Opinion ID: 1441346
Heading Depth: 1
Heading Rank: 2

Heading: false information provided by applicant for health insurance policy, which concealed his history of alcohol-related seizures and treatment for alcoholism, amounted to misrepresentation and entitled the insurer to a rescission of the policy.

Text: Uncontroverted evidence was presented at trial that the decedent, Claborn, made misrepresentations both at the time of the application and when reached by telephone by the insurance company to confirm the answers. These misrepresentations regarded his problems with alcohol. Uncontroverted evidence was also presented that had the insurance company known of these problems, no policy would have been issued to the decedent. Therefore, the trial court erred in not granting the Washington National's motion for directed verdict made at the close of the evidence. 36 O.S. 1991, § 3609, grants insurer a right to rescind a policy if there are misrepresentations contained in the application and the misrepresentations are material to the risk assumed by the insurer under the policy. This provision applies if the insurer would not have issued the policy had it been aware of the actual fact misrepresented. [1] Thus, in order for an insurer to escape liability under this section for misrepresentation in the application process, the insurer bears the burden of proof to show not only that the statements were untrue, but also that the misrepresentations were either fraudulent, material to the risks or hazards assumed by the insurer, and, in good faith, the insurer would not have issued the policy, or covered the hazard if the true facts had been known in the application. Failure to disclose a latent condition of which the person making application has no knowledge or reason to know does not constitute a defense to an action on the policy. Mass. Mut. Life Ins. Co. v. Allen, 416 P.2d 935 (Okl. 1965); Farmers and Banker's Life Ins., Co. v. Lemon, 204 Okl. 218, 228 P.2d 634 (1951). Where the evidence is conflicting as to either insured's state of health at the time of application, or the falsity of insured's statements in the application process, or the intent of the insured, the issues are properly tendered to the jury for resolution. Brunson v. Mid-Western Life Ins. Co., 547 P.2d 970 (Okl. 1976); Atlas Life Ins. Co. v. Eastman, 320 P.2d 397 (Okl. 1957). On review, if we find evidence in the record reasonably supporting the jury verdict on such questions, we are bound to affirm. Atlas Life Ins. Co. v. Eastman, 320 P.2d 397 (Okl. 1957). We do not find such evidence in the record in this matter. There was evidence presented at trial showing that the misrepresentations made by Claborn were indeed a known falsity to Claborn, and that had Washington National known of these misrepresentations, the insurance company would not have issued the policy to Claborn. Therefore, we must reverse. In Massachusetts Mutual Life Insurance Co. v. Allen, 416 P.2d 935, 940 (Okl. 1966), this Court when faced with a similar question dealing with 36 O.S. 1961, § 3609, relied upon the following sections of 29 Am. Jur., Insurance: Sec. 698.    A `misrepresentation' in insurance is a statement as a fact of something which is untrue, and which the insured states with the knowledge that it is untrue and with an intent to deceive, or which he states positively as true without knowing it to be true, and which had a tendency to mislead, where such fact in either case is material to the risk. Sec. 701. Whether a life insurance policy would have been issued had true answers been given in the application cannot be left to the determination of the insurer after the death of the insured. The matter is not to be settled by the mere pronouncement of the company after the death has occurred, but the matter misrepresented must be of the character which the court could say would reasonably affect the insurer's judgment as to the matter of the risk and amount of premium. Furthermore, the instant matter closely resembles Vaughn v. American National Ins. Co., 543 P.2d 1404 (Okl. 1975). In Vaughn, the insured provided false information on a life insurance policy that concealed his history of emotional problems, including depression and treatment in the psychiatric ward at Baptist Hospital. The application in Vaughn specifically asked if he had any of the aforementioned problems and he answered in the negative. The insured claimed that since he listed his family physician in the application, the insurance company was put on notice on any problems that he might have had regarding the emotional problems. This Court, applying 36 O.S. 1971, § 3609, held that the concealing of such information amounted to misrepresentation which was material to the acceptance of the risk on the life of the applicant. The insurer in Vaughn was entitled to rescission of the policy. Id. at 1407. Claborn urges that we not consider Vaughn without also considering Brunson v. Mid-Western Life Ins. Co., 547 P.2d 970 (Okl. 1976). Brunson, however is not controlling in the present case. In Brunson, the agent directed relevant questions governing kidney, gall bladder, female problems and pregnancy at the plaintiff's wife, then without waiting for a response, simply marked no. The insured had not understood the question to apply to him. In the present case, Mr. Claborn was the only person in the room with the agent and could not have mistaken the questions as being asked to someone else. Furthermore, the present case differs from Brunson in that Claborn verified the questions by phone when contacted by Washington National. There was no conflicting evidence as to this fact. Therefore, a directed verdict in favor of Washington National should have been granted. Washington National was lulled into complacency by Mr. Claborn's application containing false answers. There was nothing in the application that would have alerted Washington National to Mr. Claborn's past seizure episodes as well as his treatment for alcoholism. The insurance company did not rely only on the application, but also telephoned Mr. Claborn to confirm the answers. Furthermore, there is no dispute that Mr. Claborn was untruthful on his insurance application, he admitted the misrepresentation. Nor is there a dispute over whether the insurance policy would have been issued had Claborn been truthful. The Underwriters employed by Washington National testified that if they had known of Mr. Claborn's alcohol-related problems, no policy would have been issued. Mr. Claborn's expert testified that had Mr. Claborn answered all the questions on the application truthfully, Washington National probably would not have issued the policy. In the case at bar, it is evident that the misrepresentations regarding Mr. Claborn's alcoholism [2] contained in the application are material to the risk assumed by the insurer under the policy. The insurer would not have issued the policy had it been aware of the facts misrepresented. Furthermore, Claborn never presented evidence that Washington National was ever in possession of the State Farm Policy which contained the rider, thus Washington National could not have had actual knowledge of the rider. Washington National is entitled to rescission of the insurance contract. The trial court erred by not granting Washington National's motion for directed verdict.