Brown v. American General Life & Accident Insurance Co.

Citations: 680 So. 2d 334; 1996 Ala. Civ. App. LEXIS 489; 1996 WL 342280Docket: 2950206

Court: Court of Civil Appeals of Alabama; June 21, 1996; Alabama; State Appellate Court

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Juanita Brown appeals a summary judgment favoring American General Life and Accident Insurance Company and its agent, Loddie D. Williams, regarding a whole life insurance policy sold to her in February 1991. The application process involved a misrepresentation where Brown disclosed having blood pressure issues, yet the agent incorrectly marked 'no.' Brown signed the application without reviewing it and later allowed her policy to lapse after realizing the discrepancy in August 1992. In March 1993, she filed a complaint alleging fraudulent suppression of material facts under Ala.Code 1975, 6-5-102. The trial court granted summary judgment, determining that no genuine issue of material fact existed. 

Brown's claim hinges on whether American General had a duty to disclose her health condition, concealed this information, and whether she suffered damages due to this nondisclosure. The court reviewed the record but focused on Brown's failure to provide substantial evidence of damages resulting from the alleged concealment. It concluded that Ala.Code 1975, 27-14-7, which allows insurers to rescind policies for material misrepresentation, was not applicable to her case. Brown argued her injury stemmed from paying premiums on a voidable policy.

The key issue is whether the insurance policy in question was voidable under Ala.Code 1975, 27-14-7, which permits an insurer to rescind a policy if the applicant misrepresented a material fact. According to Alabama Supreme Court precedent, an insurer cannot deny benefits based on misrepresentations by the agent that did not involve the insured's participation. In this case, evidence favored Brown, showing she disclosed her high blood pressure to the agent, with corroborating testimony from her daughters. Therefore, no misrepresentation by Brown was found, and the trial court correctly determined that Ala.Code 1975, 27-14-7 did not apply as any nondisclosure originated from the agent.

Furthermore, even if the statute were applicable, Brown did not present sufficient evidence to prove the policy was voidable. Brown argued that American General would have denied coverage had they known about her blood pressure issues. However, American General's underwriting manager testified that the policy would have been issued regardless of her blood pressure, especially since, at the time of application, Brown was not on medication for her condition and had been advised by her doctor that her blood pressure was controlled. The policy was for $5,000, and based on the North American Underwriting Guidelines, such an amount would typically be issued at a standard rate if the applicant was only using one medication. Brown had not taken medication for two to three years prior to her application, further supporting American General's position.

Butler testified that the insurance policy issued by American General to Brown included a two-year 'incontestability' clause, which prohibits contesting the policy after it has been active for two years, barring nonpayment of premiums. This clause does not apply to disability or accidental death benefits. Brown applied for the policy in February 1991 and did not file her complaint until March 1993, indicating that the incontestability period had expired. As a result, Brown failed to provide substantial evidence of damages due to nondisclosure by the agent on the application. The trial court's summary judgment in favor of American General and its agent was deemed appropriate and is affirmed. The opinion was authored by Retired Appellate Judge Richard L. Holmes during active duty, with concurrence from Judges Robertson, Thigpen, and Monroe.