*1
INSURANCE
BUREAU LIFE
SOUTHERN FARM
Irene COWGER
Mary
COMPANY
Hendren & Southern Farm appellant, Justice. Newbern, David the life insured Company (the Bureau Life Insurance company), accident, Cowger of Ronald was killed in tractor Cowger. Mr. amount refused pay Mr. Cowger, Irene because beneficiary, Mary appellee when applying had his health Line In with our decision in National Old accordance policy. (1974), the trial People, * Hickman, J., grant rehearing. *2 that,
court not revealed in instructed the if the fact or facts jury death, the insurance were not the cause of application would not bar We overrule that recovery. but we do before us judgment so thus prospectively only, allowing now is affirmed. We also part judgment affirm $33,000 a fee of Cowger’s to Mrs. counsel.
Mr. and Mrs. from a bank to build Cowger wanted borrow chicken houses on their farm. The bank that Mr. Cowger’s life be insured. Mr. for a Cowger applied with the to a policy company and submitted examination physical conducted a on behalf of the who asked by paramedic him questions about his health and wrote down Mr. Cowger’s answers on a form. Mr. Cowger’s included his state- responses ments that he had not suffered stomach liver disorders used alcohol to excess in the last ten years. The truth was that Mr. Cowger had been more hospitalized during than once that time liver, had been as diagnosed having cirrhosis of the acute alcoholism, showed, and delirium tremens. The evidence and it is not contested by Cowger, Mrs. Cowger Mr. was aware of his condition when he applied policy. 21, 1986,
On June which was within the two-year period contestable, which the remained policy Mr. was killed being pinned beneath an overturned tractor on a he was slope He attempting mow. had been released from his final hospitali- zation for alcoholism the day before. No blood test was symptoms done, and there was no evidence Mr. Cowger was drunk or drinking when his death occurred.
1. Causation In Old Ins. Co. v.
S.W.2d 829 (1969), the insurer sued to rescind a health on the ground that the insured had had stated he not had “heart trouble.” The insured counterclaimed to recover on the injury leg his from shooting accident. We upheld judgment denying rescission and awarding damages on the counterclaim because a negative answer to the about question “heart trouble” was not necessarily misrepresentation. The insured had been diagnosed as having disease, more than one kind of heart but the results of exploratory surgery negative. were a concurring opinion Smith filed George Rose on the would have reached the same result
which he stated he nothing had insured’s heart condition counterclaim because the of what is now leg injury. opinion quoted part to with the (1987) Ann. 23-79-107 follows: Ark. Code § omissions, facts, concealment Misrepresentations, under the shall not prevent incorrect statements unless either: or contract Fraudulent; or (1) *3 to of the risk or to the
(2) acceptance Material either insurer; the or by the hazard assumed issued the (3) insurer in faith would have good The issued a or policy or would not have contract or at large an amount or the same premium contract in as to coverage with respect rate or would not have provided been made in the loss if the facts had resulting the hazard by insurer as either the application known the otherwise. for the or contract or the only these were provisions Justice Smith contended that “irrele- and that proof minimum of an insurer’s requirements should not bar insurance claims. vant” misrepresentations People, In Old Line Ins. Co. v. supra, adopted National case, an for credit life Justice Smith’s In that position. applicant the which was also the insurance stated in application, insurer, “I agent issued dealer as by document car that I for the insurance shown above and hereby represent apply health, and am now both free good mentally physically, disease, chronic any mental or any physical impairment age above.” Just above the applicant’s am shown letters, “I AM signature larger the statement in appeared capital to an NOW HEALTH.” The jury, responding IN GOOD contained no concluded that the interrogatory, policy application was that the insured The evidence misrepresentation. undisputed treated, four before years was not in health but had been for good blood and diabetes. making high pressure for application, above statutory language The majority opinion quoted between the and concluded there must be a causal relation barred, presum- loss misrepresentation ably meaning causal relation between the condition misrepre- sented and the loss. We stated subsection (a)(3) statute supported language: the conclusion to some extent this by good coverage “the insurer in . faith . . would not have provided loss, with to the hazard if true facts respect resulting in said, had been made known.” We it be a defense to “Thus would insurer, in a back that if the had injury show applicant disclosed a of back trouble it would have history excepted hazard from the filed a dissent- policy.” Byrd persuasive ing the essence of opinion, which was that we were guilty gross misinterpretation the statute.
While it may be that (a)(3) subsection offers some support for our rationale when combined assumption statute states only a minimum of the insurer must make to proof bar recovery for misrepresentation, ignores that conclusion remainder of the quoted statutory language. statute could not be clearer stating that bar will not recovery unless it is fraudulent or to the either “[m]aterial acceptance the risk to the hazard assumed the insurer.” As one critic of our opinion it: put
Whatever tendency the language emphasized *4 Justice Smith in paragraph [(a)(3)] of may [the statute] have, when lifted out of context to suggest requirement that a fact has contributed to the loss for which benefits policy sought, are fades when the paragraph is read as a whole. D. Adams, F. in Misrepresentation the Procurement Insur- of
ance, 17, 4 UALR L.J. at case, however,
Our opinion in the National Old Line did not rest on solely the we found in the We support statutory language. wrote:
Fairness and reason the view support causal connection Otherwise, should be essential. in- when the sured is killed a stroke of run lightning by being over car, by a the insurance could company deny successfully liability by showing was suffering insured from diabetes when he stated that he was in good health. perti- are especially of fairness
Such considerations
us.
one before
like the
nent to a credit life insurance policy
only
force for
to remain in
policy,
This was
short-term
of
made no medical examination
years.
company
three
sign
the
him either to refuse
relying upon
the applicant,
health,
in which case
good
he
not in
if was
application
issued,
a note” to
or to “clip
would never
The appellant
condition.
his health
application, explaining
defense,
it
but
its affirmative
had the burden of proving
who
salesman
automobile
made no effort
show that the
made any explanation
took People’s application
form or of the
significance
representation
printed
insurer
for three
years
health. If
had lived
good
People
it
loss. In the circumstances
would have sustained no
on
to deny liability
unjust
plainly
permit
had no connection
the basis of a
found) and
(or
might
death
so the
have
People’s
jury
if the
no defense to the insurer
have provided
resulting
coverage
had excluded
loss
142,
at
506 S.W.2d
undisclosed ailments.
Ark.
131.]
[256
the type
Given the
on the
type
emphasis placed
Line
the National Old
of medical
which
in
inquiry
occurred
to credit life
holding
policies
there is the
to limit its
temptation
medical
where no detailed
tendered
automobile salespersons
are asked. We cannot do that because the sweep
questions
We have
in the
is too broad.
principle adopted
opinion
applied
cases,
Co. v.
ruling
Ford
only
Samples,
in
similar
very
Ins. Co.
(1982);
With to the fairness and made in respect justice statements our National opinion in the Old Line case we must out that point there are counter-considerations. The we have adopted regardless misrepresentation which causes insurer to risk, undertake a will liability occur unless the loss is related to the fact misrepresented. This in the places policy applicant position being able gamble that he or she will sustain loss caused by the existence of the fact misrepresented. may may have an effect. The party defrauding the insurance not be rewarded. company may may hand, On the other the honest applicant who has the same facts to reveal will be denied insurance because of the truth. telling
It bemay that these considerations balance each other. We might conclude, even us, if it were up fairness and justice considerations come down somewhat on the side of the insured who has lied in order to obtain coverage. is, however, Our point that the decision has been made by the body charged decisions, properly making is, such general We assembly. ignored incorrectly their decision in the National Old Line case and we now correct error. result,
In reaching this we are not alone. In his 1981 article above, cited Professor Adams reported of seventeen states which had adopted statutory rules on misrepresentation resem- bling our statute none had construed such a incorporat- statute as ing the kind of causation found in the National Old requirement Line and at least rejected three states had reading. such a We have found cases since the date of the published article
256 not mention (although specifically
rejecting
position
our earlier
Mut.
Ins.
v.
Hancock
decision), Wickersham John
ing McAllister v.
Co.,
57,
(1982);
456
Mich.
318 N.W.2d
Co.,
1987),
adopting
and none
(Vt.
While we now conclude that insurer which caused ground claim on the to which the fact respect of the but with issuance related to the loss were not necessarily facts misrepresented doWe not sustained, new rule to this case. we apply making old their know on our rule relied parties contract, and not this decision they apply but must assume did Purchase Corp., Hare General Contract retroactively. v. Em See also Crawford Co., casco, supra. Mut. Lucky Equity supra; Attorney
2. fee suit to company case with the began filing by This and rescind That suit died for lack service process, the policy. brought agreed Mrs. this action. Her attorney then basis for one-third contingent her on a fee represent 23-79-208(a) (1987) Arkansas Code Ann. recovery. provides § an refuses to will include recovery against pay insurer who fees for the attorneys’ twelve with “all reasonable percent penalty and collection of loss.” prosecution that his Cowger’s Mrs. stated to the trial court attorney $80 was and he had recorded 104.9 hours regular hourly fee He also on the case which did not include conferences. early spent $1,000 $2,000 (in for trial this case charged day stated he per $800 associate total) day he of his sought presence per $438.50 trial, fees and reporter deposi- at the court attorney tions, $12.90 $7.20 company charges postage. telephone and the objected charges hourly charge to all other than 1,000 Thus, $ day charge. trial per apparently object having attorney awarded it an fee against $10,392. $33,000. The trial court awarded which we supra,
In Old Ins. Co. v. $6,000 was decided we held that a fee of not excessive we awarded an additional where the was *7 $1,500 on thorough fee In his attorney’s typically appeal. fashion, Fogleman ques- reviewed the authorities on the of of a fee be against tion the to awarded appropriateness recalcitrant insurer. contends that the fee of attorney’s also
Appellant $6,000 allowed the trial court was exces- exorbitantly the [by sive. It states that fee the correctly contemplated not fee such a fee speculative contingent is but statute] as would be reasonable for a to his for litigant attorney pay however, correct, is prosecuting such case. It not suggested that the mere time involved is the by appellant factor to only be considered. The of the statute purpose ... to an insured to of permit obtain the services competent The amount the attorney. of fee allowed should be such that well will prepared attorneys not avoid this of litigation class or fail to devote sufficient time for thorough It would preparation. commensurate only with the time and amount of work but also with the ability present meet the necessary issues arise. Also we have often considered sum the recovered or the amount involved in an action in allowing fees considering fees allowed by trial courts. The statute cases, requires this, so such as where the insurance brings suit to cancel a policy. It is also appropriate consideration be to the given judge’s trial acquaintance the case. When we consider from an of inspection cause, the record the nature of the the novelty of contest, some of the of questions presented, heat time necessary for of the preparation the standing sides, on ability attorneys both and the knowl- edge of the of trial court nature and extent of the rendered, services we cannot that this allowance on a say $51,000 of recovery and interest was excessive. [Citations omitted.]
See also the factors set out in Southall v.
Bureau
Farm
Mut.
Arkansas, Inc.,
283 Ark.
S.W.2d 228
Equitable
Rummell,
Assurance Soc.
the United States v.
against court was not precisely the trial
The fee awarded for for was The Mrs. recovery. judgment one-third date Mr. $100,000 from the eight interest plus percent based on the judg The Cowger’s percent penalty death. twelve $12,899.60. Her came to total ment interest plus fee, something was thus attorney exclusive of the company, $120,000. would be roughly fee thus contingent over $40,000. $33,000 hearing after a in which was awarded The fee involved in this claim as by attorneys was testimony given circumstances, we cannot say In these what be reasonable. fee. setting discretion in the We award the trial court abused his Cowger’s attorney an additional fee Mrs. *8 of this prosecution appeal.
Affirmed. JJ., dissent. Hays,
Hickman Hays, Justice, majority in the dissenting. Nothing Steele of Arkansas justifies overruling principle established opinion must show a causal insurance law that to an insurer deny in for connection between a fact an application loss. While this principle life insurance and the subsequent 137, v. 256 Ark. in National Old Line Ins. Co. People, appeared of the Arkansas as an interpretation 1959, been a of Arkansas Insurance Code of it has actually part Casualty law since was first in Inter-Ocean it stated so Huddleston, (1932). 458 23 A doctrine S.W. overruled, in the well in the should not be so easily established law absence of reasons. compelling has law over a decade rule
Having been
of our
for
part
losses.
doubtless
a basis for insurers to
Profes
anticipate
become
Old
in National
sor Adams had noted Justice
comment
Byrd’s
insurers
the rule is
initially
Line that “the burden
cast on
them,
adjusted
rates will
likely
premium
remain
Adams,
in
absorb the
cost.
. . .”
Misrepresentation
added
Insurance,
17 (1981).Toreverse
4 U.A.L.R.L.J.
Procurement of
which
result
now
to retain the benefits
will
the rule
invites insurers
of
change
position.
favors a causal
While
concedes that fairness
the majority
connection
it denies that the statute admits
such
requirement,
an
does
interpretation.
challenge
majority
Smith’s conclusion that the statute
a minimum
“merely provides
Old to the insurer’s successful defense.”
prerequisite
1029, 1044, 436
Ins. Co.
245 Ark.
S.W.2d
Nor
it
does
runs
complain
requirement
causation
indeed,
against public
several states have
policy;
explicitly
into their statutes. Kan. Stat. Ann.
incorporated
requirement
(1986);
40-418
Mo.
(1959);
Rev. Stat.
376.580
R.I. Gen.
§
§
Rather,
Laws
27-4-10 (1979).
under the rubric of honoring
§
intention,
legislative
its
judgment
has
own
majority
imposed
over time-tested law. Had the
intended not to
legislature actually
connection,
of a
require proof
causal
it could have acted to clarify
its position during
legislative
one of the
any
sessions conducted
since National Old Line was
handed down
1974. Generally,
legislative inaction following a
practical
interpretation
statute is evidence that
legislature
intends to
such an
adopt
interpretation.
(4th ed.).
Sutherland Stat. Const. 49.10
“There
§
is a strong authoritative effect of judicial interpretive opinions
that the legislature has
acquiesced
lapse
time without
Johnstone,
action.”
An Evaluation
the Rules
Statutory
Interpretation,
Accord,
U. Kan. L.
1 (1954).
Rev.
Shivers v.
Distributors,
Moon
Hickman,