Court Opinion

ID: 9455503
Source: CourtListenerOpinion
Date Created: 2023-08-04 19:24:34.587113+00
Date Added: 2024-06-11T17:31:38.168942
License: Public Domain

WINTER, Circuit Judge
(dissenting).
I find no failure of proof of misrepresentation. Nor do I think that the artfully practiced fraud was waived by the insurer. I dissent from the majority’s contrary conclusions; I would affirm the district judge.
In response to questions patently designed to elicit his history of acute pan-creatitis and cirrhosis of the liver from excessive use of alcohol, the insured admitted only to hospitalization and treatment for an unexceptional appendicitis. Specifically, the insured replied affirmatively to question 10(d) that he had had or had been treated for “stomach or intestinal trouble” and affirmatively to questions 11(a), (b) and (c) that he had been advised to have a surgical operation, that he had been a patient in a hospital or sanitarium and that he had been consulted or attended by a doctor or other practitioner. He denied, by his negative answer to question 12, that he had any physical deformities, impairments or ill health, other than those disclosed in his answers to questions 10(d) and 11(a)-(c), and when asked by question 13 for the complete details of all affirmative answers to the previous questions, he responded, carefully limiting his answer solely to his affirmative reply to question 10(d), that he had undergone an appendicitis operation in 1964 by Dr. O. E. Bell, at Memorial Hospital, Rocky Mount, North Carolina, that he was a hospital patient for five days and that his recovery was complete.
The fact of the matter is that the insured was suffering from a variety of serious illnesses. He had been diagnosed as having cirrhosis of the liver, acute alcoholism, gall bladder impairment and pancreatitis. He knew of these diagnoses. He had been advised to pursue a course of total and permanent alcoholic abstinence. He knew that he had not followed this *1011advice completely. Significantly, the diagnosis of these ills was made by Dr. K. D. Weeks, after the insured had ceased being a patient of Dr. Bell, and his hospitalization, during which his symptoms were diagnosed, occurred at a hospital other than the hospital where his appendix was removed.
Since the only ill health disclosed by the insured was “stomach or intestinal trouble” in his answer to question 10(d), the conclusion is inescapable that the insured’s negative response to question 12 which sought to elicit physical impairments or ill health not previously recorded was patently false. The majority’s finding that the insured, as a “lay patient” could have good faith belief that he was not ill, is simply unsupported by the record, even when his possible belief is considered as of the date of his insurance application.
Nine months before his insurance application the insured consulted Dr. Weeks. He was told that he had liver disease and other ailments, that his past history of hemorrhage was a result of the liver disease and that he was a borderline alcoholic habituate. He was strongly urged to stop permanently all alcohol indulgence and placed on a restricted diet.
Two months later, because of aggravated symptoms, the insured was placed in the hospital, where he remained for six days. At this time he and his wife were told that he suffered from cirrhosis of the liver. He was placed on a diet, told to take vitamins daily, and his physical activities were restricted. Total and permanent alcoholic abstinence was prescribed and he was directed to return for further medical evaluation in thirty days.
At the thirty-day checkup, the insured was permitted to increase his physical activity moderately, but the diet (this time with a maximum body weight prescribed), daily vitamins and total and permanent alcoholic abstinence were continued. The insured was directed to return in four months.
At the four-month checkup, which occurred a month before the application, the insured was found to be improved. He admitted that he had not pursued a course of total alcoholic abstinence, but he was told that he was better. Nonetheless, the diet, the vitamins, the restricted physical activity, the weight limitation and the total and permanent alcoholic abstinence were continued and he was told to return in six months.
Thus, a month before his insurance application, the insured knew that he had been repeatedly told that he had cirrhosis of the liver and other ailments, and further knew that he was under continuing medical supervision and medication, that his diet, weight and physical activities were restricted and that his intake of alcohol was absolutely prohibited. This is hardly a picture from which the insured could reasonably conclude that he was not suffering from “any * * * ill health.” I cannot conclude that the insured was an unintelligent or uninformed person. He was a certified public accountant and a member of at least two professional accounting societies of national stature. Cf. Equitable Life Assur. Soc. of United States v. Ashby, 215 N.C. 280, 1 S.E.2d 830, 833 (1939).
In addition to the demonstrably false answer to question 12, the insured purposefully withheld information in replying to question 13 by reason of his failure to disclose the diagnosis and treatment of Dr. Weeks and the hospitalization while he was a patient of Dr. Weeks. Even if on the day of the insurance application he considered himself in good health, this suppression of vital information cannot be explained away.
I would conclude that in two respects, i. e., the negative answer to question 12 and the suppression of a full answer to question 13, the insured practiced misrepresentations on the insurer. Under the North Carolina law which governs, the district judge had a dual basis for relieving the insurer of liability under the policies, because written answers relating to health in insurance applications are deemed material as a matter of law and a misrepresentation or omission therein will avoid the policy. Sims v. *1012Charlotte Liberty Mutual Insurance Co., 257 N.C. 32, 125 S.E.2d 326 (1962); Rhinehardt v. North Carolina Mutual Life Ins. Co., 254 N.C. 671, 119 S.E.2d 614 (1961); Tolbert v. Mutual Benefit Life Ins. Co., 236 N.C. 416, 72 S.E.2d 915 (1952); Shenandoah Life Insurance Co. v. Hawes, 256 F.Supp. 366 (E.D.N.C. 1966).
The North Carolina rule is, of course, subject to the qualification that the insurer may waive its defense of the insured’s misrepresentations. Jones v. Home Security Life Insurance Company, 254 N.C. 407, 119 S.E.2d 215 (1961). The majority finds waiver from the insurer’s failure to make further inquiries concerning the information which was disclosed. It charges the insurer, as a matter of law, with knowledge of the true facts notwithstanding the insured’s misrepresentations and suppressions. How this can be so, I fail to comprehend.
First, the insured’s limiting reference to his affirmative answer to question 10 (d) in his response to question 13 would appear unexceptional, since the data that he disclosed in answer to question 13 would appear to be a full and complete detailing of his affirmative answers to the several parts of question 11. Particularly is this so because question 12 was answered negatively. And because answered negatively, no detailing of question 12 in question 13 was required. Moreover, the insured certified at the end of his application that his “statements and answers to the above questions are complete and true.” Further inquiry from the insured would have appeared to be both unnecessary and futile.
But even if the insurer had made inquiry of Dr. Bell or of Memorial Hospital, the record does not warrant the majority’s conclusion that the insurer would have uncovered the significant information withheld from it. Despite the majority’s contrary assertion, the insured’s “almost every” examination and treatment were not in the same hospital. Nor were they by the same doctor.
The insured consulted Dr. Bell for his appendicitis and the surgical procedure was performed at Memorial Hospital, Rocky Mount, North Carolina. It is true that the insured had been hospitalized at Memorial Hospital both before and after the appendectomy. The last hospitalization there was in February, 1965, as a result of his having experienced a hemorrhage from a ruptured blood vessel in his stomach ¿er esophagus. Apparently on both occasion's some gall bladder difficulty was suspected, but the tests for this disorder were negative; no history of excessive use of alcohol was obtained; no thought of pancreatitis or cirrhosis of the liver was entertained; and for all intents and purposes the insured was discharged from medical supervision, as completely cured, on November 8, 1965. The insured did not consult Dr. Weeks until January 17, 1966, and when he was hospitalized by Dr. Weeks on April 15, 1966, he was placed in Rocky Mount Sanitarium Hospital. For the purpose of this case, this was the significant hospitalization. Although Dr. Weeks was fully acquainted with the insured’s medical history while he was under the care of Dr. Bell, there is not the faintest suggestion in the record either that Dr. Bell was aware of the insured’s history under the care of Dr. Weeks, or that the Memorial Clinic Hospital had any records with regard to insured’s later hospitalization in the Rocky Mount Sanitarium Hospital. I would conclude that inquiry of Dr. Bell and of Memorial Clinic Hospital would have disclosed little more than what was disclosed by the insured.
Overall, I would conclude that the insurer had no reason to inquire, or if it inquired, no reasonable prospect of obtaining the vital knowledge, so that it cannot be charged with knowledge of the insured’s medical picture. Absent such knowledge or reason to obtain it, the doctrine of waiver is inapplicable. Jones v. Home Security Life Insurance Company, supra; Phoenix Mutual Life Insurance Co. v. Raddin, 120 U.S. 183, 7 S.Ct. 500, 30 L.Ed. 644 (1887).
Finally, the majority finds waiver in the insurer’s delay in seeking to avoid *1013the policy. Bowles v. Mutual Ben. Health & Accident Ass’n., 99 F.2d 44, 50 (4 Cir. 1938), which is cited in support, makes clear that inaction while time passes constitutes waiver only when there is knowledge of the right to act coupled with the inaction. The insured died December 28, 1966, and the suit to avoid the policy was instituted September 25, 1967. The record is silent as to when proof of loss was submitted, what it contained, and, if it did not disclose the fraud, how and when the insurer became cognizant of it. Absent proof of these essential elements, the mere passage of nine months is without legal significance.