Peoples Life Insurance v. Jerrell

Singley, J., delivered the opinion of the Court. Peoples Life Insurance Company (Peoples) has appealed from a judgment for $10,000.00, the face amount of a policy of insurance on the life of Kenneth W. Jerrell, entered against it by the Circuit Court for Montgomery County (Shearin, J.) in favor of the beneficiary, Mildred E. Jerrell, mother of Kenneth, on a jury verdict. Kenneth died on 26 April 1972, apparently as a result of a drug overdose. At the time of his death, his life was insured under three policies issued by Peoples: two for $500.00 each, one issued in 1954, when he was an infant, the other in 1969; and a third policy, for $10,000.00, which was applied for by his mother on 15 October 1970, and issued on 29 October with an effective date of 22 October.

Peoples paid the two $500.00 policies, but declined to pay the $10,000.00 policy, relying on what it conceived to be a material misrepresentation in the application. Maryland Code (1957, 1972 Repl. Yol.) Art. 48A, § 374 provides: ⁵³⁸ “All statements and descriptions in any application for a life or health insurance policy or annuity contract, or for the reinstatement or renewal thereof, by or in behalf of the insured or annuitant, shall be deemed to be representations and not warránties. Misrepresentations, omissions, concealment of facts, and incorrect statements shall not prevent a recovery under such policy or contract unless either: “(1) Fraudulent; or “(2) Material either to the acceptance of the risk, or to the hazard assumed by the insurer; or “(3) The insurer in good faith would either not have issued, reinstated, or renewed the policy or contract, or would not have issued a policy or contract in as large an amount, or at the same premium or rate, or would not have provided coverage with respect to the hazard resulting in the loss, if the true facts had been made known to the insurer as required either by the application for the policy or contract or otherwise.” As a result, although whether misstatements in an application are false and material to the risk are ordinarily questions of fact for the jury, Cohen v. American Home Assurance Co., 255 Md. 334, 342 , 258 A. 2d 225, 229 (1969), when the evidence is clear and convincing, or uncontradicted, the court may rule as a matter of law, Continental Cas.

Co. v. Pfeifer, 246 Md. 628, 639 , 229 A. 2d 422, 427 , cert. denied, 389 U. S. 832 (1967); Heidenreich v. Metropolitan Life Ins. Co., 213 Md. 286, 295 , 131 A. 2d 914, 919 (1957); Monumental Life Ins. Co. v. Taylor, 212 Md. 202, 210 , 129 A. 2d 103, 106-07 (1957); John Hancock Mut. Life Ins.

Co. v. Adams, 205 Md. 213, 220 , 107 A. 2d 111, 113-14 (1954); Schloss v. Metropolitan Life Ins. Co., 177 Md. 191, 197-98 , 9 A. 2d 244, 247 (1939) (numerous cases cited). Peoples’ contention is that since the evidence showed that Kenneth had a long history of drug addiction, which was not disclosed in the application, its motion for a directed verdict ⁵³⁹ should have been granted, and the case should not have gone to the jury. Principal reliance is placed by Peoples on the testimony of Mrs. Jerrell.

She testified that Kenneth was born in 1954; that she had taken out a $500.00 life policy when he was an infant and a second $500.00 policy in 1969. After the death of Mr. Jerrell in June, 1970, Mr. S. W. Ferrell, an agent for Peoples in Gaithersburg, suggested that Mrs. Jerrell increase the amount of insurance on Kenneth’s life. Mrs. Jerrell signed a printed application form, which she thought was completed by Mr. Ferrell. An examination of the form shows quite clearly that it was not completed by her.

After the usual questions relating to Kenneth’s date of birth, height, weight, and school attended, there were two significant questions which were answered in the following manner (emphasis supplied): “7. Do you know of any impairment now existing in your health or physical condition? YesQ; No(xj. If yes, give particulars: “8.

Have you consulted a physician for any illness during the past three years? Yes®; NoD. If yes, give particulars and dates: Dr. Hooper 10/2/70 Gaithersburg Md. sore Throat 1 visit Good” Mrs. Jerrell was questioned about this on direct examination: “Q. Did you have any discussion at all with Mr. Ferrell about any medical problem or about Kenny’s general medical state? “A. Mr. Ferrell had known Kenny had been oftentimes sick and had to go to the doctor with a sore throat.” “Q. Did you have any further discussion with Mr. Ferrell as to what he would do as far as checking out Kenny’s medical condition? “A. He told me if the doctor who was his family doctor, Dr. Hooper would pass this, he would be back with the policy.” It would be well to note that the application which Mrs. ⁵⁴⁰ Jerrell signed was for a policy of term insurance, convertible to straight life at age 28, paid up at age 65. The application was cast in terms which might lead one to believe that Questions 7 and 8 were directed to Mrs. Jerrell, who signed as applicant for the policy.

Apparently, she did not reach this conclusion, since her answers related to Kenneth. The crux of the problem was that Kenneth had been admitted and treated for drug abuse at Suburban Hospital in 1968, and in 1969, at Montgomery General Hospital and again at Suburban Hospital. In addition, on the recommendation of