No. 89-574
IN THE SUPREME COURT OF THE STATE OF MONTANA
1991
DARLENE SCHNEIDER,
Plaintiff and Respondent,
MINNESOTA MUTUAL LIFE
INSURANCE COMPANY, a ~innesota
corporation,
Defendant and Appellant.
APPEAL FROM: District Court of the Sixteenth Judicial District,
In and for the County of Carter,
The Honorable Nat Allen, Judge presiding.
COUNSEL OF RECORD:
For Appellant:
Thomas M. Monaghan, Lucas & Monaghan, P.C. , Miles
City, Montana
For Respondent:
Gary A. Ryder, Forsyth, Montana
Submitted on briefs: August 9, 1990
Decided: February 28, 1991
Filed:
Justice William E. Hunt, Sr. delivered the Opinion of the Court.
Following a bench trial, the District Court of the Sixteenth
Judicial District, Carter County, found defendant and appellant,
Minnesota Mutual Life Insurance Company, liable on a life insurance
policy sold to plaintiff and respondent, Darlene Schneider, and her
husband, Jock Schneider. Minnesota Mutual appeals. We affirm.
The following issues are raised on appeal:
1. Did the District Court err in failing to enter judgment
in favor of Minnesota Mutual?
2. Did the District Court err in allowing expert testimony?
On March 7, 1983, Jock Schneider renewed his existing loans
at the First National Bank of Ekalaka and borrowed an additional
$1,500, increasing the total amount of his debt to the Bank to
$28,600. At the same time, he applied for insurance coverage in
the amount of $20,000 under Minnesota Mutual's Protection Plus
program, a group life plan sold through financial institutions to
protect the debt of the borrower. At the time of the application,
Jock had existing life insurance coverage with Minnesota Mutual in
the amount of $30,000.
Dean Parks, vice president of the Bank and a partner in the
Ekalaka Insurance Agency, assisted the Schneiders in completing the
application by asking Jock questions and typing his responses on
the form. Parks had known Jock all of his life and had done
business with the Schneiders over the years.
The insurance application contained two questions relating to
health:
2
1. During the last three years, have you been
hospitalized or have you consulted a physician or
physicians for any reason?
2. Have you ever been treated for or advised that you
had any of the following: heart, lung, nervous or kidney
disorder, high blood pressure, cancer or tumor, diabetes?
The application requested additional information if the applicant
answered "yes" to either question. Jock answered "no8' to both
questions. His wife, Darlene, answered l'yesll the first question
to
and provided information regarding the removal of a cyst in 1983.
On March 23, 1983, Jock died of a gunshot wound to the head.
A coroner's jury determined that the death was accidental. The
District Court in the present civil case found that the death was
not related to alcohol.
Minnesota Mutual promptly paid the claims on the life
insurance policies procured by Jock prior to the 1983 policy at
issue in this case. It did not, however, automatically pay on the
1983 protection Plus Policy. Instead, because the effective date
of coverage on the 1983 policy was within two years of the date of
death, the insurance company invoked the contestability clause in
the policy and conducted a routine investigation of Jock's medical
history.
During the investigation, Minnesota Mutual obtained the
medical records of Dr. Stephen Shaub of Ekalaka. The records
showed that Dr. Shaub had seen Jock several times between December
2, 1981 and June 21, 1982. On December 2, 1981, Dr. Shaub
diagnosed Jock as suffering from alcoholism and depression. He
prescribed medication for the ailments. Follow-up visits occurred
3
on January 4, January 18, and February 16, 1982 to check
medication. On April 26, 1982, the doctor once again assessed
Jock's condition as alcoholism and depression. Medication was
refilled on June 21, 1982.
On June 20, 1983, Minnesota Mutual sent Darlene a letter
rejecting her claim for benefits under the $20,000 policy because
Jock had failed to disclose the visits to Dr. Shaub in the
insurance application. Minnesota Mutual wrote:
After careful consideration, we have determined that if
this additional information [the visits to Dr. Shaub] had
been available to our underwriters at the time they were
considering your husband's application for this
insurance, they would have declined to insure him.
Darlene instituted this action against Minnesota Mutual,
alleging breach of contract for failing to pay the claim. She
additionally sought punitive damages on several theories. The
District Court bifurcated the action and a bench trial proceeded
on the contract issue only. Following trial, the court entered
findings of fact, conclusions of law and judgment in favor of
Darlene. The court then certified the judgment as final pursuant
to Rule 54(b), M.R.Civ.P. This appeal followed.
I.
Did the District Court err in failing to enter judgment in
favor of Minnesota Mutual?
Minnesota Mutual argues that § 33-15-403, MCA, allows it to
deny Darlene's claim because Jock incorrectly completed the
insurance application by failing to reveal the visits to Dr. Shaub.
Section 33-15-403, MCA, provides:
(1) All statements and descriptions in any application
for an insurance policy or annuity contract or in
negotiations therefor by or in behalf of the insured or
annuitant shall be deemed to be representations and not
warranties.
(2) Misrepresentations, omissions, concealment of facts,
and incorrect statements shall not prevent a recovery
under the policy or contract unless either:
(a) fraudulent;
(b) material either to the acceptance of the risk or to
the hazard assumed by the insurer; or
(c) the insurer in good faith would either not have
issued 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.
Minnesota Mutual contends, and Darlene concedes, that this
statute should be read in the disjunctive. Thus, a
misrepresentation, omission, concealment of fact or incorrect
statement will prevent recovery under an insurance policy if one
of the three factors listed in subsection (2) is present.
Both parties agree that Jock's failure to notify Minnesota
Mutual of his visits to Dr. Shaub constituted a misrepresentation,
omission, concealment of facts or incorrect statement as specified
in the statute. Darlene maintains, however, that Jock's false
answer on the insurance application does not prevent recovery
because it was neither fraudulent nor material nor would Minnesota
Mutual in good faith have denied the policy had Jock revealed the
consultations with the doctor. Minnesota Mutual, on the other
hand, argues first that its denial of the claim was justified under
5 33-15-403 (2)(a), MCA, because Jockls concealment of the facts
constituted fraud.
The District Court found that Minnesota Mutual did not carry
its burden of proving that Jock fraudulently completed the
application. We hold that this finding is not clearly erroneous.
Minnesota Mutual next argues that the information Jock omitted
on the application was material.
The requirement that a misrepresentation on an insurance
application be Itmaterial either to the acceptance of the risk or
the hazard assumed by the insurer8* in 5 33-15-403 (2)(b), MCA,
overlaps a great deal with the condition in 5 33-15-403 (2)(c), MCA,
that allows an insurer to deny coverage for a misrepresentation if
the insurer in good faith would not have 1) issued the policy; 2)
issued the policy in as large an amount; 3) issued the policy at
the same premium; or 4) provided coverage with respect to the
hazard resulting in the loss.
An omission or misrepresentation may be material if, had the
truth been known, the reasonable and prudent insurer would not have
issued the policy or would have issued it at a higher premium.
Cummings v. Prudential Ins. Co. of America, 542 F. Supp 838, 840
(S.D. Ga. 1982); Prudential Ins. Co. of America v. Anaya, 428 P.2d
640, 644 (N.M. 1967). This definition of materiality incorporates
the idea of subsection (2)(c), that is, that the policy would not,
among other things, have been issued had the insured revealed the
true state of affairs. The primary difference between the two
subsections is that (2)(b) deals with an objective standard of
materiality, reasonableness, while (2)(c) refers to a subjective
standard, good faith.
Minnesota Mutual contends that it justifiably denied coverage
under subsection (2)(b) because the diagnosis of alcoholism was
material to the risk assumed. The materiality of an insured's
misrepresentation is determined by the extent the false answer
"initially influenced the insurer to assume the risk of coverage
.... [Tlhe misrepresentation in the insurance application may
be material if it diminishes the insurer's opportunity to determine
or estimate its risk." Berger v. Minnesota Mut. Life Ins. Co. of
St. Paul, Minn., 723 P.2d 388, 391 (Utah 1986). Thus, the
materiality of a misrepresentation generally is measured at the
time the insurer issues the policy rather than at the time of the
insured's death. Beraer, 723 P.2d at 391.
The question of materiality is a question of fact. Beraer,
723 P.2d at 392. In this case, the District Court found that
Jock's incorrect statement on the insurance application was not
material. This finding is not clearly erroneous.
As the District Court pointed out, the Protection Plus group
life insurance application failed to ask any specific questions
about either alcoholism or alcohol use. The court surmised that
the prudent insurer would have specifically requested information
about all critical underwriting factors. Thus, if alcoholism was
indeed material to Minnesota Mutual's acceptance of the risk, it
would have expressly asked questions about alcohol use, just as it
specifically requested information about heart, lung, nervous or
kidney disorders, high blood pressure, cancer and diabetes. Other
courts have reached a similar conclusion. Botway v. American Int'l
Assurance Co. of New York, 543 N.Y.S.2d 651, 652 (N.Y. App. Div.
1989) ; Kampfe v. Minnesota Mut. Life Ins. Co., C.V. 82-21-BLG, slip
op. at 11-12 (E.D. Mont. 1983).
Minnesota Mutual's employees testified that alcohol use was
material to the decision to accept the risk because the company
automatically denied coverage to any applicant who had been
diagnosed as an alcoholic and had been drinking within the five
years preceding the application. This practice, however, was not
reduced to writing in the underwriters1 manual, although other
procedures regarding alcohol habits were included in the manual.
Substantial credible evidence supported the District Court's
finding that alcohol use was not material to the risk assumed by
Minnesota Mutual in this case. The District Court did not err in
concluding that Minnesota Mutual's denial of coverage was not
warranted under § 33-15-403 (2)(b), MCA.
Minnesota Mutual also argues that it legitimately denied
coverage under subsection (2)(c) because it would not in good faith
have insured Jock if it had known that he had been diagnosed as an
alcoholic.
Like the question of materiality, the question of good faith
is a question of fact. The District Court concluded that Minnesota
Mutual did not exercise good faith in reviewing the claim because
it conducted only a limited investigation of the facts regarding
Jockls alcohol use and that this investigation was conducted for
the sole purpose of denying the claim. It also found that
Minnesota Mutual failedto follow its own underwriting criteria for
applicants who use alcohol. These findings are not clearly
erroneous.
Minnesota Mutual's underwriting manual provided:
A history of current acute alcoholism, delirium tremens
and/or alcoholic psychoses is usuallv RNA [risk not
acceptable]. (Emphasis added.)
Despite this provision in the manual, a Minnesota Mutual
underwriter testified that the company automatically rejected the
application of anyone who had been diagnosed as an alcoholic.
In addition, the underwriting manual required underwriters to
ll[l]ook for the effects on business reputation and acumen,
financial standing, home environment, social behavior and alcohol
dependence" when investigating an applicant's drinking habits to
determine insurability. Minnesota Mutual neglected to conduct such
an inquiry. Instead, it relied solely on Dr. Shaubls medical
records to deny coverage. Dr. Shaub, however, in his deposition
introduced at trial admitted that he was not an expert on
alcoholism and that Jock did not exhibit any of the physical
symptoms of the disease. A chemical dependency counselor testified
that there was not enough information in the medical records to
determine whether Jock was an alcoholic. From this evidence, the
District Court could have properly concluded that had Minnesota
Mutual followed its own manual it would have discovered the extent
of Jock's problem and may have issued the policy in spite of his
alcohol use.
The District Court did not abuse its discretion in concluding
that Minnesota Mutual could not deny coverage under the good faith
provision of 5 33-15-403 (2)(c), MCA. Substantial credible evidence
supported the finding that Minnesota Mutual conducted only a
limited investigation before rejecting Darlene's claim, an
investigation that did not comply with the insurer's own written
procedures.
Did the District Court err in allowing expert testimony?
At trial, Darlene offered the expert testimony of Russell
Mann, a chartered life underwriter with 23 years experience in the
life insurance industry and past president of the Montana State
Association of Life Underwriters. Minnesota Mutual objected
several times to the testimony, arguing that Mann was not qualified
to comment on home-office underwriting practices in general or the
practices of Minnesota Mutual in particular. The District Court
overruled the objections.
The trial court retains broad discretion to determine whether
a witness qualifies as an expert in a particular field. The degree
of those qualifications "affects the weight rather than the
admissibility of [the expert's] testimony." Little v. Grizzly
Mfg., 195 Mont. 419, 427, 636 P.2d 839, 843 (1981).
In this case, the District Court did not abuse its discretion
in allowing Mannls testimony. Mannls qualifications and testimony
demonstrated that he had worked with many types of products sold
by the life insurance industry and that he was familiar with the
factors considered by an underwriter when determining the
insurability of an applicant for life insurance. Under these
circumstances, the fact that he had never been a home-office
underwriter went to the weight rather than to the admissibility of
the evidence.
An expert need not have been employed by the defendant
insurance company before he can comment on the practices of that
company. As long as the testimony indicates that the expert has
knowledge of the standards and practices of the insurance industry
in general, his testimony is admissible to explain the custom of
the industry. John Hancock Mut. Life Ins. Co. v. Conway, 240
S.W.2d 644, 646 (Ky. 1951).
Darlene requests an award of attorney fees incurred on this
appeal under either Rule 32, M.R.App.P., or Rule 33, M.R.App.P.
We decline to grant such an award.
Rule 32, M.R.App.P., allows damages for appeals taken without
merit. Damages are not warranted, however, whenever a reasonable
ground for appeal exists. Tope v. Taylor, 135 Mont. 124, 132, 768
P.2d 845, 850 (1988). In this case, Minnesota Mutual had
reasonable grounds for appeal. The questions presented on the
appeal were not clear cut but delved into an area in which there
is very little Montana decisional law.
Rule 33, M.R.App.P., provides for costs on appeal to the
prevailing party. The costs allowed under this rule, however, do
not include an award of attorney fees unless the fees are based on
a contract, Poulsen's, Inc. v. Wood, 232 Mont. 411, 417, 756 P.2d
1162, 1166 (1988), or a specific statute. In this case, no
contract or statute granting attorney fees exists.
The judgment of the District Court is affirmed and Darlene's
request for attorney fees on appeal is
Penied.
4 4 r+/*c
chief J stice
Schneider v. Mbnesota Mutual Life Ins.Co.
48 St-Rep.224
1. Did the District Court err in fiiling to enter
judgment in favor of Minnesota Mutual?
DARLE*'JESCrnTEIDER,
Plaintiff and Respondent, 2. Did the District Court e n in allo~icg
expert
v* testimony?
MINNESOTA MUTUAL LIFE On Ahhrch7, 1983, Jock Schneider renewed his
ISSCRL'L'CECOMPANY,a Minnesota existing lasat the First 3ationa.I B d of EkRlakIl
on
corporation, and bornwed an additional $1,500, increzsing the
total amount of his debt to the Bsnlr to $28,600. At
Defendant and AppelIant. the same time, he applied for ran^ coversge in
the amount of $20,000 under Minnesota Mutual's
Protection Plus program, a group life plan sold
W d Feb. 28.1991.
ia through f i n d institutions toprotect the debt ofthe
borrower. At the time of the application, Jock had
existing life. insurance coverage with Minnesota
Mutual in theamount of $30,000.
D a Parks, \-ice president of the Bank and a
en
IPc'Sm4,YCE, A p d f o finding that insurance
rm partner in the Ekalaka rrsurance Agency, mse it d
company wes liable on policy sold to p!aintiff where the Schneiders in completing the application by as-
d d wec later found to have unreprted \isitsto king Jock questions and t-vping his resporses on the
doctrr a d suqwted alcoholism. The Supreme Court f ~ r m .Parks had bourn Jock all of his life and had
held: done business with the Schneiders o v a the years.
The irsurance application contained two questions
1. An o m i d o n or misrepresentation may be re!ating to health:
material if, had the truth k n known, the rezsonable
and prudent insurer would not have issued the policy "1. During the 1 s t three y a r s , have you been
or would have issued it at a higher premium. hospitalized or have you corsuJted a physician or
I physicians for any rezson?
2. An expert need no have been employed by t h e "2. Have you ever k n treated for or a d v b d t b t
defendant insurmce company &fore he can comment you had any of the following. heart, lung, n- Y V O U or
~
on the practices of that company. kidney disorder, high blood p m u r e , cancer or tumor,
diabetes?"
3. Dmzges are not w m + dwhere 8 reasonable The application requested additional inf~rrnationif
ground for appeal exists. the applicant arswered 'yes"to either question. Jock
answered "non to both questions. His wife, Darlene,
Appeal from the District Court o Carter County.
f
S i r h e n t h Judicial District. arswered '>esn to the Arst question and provided
Honorable Sat Allen,Judge presiding. information ~ g o r d i n g removal of a qst in 1983.
the
For A p p l l m t : Thomas M. Blonaghan, Luczs & On M m h 23,1983, Jock died of a gurshot wound
Momghan, P.C., Miles City to the head. A coroner's jury determind that the
d a t h was accidental. The District Court in the
For k p n d e n t : Gaq k Rj-der, Forq-th present chi1 -found that the death w s n o t related
to alcohol.
JUSTICE HUYT delivered the Opinion of the Minnesota Mutual promptly paid the claims on the
Court. life insurance policies procured by Jock prior to the
1983 policy at k u e in this case. It did not, however,
Following a b n c h trial, the District Court of t h e autonatjcally pay on the 1983 Protection Plus Policy.
Sixteenth Judicial District, C a t e r County, found Irskad, the efkctive date of coverage on the
defendant m d a p ~ l l a n tMinnesota hlutual Life In-
, 1983 policy ~izswithin two years of the date of death,
surance Company,lia.bleon a life irsuransepliqsold the insurance company invoked the con4atability
to plaintiff and respondent, Darlene Schneider, and clauw in the pljcy and conduc!! a routine investiga-
her husband, Jock Schneider. Minnewta 3futual a p tion of Jock's mdical history.
PAS. afEr7.n.
U'e
During the investigation, Minnesota Mutual ob-
The following issues are raked on appeal: tained the m d c l r m r d s of Dr. Stephen Shaub of
eia
STATE REPORTER --
V O L U l E 48 28 Feb. 1991
.225 .. . Sehneider v. Minnesota Blutuq Life Ins. Co.
48 StStep. 224
E k a k h The ncords showed that Dr. SFaub had "(c) the irsurer in good faith would either not have
seen Jock xveral times l e t w e n Decembr 2, 1981 k u e d the policy or amtract or would not have issued
and June 21,1982. On December 2,1981, Dr. S b u b a policy or contract in as kgs an amount or a t the
diagnosed Jock as surering from almholkm and same premium or mte or would not have provided
depression. He p-rxd medication for the ail- covere with respect t the h a a d resulting in the
o
ments. Follow-up visits oacurred on Jan- 4, loss if the true hcts had keen rrade known to the
January 18, and February 16,1982 to check m e d i a - insurer as required eitber by the application for the
- .-
tion. On April 26, 1982, the doctor once again as- policy or contract or otherwise."
s e s d J c ' condition as alcoholis and depression.
oks
Minnesota Mutual contends, and-Darlene con-
1. Medication was refilled on June 21,1982.
ceds, that this statute should be r e d in the d s j u n e
. .5 .
-. On J u n e 20,1983, ,&nnesota Mu t d sent Darlene ' tive. Thus, a misrepresentation, omission,
a letter rejecting her claim for benefits under t h e concealment of fact or incorrect,statement will
$20,000 policy because Jock bad failed to d k l a s e t h e prevent recc\qry under a n insurance policy if one of .
visits to Dr. Shaub in the insurance application. bfin- the three factorslisted in subsaction (2)is p m n t .
n w t a hlu tual wmte: .-
?
.
i
- - Both h i e s agree that Jwk's f& a& to notify
>'
. "After carefbl consideration, we have determined Minnesota .Mutual of his vst to Dr. Shaub con-
iis
that if this additioral information [the visits to Dr. stituted a m k r e p m n t a t i o n , omission, concealment
-
'
Shaub] had been available to our underw~iters t the
a of hds or incorrect statement es spwified in'the
time they were mrsidering your husband's applim- statute. Darlene maintains, however, that Jock's
tion for this insurance, they would have declined t o &be arswer on the irsurance application d w not
irsure him." prevent ravery because it was neither fraudulent
nor material nor would Mirnmta Mutual in good
Darlene instituted this action against Minnesota faith Fave denied the policy had Jock revealed the
2clutual, alleging breach of contract for failing to pay corsultations with the dxtor. ftlinnesota Mutual, on
the claim. She additionally mught punitive damzges
on several thsories. The District Court bifurca!d the
action and a bsnch trial p r o c d a d on the contract
issue only. Following trial, the court entered findings
of fact, conclusiors of law and judgment in favor of The District Court found that ftfinnesta Mutual
Dulene. The court then ertified the judgment as did not carry i t s burden of proving t h a t Jock
6nal p u s u a n t to Rule 54@), 3t.R.Civ.P. This a p p a l fraudulently completed the application. U'e hold that
fo!lowed. this finding is not clearly erroneous.
.
1
~ i n n & t a Mutual next mgus that the infoma-
tion Jock omitted on the application was ma!erial.
Did the District Court e n in failing to enter judg-
ment in favor of Minnesota Mutual? The requinment that a misrepresentation on an -
"materia! either to the
bfinnessta Mutual argues that § 33-15-403, MCA, assumed by the
allows it to deny Dulene's claim because Jock inmr- a great deal with
redly completed the imumnce application by failing the condition in 3 33-15-403(2) (c), IiICA, that allows
to reveal the visits to Dr. Shaub. Section 33- 15-403, an irsurer to deny cove- for a misrepresentation if
MC.4, provides: the irsurer in gmd faith would not have 1)&ued the
policy; 2) issued the policy in as l a g e an m o u n t ; 3)
"(1) All statements and descriptions in any applim- issued the policy at the same premium; or 4) provided
tion for an in-curance policy or mnuity contract or in coverage with r e s p c t to the hazard resulting in the
negotiatiors therefor by or in beFdf of the irsured or lass. .
annuitant s F d l be deemed to be represe~tatiors d
m
not wmanties. [I] An' omission or misreprsentation may be
material if, had the truthbsen known, the rezsonable
"(2) Iifisrepresentations, omissions, c o n d m e n t of and prudent irsurer would not b v e h u e d the policy
facts, end incorrect staf.ements shall not prevent a or would have it at a higher premium. Cum-
reanveryunder the policy or contract u !Q either:
n- m i n p v. Prudentid Ins.Co. of b e r i c a , 542 F.Supp.
"(a) fraudulent; 838, 840 (S.D. Ga. i982); Prudential Ins. Co. of
America v. Amla, 428 P.2d 640, 644 (N.M. 1967).
"(b) material either to the accepknce of the risk or This definition ofrnakriality incorporates the idea of
to the hazard ==urnad by the irsurer; or subsextion (2)(c), tbat is, that the policy wou;d not,
VOLCME 48 -- 28 Feb. 1991 STATE REPORTER
Schneider v. Minnesota M U M Lile Ins.Co.
48 St&p. 224
timongother things, have k e n i s s u d had the ir-sured to tbe risk =msd by Minn
retdd the true state of af?Xrs. The primary dif- The Di-trict Court did no
f~rence between the two subsections is that (2)(b) h l i n n m t a Mutual's denial of coverage
- ,-&-
deals with a n objective standard of materiality, r a t e d under O 33-15-403 (2) ( ) MCA.
b, -f
::
;
r-ndleness, while (2)(c) =fers to a subjective
s t m h d , g d faith.
Mimwta a?so argvejtht it legitimatelj
e w it
denied covenge under s u k t i o n (2)(c) b z
Minnesota Mutual contends that i t justifiably would not in gcod fajth Fave irsured Jock if i t had
denied coverage under subsection (2) (b) because t h e known that he Fad bsen d i e g n d es an alcoholic.
diagnmis of alcoholism wes material to the risk as-
sumed. The materiality of an irsured's mkrepresen- Like the qwstion of makridity, the question of
tation is determined by the extant the &he =wer good faith is a question of fact. The District Court
the risk of concluded that Minnemta Mutual did not exercise
in the irsurance good raith in reviewing the claim b e c a w it mnducted
material if it diminishes the only a limited investigation of the facts regarding
opportunity to dekmine or estimate its h k ' s alcohol use and that this investigation was
Berger v. *Wnnesota Mute Life Ins. Co. of St. conducted for the a l e purpose den~ing the
pa,,], M ~ ~723 ,p.2d 388,391
, wt& 1986). ~ hthe ~ It ,also found that Minnesota Mutual failed t follow
o
its o a n underwriting criteria for applicants who use
materiality of a misrepresentation generally is
mezsured at the time the irsurer issues the ~ o l i c v alcohol. These finding are not clearly erroneous.
rather than at the time ofthe insured's death. ~.&e;, Minnesota Mutual's underwriting manual
723 P.2d at 391. pro\idzd: .
The quetion of materiality is a question of fact. "A history of current acute alcoholism, delirium
Berger, 723 P.2d a t 392. In this case, the District tremers and/or alcoholic pqchases is usually RVA
Court found that Jock's incormt statement on the [risk not acceptable]." (Empbzsis added.)
insurance application was not matzrial. This finding
is not clear13 erroneous. D s p i t e this provision in the manual, a Minnesota
Mutual underwriter testified that the mmpany a u t e
As the District Court pointed out, the Protection matically rejected the application of anyone who had
Plus group life insurance application failed to ask any been dizgnozd as an alcoholic.
specific questions about either alcoholism or alcohol
we. The court surmised that the prudent in= -urer In addit ion, the underu-riting manual required un-
would hive s ~ i f i c a l l yques!.sc? inf~rmation about deru-riters to "[l]wk for the efCi?ctson busines: reputa-
all critical underwriting factors. Thus, if alcoholism tion a n d acumen, finslncial standing, home
w a s i n d d rna!erial to .wnnmta Mutual's a m p environment, social b e h a ~ j and alcohol depndence"
~r
tance of the risk, it would have expm-ly s k e d ques- when investigating m appliant's drinking habits to
t iors about alcohol use,just a it specifically requested
s determine irsurability. Minnesota Mutual neglected
information about heart, lung, nervous or kidney dis- to conduct such an inquiry. Irstsad, it relied solely on
cirders, high blood pressure, czncer and diabe4a. Dr. Shaub's medical rxords to deny covenge. Dr.
Other courts have reached a similar conclusion. Bot- Shaub, however, in his deposition introduced at trial
way v. . h e r i m I n t l h u r m c e Co. of Xew York, 543 admitted that he wesnot an expert on alcoholism and
N.Y.S.2d 651, 652 (N.Y.App. Div. 1989); Kampfe v. that Jock did not exhibit any of the p h ~ s i m l s p p t o m s
Minnewta Mut. Life Ins. Co., C.V. 82-21-BLG,slip op. of the disezse. A chemical depndency coursel~r tes-
a t 11-12 (E.D. Mont. 1983). tified that there w z s not enough information in the
medical records to determine whether Jock w a s an
Minnesota Mutual's emplo~ees! s t i f i d that al- alcoholic. From this erida-ice, the District Cowt could
coho1 use ~-2.s material to the decision to a c e p t the h a w properly concluded that had Minnesota Mutual
risk because the company automatically denied follow& its cwn manual it would have discovered the
c o v e r e to m applicant who had k n d i a g n d a s
y extent of Jock's problem and may have issued the
a n alcoholic and had been drinking within the five policy in spite of his alcohol use.
y e a s p d i n g the applimtion. Thic practice, how-
ever, wzs not reduced to writing in the underwriters' The District Court did not abuse its discretion in
rcmual, although other p d u r e s regarding alcohol concluding that Minnesota Mutual could not deny
habits were includsd in the rcmual. co~~rzge under faith pro\+sion of § 33-15-
credible e\