Opinion ID: 512864
Heading Depth: 2
Heading Rank: 3

Heading: Temporary Insurance Agreement

Text: 23 Lewis argues that he is entitled to insurance benefits under the TIA. The court concluded that Mr. Card's answer to the cancer inquiry was a material misrepresentation and precluded coverage. 24 A misrepresentation of fact by an applicant is material and sufficient to avoid an insurer's obligations if it induces the insurer to assume a risk which it otherwise would not. See Charlton v. Wakimoto, 70 Idaho 276, 216 P.2d 370, 372 (1950). The TIA provides also that a material misrepresentation will invalidate the agreement. 25 Two inquiries are required for evaluating an insurer's claim of material misrepresentation: 1) Did the applicant make a misrepresentation; and 2) was it material? See Wardle v. Int'l Health & Life Ins. Co., 97 Idaho 668, 551 P.2d 623, 626 (1976).
26 The failure to disclose information is a misrepresentation if the wording of the question is such that the applicant could reasonably have been expected to understand that disclosure was required. See Wardle, 551 P.2d at 626. 27 The TIA posed just two questions regarding the applicant's health. The critical one stated: 28 Has (have) the person(s) listed above as proposed insured(s): 29 2. within the past two years been treated for heart trouble, stroke, or cancer, or had such treatment recommended by a physician or other medical practitioner; 30 If either of the above questions is answered yes or left blank, no agent of Kansas City Life Insurance Company is authorized to accept money and no insurance will take affect under this agreement. 31 Both health questions on the TIA dated December 14 were marked no. The district court ruled that the word cancer is not ambiguous, and that Mr. Card was required to answer yes to the second question. Lewis argues that Mr. Card was not obligated to disclose treatment for skin cancer because the term cancer, as used in the TIA, is ambiguous. He argues that the court erred by deciding, as a matter of law, that the negative response was a misrepresentation. 32 Idaho courts vest responsibility with the fact-finder for determining whether a response is a misrepresentation. Dean v. Nationwide Life Ins. Co., 96 Idaho 772, 536 P.2d 1122, 1125 (1975). Federal courts, of course, are not bound by state law when allocating responsibility between the court and fact-finder. See Deland v. Old Republic Life Ins. Co., 758 F.2d 1331, 1335 (9th Cir.1985). We need not decide if the question is one for the fact-finder because the record is insufficient to create a disputed issue of fact. See Fed.R.Civ.P. 56(c). 33 The record does not reflect an ambiguity. It indicates that Mr. Card wrote on the medical questionnaire skin cancer on R. temple removed by surgery in response to a question about prior diagnoses for tumor or cancer. He wrote also skin cancer surgery complete removal as the reason for his most recent visit to a physician. 34 Lewis's argument that skin cancer is fairly common, and individuals simply to do not associate it with the ordinary meaning of 'cancer,'  is not availing. Mr. Card associated his condition with cancer on the health questionnaire. There is no reason for him not to have made the same association two days later on the TIA. Under these circumstances, it is reasonable to have expected him to understand that the TIA's inquiry required disclosure of the cancer. The negative response was a misrepresentation.
35 The court ruled that the negative response was material. Lewis argues that it was not because Kansas City Life knew of the cancer at the time it evaluated the insurance application, that it decided to offer coverage despite knowledge of the cancer, and that the cancer was in no way connected with Mr. Card's death. He argues also that the court erred by deciding the question of materiality. 36 The question of materiality is reserved generally for the trier of fact. See Matthews v. New York Life Ins. Co., 92 Idaho 372, 377, 443 P.2d 456, 461 (1986). But the absence of a legitimate factual dispute makes it appropriate to decide the question as a matter of law on summary judgment. See Fed.R.Civ.P. 56(c). 37 Lewis relies heavily on the argument that the negative response was not material because Kansas City Life decided to insure Mr. Card despite its knowledge of the cancer. But the question of coverage under the application is not now at issue. The court decided that question on the failure to meet an express condition of the application, not on a material misrepresentation. 38 The question of materiality is relevant only to the validity of the TIA. A misrepresentation is material if it induces an insurer to provide coverage when it otherwise would not. See Wakimoto, 216 P.2d at 372. By statute, Idaho limits the effect of misrepresentations: 39 Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either: 40    41    42 (b) material either to the acceptance of the risk, or to the hazard assumed by the insurer; or 43 (c) the insurer in good faith would either not have issued the policy or contract, ... 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. 44 Idaho Code Sec. 41-1811. 45 We conclude, as a matter of law, that the negative response was a material misrepresentation. The TIA states expressly that no insurance will take effect under this agreement unless the applicant answers both questions affirmatively. Because the TIA provides immediate interim coverage, Kansas City Life does not have the opportunity to evaluate risks individually. It has determined that applicants who meet the medical qualifications are acceptable risks, and it provides coverage without further evaluation. Those who do not are unacceptable and will not be covered. It depends solely on accurate responses to the health questions to identify acceptable and unacceptable risks. 46 By express terms of the TIA, Kansas City Life will not accept the risk of interim coverage unless the applicant meets the health qualifications. The TIA provides that those conditions cannot be waived. A false negative answer to either health question would induce Kansas City Life to provide interim coverage when it clearly would not otherwise. The misrepresentation here falls within subsections (b) and (c) of section 1811. The failure to answer the health questions accurately is a material misrepresentation and a sufficient ground to avoid coverage. 47 Lewis asserts two waiver arguments: (1) Kansas City Life waived the requirement that the applicant be free from cancer because it requested the TIA even after it learned of his cancer; and (2) it waived two provisions of its Agent's Manual by accepting payment with the TIA. Kansas City Life requested the TIA after Mr. Card's death. 48 Nothing in the record suggests that Lewis relied on that request. That alone is sufficient to reject the waiver argument. We also point out that the TIA states explicitly: No one is authorized to waive or modify any provision of this agreement. Proof that Kansas City Life had waived provisions of its Agent's Manual would not entitle Lewis to relief. Those provisions do not stand in the way of coverage; it is the conditions of coverage requiring freedom from cancer. 49 We summarily reject the argument based on Industrial Indemnity Co. v. United States Fidelity and Guaranty Co., 93 Idaho 59, 454 P.2d 956 (1969). There was never any coverage to rescind; the TIA had not been submitted and the policy had not been delivered.