Court Opinion

ID: 9684316
Source: CourtListenerOpinion
Date Created: 2023-08-24 13:53:20.532924+00
Date Added: 2024-06-11T18:17:54.576826
License: Public Domain

Larry D. Vaught, Judge, concurring. I concur in the result reached by the majority only because we are bound by the interpretation of Ark. Code Ann. § 23-79-107 set forth by the supreme court in Phelps v. U.S. Life Credit Life Ins. Co., 336 Ark. 257, 984 S.W.2d 425 (1999). Phelps established that an insurer cannot rely on section 23-79-107(a) (3) to rescind a policy if an applicant, in good faith, answered a question concerning a pre-existing medical condition in the negative, even though the empirical fact of the preexistence of the condition was proven. The trial court in this case found that a question of fact remained as to the applicant’s knowledge of the lung condition; therefore, summary judgment is not appropriate, and we must reverse. I do not agree with the majority’s analysis which attempts to reach the same conclusion as Phelps using prior case authority. Arkansas Code Annotated § 23-79-107(a) provides: (a) All statements in any application for a life or disability insurance policy or annuity contract, or in negotiations therefor, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warranties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under the policy or contract unless either: (1) Fraudulent; (2) Material either to the acceptance of the risk or to the hazard assumed by the insurer; or (3) The insurer in good faith would not have issued the policy or contract or would not have issued the policy or contract in as large an amount or at the same premium or rate or would not have provided coverage with respect to the hazard resulting in the loss if the facts had been made known to the insurer as required by the application for the policy or contract or otherwise. This statute has been on the books in substantially this same form since 1959, having been adopted by Act 148 of 1959. The purpose of the provision is found in the first sentence where statements in insurance applications are held to be representations and not warranties. Prior to Act 148 of 1959 the law provided that such statements were warranties. See Ark. Stat. Ann. § 66-1015 (1947). Because insurers could no longer rely on the warranties of their applicants, they were given three grounds for rescinding a policy if it were determined that a statement made on the application was a misrepresentation, omission, concealment of fact, or incorrect statement. As quoted in Life and Casualty Ins. Co. v. Smith, 245 Ark. 934, 938, 436 S.W.2d 97, 99 (1969), Couch on Insurance 2d, 35:24, states: If it is shown that the misrepresented matter was material to or increased the risk it is immaterial and irrelevant that the insured had acted in good faith without any bad motive or intent to deceive. This means that if a representation is made which is untrue and material it taints the contract, whether fraudulent or not, and if untrue and fraudulent, it taints the contract, whether material or not. This analysis was used by the supreme court to uphold the rescission of a policy where it was shown that the applicant had no. knowledge of his wife’s preexisting condition in Dopson v. Metropolitan Life Ins. Co., 244 Ark. 659, 426 S.W.2d 410 (1968). Similarly, in Union Life Ins. Co. v. Davis, Adm’x, 247 Ark. 1054, 449 S.W.2d 192 (1970), the supreme court reversed and dismissed a judgment for the insured where the deceased stated on his application that he was in good health (and thought he was), but it was determined that he suffered from coronary artery disease at the time of the application. See also Marshall v. Prudential Ins. Co., 253 Ark. 127, 484 S.W.2d 892 (1972), and American Family Life Assur. Co. v. Reeves, 248 Ark. 1303, 455 S.W.2d 932 (1970). Each of these cases is similar to the instant case in that the applicant, in good faith, attested to good health, and the company relied on the representation and issued a policy. In each case the proof reflected that a preexisting condition caused the death or loss to the insured, and in each case the company asked for rescission based on section 23-79-107 (a) (3). While there were different degrees of knowledge of the insured about the omitted condition, the court always reached the defense in subsection (a)(3). This is because the court consistently interpreted “incorrect statement” to mean what it says. The applicant’s subjective belief about his health does not make a statement about his health any more or less correct. The supreme court was consistent in these cases and applied a rational analysis of the statute. Even the cases relied on by the majority do not mandate a different result. American Republic Life Ins. Co. v. Edenfield, 228 Ark. 93, 306 S.W.2d 321 (1957) predates the statute in question by two years and has little, if any, value in construing it. Also, Edenfield was primarily concerned with doctor-client privilege and scope of discovery. The other principal case relied on in the majority opinion is Findley, Adm’x v. Time Ins., Co., 269 Ark. 257, 599 S.W.2d 736 (1980). This case affirmed a judgment for the insurer and is cited by the majority for what amounts to dicta. This brings us to Phelps, supra, the latest construction of section 23-79-107(a)(3). In that case, the applicant did not disclose prior heart problems because he misinterpreted a question on the application. The trial court found that the decedent answered in good faith and that the question was ambiguous, but that section 23-79-107(a)(3) applied and allowed the company to rescind. The supreme court reversed, holding that the question was ambiguous and it should be construed against the insurer. It further held that section 23-79-107(a) (3) did not apply because the applicant was truthful when he answered no to the question on the application, and therefore, there was no incorrect statement. I believe that this second holding in Phelps does not follow prior authority and does not reflect a reading of the clear language of Ark. Code Ann. § 23-79-107 (a) (3). However, it is the law and we are constrained to follow it. Therefore, I concur.