Northern National Life Insurance v. Lacy J. Miller MacHine Co.

305 S.E.2d 568 (1983)

NORTHERN NATIONAL LIFE INSURANCE COMPANY
v.
LACY J. MILLER MACHINE COMPANY, INC.

No. 8222SC919.

Court of Appeals of North Carolina.

August 2, 1983.

Smith, Patterson, Follin, Curtis, James & Harkavy by Norman B. Smith and John Dusenbury, Jr., and John T. Manning, Greensboro, for plaintiff.

Wilson, Biesecker, Tripp & Sink by Joe E. Biesecker, and House, Blanco & Osborn, P.A. by Lawrence U. McGee and John S. Harrison, Lexington, for defendant.

WELLS, Judge.

At the outset, we address plaintiff's contention raised at oral argument of this case that our decision in this case must be dictated by the decision of this Court in Manhattan Life Insurance Company v. Lacy J. Miller Machine Company, Inc., 60 N.C.App. 155, 298 S.E.2d 190 (1982), disc. rev. denied, 307 N.C. 697, 301 S.E.2d 389 (1983). In Manhattan, a case similar to the present case, this Court affirmed the trial court's grant of plaintiff's motion for summary judgment. While we recognize that this case and Manhattan involve similar issues, we note that one important factual difference is apparent. In Manhattan, the application was signed both by Buie in his capacities as vice-president, secretary and treasurer of the corporate defendant, and by Miller. Moreover, Manhattan was a summary judgment case, and the scope of appellate review and questions presented on appeal were necessarily different than in the present case. In Manhattan, the Court did not address the issue of agency, as that issue relates to which of the parties in that case furnished the false information contained in the application. We do not believe that the decision in Manhattan is controlling on the issue presented in the present appeal.

It is proper to direct a verdict for the party with the burden of proof only if the evidence so clearly establishes the facts in issue that no reasonable inference to the contrary may be drawn. Bank v. Burnette, 297 N.C. 524, 256 S.E.2d 388 (1979). It is generally held that a directed verdict for the party with the burden of proof is proper only if the credibility of the movant's evidence is "manifest as a matter of law." Id. Situations where the movant's evidence is sufficiently credible include:

(1) Where non-movant establishes proponent's case by admitting the truth of the basic facts upon which the claim of proponent rests.

(2) Where the controlling evidence is documentary and non-movant does not deny the authenticity or correctness of the documents.

(3) Where there are only latent doubts as to the credibility of oral testimony and the opposing party has "failed to point to specific areas of impeachment and contradictions."

Id. (cites omitted.)

Plaintiff contends that the insurance policy on the life of Miller was void ab initio. "It is well established that an insurance company cannot avoid liability on a life insurance policy on the basis of facts known to it at the time the policy went into effect." Willetts v. Insurance Corp., 45 N.C.App. 424, 263 S.E.2d 300, disc. rev. denied, 300 N.C. 562, 270 S.E.2d 116 (1980), citing Cox v. Assurance Society, 209 N.C. 778, 185 S.E. 12 (1936). Of course, the knowledge of or notice to an agent of an insurer is imputed to the insurer itself, absent collusion between the agent and the insured. Cox v. Assurance Society, supra; Insurance Co. v. Grady, 185 N.C. 348, 117 S.E. 289 (1923); Buchanan v. Nationwide Life Insurance Co., 54 N.C.App. 263, 283 S.E.2d 421 (1981). Moreover, an insurance company is deemed by law to have notice of facts that an inquiry pursued with ordinary diligence and understanding would have disclosed. Gouldin v. Insurance Co., 248 N.C. 161, 102 S.E.2d 846 (1958); Willetts v. Insurance Corp., supra.

A corollary to the above rules, applicable to the present case, is that when the agent of the insurance company answers questions for the applicant on an application for insurance, without the applicant having reason to know what answers the agent is supplying, the insurance company will be equitably estopped to rely on the falsity or inaccuracy supplied by its own agent in any effort to defeat liability on the policy. See Heilig v. Insurance Co., 222 N.C. 231, 22 S.E.2d 429 (1942); Cato v. Hospital Care Association, 220 N.C. 479, 17 S.E.2d 671 (1941); cf. Sauls v. Charlotte Liberty Mutual Insurance Co., 62 N.C. App. 533, 303 S.E.2d 358 (1983).

It is well established that when the evidence raises a question of whether a misrepresentation in an application for insurance is attributable to the insured or to the agent of the insurer alone, the question must be resolved by the finder of fact. See Chavis v. Insurance Co., 251 N.C. 849, 112 S.E.2d 574 (1960); Heilig v. Insurance Co., supra; Cox v. Assurance Society, supra; Buchanan v. Nationwide Insurance Co., supra.

Applying these principles to the evidence in the present case, it becomes clear that a threshold issue in this case is whether there was sufficient evidence to submit to the jury the question of whether Brooks was an agent of plaintiff insurance company. Plaintiff, in its brief, concedes that the dispositive question presented in this appeal relates to who must bear responsibility for the false answers in Miller's application. It was for the jury to decide whether Brooks was an agent of plaintiff or defendant and whether defendant had either actual or implied knowledge of the false statements in the application, and we affirm the judgment of the trial court.

G.S. 58-197 provides that

A person who solicits an application for insurance upon the life of another, in any controversy relating thereto between the insured or his beneficiary and the company issuing a policy upon such application, is the agent of the company and not of the insured.

The statute thus establishes a conclusive presumption of an agency relationship between the agent and the insurance company once "solicitation" on the part of the agent is found.

The word "solicit" is not defined in the definition section of Chapter 58 of the General Statutes; nor does the term appear to have been authoritatively construed in the reported decisions of the appellate courts of this state. Its meaning must be discerned, therefore, by application of fundamental principles of statutory construction.

Two well settled principles of statutory construction in this state are that the words in a statute are to be construed so as to further the intent of the legislature, Commissioner of Insurance v. Automobile Rate Office, 293 N.C. 365, 239 S.E.2d 48 (1977), and that absent a special or technical definition or other clear indication to the contrary, words in a statute must be given their ordinary meaning. Food Town Stores v. City of Salisbury, 300 N.C. 21, 265 S.E.2d 123 (1980). Generally the best indicia of legislative intent are: the spirit, language and objectives of the act. Savings & Loan League v. Credit Union Commission, 302 N.C. 458, 276 S.E.2d 404 (1981).

Clearly, G.S. 58-197 was enacted by the General Assembly as a protective measure for consumers of insurance services. Its import is obviously to expand the class of persons capable of binding insurers to enforceable insurance obligations, and to prevent insurers who obtain consideration from persons solicited on their behalf, from relying on the purportedly ultra vires actions of their agents to deny liability to beneficiaries.

Webster's Third New International Dictionary of the English Language, Unabridged 2169 (1976), in pertinent part, defines "solicit" as "... to approach with a request or plea (as in selling or begging)... to seek eagerly or actively ...."

The evidence in the present case tended to show that Brooks was in the business of selling insurance; that he frequented the corporate headquarters of defendant for the purpose of selling insurance; that, pursuant to a request, he found out about plaintiff's plan and suggested to defendant that the plan may meet its needs; that he delivered to defendant application forms and, eventually, issued insurance policies for plaintiff; that he forwarded the applications and binder payments from defendant to plaintiff; and that he was paid a commission by plaintiff on the policies he sold to defendant. This evidence was sufficient to permit the jury to find that Brooks solicited the application of the insured and was, therefore, an agent of plaintiff and not of defendant.

We note that there was abundant evidence which would have permitted, but did not require, the jury to find that defendant knew or should have known that Brooks supplied false information to plaintiff. The jury's verdict, in light of the jury instructions given, clearly indicates that the jury rejected this evidence favoring plaintiff and found that the misrepresentations were those of Brooks, acting as agent of plaintiff. Upon the verdict of the jury, plaintiff is estopped to assert the fraud of Brooks in its effort to defeat defendant's recovery under the insurance policy.

No error.

PHILLIPS, J., concurs.

HEDRICK, J., dissents.

HEDRICK, Judge, dissenting:

While I do not necessarily agree with all that was said or unsaid in Manhattan Life Ins. Co. v. Miller Machine Co., 60 N.C.App. 155, 298 S.E.2d 190 (1982), disc. rev. denied, 307 N.C. 697, 301 S.E.2d 389 (1983), I feel we are bound by the results in that case especially since our Supreme Court denied the petition to review this court's decision in that case.