The Prudential Insurance Company of America v. Frances S. Barden

424 F.2d 1006, 1970 U.S. App. LEXIS 9813

Opinions

ALBERT V. BRYAN, Circuit Judge.

Two policies issued by The Prudential Insurance Company of America on October 1, 1966 in North Carolina upon the life of Frank Barden were rescinded at the insurer’s suit after his death on December 28, 1966. Both the suit, and the decision of the District Court sustaining it, were grounded upon the assertion of falsity in material representations in the application for the insurance. The beneficiary of the contracts — Frances S. Barden, the widow — appeals. We reverse because of the failure in proof of misrepresentations and also because of the waiver of the asserted misrepresentations.

Subsistence of the policies — each for $10,000.00 — at death was not questioned. Judgment went upon the company’s summary motion, but no point is made of this procedure since the evidential facts are not in controversy. Frank Barden, 48 years old and an accountant by profession, applied on September 29, 1966 for the insurance under a group type plan of the American Institute of CPAs. His written application avowed the completeness and truth of its contents.

The trial court concluded that “in fact and in law the answers to questions 12 and 13 * * * were clearly false, with no waiver or estoppel on the part of the plaintiff [the company]; that said answers were material as a matter of law; * * * ” Verbatim, the text and context of the relevant portions of the application follow:

Question No. 12, whose answer the company impugns as a misrepresentation, asks for a listing of “deformities, impairments or ill health not recorded” in the responses to the dozen searching inquiries of questions 10 and 11. Notably, No. 12 speaks in the present tense and the applicant’s negative response likewise speaks as of the time of the application, that is September 29, 1966. There was adequate basis for his answer. On January 17,1966 he sought a “general checkup” by Dr. K. D. Weeks because of “excessive fatigue over a period of one or two years.” He returned for “thirty-day check-ups”, and the physician described his condition as of May 23, 1966 as follows:

“Reported doing well and feeling fine. Apparently has not indulged in alcoholic drink and has taken good care of himself, resting completely except for his essential gainful occupation. ROS not remarkable. Has no specific complaint. The abdomen is slightly rounded but there is no evidence of enlargement of the liver, no tenderness and no evidence of free fluid. Heart and lungs are clear. His facial appearance is still that of an alcoholic but less marked.” (Accent added.)

In a routine four-months reexamination, the same physician summarized the patient’s condition as of August 23, 1966, just a few days more than a month before the application, in this way:

“(4) August 23, 1966.

“Has continued to do remarkably well and at this time has no complaints. He has followed his routine quite well but admits that he occasionally takes a beer or two and an occasional drink of whiskey. His facial appearance has improved, he no longer complains of nausea or fatigue and his ROS is not remarkable. He has had no abdominal complaints, appetite, digestion and bowel functions have been good. He has continued to lose a little weight and has remained on his diet as prescribed. Re-examination otherwise is not remarkable. There is no palpable enlargement of his liver, there is no evidence of abdominal ascites or other palpable organs or masses. Heart action good, lungs clear. Mouth and tongue negative. Fasting blood sugar and cholesterol are comparatively satisfactory and the latter has again improved.

“Impression: Condition shows progressive improvement with no current clinical evidence of active liver damage.” (Accent added.)

These periodic reports were certainly sufficient to justify a lay patient to believe that a few weeks later, without an intervening sickness, he could say in good faith that he was not then suffering from “any physical deformities, impairments or ill health not recorded” in the catechism of 10 and 11.

Incompleteness in the answer to question 13 — apparently suggesting that it did not tell the whole truth — was the basis for branding its answers as misrepresentations. It comprises an omnibus inquisition for details of the “yes” answers to 10, 11 and 12. Reiteration of No. 12’s integrity will not be undertaken in connection with 13, for its bona fides has been demonstrated.

Deficiency is first leveled at 13 for its singleness of answer. The response adverts solely to 10(d) and details merely an appendectomy two years previous. Seemingly, the company contends that the applicant should have catalogued all indispositions suffered in the five year period before September 29, 1966. According to the company’s brief, with their chronology and nature, they would have been the following:

1. July 28, 1963 after admission to Memorial Hospital in Rocky Mount, North Carolina upon direction of Dr. Bell, examinations disclosed slight cardiospasm and plyorospasm, with duodenal irritability and slowly emptying stomach. On the next day X-rays taken in same hospital.

2. May 5,1964- successful appendectomy — same hospital.

3. May 12, 196U released from hospital.

4. February 9, 1965 admitted to same hospital on complaint of nausea and vomiting of blood, and given injection of glucose.

5. February 10-11, 1965 received two injections of whole blood and more glucose at same hospital.

6. February 18, 1965 released from hospital after determination that vomitus came from ruptured blood vessel in stomach or esophagus.

7. January 17, 1966 Dr. Weeks, on complaint of excessive fatigue over one or two years, and after relating history of February 1965 hospitalization, diagnosed condition as

(a) Alcoholic habituation, borderline

(b) Fatigue symptoms associated with “Dx#l”

(c) History of esophegal varices, secondary to cirrhosis or liver disease in February 1965

(d) Hypereholesterolemie

(e) Hypothyroid

(f) Epidermophytosis of feet

Patient was informed of diagnosis and urged to stop permanently all alcoholic indulgence because of liver trouble, and put on low cholesterol diet.

8. April 15, 1965 — with Dr. Weeks in attendance, admitted to sanitarium, also in Rocky Mount, for weakness, abdominal pain, nausea and frequent regurgitation of food — diagnosis of acute hepatitus stage of cirrhosis of liver.

9. April 21, 1966 — released with diagnosis of cirrhosis of liver and with instructions of physical rest and total alcoholic abstinence.

10. May 23, 1966 — reexamination by Dr. Weeks who found facial appearance of an alcoholic but less marked and improved appearance — repetition of instructions.

11. August 23, 1966 — routine 4-month follow-up examination discovered resumption of some beer and an occasional drink of whiskey — observed progressive liver improvement.

12. December 28, 1966 — admitted to same sanitarium in Rocky Mount, for nausea, vomiting, drenching sweat —died from acute pancreatitis.

This, we think, was expecting too much of the applicant. Omission of the tabulation cannot be considered a withholding of information sufficient to constitute misrepresentation.

Question 13, in its inclusion of No. 10, asks about previous treatment for, or indication of, specified physical trouble or disorders of the applicant. Appendectomy was noted because of No. 10(d)’s inquiry on whether the applicant had been “treated” for or had any indication of “stomach or intestinal trouble”. The surgery was certainly in this category. As tied into 13, No. 10 did not allude to any liver involvement, something with which the applicant had suffered. Thus question 10 in this context was meetly answered.

Question 11, as embraced in 13, is not directed to a particular disease or parts of the anatomy. Rather, it is a multiple quizzing designed to elicit information regarding any medical attention whatsoever which Frank Barden may have received “within the past five years”. His reply to each part was positive, that is: (a) “yes” he had had or been advised to have a surgical operation, (b) “yes” he had been a patient in or advised to enter a hospital or sanatorium, and (c) “yes” he had consulted, been attended or examined by a doctor or other practitioner. This question was as broad as phraseology would permit and was fully rejoined.

Each of these rejoinders could well have been referable to the appendectomy. Likewise they could have related to the medical attention he received for liver troubles or to any of the possible maladies not appearing in question 10. No deception or half-truth is proved here.

To summarize, the company’s accusations of falsity were in no instance sustained. The burden was upon the company to prove that the answers to questions 12 and 13 were false. Old Colony Ins. Co. v. Garvey, 253 F.2d 299, 301 (4 Cir. 1958).

No. 13 afforded the insurer abundant means of discovery of complete medical history in respect to the “Stomach or Intestinal Trouble” asked in 10 (d). The insurer needed but to interview the surgeon and look at the hospital records. Almost his every examination and treatment were in the same hospital. In these circumstances the law of North Carolina, controlling in this diversity case, will not permit a defense of incompleteness to defeat the policy. The company already had the equivalent of the details it was dredging for in No. 13, for as was recognized in Gouldin v. Inter-Ocean Ins. Co., 248 N.C. 161, 102 S.E.2d 846, 849 (1958):

“ ‘Knowledge of facts which the insurer has or should have had constitutes notice of whatever an inquiry would have disclosed and is binding on the insurer. The rule applies to insurance companies that whatever puts a person on inquiry amounts in law to “notice” of such facts as an inquiry pursued with ordinary diligence and understanding would have disclosed.’ 16 Appleman, Insurance Law and Practice, p. 817.”

Indeed, if any of the answers appeared to be so scanty as to suggest concealment, the insurer waived the defect. When the company accepted the application, it was perfectly plain that all of the questions had not been answered as fully as the company thought requisite. Nevertheless, the policy was granted. By issuing the policy without requiring a more expanded answer the company “waived answer to the inquiry and elected to treat it as immaterial.” Bowles v. Mutual Ben. Health & Accident Ass’n, 99 F.2d 44, 46 (4 Cir. 1938). Waiver is also presumed when the insurer, as it did here, waited for several months to raise the objection. Id. at 50.

It is best summed up in Phoenix Mutual Life Ins. Co. v. Raddin, 120 U.S. 183, 190, 7 S.Ct. 500, 502, 30 L.Ed. 644 (1887), it is said:

“But where upon the face of the application a question appears to be not answered at all, or to be imperfectly answered, and the insurers issue a policy without further inquiry, they waive the want or imperfection in the answer, and render the omission to answer more fully immaterial. * * * ”

Nothing we have said trespasses upon our holding in Sivertsen v. The Guardian Life Ins. Co., 423 F.2d 443 (4 Cir., No. 13,282, 1970), for the facts are markedly apart in the two. Here there was no effort to withhold information. Where the answers may not be precise, they are not shown to be knowledgeably so to the applicant.

The judgment on appeal must be vacated, and the action remanded with directions for entry of judgment in favor of the appellant.

Vacated and final judgment ordered.