury were to accept Urban's version and conclude he did not commit fraud, the jury could determine the Chisms acted with a reckless disregard for the truth when they failed to read the application. Again, resolution of the issue requires the weighing of the conflicting evidence regarding the facts surrounding the taking of the application. Because of the disputed facts, the district court erred in granting summary judgment.