Opinion ID: 1749386
Heading Depth: 1
Heading Rank: 2

Heading: did the trial court err in submitting the issue of punitive damages to the jury?

Text: We begin this discussion by addressing National's assertion that the Millers knew that their application for insurance contained false information and as a result the insurance company had a judicial reason and therefore an arguable basis for denying the claim. Both agents Dillon and Blount testified that Mrs. Miller told them that her child had suffered a heart murmur. Although Blount denied that they were told the child had been hospitalized, Dillon stated that they were given that information. Later in the course of the trial Dillon retracted his statement and denied that they had been told that the child had been hospitalized. Regardless, both agents admitted knowing of the heart murmur. They failed to note that on the application or explain it in the space provided on the application. Both Dillon and Blount were aware that they had been responsible for filling out the application and that Mrs. Miller was relying on them to record her responses. Whether Mrs. Miller disclosed her child's hospitalization may have been a question of fact; however, there was no issue of fact as to whether she disclosed the heart murmur. Both Dillon and Blount testified that she had informed them of the murmur. In World Insurance Co. v. Bethea, 230 Miss. 765, 93 So.2d 624 (1957), this Court quoted from an earlier decision, Planters Insurance Co. v. Myers, 55 Miss. 479 (1877): We adopt the doctrine of those cases which hold that, if the agent takes charge of the preparation of the application, or suggests or advises what shall be answered, or what shall be a sufficient answer, the company shall not avoid the policy because they are false or untrue, if full disclosures were made by the applicant to him. Not only did Blount and Dillon take charge of the preparation of the application, but, they made the decision, independent of Mrs. Miller, not to record the information about the heart murmur. Under the law of this state National cannot avoid the policy because the application for insurance did not fully disclose information given to its agents. The failure of the application to contain all of the information relayed by Mrs. Miller to Dillon and Blount does not constitute an arguable basis for denying the claim. See, Bankers Life Insurance v. Crenshaw, 483 So.2d 254 (1985). National next asserts that the knowledge gained by Dillon and Blount while taking the application from Mrs. Miller cannot be imputed to it because they were merely soliciting agents. That position is contrary to the law of this state as defined both by statute and case law. Miss. Code Ann. § 83-17-1 (1972) reads as follows: Every person who solicits insurance on behalf of any insurance company, or who takes or transmits, other than for himself, an application for insurance or a policy of insurance, or who advertises or otherwise gives notice that he will receive or transmit the same, or who shall receive or deliver a policy of insurance of any such company, or who shall examine or inspect any risk, or receive, collect, or transmit any premium of insurance, or make or forward a diagram of any building, or do or perform any other act or thing in the making or consummation of any contract of insurance for or with any such insurance company, other than for himself, or who shall examine into or adjust or aid in adjusting any loss for or on behalf of any such insurance company, whether any of such acts shall be done at the instance or request or by the employment of the insurance company, or of or by any broker or other person, shall be held to be the agent of the company for which the act is done or the risk is taken as to all the duties and liabilities imposed by law, whatever conditions or stipulations may be contained in the policy or contract. Such person knowingly procuring, by fraudulent representations, payment or the obligation for the payment of a premium of insurance shall be punished by a fine of not less than one hundred dollars nor more than five hundred dollars, or be imprisoned for not more than one year. Decisions of this Court interpreting § 83-17-1 are far too numerous to attempt to enumerate them all. Some examples follow. In Hartford Fire Insurance Co. v. Clark, 154 Miss. 418, 122 So. 551 (1929), this Court held: Appellant does not seriously contend that the testimony is not sufficient to support the finding of fact that the agent Dicken had knowledge of the condition of the title or quality of ownership of the insured when he accepted and forwarded the application and when he countersigned and delivered the policy and collected the premium. Nor does appellant directly attempt to controvert the proposition of law that an insurance company, like other principals, is bound by knowledge of, or notice to, its agents within the general scope of his authority, notwithstanding a contrary provision in the application or policy. 32 C.J. 1069. This proposition of law has become too firmly fixed in our jurisprudence to be now questioned. For instance, on this point it was said in Rivara v. Ins. Co., 62 Miss. [720] at page 729: In such case the insurance company cannot claim that it has been wronged or deceived, and to permit it to issue a policy and take the benefits of the contract, knowing at the time that it is not bound thereby, and afterwards to avoid liability thereon, upon the ground that something existed or did not exist of which the company or its agent was fully aware at the time the contract was made, would be repugnant to that sense of justice and morality which is and should be inculcated by law. See, also, Ins. Co. v. Randle, 81 Miss. 720, 33 So. 500; Ins. Co. v. Gibson, 72 Miss. 58, 17 So. 13. But it is the contention of appellant that the agent Dicken was a mere soliciting agent, that he had no authority to issue a farm policy such as this, and that the facts were such as to put the insured on notice of this limited authority. Putting aside the fact that this policy under its express terms had no validity until countersigned by S.H. Dicken & Son, and that their signature was not the intermediate but the final act of execution which put the policy into existence, and conceding for the purposes of this case that Dicken was a soliciting agent only, we think the weight of modern judicial opinion throughout the country supports the proposition that knowledge acquired by a soliciting agent in the course of his employment in soliciting insurance, preparing and transmitting applications, delivering policies, etc., is ordinarily imputed to the company, 32 C.J. 1325; 26 C.J. 296-298, and, were the question a new one in this case and in this state, we would so hold, not only upon principles of the common law, but upon what we deem to be the clear provisions of our statute, section 2615, Code 1906 (section 5873 Hemingway's 1927 Code). But the question is not new in this state; it was expressly decided in Big Creek Drug Co. v. Ins. Co., 115 Miss. 333, 75 So. 768, in which the court said: It makes no difference whether Dezonia was a soliciting agent or a general agent of his company. The testimony undisputably shows that he was the only agent who solicited the insurance, inspected the risk, accepted the application, receipted for the premium, and delivered the policy... . In this case the knowledge of Dezonia was the knowledge of the company; and a policy delivered with full knowledge of a state of facts which under its written stipulations, would render the insurance void should be binding upon the company. We not only approve the holding in the cited case, but we approve and adopt the terse expression taken from the opinion in Bergeron v. Ins. Co., 111 N.C. [45] at page 47, 15 S.E. 883, wherein the whole matter is cast into one sentence as follows: The principle has been more than once announced by this court, that where a soliciting agent is informed, before the policy is issued, of a fact, which, if fraudulently concealed by the applicant, would constitute a ground of forfeiture under one of its conditions, and afterwards receives the premium and delivers the policy, his knowledge is imputed to his principal, and, whether he actually communicates the fact to the principal office of the company or not, the condition is deemed to have been waived. (Emphasis supplied) 154 Miss. at 427-429, 122 So. at 554. In Life Insurance Co. v. Cassity, 173 Miss. 840, 163 So. 508 (1935), the Court briefly set forth the facts and rules of law as follows: We are of the opinion that the case at bar is not controlled by said cases, and others of similar import. The proof of both the appellant and the appellee showed that the cashier of the Jackson office had authority to transmit applications for benefits under policies issued by the company in this state to the home office. It is true that the cashier did not pass upon the sufficiency of the proof to establish liability, but he was authorized to assist policyholders in preparing applications. It was his duty to transmit them to the home office, and to advise policyholders as to what their rights were under the policies, and what proof was necessary for them to furnish to the company in order to sustain their claims; and, as stated by the company's former agent, frequently claims were adjusted and disabilities paid, although in the opinion of the agent of the company they were not strictly bound thereby. In other words, the cashier of the local office was an agent for the company for receiving applications to be transmitted to the home office. That being true, the cashier of the Jackson office was the agent of the company or its alter ego, under section 5196, Code 1930, and the cases there cited and Aetna Ins. Company v. Lester, 170 Miss. 353, 154 So. 706. 175 Miss. at 851, 163 So. at 511. See also World Insurance Co. v. Bethea, supra , and Big Creek Drug Co. v. Insurance Co., 115 Miss. 333, 75 So. 768 (1917). Next, National argues that the knowledge of Dillon was not imputable to it because following the tape recorded conversation between Mrs. Miller and Dillon, the Millers had knowledge that Dillon was not being honest with National and therefore the inference that his knowledge was imputable to National was not applicable. At first blush, this argument sounds persuasive; however, upon examination its logic loses its luster. First, although Dillon told Mrs. Miller that he was going to misrepresent his knowledge to the insurance company, Mrs. Miller had no way of knowing that he would actually do so. Secondly, and more importantly, the Millers had absolutely no reason to believe that Blount or Brashier would join in this conspiracy of silence by failing to disclose and, at times, misrepresent the extent of their knowledge. Certainly the knowledge of Blount and Brashier was attributable to National. Both men were aware that Dillon had not been honest with the company. Both men, after having discussed repeatedly the fact that Mrs. Miller did inform them of the child's heart murmur, made the conscious decision not to disclose the truth. Blount and Brashier were supervisors and held executive positions with National. They not only had the authority, but the affirmative duty of transmitting the extent of their knowledge to National's claims office. Their failure to do so is completely unexplained by the record except by the inference that they were willfully covering up Blount's negligence in filling out the insurance application. Of course, bad faith on the part of an insurance company must be in the form of some act or failure to act on the part of an individual or individuals acting for the company. Where these agents failed to correctly record Mrs. Miller's responses on the application and then further failed to bring that error to the attention of the claims department, and in fact, misrepresented the extent of their knowledge, it cannot be said that a jury would not be justified in finding that those agent's actions amounted to willfulness or such gross negligence as to amount to a reckless disregard of the Millers' rights. In that situation, the issue of punitive damages is properly submitted to the jury. Bankers Life & Casualty Co. v. Crenshaw, supra; Commodore Corp. v. Bailey, 393 So.2d 467 (Miss. 1981). In Napp v. Liberty National Life Ins. Co., 248 Miss. 320, 159 So.2d 164 (1963), this Court held that it is well settled that the principal is liable for the frauds and misrepresentations of his agent acting within the scope of the authority or employment of the agent, even though he had no knowledge thereof and received no benefits therefrom. In this case, the knowledge of Blount and Brashier was attributable to National. That knowledge was not only that Mrs. Miller had revealed her son's heart murmur, but also that Agent Dillon was misrepresenting the extent of his knowledge. Instead of coming forward with what they knew to be the truth, Blount and Brashier also chose to conceal the truth. Finally, we look at the extent of investigation into the claim made by National prior to its rejection. National's claims office and its attorneys never interviewed Blount or Dillon until only two weeks prior to trial, some eleven months after rejecting the claim. Those attorneys never made discovery requests which would have revealed Dillon's tape recorded conversation with Mrs. Miller. In addition, the failure of National to even interview Dillon's supervisor, Blount, until just two weeks prior to trial is tantamount to the inexcusable inadequate investigation we condemned in Bankers Life & Casualty Co. v. Crenshaw, supra. When all of these circumstances are viewed together, we conclude that the issue of bad faith and punitive damages was properly submitted to the jury.