*1 No. C-859 Life Insurance Company Theresa Wade
(560 446) P.2d January Opinion rehearing and as Decided 1977. modified modified denied March 14, 1977. *2 Don, Shelley B. petitioner.
Gorsuch, Kirgis, Grover, Campbell, Walker & Warren, Robert E. Jr., Wadle, Michael J. for respondent.
En Banc. MR. JUSTICE ERICKSON delivered the opinion of the Court. granted certiorari to review the decision in Wade v. Olinger Colo. App. 544 P.2d 412 (1975). We reverse and remand with directions. grade 28-year-old is a woman with a ninth education. her In re- Life Insurance solicited business. Company (funeral arrangements) for a life insurance petitioner applied
sponse, $1,500, and named herself as bene- for her mother in the amount of home, came to the ficiary. petitioner’s An for the insurer inter- form for her. and filled out the petitioner, viewed selling insurance for sixteen that he had been testified per year. interviews While his and that he conducted about 300 years, his questionable, home was ability petitioner’s to recall the situation at asking general some general initiаlly did indicate a testimony procedure through reading then regarding the health of the insured and questions form, in the list of omitting half of the items up but later, to be checked relevant ailments. The items were supposed omitted interview, sign near the end of the after the was asked to coverage Apparently, and to indicate the desired. this was form amount of *3 that “embarrassing” agent to avoid the The stated his incentive applicant. selling policies equal for consisted of a commission. The commission was to year’s to the first His entitlement the commis- premium policy. status of sion was not affected the continuation or the ultimate a which he sold.
During agent the the ad- petitioner, course of the interview with the seeking things her that he was as to which were only vised information delet- following apparently “serious.” He then read of the parts questions, “embarrаssing”: ing might which he felt portions any did he or she ever have any person “3. Does above named now have or trouble, tuberculosis, following: high pressure, paraly- Heart blood tumor, disease, trouble, ulcer, sis, cancer, epilepsy, kidney venereal diabe- tes, alcoholism, asthma, edema, swelling or circula- emphysema, dropsy, fever, ailment, arthritis, disease, rheumatism, rheumatic muscular tory defect, mental other disease or ailment or physical injury, physical or sur- gical operation? named a any person by physician practitioner
“4. Has been attended for treatment or been admitted to a or sanitarium in the hospital past five years?” interview, just asking petitioner
At the end of the to initial the prior form, items. The may application have mentioned the omitted both petitioner questions negative. form indicated answered mother diеd of cancer and made Subsequently, petitioner’s petitioner a claim benefits due under the The insurer refused policy.1 pay, for claiming respect questions 3 and 4. responses fraud years The died within two of the insurance contract. Accord insured the date of the execution 10-7-102(1)(b), ingly, section the “incontestable” clause of the contract was not in effect. See 1973; Bailey, C.R.S. Union Mutual gone
Evidence at trial indicated that the mother had to a hospital for a emergency regarding injury room consultation foot 1970. pe- serious, testified that she that was titioner felt this incident not and the gives injury.2 record below no evidence as the seriousness of this Other indicated that the insured had received some treatment for evidence a mis- carriage, high blood pressure, petitioner and arthritis. The testified that knew only miscarriage. treatment for colds and for the She explic- she itly miscarriage advised the treatment and “check-ups,” some but told such he her matters were unimportant. occasions,
On two signed in 1967 and also treat- that, ment authorization forms her Hospital mother. records indicated authorizations, pursuant to these was briefly insured examined discharged within a few report hours. Those records contain a of a drink- ing spree diagnosis and a tentative of “alcohоlism.” The record does not that show the plaintiff had of the content of these records. medical aide, records indicated only that insured saw a nurse social doctor, rather than a on several occasions.
The trial judgment court entered petitioner holding for the “the plaintiff answered the questions truthfully without any intent to deceive or misrepresent.” In reversing, the court of held appeals that: “In evaluating plaintiffs аnswers to on form, the trial court obviously light those considered answers agent’s plaintiff advice interested information concerning injuries context, or diseases that were ‘serious.’ In trial plaintiff court found that the questions truthfully answered to the best of However, knowledge. her agent’s if the statements are in conflict with the instructions the application, plaintiff not rely on the instructions of *4 Olinger’s agent relative to the questions how be application must answered.” (1) whether,
The before issues us are under the circumstances of this case, 10-2-204, 1973, of application section petitioner’s C.R.S. bars claim representations whether, reliance on the agent, (2) of the under the case, circumstances of this the petitioner possessed requisite state of mind to allow the insurer to avoid the policy. I.
Misrepresentation by Agent 10-2-204, 1973, Section provides, C.R.S. in pertinent part: 2 Thus, materiality proven this fact not the insurer. See Farmers and Bankers Life Allingham, 1972) law). Co. v. 457 (applying Insurance F.2d 21 Colorado
405 agent or not declaration made to con- no statement or “[B]ut having taken been made application, in shall be or considered as tained charging to or or it brought company, or the notice to with any liability by reason thereof.”3 case, insurer applying
In the statute this we note that the in raised the issue of the statute his applicability pleadings, never trial, are, during new the course of the his motion for a trial. thus, presented not considered be statute raised a waiver of stat low. This alone be considered sufficient basis for Sumner, Kinsey 34 utory protection. 9(i); See C.R.C.P. ex rel. v. People 61, (1974). 525 512 Denning Colo. P.2d See also v. A. V. Wilson 372, assuming Colo. 326 appli & 137 P.2d 77 Even raised, statute, cation of the statute had been we find under properly cоurt, previously adopted by inapposite constructions the facts of this case. Fukushima, 236, York 74 New Colo. 220 Life 994
P. this court limited the of the above effect statute these terms:
“The solicitor and medical examiner of an insurance are company its agents, acts their and knowledge are of their principal those and the in- sured responsible cannot held for wrong through a perpetrated their fraud or False negligenсe. statements . . . known to them at the time made Accord, be false are added.) no defense.” (Emphasis Kras, Federal Co. Insurance v. 96 P.2d Colo. 45 636 Life (1935); Farnsworth, Northwestern Mutual Insurance v. Co. 60 (1915); Colo. see also Constitution Insurance Co. Rogerson, 130 Colo. P.2d (1954); German American Hyman, (1908) (no-waiver Co. Colo. 94 P.27 clause insurer; in policy inapplicable agent’s held estopped because acts such construed); clauses are to bе narrowly Pomeroy v. Rocky Mountain Institute, Insurance and Savings (1886) (agent’s P. waiver of against applicant). insurer’s claim misrepresentation
A situation similar instant case arose United American Life Rebarchek, (D. There, Co. F.Supp. 1955). sought the insurer to avoid the policy because “material misrepresenta- tions” insured. insurer had filled out applica- asked, tion. The pursuant insured was application, “Do use al- you beverages “Surе, coholic form?” He I any responded: take drink a now “Sure, and then moderately.” ‘No,’ then said: down put because *5 all law, we do once in a while.” The court then noted that under Colorado payment The statute also or an obligation provides payment that an of a “agent premium who of knowingly insurance is procures by guilty fraudulent misdemeanor representations the part fraud on misinterpretation, negligence .
“. . sinсe statutory probition, the agent fall without the in such circumstances the limitations ‘statements reasoning policy such also fall without same agent.” the and of promises’ relied, part, upon
The court Suravitz Prudential Rebarchek Co., (1914) (policy provision stating 244 Pa. 91 A. bind “falls of the agent company protecting prin- could not the short cipal from the agent the negligence preparing applica- or fraud of tion.”). recovery, been applied prevent
Even where statute has agent’s the terms of the insurer’s clearly act has been such as to qontradict form or In Benson Banker’s application Casualty policy. statute, 362 P.2d we applied issue of agent that the of an insurance com- company
“whether a misstatement previous which occurred within the five is interested in illness pany contrary express which statement is terms insur- year pеriod, contract, binding is that the upon company require ance so as to policy notwithstanding falsity enforced of the information con- upheld tained therein.” agent’s representations, oral contradicting concluded “[t]he contract, binding express terms insurance could not be on the de added.) See company.” (Emphasis
fendant
also Warner v. Farmer’s
Exchange,
(1934)
Automobile Inter-Insurance
The we case was stated in problem aptly face in this Cadez v. 1961): Casualty General 298 F.2d agents “It produce be that some insurance their enthusiasm negligent concеrning coverage. business make reckless or statements persons The such that complexity modern insurance contracts is desir- ing great understandably place reliance on the who han- protection dles their insurance business.” which, if petitioner in this case was faced with literally, require
taken would an exhaustive disclosure of even open-ended, Therefore, the slightest ill-feeling asking her ever suffered mother. the agеnt about the to be proper given questions, construction to these seeking express was not alteration or waiver of the terms of form; seeking make merely contract or she was sense agent’s otherwise unanswerable response insurance questions.
407 interested was “serious” matters was a company reasonable of the form. See United interpretation American Insurance Co. v. Life Rebarchek, did supra. It nоt contradict the terms of and is not within the letter or of the insurer’s statutory protection against agents. express negligent the waiver of terms If the form, in his interpretation responsibility for such error must lie Fukushima, with the insurer. See New York Insurance Co. v. Life supra. To otherwise would invite promulgation hold of insurance applica- tion and forms conduct an which would trap unwary.4 The trial court found that had answered the ques “truthfully” good tions and in faith. Even had application of statute below, result, been raised based upon analysis, above would neces sarily be the competent same. As there was evidence to support this find below, New York ing we will not disturb it Insurance Co. appeal. Life Fukushima, supra. v.
II.
The Applicant’s State Mind
Consistency in the articulation of principles governing the avoidance
of insurance
has
policies
been a troublesome task in
jurisdiсtion.5
Germania
Insurance Co. v.
Klein,
326,
25 Colo. App.
convincing evidence); Supreme Tribe Ben-Hur v. (1921) 70 P. risk,
“A false statement or declaration a fact material to the and upon based, which the policy is will avoid the whether that policy, misrepresen- mistake, tation be the result of intention or of good and whether made in or not so faith made.” recently,
More the court of appeals, Gomogda Prudential *7 Co., 31 Insurance 501 756 found Colo.App. P.2d that: “. . . an insurance cannot be avoided on the of basis false statements or declarations of an applicant, unless such statements or declarations are issued, material risk or form the basis on which the policy is and un- they knowledge less are made with part applicant of matters Thus, which make them false misleading. the test is one of fraud and deceit.”
The Gomogda decision reviewed prior Colorado case law and
concluded
knowledge
that an element of
the part
of the applicant was
required
order for an
policy.
agree
insurer
avoid the
with that
portion of the Gomogda analysis. Whilе there exist
exceptions
some
by
statutes,
virtue of case law
special
the majority rule among
ju
other
risdictions clearly appears to
of an
require proof
“knowledge,”
element of
dispensing
while
with proof of an “intent to deceive.” See
17
generally
J.
73-75,
Appleman,
Insurance Law and
(1945
Practice
9481-9503
§ §
Anderson,
1976);
Supp.
R.
Couch on Insurance 2d
chap.
(1961
1976).
and Supp.
jurisdiction.
This is
rule in this
See Hollinger
Co.,
v. Mutual
Insurance
192 Cоlo.
See
Unger Metropolitan
Colo. J.I.
Prosser,
W.
The Law
(1968);
Ill.App.2d
N.E.2d 907
Torts,
1971).
108 at 718
ed.
§
examрle,
For
“know” that he or the
prospec
tive insured
had
“any physical injury”
has
sense of a bruise or sore
muscle from some routine physical activity. Under the rule announced in
case,
case,
e.g.,
the trier of fact
look at the
would
circumstances
*8
soreness,
the bruise or
would
person
reasonable
and decide if a
have
past
We are aware that
decisions
court
that “it
of this
have stated
is for the insurer to determine
materiality
importance
questions
applicant
of the
to such
rather
the
answers
than for
regardless
consequence.”
Capitol
that he
the fact
consider them of no
Insurance Co.
Life
Thurnau,
345,
(1954). See,
v.
e.g.,
130 Colo.
perceived insurance, to know about in as- desire the insurer would type sessing the risks.8 of this the ele- opinion, with the announcement
Contemporaneously
to avoid an insurance
in order
prove
an insurer must
which
ments
Mutual
Hollinger
were set out
fraud
Benefit
Accordingly, light рrinci- redetermination to the trial court for a be remanded ples articulated in this decision. GROVES, MR. JUS- HODGES, MR. JUSTICE
MR. JUSTICE LEE, CARRIGAN concur. and MR. JUSTICE TICE in the result. CHIEF JUSTICE PRINGLE concurs MR. KELLEY dissents.
MR. JUSTICE dissenting:
MR. JUSTICE KELLEY with to the factual respect I the record interpret dissent. respectfully I result, agree a I majority. than does the As differently situation ex- and conclusions reasoning Both the appeals. of the court of opinion of this court opinion with the therein to me to consistent appear pressed Hollinger v. Mutual Benefit Life 824. 560 P.2d *9 recently applied in Howard v. Golden State Mutual analysis was A similar (1975), where the court noted: 231 N.W.2d 60 Mich. law, synonymous sincerity misrepresentation refers to a truth and lack insurance “[I]n fraud, truth, meaning relating things exactly they which is are. The than to the literal rather light falsity representation on an insurance should be in the of what truth or of a examined application. reason to know at the time of the knеw or had specially equipped acceptance to determine what facts is not are material to “The insured him, put good expected are but not to to answer in He risk. faith profession problem understanding beyond bring of the medical of mate- of medicine riality. us, [applicant] questions put applica- answered the to him the insurance before
“In the case
agent.
agree
judged
.
.
not be
on a standard
the insurance
.
that his answers should
tion and
capable
answering.”
original.)
[applicant]
(Emphasis
beyond
which the
Annot.,
generally,