42348 Record No. 7132.
April 27, 1970
Present, All the Justices.
(1) Insurance — Misrepresentation.
(2) Pleading and Practice — New Issue on Appeal.
(3) Estoppel — Burden of Proof.
1. In application for automobile liability policy, Brown reported that he had no impairments although he knew that he was suffering from epilepsy. No ambiguity in word "impairment" as used in application. Not error to hold, in declaratory judgment action after accident has occurred, that policy is void. Even liberal underwriting standards of National would not have been met had there been a disclosure of epileptic condition.
2. Question of whether written application for original policy is part of renewal policy cannot be raised for first time in Appellate Court. Rule 1:8.
3. Burden rests on parties relying on waiver or estoppel to prove the essentials of such waiver or estoppel by clear, precise and unequivocal evidence. Since no evidence has been produced to show that insurance company was or should have been on notice of misrepresentation and since evidence shows Brown concealed his condition from others, not error to hold that burden of proof not carried.
Appeal from a decree of the Court of Law and Chancery of the City of Roanoke. Hon. Stanford L. Fellers, judge presiding.
John L. Walker, Jr.; James I. Moyer (O. Dalton Baugess; Woods, Rogers, Muse, Walker Thornton, on brief), for appellants.
Richard C. Rakes (Gentry, Locke, Rakes Moore, on brief), for appellees.
This is an appeal from a final decree in a declaratory judgment suit wherein the trial court declared void ab initio a policy of automobile liability insurance issued by National Indemnity Company ("National"), to John Taylor Brown, deceased, ("Brown"). The decree further provided that National had no duty to pay any part of a judgment obtained by Obadiah R. Merricks against Brown's administrator.
This case was heard by the trial court on depositions and the exhibits which were filed.
We awarded an appeal from the decree to Utica Insurance Company ("Utica") and Safeguard Insurance Company ("Safeguard"), who were made parties defendant in the court below.
The evidence discloses that Brown contacted James F. Firebaugh, an agent for Nationwide Insurance Company in Roanoke, Virginia, requesting that Firebaugh issue an automobile liability insurance policy with his company covering Brown's automobile.
Firebaugh, whose brother was married to Brown's aunt, determined from his initial conversation with Brown that he was unmarried and under twenty-five years of age.
Firebaugh advised Brown that he could not write the coverage with Nationwide Insurance Company because Brown would not qualify under the underwriting standards established by that company. He advised Brown, however, that he would attempt to place this business and obtain coverage for him through another company.
On June 2, 1964, Firebaugh obtained from Brown, on forms provided by Insurers of Virginia, Incorporated, the general agent for National, a written application for an automobile liability insurance policy. When required by the application to "List any impairments you may have," Brown responded "None."
The written application and net premium were forwarded to National's general agent and on June 3, 1964, a liability insurance policy for minimum limits was issued covering Brown's car from that date to June 3, 1965. It should be noted that this policy was a voluntary contract entered into between Brown and National and that Brown was neither a "statutory risk" under the provisions of the Motor Vehicle Safety Responsibility Act, Code Sec. 46.1-388 to 46.1-514, nor a "poor risk" who obtained his coverage under the Virginia Assigned Risk Plan set up pursuant to Code Sec. 38.1-264.
The terms "statutory risk" and "poor risk" are used here as they are defined in Virginia Farm Bureau Mut. Ins. Co. v Saccio, 204 Va. 769, 133 S.E.2d 268 (1963).
When the original policy expired on June 3, 1965, it was not immediately renewed because the renewal premium had not been paid. The premium had been substantially increased due to a speeding conviction of Brown in February, 1965. Subsequently, on July 26, 1965, a renewal was requested and the premium was paid by Brown. The renewal policy, which was issued on July 26, 1965, is the policy with which we are now concerned. This policy shows on its face that it is a renewal of the policy issued on June 3, 1964.
On September 26, 1965, while operating his car in Henry County, Virginia, Brown suffered an epileptic seizure and his car collided with a car owned and driven by Obadiah R. Merricks. At no time prior to this accident, which gave rise to the claims under the policy, did National or any of its agents have actual knowledge that Brown was suffering from epilepsy.
At the time of the application, Firebaugh, because of his family connection with Brown, knew that Brown's father committed suicide in 1961 and that Brown had been the one who first discovered his father's body. Firebaugh knew that Brown had been treated by a physician for an "emotional strain" or "nervous disorder" following this incident. Firebaugh discussed this with Brown and from the conversation "determined that this did not affect his driving."
Brown did not reveal to Firebaugh that he had suffered from grand mal epileptic seizures since shortly after his father's death in 1961 and that he was receiving daily doses of Dilantin, a drug used for the treatment and control of such a condition.
The evidence establishes that Brown had suffered a grand mal epileptic seizure on February 23, 1963, which resulted in a loss of consciousness. In November, 1963, when he applied for a renewal of his operator's license, he disclosed this information to the Virginia Division of Motor Vehicles ("D.M.V.") and his license renewal application was refused.
Brown was not licensed to drive a motor vehicle from November, 1963, until March, 1964, when a new license was issued after his physician certified to D.M.V. that he had suffered no epileptic seizures for more than one year. This license was issued on condition that Brown would file with D.M.V., at least every six months, an acceptable physician's statement about his medical condition.
National's agent, as a part of its routine procedure, after the initial policy was issued and again before the renewal policy was issued, received from D.M.V. an "operation record" check on Brown. From the information furnished by D.M.V., National knew that Brown was licensed to drive, that he had been involved in no reported accidents and that he had been convicted of speeding in February, 1965. The D.M.V. reports, while showing that Brown was required to wear "corrective lenses" while driving, did not disclose the information in D.M.V. files regarding Brown's epilepsy.
The first argument advanced by Utica and Safeguard is that Brown made no material misrepresentation of fact in the insurance application. They argue, in this connection, that the word "impairment," as used in the application, is ambiguous and that this ambiguity should be resolved against National.
We find no ambiguity in the word "impairment" as it is used in the application for insurance. We agree with the able trial judge that "impairment" as used in the application ". . . could mean nothing else than that which would or might affect the ability of the insured to operate the car safely. Surely this could not have been misunderstood by a reasonably intelligent person, and the evidence shows that Brown was clearly within that classification."
Code Sec. 38.1-336 provides:
"All statements, declarations and descriptions in any application for a policy of insurance or for the reinstatement thereof shall be deemed representations and not warranties, and no statement in such application or in any affidavit made before or after loss under the policy shall bar a recovery upon a policy of insurance, or be construed as a warranty, anything in the policy to the contrary notwithstanding, unless it is clearly proved that such answer or statement was material to the risk when assumed and was untrue."
Under this statute we have uniformly held that misrepresentations of facts, in an application for insurance, material to the risk when assumed renders the contract void. State Farm Mut. Automobile Ins. Co. v. Butler, Admr., 203 Va. 575, 125 S.E.2d 823 (1962); Scott v. State Farm Mut. Automobile Ins. Co., 202 Va. 579, 118 S.E.2d 519 (1961); Inter-Ocean Ins. Co. v. Harkrader, 193 Va. 96, 67 S.E.2d 894 (1951); North River Ins. Co. v. Atkinson, 137 Va. 313, 119 S.E. 46 (1923).
From the evidence before us there can be no question that Brown, at the time he made his written application for the policy, was suffering from epilepsy and that he was aware of his condition. It is, therefore, obvious that his representation regarding "impairments" was false.
The record discloses that National was principally engaged in writing so-called "substandard" risks at increased rates and that its underwriting standards were extremely liberal when judged by industry standards. The fact that the representation was material to the risk when assumed is fully established by the uncontroverted evidence that Brown would not have met even National's liberal standards had there been a disclosure of his epileptic condition.
The next contention of Utica and Safeguard is that the trial court erred in considering the written application as a part of the renewal policy since there was a lapse of approximately seven weeks from the date coverage expired under the original policy before the renewal policy was issued. The record, however, shows that this question was not raised before the trial court. We hold that it cannot now be raised for the first time in this court. Rule 1:8, Rules of Court; Wash v. Holland, 166 Va. 45, 54, 183 S.E. 236, 240 (1936); Nationwide Mutual Insurance Company v. Tuttle, 208 Va. 28, 31, 155 S.E.2d 358, 360 (1967); Forester v. Commonwealth, 210 Va. 764, 173 S.E.2d 851 (1970).
The last assignment of error relied on by Utica and Safeguard is that National is estopped and has waived its right to have the policy issued to Brown declared void ab initio.
It is elementary that the burden rests on the party relying on a waiver or estoppel to prove the essentials of such waiver or estoppel by clear, precise and unequivocal evidence. The evidence must not leave the matter to mere inference or conjecture but must be certain in every particular. Trayer v. Bristol Parking, Inc., 198 Va. 595, 606, 95 S.E.2d 224 (1956). See also 7 Michie Jur., Estoppel Sec. 39, p. 307 and 19 Michie Jur., Waiver Sec. 5, p. 537.
Nothing in the application or in the "operation record" check gave National any reason to suspect that Brown had misrepresented the facts set forth in his application.
No evidence has been produced to show that National had information which might be sufficient to put it on notice to make further inquiry or investigation beyond the routine "operation check" which was made.
Moreover, the evidence establishes that Brown not only concealed his condition in the application and in his discussions with Firebaugh, but that he also concealed it from a physician who had seen and treated him for various ailments on at least nine occasions during 1965 prior to the accident of September 26, 1965.
We agree with the court below that Utica and Safeguard have failed to carry the burden of proof to establish either a waiver or an estoppel.
The decree is affirmed. Affirmed.