Opinion
No. 43688.
December 6, 1965.
1. Insurance — health and accident policy — fraud in procurement of policy — adequate disclosure of prior medical history made.
In action on health and accident policy, evidence on issue of insurer's affirmative defense of fraud in procurement of policy supported finding that plaintiff made adequate disclosure of his prior medical history to agent who took his application.
2. Insurance — health and accident policy — evidence — total disability within meaning of policy.
Evidence supported finding of plaintiff's total disability within meaning of health and accident policy issued by defendant insurer.
3. Insurance — health and accident policy — evidence — doctor's deposition admissible.
In action on health and accident policy, deposition of physician, who examined insured after period of alleged disability involved, as to insured's symptoms and possibility that they were caused in part by Meniere's disease was competent, in view of prior testimony of insured and his doctor relating to symptoms related to doctor.
4. Insurance — health and accident policy — benefits under — depreciation not to be added to profit in computing earnings.
Insured who owned large truck suitable for hauling cargo, and who contracted with holders of certificates of convenience and necessity to use such truck in connection with their business, was not entitled to add depreciation on truck to his profit on contract transactions in computing his earnings, for purpose of determining benefits under health and accident policy.
Headnotes as approved by Jones, J.
APPEAL from the Circuit Court of Winston County; MARSHALL PERRY, J.
Watkins, Pyle, Edwards Ludlam, Robert H. Weaver, Jackson, for appellant.
I. The overwhelming weight of the evidence established that the applicant failed to disclose to the company's soliciting agent (1) the existence of a chronic empyema cavity with a drainage tube in place; (2) a serious lung operation performed on the empyema condition at Mississippi State Sanatorium in 1942, and (3) an X-ray made in 1959 disclosing presence of the chronic empyema condition and the drainage tube in place.
II. Did the failure to disclose (1) the existence of the chronic empyema condition with a drainage tube in place; (2) the occurrence of a serious lung operation in 1942 for the empyema condition; and (3) the existence of an X-ray in 1959 disclosing the empyema condition; constitute misrepresentations of facts which were material to both the risk and/or the hazard?
III. The overwhelming weight of the credible evidence established that Prisock was not totally disabled after April 7, 1961, the date on which the last claim was paid.
IV. The consideration of the testimony of Dr. Bounds, who first examined Prisock on March 1, 1963, and began treatment thereafter for a disease affecting the ear, was neither relevant nor material to the question of disability during the period January 8, 1962 through February 5, 1962 attributable to duodenitis and bad colds, and was therefore highly prejudicial to the company.
V. Did the acceptance of quarterly premiums dated October 2, 1961; December 27, 1961; and March 22, 1962, after receiving notice of the empyema condition on or about August 25, 1961, estop or waive the company's right to rescind the contract for the misrepresentation of a material fact?
Collation of authorities: Commercial Standard Insurance Co. v. Robertson, 159 F.2d 408; Home Life Insurance Co. v. Madere, 101 F.2d 292; Mutual Benefit Health Accident Assn. of Omaha, Nebraska v. Moor, 238 Miss. 835, 120 So.2d 439; Sec. 5687.5, Code 1942; Wigmore, Evidence (3d ed.), Sec. 437.
Strong Smith, Louisville; Barnett, Montgomery, McClintock Cunningham, Jackson, for appellee.
I. Answering appellant's Point 1, wherein it is argued that the overwhelming weight of the evidence established that the applicant failed to disclose to the company's soliciting agent: (1) The existence of chronic empyema cavity with a drainage tube in place; (2) a serious lung operation performed on the empyema condition at the Mississippi State Sanatorium in 1942, and (3) an X-ray made in 1959 disclosing presence of chronic empyema condition and the drainage tube in place, appellee, answering says: Continental Casualty Co. v. Garrett, 173 Miss. 676, 161 So. 753; F.W. Woolworth Co. v. Volking, 135 Miss. 410, 100 So. 3; Gulf S.I.R. Co. v. Simmons, 153 Miss. 327, 121 So. 144; Hartford Fire Insurance Co. v. Williams, 165 Miss. 233, 145 So. 94; McLemore McArthur v. Rogers, 169 Miss. 650, 152 So. 883; St. Paul Fire Marine Insurance Co. v. Loving, 163 Miss. 114, 140 So. 727; Tri-State Transit Co. v. Moore, 188 Miss. 722, 196 So. 231; Westbrook v. Corneil, 199 Miss. 118, 23 So.2d 753.
II. Answering appellant's Point II, wherein it is argued that the failure to disclose: (1) The existence of the chronic empyema condition with a drainage tube in place; (2) the occurrence of a serious lung operation in 1942 for the empyema condition; and (3) the existence of an X-ray in 1959 disclosing the empyema condition; constitutes misrepresentations of fact which were material to both the facts which were material to both the risk and/or hazard, the appellee, answering says: Home Life Insurance Co. v. Madere, 101 F.2d 292; Hossley v. Union Indemnity Co. of New York, 137 Miss. 537, 102 So. 561; Martin v. Motors Insurance Co., 219 Miss. 473, 68 So.2d 869.
III. In answer to appellant's Point III, wherein it is argued that the overwhelming weight of the credible evidence established that Prisock was not totally disabled after April 7, 1961, the date on which the last claim was paid and, in answering says: American Bankers Insurance Co. v. White, 171 Miss. 677, 158 So. 346; Mutual Benefit Health Accident Assn. v. Mathis, 169 Miss. 187, 142 So. 494.
IV. In answer to appellant's Point IV, wherein he argues that the consideration of the testimony of Dr. Bounds, who first examined Prisock on March 1, 1963, and began treatment thereafter for a disease affecting the ear, was neither relevant nor material to the question of disability during the period January 8, 1962, through February 5, 1962, attributable to duodenitis and bad colds and was therefore highly prejudicial to the company, we answering say: Davis v. Agents Finance Corp., 249 Miss. 839, 164 So.2d 449; Foster v. Mississippi State Highway Comm., 244 Miss. 57, 140 So.2d 267; Melton Hardware Co. v. Heidelberg, 91 Miss. 598, 44 So. 857; Metzger v. Sessions, 198 Miss. 892, 23 So.2d 746; Mississippi Central R. Co. v. Roberts, 173 Miss. 487, 160 So. 604; Paramount Fire Insurance Co. v. Anderson, 211 Miss. 372, 51 So.2d 763.
V. Did the acceptance of quarterly premiums dated October 2, 1961, December 27, 1961 and March 22, 1962, after receiving notice of the empyema condition on or about August 25, 1961, estop or waive the company's right to rescind the contract for the misrepresentation of a material fact? Boult v. Maryland Casualty Co., 111 Fed. 257; Cotten v. Fidelity Casualty Co., 41 Fed. 506; New York Life Insurance Co. v. Dumler, 282 Fed. 969; 29A Am. Jur., Breach of Co-operation, Sec. 1083 p. 250.
VI. The trial court erred in finding that the insured's income, after deduction of depreciation amounted to only $200.00 per month and that the liability of the insurer was limited to that amount, although the monthly indemnity was for the sum of $400.00 per month. Gallants Case (Mass), 95 N.E.2d 536; Kuntz v. Kinney, 33 Wis. 510; Postal Telegraph Co. v. Industrial Accident Comm. (Cal.), 32 P.2d 1067; Springfield Coal Mining Co. v. State Industrial Comm., 291 Ill. 408, 126 N.E. 133; Williams v. Sorensen, 106 Mont. 122, 75 P.2d 784.
This case was tried before the Circuit Court of Winston County. There was a stipulation that it should "be heard and tried as an equity matter," so it was heard by the Circuit Judge with no jury.
The suit was upon a health and accident policy, and alleged total disability of appellee from January 1961 to the date of the filing of the suit and thereafter. Payment of benefits for January, February, and part of March 1961 was admitted. The policy provided in the event of total disability, payments at the rate of $400 per month subject to the provision hereinafter shown. It also waived premiums after six months of total disability. Appellee sought the monthly benefits, plus $516, the amount of premiums paid by him under protest. Further, the policy provided for certain additional benefits in event of confinement in a hospital. Plaintiff sought same for certain times spent in a hospital.
Appellant answered admitting the issuance of the policy, but denying total disability within the terms of the policy for the time alleged. It admitted payments for January, February and part of March 1961, but denied that same were due and denied it was indebted to appellee in any sum. As an affirmative defense it pled fraud in the procurement of the policy by false answers to questions as to appellee's health, previous treatments, etc., which materially affected the risk and hazard, and that the disability was from a cause which originated prior to the date of the policy.
The affirmative defenses were denied. Appellee charged that the agent who took the application was his nephew and knew all about his condition, including the fact that he carried a drainage tube as a result of an operation in 1942 for empyema. He also maintained that in answering questions on the application he made full disclosure of his condition.
After hearing the evidence, the judge found for appellee and rendered judgment for the full amount sought except that he fixed monthly benefits at $200 rather than $400.
From this judgment appellant appealed and appellee cross-appealed. We affirm the case.
Appellant assigns the following as error: (1) The finding as a matter of fact that appellee made an adequate disclosure; (2) the finding of total disability within the meaning of the policy from April 7, 1961 to February 5, 1962; (3) the admission of the deposition of Dr. L.H. Bounds; and (4) the finding that acceptance of premiums after knowledge of misrepresentation waived the right to rescind. (Hn 1) Appellee and cross-appellant assign and argue as error the fixing of benefits at $200 per month rather than $400.
In order to sustain appellant's assignments of error Nos. 1 and 2, we would be required to substitute our judgment for that of the trier of the facts. Appellee testified that he did make full disclosure as to matters asked him, and that the agent was his nephew and had lived in the same community, visited him, and knew of his condition and previous health experiences. The agent denied that he so knew or that disclosures were made. It was shown without dispute that appellee gave appellant written authority to consult his family physician. Appellant wrote the doctor for information. The doctor answered, but the answer was confined to the doctor's records and did not include certain information that the doctor knew outside the records. This was explained by the doctor's statement that such requests came by the dozens, and were delivered to a secretary for answers, which he signed without reading. This evidence afforded substantial proof to support the judge's finding.
(Hn 2) On assignment No. 2, the Court had the evidence of appellee, the positive testimony of the doctor, and evidence given by neighbors to support his finding. We cannot disturb it.
(Hn 3) The third assignment arises from the fact that in 1963, after the period of disability here involved, Dr. L.H. Bounds, an eye, ear, nose and throat specialist of Meridian, examined appellee and diagnosed one of his ailments as Meniere's disease. Appellee testified that during the period for which he sued, he had suffered from dizziness, nausea and other symptoms. His doctor related complainants by appellee of such symptoms during said time. Dr. Bounds' deposition showed some of these were symptoms of Meniere's disease and he could not give a professional opinion as to how long appellee had been afflicted with this disease. He said that it sometimes developed rapidly and sometimes slowly. We think the deposition was competent in view of the previous testimony of the appellee and his doctor.
What has been said makes it unnecessary to pass upon the fourth assignment.
Appellee and cross-appellant contend on cross-appeal, as stated, that he should have been allowed $400 per month rather than $200. Part VII of the policy reads:
If the total monthly amount of loss of time benefits promised for the same loss under all valid loss of time coverage upon the Insured, whether payable on a weekly or monthly basis, shall exceed the monthly earnings of the Insured at the time disability commenced or his average monthly earnings for a period of two years immediately preceding a disability for which claim is made, whichever is the greater, the Company will be liable only for such proportionate amount of such benefits under this policy as the amount of such monthly earnings or such average monthly earnings of the Insured bears to the total amount of monthly benefits for the same loss under all such coverage upon the Insured at the time such disability commences and for the return of such part of the premiums paid during such two years as shall exceed the pro rata amount of the premiums for the benefits actually paid hereunder; but this shall not operate to reduce the total amount of benefits payable under all such coverage upon the Insured below the sum of two hundred dollars or the sum of monthly benefits specified in such coverages, whichever is the lesser, nor shall it operate to reduce benefits other than those payable for loss of time.
The question here depends upon the words "earnings" and "depreciation." Earnings is defined as follows:
— Verbal Noun. The word, usually in the plural form, "earnings," is used as a verbal noun meaning generally that which is earned.
In a broad sense, it refers to money or other compensation paid for services rendered, aptly applying to the pay received by both laborers and officials; it usually is limited to earnings chiefly produced by one's personal efforts as distinguished from the income derived from a business in which the investment of capital predominates, and has been defined as meaning gains of a person derived from his services or labor without the aid of capital; money or other compensation to which one had a claim for services rendered, desert, or reward; money or property gained or merited by labor, service, or the performance of something; the price of services performed; the reward of labor or the price of personal service performed.
In a more limited sense the term has been applied to the labor of workmen exclusively, and has been defined as wages, or the fruit or reward of labor; and it has been said that this is the ordinary meaning attached to the use of the word. 28 C.J.S. Earn at 610 (1941).
This is in accord with the great weight of authority. See 14 Words and Phrases Earnings 31 (1952).
In 26A C.J.S. Depreciation at 492 (1956), "depreciation" is defined as follows:
It has been said that, by derivation and common usage, the word means a fall in value, or a reduction of worth; that, in the ordinary sense, it is represented by the number of dollars necessary to rehabilitate the property sufficiently to place it in safe condition for operation. The word "depreciation" usually means the loss or decline in value which occurs gradually over the useful life of a material thing due to physical wear, tear, and decay, and generally is limited to losses or declines in value which are not restored by current repairs and maintenance.
"Depreciation" has been defined as meaning an act of depreciating; a fall or decline in worth from any cause; the loss in value of some destructible property over and above current repairs; the loss, not restored by current maintenance, which is due to all the factors causing the ultimate retirement of the property; the deterioration of physical assets due to wear and tear, decay, and age; the decline in the value of an asset due to such causes as wear and tear, action of the elements, obsolescence, and inadequacy; an expense or loss occasioned by using up physical property employed as fixed capital; deterioration arising from age and use and improvements due to better methods, more economical and efficient designs, inventions, and general advance in the art, notwithstanding reasonable current repairs; a subnormal condition of physical property such as to impair the capacity for service, usefulness, and the intrinsic value of the investment; and in a particular connection, realized losses by the actual sale or exchange of property.
It is sometimes described as amounting to the sale of property through use.
With these definitions in mind, we consider the error assigned by cross-appellant. The facts were: Cross-appellant owned a large truck and trailer suitable for hauling cargo. He testified that he contracted with holders of certificates of convenience and necessity to use his truck and trailer in connection with their business in consideration of seventy-five percent of the charges collected for such transportation by him.
There were introduced what were admittedly copies of his income tax returns for the years 1958, 1959 and 1960. They were similar except for amounts and the one for 1960 illustrates cross-appellant's contention.
This report shows total collections for that year of $9,514.93; total expenses (oil, gas and grease, repairs, licenses, tags, claims and state tax permits, telephone, brokerage fees, cargo insurance, Alabama mileage book and charges, unloading charges, and depreciation) of $7,476.56, leaving $2,038.37, which is shown as "profits from business." The depreciation is listed as $1,933.28. It is contended that this amount of depreciation should be added to the "profit" of $2,038.37, bringing his "earnings" to $3,971.68, which, of course, would be more than $200 per month.
(Hn 4) With this contention we cannot agree. Depreciation is a legitimate item, and where assets of substantial value are used it is a necessity in order to determine the financial status of the business and reflect its true operations.
There is also involved the fact that no division of the "profits" as between rent for the equipment and compensation for services of cross-appellant was made, but this necessitates no discussion.
Affirmed on direct and cross-appeal.
Lee, C.J., and Rodgers, Inzer and Smith, JJ., concur.