Opinion ID: 1221869
Heading Depth: 1
Heading Rank: 1

Heading: Misrepresentation by the Agent

Text: Section 10-2-204, C.R.S.1973, provides, in pertinent part: [B]ut no statement or declaration made to or by an agent . . . not contained in the application, shall be taken or considered as having been made to or brought to the notice or knowledge of the company, or as charging it with any liability by reason thereof. [3] In applying the statute to this case, we note that the insurer never raised the issue of the applicability of the statute in his pleadings, during the course of the trial, or in his motion for a new trial. We are, thus, presented with application of a statute not raised or considered below. This alone may be considered a sufficient basis for waiver of the statutory protection. See C.R.C.P. 9(i); People ex rel. Kinsey v. Sumner, 34 Colo.App. 61, 525 P.2d 512 (1974). See also Denning v. A. V. Wilson & Co., 137 Colo. 372, 326 P.2d 77 (1958). Even assuming that the application of the statute had been properly raised, we find the statute, under constructions previously adopted by this court, inapposite to the facts of this case. In New York Life Insurance Co. v. Fukushima, 74 Colo. 236, 220 P. 994 (1923), this court limited the effect of the above statute in these terms: The solicitor and medical examiner of an insurance company are its agents, their acts and knowledge are those of their principal and the insured cannot be held responsible for a wrong perpetrated through their fraud or negligence. False statements . . . known to them at the time made to be false are no defense. (Emphasis added.) Accord, Federal Life Insurance Co. v. Kras, 96 Colo. 589, 45 P.2d 636 (1935); Northwestern Mutual Life Insurance Co. v. Farnsworth, 60 Colo. 324, 153 P. 699 (1915); see also Constitution Life Insurance Co. v. Rogerson, 130 Colo. 26, 273 P.2d 1019 (1954); German American Insurance Co. v. Hyman, 42 Colo. 156, 94 P. 27 (1908) (no-waiver clause in policy held inapplicable because agent's acts estopped insurer; such clauses are to be narrowly construed); Pomeroy v. Rocky Mountain Insurance and Savings Institute, 9 Colo. 295, 12 P. 153 (1886) (agent's waiver of insurer's claim of misrepresentation against applicant). A situation similar to the instant case arose in United American Life Insurance Co. v. Rebarchek, 134 F.Supp. 554 (D.Colo. 1955). There, the insurer sought to avoid the policy because of material misrepresentations by the insured. The agent of the insurer had filled out the application. The insured was asked, pursuant to the application, Do you use alcoholic beverages in any form? He responded: Sure, I take a drink now and then moderately. The agent then said: Sure, put down `No,' because we all do once in a while. The court then noted that under Colorado law, . . . since misinterpretation, negligence or fraud on the part of the agent in such circumstances fall without the statutory prohibition, by the same reasoning such also fall without the policy limitations on `statements and promises' of the agent. The Rebarchek court relied, in part, upon Suravitz v. Prudential Insurance Co., 244 Pa. 582, 91 A. 495 (1914) (policy provision stating that agent could not bind the company falls far short of protecting the principal from the negligence or fraud of the agent in preparing the application.). Even where the statute has been applied to prevent recovery, the agent's act has been such as to clearly contradict the terms of the insurer's application form or policy. In Benson v. Banker's Life and Casualty Co., 147 Colo. 175, 362 P.2d 1039 (1961), we applied the statute to the issue of whether a misstatement of an insurance company agent that the company is interested only in illness which occurred within the previous five year period, which statement is contrary to the express terms of the insurance contract, is binding upon the company so as to require that the policy be upheld and enforced notwithstanding the falsity of the information contained therein. We concluded that [t]he agent's oral representations, contradicting the express terms of the insurance contract, could not be binding on the defendant company. (Emphasis added.) See also Warner v. Farmer's Automobile Inter-Insurance Exchange, 104 Colo. 359, 90 P. 965 (1934) (attempted waiver of forfeiture clause by agent); Commonwealth Casualty Insurance Co. v. Kuhrt, 75 Colo. 175, 225 P. 251 (1924) (regarding authority of agent to bind company as to effective date of insurance). But see Massachusetts Protective Ass'n v. Allen, 54 F.2d 788 (D.Mo.1931) (applying Colorado law to preclude insured's claim of entry of false answers by agent). The problem we face in this case was aptly stated in Cadez v. General Casualty Co., 298 F.2d 535 (10th Cir. 1961): It may be that some insurance agents in their enthusiasm to produce business make reckless or negligent statements concerning policy coverage. The complexity of modern insurance contracts is such that persons desiring protection understandably place great reliance on the agent who handles their insurance business. The petitioner in this case was faced with questions which, if taken literally, would require an open-ended, exhaustive disclosure of even the slightest ill-feeling ever suffered by her mother. Therefore, in asking the agent about the proper construction to be given to these questions, the petitioner was not seeking an alteration or waiver of the express terms of the contract or application form; she was merely seeking to make sense of otherwise unanswerable questions. The agent's response that the insurance company was interested only in serious matters was a reasonable interpretation of the form. See United American Life Insurance Co. v. Rebarchek, supra . It did not contradict the terms of the application and is not within the letter or policy of the insurer's statutory protection against the waiver of express terms by agents. If the agent was negligent in his interpretation of the form, the responsibility for such error must lie with the insurer. See New York Life Insurance Co. v. Fukushima, supra . To hold otherwise would invite promulgation of insurance application forms and conduct by an agent which would trap the unwary. [4] The trial court found that the petitioner had answered the questions truthfully and in good faith. Even had application of the statute been raised below, the result, based upon the above analysis, would necessarily be the same. As there was competent evidence to support this finding below, we will not disturb it on appeal. New York Life Insurance Co. v. Fukushima, supra .