Friday, July 8, 2005
Insured Who Told Agent She Had Smoked, but Wrote Otherwise on Application, Did Not Conceal Fact—S.C.
By a MetNews Staff Writer
A suit by the surviving spouse of a woman whose life insurance policy was dishonored because she allegedly lied by denying having smoked in the 36 months before she applied for the policy should not have been dismissed on that ground, the California Supreme Court ruled yesterday.
Patrick O’Riordan raised a triable issue of material fact by alleging that his wife told the agent who procured the policy that she had shared a couple of cigarettes with her sister in the three-year period to which the application referred, Justice Joyce L. Kennard wrote in the 6-0 decision.
If the allegation is true, Kennard explained, then Amy O’Riordan did not, as a matter of law, conceal the fact of her having smoked from Federal Kemper Life Assurance. The case was sent back to the Third District Court of Appeal to consider other issues.
Patrick O’Riordan explained that his wife had smoked for many years but quit in 1991, five years before submitting her application. When they explained the situation to independent insurance agent Robert Hoyme, O’Riordan said, he told them that the company was only looking to screen out those who smoked regularly and there would be no problem in answering “no” if blood and urine tests conducted in connection with the insurance physical showed no traces of nicotine—which they did not.
Kemper issued the policy in June 1996 at the preferred nonsmoker rate, paying Hoyme a commission each month.
Amy O’Riordan was diagnosed with breast cancer in November 1997 and died in June 1998, two days before the policy would have become incontestable. After its claim investigation resulted in the disclosure that O’Riordan had received a nicotine patch in 1995, and that her doctor reported her having begun “to smoke a little bit again,” Kemper denied the claim and rescinded the policy.
Patrick O’Riordan sued in Sacramento Superior Court, but the judge granted summary judgment to Kemper and the Court of Appeal affirmed.
But Kennard wrote for the high court:
“[E]ven if, as Kemper insists, [the application] required disclosure of even a single cigarette smoked during the period at issue, Amy did not conceal that information from Kemper, because she did mention it to Hoyme when she applied for the life insurance. Although Hoyme was not Kemper’s agent when he assisted Amy in responding to Kemper’s medical questionnaire, he became one when his request to be so appointed—submitted with Amy’s application—was granted....Once he became Kemper’s agent, Hoyme had a duty to disclose to Kemper any material information he had pertaining to Amy’s life insurance policy, and Kemper is deemed to have knowledge of such facts.”
The case is O’Riordan v. Federal Kemper Life Assurance, 05 S.O.S. 3378.
Copyright 2005, Metropolitan News Company