Huffman v. STATE CAPITAL LIFE INSURANCE COMPANY

174 S.E.2d 17 (1970) 8 N.C. App. 186

Doyt HUFFMAN, Administrator of the Estate of Ruth Huffman, Deceased, and Burke County Savings & Loan Association
v.
STATE CAPITAL LIFE INSURANCE COMPANY.

No. 7025DC108.

Court of Appeals of North Carolina.

May 27, 1970.

Byrd, Byrd & Ervin, by Robert B. Byrd, and John W. Ervin, Jr., Morganton, for plaintiffs-appellees.

Allen, Steed & Pullen, Raleigh, and Patton & Starnes, Morganton, by Thomas W. Steed, Jr., Raleigh, for defendant appellant.

PARKER, Judge.

Defendant admitted issuance of the policy, death of the insured during the period for which premiums were paid, and that proof of death was duly submitted. Plaintiffs introduced the policy. The admissions and the policy made a prima facie case for the jury and placed on defendant the burden of showing legal excuse for refusing payment according to the terms of the policy. Rhinehardt v. Insurance Co., 254 N.C. 671, 119 S.E.2d 614; Chavis v. Insurance Co., 251 N.C. 849, 112 S.E.2d 574. Plaintiffs' evidence did not establish defendant's affirmative defenses as a matter of law, and defendant's assignment of error based on the court's refusal to grant nonsuit cannot be sustained.

When instructing the jury the court charged that if the jury should find from the evidence that the deceased had made false statements in answer to questions on the application for the insurance policy relating to her health and that the deceased knew at the time that such statements were false "and that she made them for the purpose of misleading the defendant into entering into a contract of insurance" then they should find for the defendant. (Emphasis added.) The court had previously instructed the jury that if they believed that the answer made by the deceased in her application for the insurance policy, even though untrue, was "made in good faith and without any intention to deceive, then, in that event the incorrect proof of said answer would not prevent the plaintiff from recovering." These instructions, in addition to being obscure, were erroneous. In order to avoid the policy on the grounds that the insured made false statements in her application for insurance as to her health, it was not necessary that the defendant insurance company show that the insured harbored any intent to deceive. "If insured made the statement and if it was false, the question as to whether it was fraudulently, knowingly or innocently made is of no importance. The statement in either case is material as a matter of law, and the policy will be avoided." Rhinehardt v. Insurance Co., supra. Appellees seek to distinguish the instant case from the Rhinehardt case on the ground that the application which insured signed in the instant case required the insured to answer if she was in good health so far as she knew. Appellees contend that the phraseology of the question necessarily injected the element of scienter. Even so, the court's charge was in error, since it required the defendant to prove not only that the insured answered the question as to her knowledge of her state of health incorrectly, but that she did so with the specific intent to deceive and mislead the defendant into issuing the policy of insurance. The defendant was not required to carry such a burden in order to make good its defense.

In oral argument appellees' counsel also contended that any error in the charge could not have been prejudicial, since the effect of the jury's verdict in answering issues 4 and 6 was to find that the insured had not in fact answered questions 11 and 13 on the application in the manner disclosed by defendant's evidence, and therefore the jury could not have been concerned with any questions as to whether the deceased harbored an intent to deceive. We do not agree. In the instant case, unlike the situation which was presented in Chavis v. Insurance Co., supra, there was no conflict in the evidence as to whether the insured had actually answered the questions on the application in the manner disclosed by defendant's evidence. All of the evidence indicated that she did. The charge considered as a whole was confusing, and the jury could well have been misled.

Appellant's remaining assignments of error relating to the court's charge to the jury also have merit. In particular, the court failed to charge the jury properly as to the substantive law applicable to issue number 8, relating to the "good-health" clause contained in the application for the insurance policy. "Such a provision is valid and enforceable, and is generally considered a condition precedent to the policy's becoming effective, and it is immaterial in this respect that the insured was ignorant of his condition." 43 Am.Jur.2d, Insurance, § 234, p. 295. Where, as was the case here, the policy is issued without a prior medical examination, a majority of jurisdictions which have considered the matter have adopted the view that a "good-health" clause of the type involved in this action will be construed literally as requiring good health of the insured at the time the policy is issued or delivered and will not be construed as applying only to changes in the applicant's health which have taken place since the making or acceptance of the application. 43 Am.Jur.2d, Insurance, § 235, at p. 297; Annotations, 136 A.L.R. 1516, 1527; 60 A.L.R. 2d 1429, 1440.

For the errors noted in the court's charge, there must be a

New trial.

MORRIS and HEDRICK, JJ., concur.