Court Opinion

ID: 9536385
Source: CourtListenerOpinion
Date Created: 2023-08-07 06:58:54.409245+00
Date Added: 2024-06-11T14:54:23.982363
License: Public Domain

Zenoff, D. J.,
dissenting:
I respectfully dissent. There should not be a reward for a knowing and wilful misrepresentation. Poe v. La Metropolitana Co., 76 Nev. 306, 353 P.2d 454 (1960), and Smith v. North American Ins. Co., 46 Nev. 30, 205 P. 801 (1922), support the proposition that “the insured should observe the utmost good faith and deal honestly and fairly with the company in respect to all material facts inquired about, and as to which he had or should be presumed to have had knowledge, and make a full, direct, and honest answer, without evasion or fraud, and without suppression, misrepresentation, or concealment of material facts which the parties themselves deemed material to be disclosed.” Smith v. North American Ins. Co., supra, at 45-46 (citing Moulor v. American Life Ins. Co., 111 U.S. 335, 4 S.Ct. 466, 28 L.Ed. 447 (1884)).
The majority turns on the presumption that the company had actual knowledge of the misrepresentation *464because of an experience which would be revealed by an examination of its inactive files, and cites authority in support of this proposition. The cited cases are distinguishable from the fact situation here.
Rhode v. Metropolitan Life Ins. Co., 129 Mich. 112, 88 N.W. 400 (1901), and Great Northern Life Ins. Co. v. Vince, 118 F.2d 232 (6th Cir. 1941), hold that a life insurance company is not deemed to possess actual notice of information which it may have in its records unless there is some circumstance to direct its attention to earlier records. See also Brown v. Metropolitan Life Ins. Co., 65 Mich. 306, 32 N.W. 610 (1887).
The logic of O’Rourke v. John Hancock Mutual Life Ins. Co., 23 R.I. 457, 50 A. 834 (1902) is persuasive if confined to the language used. It says that if an insurer is allowed to use the records to avoid the loss, it should be imputed to its knowledge when accepting the policy. Yet, the case turns on the minority of the insured whose warranties were not permitted to be set in defense by the company after his death.
Clay v. Liberty Industrial Life Ins. Co. (La.App.), 157 So. 838 (1934), Hicks v. Home Security Life Ins. Co., 226 N.C. 614, 39 S.E.2d 914 (1946), and Monahan v. Mutual Life Ins. Co., 103 Md. 145, 63 A. 211 (1906), cited by the majority in support of the premise that an insurance company is held to be cognizant of information in its own records, all involve situations where more than one policy is outstanding, contrary to policy provisions. And in each of these cases, the additional policies being objected to were issued by the same company, so waiver was applied. The information the insurers were held to have knowledge of was contained in an active file.
In the case before this court, the information deemed by the majority to be knowledge to the insurer are facts from an inactive file. A distinction should be made between files used periodically by an insurer to record premiums paid, changes in beneficiaries and addresses, and renewals, and files containing records of rejections for coverage, claims from former policies, and cancellations.
*465It appears from the evidence that all current policies are on file at the head office and that inactive files are destroyed according to a specified company policy. The evidence also shows that destruction of records in various branch offices, while subject to the same policy, is not coordinated with the destruction at the head office due to different storage facilities. It seems inequitable to hold an insurance company to knowledge of what is contained in the files of one isolated outpost. Since all active files are maintained at the head office, it seems that the only workable rule is to hold an insurer cognizant of the active files.
The controlling factor in the Clay, Hicks, and Monahan cases was that the insurer knowingly collected premiums on a void policy thereby inducing the insured to believe he was protected by valid insurance. In the Clay case premiums were accepted for 50 weeks, in Hicks for over a year, and in Monahan for 41 weeks. “It might be that the mere issuance of the policy would not work an estoppel by waiver, but after a reasonable time has elapsed during which the company might ascertain the fact of its issuance, and certainly after the payment of 50 weekly premiums, it must be presumed to have waived the provisions (against the existence of another policy) in that regard.” Clay v. Liberty Industrial Life Ins. Co., supra, at 839-840.
In the present case the loss of the violin occurred slightly more than two months after issuance of the policy. The trial court here found that the company did not have knowledge of the prior experience with the insured at the time of the issuance of the policy, and since there was such a short period between issuance of the policy and the loss, and only one premium had been paid,1 there is not sufficient evidence in the record to have alerted the insurer to search its dead files to upset the determination of the trial judge that the company should be held to be without knowledge, actual or presumed.
The fire insurance case cited by the majority, Kennedy v. Agricultural Ins. Co. of Sioux Falls, 21 S.D. *466145, 110 N.W. 116 (1906), also can be distinguished by the active file analogy. In that case a provision prohibiting the coverage of the same property by additional insurance was invoked by the insurer to avoid the loss. The insurer, on the additional policy in issue, was the reinsurer and was thus held to have knowledge of both policies.
While McKinnon v. Massachusetts Bonding & Ins. Co., 213 Wis. 145, 250 N.W. 503 (1933), is the only case involving theft insurance, the court in that case found that the misrepresentation involved (that insured had not had a loss in the prior five years) was made without intent to deceive. In the case before this court, the trial court found that the misrepresentations were fraudulently made.
In Kelly v. Metropolitan Life Insurance Co., 44 N.Y.S. 179 (1897), the fact of a previous rejection had been withheld from the- company. The- court held that the act of rejection by the same company was its own and they were held to have had knowledge of it. However, in Atlas v. Metropolitan Life Ins. Co., 181 N.Y.S. 363 (1920), the Kelly case was eroded. A clause in the policy provided that issuance of the policy no-t be deemed a waiver of a representation as to- the existence of any previous policy. It was held that “the receipt of premiums continuously after the issuing of a policy is * * * if unexplained, conclusive evidence of a waiver of the condition,” and cited the Kelly case. Id. at 365. (Emphasis added.)
This was not a case where the agent of the company who had written the first policy also wrote the second. Nor was this a situation where there was another active file with the company that would cause it to be aware on a periodic basis that something unusual existed between the insured and the company. Nor am I satisfied that the language o-f the application and the policy did not sufficiently refer to each other so as to make the false inducement a part of the policy itself. And since NRS 686.190 requires that applications be attached to policies only in the life insurance and health and accident insurance classifications in order *467for the insured to be bound by the written statements in the application, it is clear that actual attachment of the application is not necessary in this instance. See NRS 681.030 (3) (c) for the separate classification of personal property floaters. The application form itself referred to the policy and provided that, “* * * this form shall be the basis of the contract should policy be issued. If any of the above questions have been answered falsely or fraudulently the entire insurance shall be null and void and all claims thereunder shall be forfeited.”
The policy as issued contained the following condition :
“1. Misrepresentation and Fraud. This policy shall be void if the assured has concealed or misrepresented any material fact or circumstance concerning this insurance or the subject thereof or in case of any fraud, attempted fraud or false swearing by the assured touching any matter relating to this insurance or the subject thereof, whether before or after a loss. ‘THIS POLICY IS MADE AND ACCEPTED SUBJECT TO THE FOREGOING STIPULATIONS AND CONDITIONS AND TO THE CONDITIONS PRINTED IN THE BACK HEREOF, WHICH ARE HEREBY ESPECIALLY REFERRED TO AND MADE A PART OF THIS POLICY, together with such other provisions, agreements or conditions as may be endorsed hereon or added hereto, and no officer, agent or other representative of this company shall have power to waive or be deemed to have waived any provision or condition of this policy unless such waiver, if any, shall be written upon or attached hereto, nor shall any privilege or permission affecting the insurance under this policy exist or be claimed by the assured unless so written or attached.’ ” (Emphasis added.)
While there is a split of authority in the state courts as to the validity of non-waiver agreements, many state courts and the Federal Courts hold that these agreements are a valid limitation to the policy. See Northern Assurance Co. v. Grand View Bldg. Ass’n, 183 U.S. 308, 22 S.Ct. 133, 46 L.Ed. 213 (1901); Lamar *468v. Aetna Life Ins. Co., 85 F.2d 141 (10th Cir.1936); Gish v. Ins. Co. of No. America, 16 Okl. 59, 87 P. 869 (1905).
Healey v. Imperial Fire Ins. Co., 5 Nev. 268, 5-6-7 Nev. 215, seems to lend support to strictly enforcing these provisions. “There is but one safe rule, and that is take the contract as written, subtracting nothing therefrom, adding nothing thereto. * * * The court is to enforce contracts which the parties have made, but has no power to make new contracts for them, or to alter or vary in any essential particular, those they have mutually agreed to be bound by.” Id. at 220-1. Therefore, since there was no waiver written upon or attached to the policy, the insurer should not be deemed to have waived the condition requiring forfeiture for misrepresentations.
There need be little concern about the future life insurance cases when the company seeks to avoid payment claiming misrepresentations in the application and the deceased is not available to refute the contention. The cases have set up patterns and standards that impose responsibilities upon the companies after the issuance of a policy and receipt of premiums thereon. For the purposes of this factual state, the plaintiff-appellant made a deliberate misrepresentation of a material fact to the company and there were not enough other factors present to create actual or presumed knowledge.