HORGER V. MUTUAL OF OMAHA, 1972-NMSC-022,
83 N.M. 596, 495 P.2d 376 (S. Ct. 1972)
CARLTON H. HORGER, Plaintiff-Appellee,
vs.
MUTUAL OF OMAHA INSURANCE COMPANY, Defendant-Appellant
SUPREME COURT OF NEW MEXICO
1972-NMSC-022, 83 N.M. 596, 495 P.2d 376
Appeal from the District Court of Otero
County, Stanley, Judge
S. THOMAS OVERSTREET, Alamogordo, N.M.,
Attorney for Appellee.
SHIPLEY, DURRETT, CONWAY & SANDENAW,
Alamogordo, N.M., Attorneys for Appellant.
MCMANUS, Justice, wrote the opinion.
Donnan Stephenson, J., Samuel Z. Montoya,
J.
{1} On July 9, 1969, Carlton
H. Horger, plaintiff-appellee, entered into a contract of sickness and accident
insurance with Mutual of Omaha Insurance Company, defendant-appellant. On July
11, 1969, plaintiff suffered accidental bodily injury and timely filed a notice
of claim and proof of loss but defendant refused to pay the named benefits.
Plaintiff then brought suit in the District Court of Otero County, on June 1,
1970 against defendant who answered, setting up two affirmative defenses and a
counterclaim.
{2} The first affirmative
defense alleged fraud on the part of the plaintiff based on the fact that the
monthly income stated on the application for insurance was in excess of his
actual monthly income (a contention not pursued on appeal), and that he failed
to advise the insurer that a similar sickness and accident policy was in effect
with Allstate Insurance Company. The defendant further alleged that it would
not have issued the policy had the true facts been disclosed at the time of the
application.
{3} The second affirmative
defense alleged that the defendant attempted to cancel and rescind the policy,
and tendered a return of all premiums to the plaintiff as a result of the fraud
perpetrated by the plaintiff.
{4} The counterclaim asked
that the court rescind the contract and allow defendant to
{*597}
recover costs and other relief as the court deemed just. The counterclaim
was based on the same allegations stated in the first and second affirmative
defenses.
{5} The cause was tried
before a jury and judgment entered for the plaintiff in the sum of $6,419.44.
The defendant had moved for a directed verdict at the close of the plaintiff's
evidence and for judgment non obstante veredicto following trial. Both motions
were denied. It is from this verdict and judgment for the plaintiff that the
defendant now appeals.
{6} The defendant sets down
four major joints for reversal. We will discuss only the first two which are as
follows:
"POINT I: The court erred in denying
defendant-appellant's motion for a directed verdict and for judgment non
obstante veredicto because of plaintiff's concealment or misrepresentation of a
fact which was material to the risk assumed by defendant and which was proven
by uncontradicted testimony upon which reasonable minds could not draw a
different conclusion.
"POINT II: Where the insurer's defense in a case is
misrepresentation resulting from false answers or omissions to questions given
in the insured's application as to matters material to the risk, the insurer is
entitled to instructions that actual fraud need not be proved and that
misrepresentation as to a fact material to the risk, even though innocently
made, would avoid the policy."
{7} Defendant's third point
deals with the taxing of the cost of reproduction of a transcript of a
deposition and the fourth point concerns the taxing of costs of an expert
witness who did not testify. In light of our decision in this case it will be
unnecessary to discuss the latter two points.
{8} The pertinent facts
follow. Plaintiff mailed a business reply card inquiring about an insurance
offer by Mutual of Omaha, defendant herein. The card was answered by the local
agent. Ted Forbes, who was authorized to take applications. Forbes discussed
the plaintiff's insurance needs and prepared an application for an income
disability policy. The application included the now disputed question No. 9,
reading: "What insurance is held or has been applied for by you or your
dependents?" The only answer written in was. "Aetna Group
Hospital." The policy was issued on the basis of this application.
Testimony was also given to the effect that defendant's agent. Forbes, had
incorrectly read question No. 9 to the plaintiff in that Forbes asked only what
insurance plaintiff actually had, and that the plaintiff had not himself read
the application. This testimony was contradicted by that of Forbes.
{9} The plaintiff had applied
for similar insurance from Allstate Insurance Company less than one month
before his application to Mutual of Omaha. Plaintiff testified to the effect
that he applied for the Mutual of Omaha policy because he did not think he was
going to be insured by Allstate. He is now collecting benefits under the
Allstate policy.
{10} On July 11, 1969, the
plaintiff splashed battery acid in his right eye while working at Holloman Air
Force Base and he has continued to have trouble with the eye even though the
attending physicians have been unable to find anything physically wrong. At any
rate, the plaintiff has had numerous emotional problems and continued loss of
vision in the right eye, resulting in an inability to return to work as a heavy
equipment operator.
{11} One month after the
accident, on August 12, 1969, defendant sent a photocopy of the application,
with a letter of transmittal, asking the plaintiff to review the application
and determine if it was "incomplete in any respect" and, if so, to return
it with the additional information. Plaintiff checked the box indicating that
he had reviewed the application and found the answers to be correct. Testimony
indicated
{*598} that he had compared
the photocopy with his copy, found them to be the same and returned the letter
without actually reading the application.
{12} Mutual of Omaha defended
the suit and now asks for reversal of the judgment on the basis that the
omission of information on the questionnaire concerning the Allstate insurance
was a material omission and thus voids the policy.
{13} Recent New Mexico cases
dealing with the present problem include Modisette v. Foundation Reserve
Insurance Co.,
77 N.M. 661,
427 P.2d 21 (1967), wherein it was stated:
"The general rule, and the rule consistent with
principles of contract and the duty of fair dealing, which is the duty imposed
upon both the insurer and the insured, is that if misrepresentations be made,
or information withheld, and such be material to the contract, then it makes no
difference whether the party acted fraudulently, negligently, or innocently. *
* *
"If the information withheld, or the misrepresentations
made, were material, then defendant was entitled to void the policy in the
absence of waiver or estoppel. * * *"
{14} The Court went on to
state:
"A representation or concealment of a fact is material
if it operates as an inducement to the insurer to enter into the contract,
where, except for such inducement, it would not have done so, or would have
charged a higher premium. * * *"
{15} The case under
discussion dealt with an automobile comprehensive policy. The insured had
concealed, by false answers, the facts that a previous policy had been canceled
for nonpayment of premiums and that he had been denied coverage during the
preceding 36 months.
{16} This differs from the
case at bar in that here we are dealing with a policy for income benefits and
that there is substantial evidence to the effect that the question asked by the
defendant's agent was, "if he had any insurance" and "if so, what
insurance did he have," rather than question No. 9 as previously noted.
The question propounded by the agent had been truthfully answered, i.e.,
plaintiff did have insurance and it was with Aetna. That particular question
does not lend itself to the answer that plaintiff had applied for insurance
with Allstate. The testimony is confused and contradictory but the evidence
submitted was adequate to prevent the lower court from granting appellant's
motions, as previously stated. The materiality of the misrepresentation is
ordinarily a matter for the finder of facts. Tsosie v. Foundation Reserve
Insurance Co.,
77 N.M. 671,
427 P.2d 29 (1967); Modisette v. Foundation Reserve
Insurance Co., supra. Therefore, the court did not err in this regard and the
cause was properly submitted to the jury.
{17} Defendant's Point II is
well taken, however, because of the evidence adduced at the trial that the
misrepresentation made by the plaintiff could have been unintentional and the
jury should have been given the opportunity to consider this factor in its
overall deliberations. In Tsosie v. Foundation Reserve Insurance Co., supra,
Justice Oman's specially concurring opinion, 77 N.M. at 678, 427 P.2d at 33,
states:
"It is recognized in the opinion that the correct rule of
law applicable in insurance cases is no different than that applicable in
mercantile transactions. The rule is that if a misrepresentation be made, or
information be withheld, and such be material to the contract, then it makes no
difference whether the party making the misrepresentation or withholding the
information acted innocently or with an intent to deceive."
{18} The instruction given to
the jury on the subject was, as follows:
"No. 16. You are instructed that, in order that
misrepresentations made in procuring insurance shall have the effect to make
the policy void, such misrepresentations must be material to the risk, or
influenced the issuing of the policy, are questions for the jury to determine
from the evidence.
"The Court instructs the Jury that, in order for the
Defendant company in this suit to be entitled to a verdict in its favor, on the
ground that the policy was void because of misrepresentation by the plaintiff
in procuring the insurance, the defendant company must prove to the satisfaction
of the jury that the Plaintiff made such misrepresentations, and that they were
as to matters material to the risk."
{19} This instruction does
not state all of the alternatives, and it is the duty of the court to instruct
the jury on the law applicable to the case. See Floeck v. Hoover,
52 N.M. 193,
195 P.2d 86 (1948); Gallegos v. McKee,
69 N.M. 443,
367 P.2d 934 (1962).
{20} The defendant was
prejudiced by the court's failure to instruct the jury that the
misrepresentation need not have been intentional to void the policy.
{21} The cause is remanded
for a new trial in a manner consistent with this opinion.
Donnan Stephenson, J., Samuel Z. Montoya, J.