Stumpf v. State Farm Mutual Automobile Insurance

Barnes, J., delivered the opinion of the Court. The appellants, Wilma Rose Stumpf, her husband, Clifford Forrest Stumpf, Sr., and the two Stumpfs as surviving parents of their son, Clifford Forrest Stumpf, Jr., sued Donald Leon Nines, the named insured in an Assigned Risk Policy, carried by the appellee, State Farm Mutual Automobile Insurance Company (State Farm), in the Circuit Court for Allegany County for damages resulting from an automobile accident on Henderson Boulevard in Cumberland on April 14, 1965, in which Mrs. Stumpf was seriously injured and her infant son killed when Nines’ automobile ran over the sidewalk and struck them. Judgments were rendered against Nines in favor of Mrs. Stumpf for $40,000, in favor of Mr. Stumpf for $25,000 and in favor of the Stumpfs as surviving parents of their infant son for $3,000, together with the court costs. Executions were duly issued on the judgments and were returned “Nulla Bona.” The judgments not having been satisfied, and more than 75 days having elapsed since their rendition, the appellants sued State Farm in the Circuit Court for Allegany County (Getty, J.) to recover the amounts due on the judgments.

The Circuit Court entered a judgment for State Farm on April 18, 1968, and the appellants took a timely appeal to this Court from that judgment. ⁷⁰⁰ On May 13, 1964, Nines applied for automobile insurance through David M. Watson, an independent insurance broker in Cumberland. Nines had been turned down by another insurance company, so that it was necessary to file an application for automobile insurance through the Maryland Assigned Risk Plan. Watson testified that he typed the application in his office, inserting in the application forms the answers given him by Nines. .Thereafter the application was signed by Nines and notarized by Watson. There is a certification that Watson had read the assigned risk plan for this State, had explained those provisions to the applicant, and had included in the application “all required information given to me by the applicant.” Question 16 on the application form states: “Has Applicant (or anyone who usually drives the applicant’s motor vehicle) any mental or physical disability?” The response to that question was “No” typed in the space provided for the answer.

The Maryland Automobile Assigned Risk Plan, Section 9, entitled “Eligibility” provides in relevant part: “An applicant shall be considered eligible if he reports all information of a material nature, and does not make incorrect or misleading statements, in the prescribed application form, or does not come within any of the prohibitions or exclusions listed below. “A risk shall not be entitled to insurance nor shall any subscriber be required to afford or continue insurance under the following circumstances.” Then follow six provisions, the one relevant to the present case being: “(E) If the applicant or any one who usually drives the automobile is subject to epilepsy, * * The Maryland Automobile Assigned Risk Plan was promulgated by the insurance companies doing business in Maryland, subject to approval by the Insurance Commissioner, for an equitable apportionment among them of applications for automobile insurance for “applicants who are in good faith entitled to but who are unable to procure such insurance through ordinary methods,” and the insurers “may agree among themselves ⁷⁰¹ on the use of reasonable rate modifications for such insurance,” the rate also being subject to the approval of the Insurance Commissioner. Code (1957), Article 48A, Section 223 (15), Laws of 1949, Chapter 511. 1 State Farm in the policy issued in this case, agreed to pay on behalf of the insured all sums which the insured “shall become legally obligated to pay as damages because of bodily injury, sickness or disease including death at any time resulting therefrom, sustained by any person caused by accident and arising out of the ownership or use of the automobile.” The policy was issued for one year beginning May 19, 1964 for coverages in the amount of $15,000 for each person with a maximum of $30,000 for each occurrence. The policy in Condition 16 provided : “16. Declarations.

By acceptance of this policy the named insured agrees that the statements in the declarations are his agreements and representations, that this policy is issued in reliance upon the truth of such representations and that this policy embodies all agreements existing between himself and the company or any of its agents relating to this insurance.” There was no dispute that Nines was subject to epileptic seizures. Nines had been in the Marine Corps from September 1953 to September 1963. He had his first epileptic seizure on February 19, 1958 in Okinawa, possibly as a result of a traumatic injury. Nines was put on temporary retirement in October 1959 after which he received extensive treatment and received a medical discharge from the Marine Corps on September 1, 1963, “Diagnosis, epilepsy.” He received from the Government of the United States a 30% disability pension and has continued to receive treatment and medication from a Naval Hospital. ⁷⁰² In September 1959, Nines, in his application for a Maryland motor vehicle operator’s license, was asked, “Have you had or been treated for fainting or dizzy spells or epilepsy, paralysis or any other physical or mental disability?” He answered this question “No,” signed the application and subscribed to it before a notary public.

In subsequent applications for renewals of his operator’s license, dated April 27, 1962 and May 2, 1964, he was asked, “Do you have any kind of mental disability which would affect your driving?” His answers in both instances were “No.” Nines admitted that he had an epileptic seizure in August 1964. On April 14, 1965, Nines, while driving his automobile on Henderson Boulevard in Cumberland, ran up on the sidewalk, seriously injuring Mrs. Stumpf and killing her young son, as we have stated. Corporal Moyer, of the Cumberland Police Department, was directing traffic at the intersection of Henderson Boulevard and Frederick Street at the time of the accident. He testified that immediately following the accident he observed Nines in his automobile.

He stated that Nines was “thrashing about in his car * * * he was perspiring very heavily” and “there was slobber running down his face, down over the front of his jacket.” When the officer questioned Nines, at times Nines “answered okay, other times he was very incoherent.” Later, when questioned at the investigator’s office, Corporal Moyer testified that Nines made the following statement: “He stated that he had had a seizure, and then went on to state that it must -have been I think he called it a grand mal seizure, and that he had never had one of those before, that he had always had the small seizure, * * * he then explained to us the difference between the seizures. * * * the petit mal I believe it is and grand mal, and he said that he thought he had had the grand mal seizure this time.” Later, however, in his pretrial deposition which was admitted into evidence at the trial of the case, Nines stated that he did not have an epileptic seizure at the time of the accident, but had struck his head on the windshield. He said that he had stated that he had had an epileptic seizure because of the fear of a murder charge being placed against him. ⁷⁰³ On April 15, 1965, the day following the accident, the manager of the claims office of State Farm in Cumberland took a statement from Nines in which Nines disclosed the history of his epilepsy. The manager at the same time obtained from Nines an “Authorization for Claim Service and Non-Waiver of Rights” which authorized State Farm to investigate, negotiate, settle, deny or defend any claim arising out of the accident, but in which it was agreed that “such actions shall not waive any o£ the rights of the undersigned or of the Company under any contract of insurance.” Nines was charged with manslaughter as a result of the accident, but, because of the hospitalization of Mrs. Stumpf, the prosecuting witness, the trial was postponed until September 8, 1965. At the trial, a sworn statement given by Nines to the County Investigator was received, in which he disclosed that he had been under constant medication for these seizures since his retirement and was required to take three different medications four times a day.

He described in some detail the type of epileptic seizures to which he was subject. He stated: “I blacked out [at the accident] because of an epileptic seizure. “Q. Can you describe the type of epileptic seizure? A. They have two classes, a grand mal and a petty mal. I had a petty mal. “Q. How do you evaluate this one you had this evening as petty mal?

A. Well, the last grand mal I had I was unconscious for four or five hours. This time I didn’t have any notice of it coming on me, my tongue is not chewed, and the thing that is in common with a petty mal is that I am quite weak. I was probably only unconscious for a brief period of time.” Nines stated that he could not remember how he answered the question in regard to having any physical or mental defects or disability in his application for a driver’s license and the subsequent renewal applications. On October 12, 1965, State Farm notified Nines by letter that it was rescinding the policy as of the date of its issuance and was treating it as void from its inception.

This action was ⁷⁰⁴ taken because of the material misrepresentation by Nines in his application in stating that he had no physical defects when in fact he did, and State Farm’s reliance upon the statement in the application. It was further stated that if it had had knowledge of the matter at the time it would have rejected the application and declined to issue the policy. It enclosed its check for $52.20 as a return of premium, with a note that Watson owed Nines $5.80 for unearned commission. Later, on October 28, State Farm enclosed an additional check to Nines for $5.80.

Nines cashed both checks. At the trial of the case, the plaintiffs produced an expert medical witness and propounded a hypothetical question to him seeking to elicit the opinion of the witness, based on reasonable medical certainty or probability, whether or not the patient had a mental or physical disability. After the objection to this hypothetical question was sustained, the plaintiff proffered to prove by the medical expert that Nines did not have a physical or mental disability at the time of the accident. We will consider this matter more fully later in this opinion.

The trial court, sitting without a jury (a jury trial having been waived), filed a written opinion on April 18, 1968 in which, after carefully reviewing the evidence, it found as a fact that Nines “had a mental or physical disability at the time he completed the application for insurance and that the answers made by him were knowingly and intentionally false as well as material to the risk.” The trial court further found that if State Farm had known of the misrepresentation it would not have issued the policy and further that State Farm acted within a reasonable time, under the circumstances of the case, in rescinding the policy and returning the premium. On the same day, the trial court passed an order rendering a judgment for the defendant, State Farm, and requiring the plaintiffs to pay the costs. Four questions concerning the findings and rulings of the trial court are presented to us: 1. Was the trial court clearly erroneous in finding that the insured, Nines, had made a material misrepresentation in his application for insurance which justified State Farm in rescinding the policy ? ⁷⁰⁵ 2.

Was the trial court clearly erroneous in finding that State Farm was not guilty of such unreasonable delay in asserting its right to rescind as would preclude it from rescinding the policy ? 3. Did the trial court err in sustaining the objection of State Farm to the hypothetical question propounded to Nines’ medical expert ? 4. Was the insured, Nines, guilty of such lack of cooperation as to entitle State Farm to avoid its policy? We are of the opinion that the first three questions should be answered in the negative and the judgment of the lower court should be affirmed.

We, therefore, do not find it necessary to consider question 4, although the trial court expressed the opinion that the failure of Nines to cooperate also justified an avoidance of the policy by State Farm. 1. The Maryland law in regard to misrepresentations in applications for automobile insurance justifying rescission of the policy by the insurer was aptly summarized in Erie Insurance Exchange v. Lane, 246 Md. 55 , 227 A. 2d 231 (1967). In Erie, Judge Marbury, for the Court, stated: “A misrepresentation by the person insured, in the application for a policy of insurance covering the owner or his automobile against liability or damages, will not affect the validity of the policy, unless the representation relates to some matter which is material to the risk, or prejudicial to the company, or was not made in good faith by the applicant or unless, by virtue of the terms of the application and policy, it is made an affirmative warranty. 7 Blashfield, Automobile Law and Practice, Section 301.4. ( 246 Md. at 59 , 227 A. 2d at 234 .) “The burden was on the insurer to establish the insured’s fraud or misrepresentation in an application for insurance, Sun Ins.

Office v. Mallick, supra, and, ordinarily, whether a representation in an insurance application was true or false, or material to the risk, is for the jury to determine. Monumental Ins. Co. v. ⁷⁰⁶ Taylor, 212 Md. 202, 129 A. 2d 103 .” ( 246 Md. at 63 , 227 A. 2d at 236 .) The Maryland law is also well established that the provisions in the policy giving injured persons the right to sue the insurer do not enlarge the liability of the insurer, but merely enable the injured persons to succeed to the rights of the insured against the insurer, so that defenses which are effective against the insured are likewise effective against the injured persons. Indemnity Ins.

Co. v. Smith, 197 Md. 160 , 78 A. 2d 461 (1951) ; American Automobile Insurance Co. v. Fidelity and Casualty Co., 159 Md. 631 , 152 A. 523 (1930). In Indenmity Ins. Co. v. Smith, supra, Judge Delaplaine, for the Court, stated: “The judgment creditor, who sues on a policy indemnifying the insured against claims for damages, stands in the shoes of the insured and is chargeable like the insured with any breach of conditions on which liability depended.” ( 197 Md. at 165 , 78 A. 2d at 463 .) See 45 C.J.S. Insurance, § 588 at 385-86 (1946); 46 C.J.S. Insurance, § 1191(3) at 112 (1946); 29A Am. Jur.

Insurance, § 1489 at 599 (1960). As we have indicated, the trial court, sitting without a jury, found that the insured, Nines, had a mental or physical disability when he completed the application for insurance, and his answer to the question concerning whether or not he had such a disability was knowingly and intentionally false. The trial court also found that the answer was material to the risk, and if State Farm had known of the misrepresentation, it would not have issued the policy. In our opinion, there was ample evidence to support the trial court’s findings, and we shall not hold that his findings were clearly erroneous — the test established by Maryland Rule 885 in considering findings of the facts by a trial court, sitting without a jury.

(a) The first question to be considered is whether or not epilepsy is to be considered to be a “mental or physical disability,” and accordingly, whether Question 16, eliciting from Nines the in ⁷⁰⁷ formation that he had “any mental or physical disability,” was reasonably designed to obtain from him the information that he suffered from epilepsy. In our opinion, the answer is in the affirmative. The inquiry addressed to the applicant for the automobile insurance must be reasonably designed to elicit from him the information which he possesses, material to the risk, as a condition precedent to the application of the rule that a failure to disclose may be a basis for the avoidance of the policy by the insurer. Government Employees Insurance Co. v. Cain, 226 F. Supp. 589 (D. Md. 1964).

See also Harris v. State Farm Mutual Automobile Ins. Co., 232 F. 2d 532 (6th Cir. 1956). Disability is defined by Webster’s Third Neva International Dictionary 642 (1961) as: “|T]he condition of being disabled; deprivation or lack especially of physical, intellectual, or emotional capacity or fitness * * * a physical or mental illness, injury, or condition that incapacitates in any way * * * a material object or condition that hinders, impedes or incapacitates; HANDICAP * * Epilepsy is defined in Stedman’s Medical Dictionary 536 (1966) as follows : “Epilepsy — A chronic nervous disorder, characterized by attacks of unconsciousness or convulsions or both, and sometimes associated in the later stages with mental disturbance.” • Dr. Charles C. Spencer, the medical expert produced by Nines, described the two common forms of epilepsy as follows: “The most common form is grand mal epilepsy, and in this form a characteristic attack consists of a brief period of warning to the patient while he is still conscious, that he is about to have an attack. These are very vague in character and can’t be succinctly described.

Followed by a sudden cry and stiffening of the individual. He usually then falls to the ground if he is standing, or assumes a rigid position, stops breath ⁷⁰⁸ ing, turns blue, then begins rapid jerking motions of the limbs of the body and the muscles of the trunk. This persists for several minutes. It is followed then by a period of relaxation and unconsciousness, which varies from several minutes to several hours.

This in turn is followed by a period of drowsiness and frequently by headaches, sometimes even by a brief period of paralysis. Now a petit mal epilepsy, which is the second most frequent type, is a brief lapse of consciousness, is usually seen only in children or at least begins only in childhood ages.” It appears from the statements made by Nines to the investigating officer, to the County Attorney, to the State Farm agents and in his deposition, that he was familiar with both forms of epilepsy. Then too, Nines was, or should have been, personally aware of the use of the words “physical or mental disability”