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06/30/95 EUGENE KNYSAK v. SHELTER LIFE INSURANCE

June 30, 1995

EUGENE KNYSAK, PLAINTIFF-APPELLEE,
v.
SHELTER LIFE INSURANCE COMPANY, A STOCK COMPANY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of St. Clair County. No. 88-L-421. Honorable Milton S. Wharton, Judge, presiding.

The Honorable Justice Lewis delivered the opinion of the court: Welch and Chapman, JJ., concur.

The opinion of the court was delivered by: Lewis

JUSTICE LEWIS delivered the opinion of the court:

"Born but to die, and reas'ning but to err;" Alexander Pope, An Essay on Man, Epistle II.

The appellate courts definitely need some direction from the supreme court in defining "misrepresentation," when construing applications for automobile, health, or life insurance. What has happened is that in Campbell v. Prudential Insurance Co. of America (1958), 15 Ill. 2d 308, 155 N.E.2d 9, the supreme court held that the "or" in section 154 of the Insurance Code of 1937 (now 215 ILCS 5/154 (West 1992)) should be construed in the disjunctive rather than in the conjunctive. That section reads as follows:

"No misrepresentation or false warranty made by the insured or in his behalf in the negotiation for a policy of insurance, or breach of a condition of such policy shall defeat or avoid the policy or prevent its attaching unless such misrepresentation, false warranty or condition shall have been stated in the policy or endorsement or rider attached thereto, or in the written application therefor, of which a copy is attached to or endorsed on the policy, and made a part thereof. No such misrepresentation or false warranty shall defeat or avoid the policy unless it shall have been made with actual intent to deceive or materially affects either the acceptance of the risk or the hazard assumed by the company ***." (Emphasis added.) 215 ILCS 5/154 (West 1992).

Our appellate courts have since paid lip service to Campbell but have proceeded in most cases to reason and decide the insurance coverage as if section 154 was written in the conjunctive when there has not been a showing of actual intent to deceive by the insured. We will discuss this matter in greater detail later in this opinion.

First, we must present the facts. Defendant, Shelter Life Insurance Company, appeals from a jury verdict that awarded plaintiff $18,068.28 in damages for breach of contract (count I) and $32,000 in damages for intentional infliction of emotional distress (count V). Defendant raises the following issues: whether the trial court erroneously denied defendant's motion for a judgment n.o.v. or, in the alternative, for a new trial, due to the fact that defendant did not breach the contract with plaintiff because (1) plaintiff misrepresented his wife's health condition on the insurance application, and (2) plaintiff failed to prove the elements of a cause of action for intentional infliction of emotional distress. For the reasons listed below, we affirm the trial court's decision as to count I and reverse as to count V.

In May 1986, plaintiff met with defendant's agent, Sandra Biemfohr (Biemfohr), and applied for a health insurance policy covering himself and his wife, Anna Knysak (Anna). Because of an inability to speak English, Anna did not attend this meeting and plaintiff was assured by Biemfohr that there would be no problem if he answered the questions for his wife. The application contained numerous questions regarding the past and present health of both applicants concerning whether either applicant ever had or were treated for certain diseases. Of import are the questions that pertained to Anna's past and present health status, in particular questions 21a and 21g, relating to occurrence and treatment of high blood pressure and diabetes, respectively. On behalf of his wife, plaintiff answered both of these questions "no".

At the end of the application, above the signature line, was the following language: "The owner declares to the best of his or her knowledge and belief that the answers recorded in this application are complete and true ***." Based on plaintiff's answers found in the application, a health insurance policy was issued covering plaintiff and his wife.

Anna suffered a stroke and was hospitalized in April 1987, and plaintiff submitted a claim to defendant which was denied. Defendant based its decision on an investigation which revealed that Anna had been diagnosed with and treated for both high blood pressure and diabetes since November 1984, with a series of office visits and laboratory tests documented from that time and continuing until just prior to her stroke. According to defendant, the high blood pressure and diabetes were preexisting conditions as defined by the policy, present during the two-year period preceding coverage, and therefore excluded.

Defendant's special claims supervisor, Carl Carver (Carver), sent a letter to plaintiff in September 1987 and offered to reform the policy to exclude coverage for Anna. This letter further stated that because plaintiff did not accurately answer the questions of the application regarding Anna's health, there were preexisting conditions that, according to the policy provisions, would not be covered. Plaintiff rejected the reformation, and defendant rescinded the policy and refunded plaintiff's premium.

In a letter to Anna's physician, Dr. R. Brad Ringhofer (Dr. Ringhofer), Carver stated: "I do not believe Dr. Knysak wilfully withheld information with intent to defraud. I believe him to be an honest person. I have communicated this to him." Carver further testified that had defendant known Anna's complete health information, it would not have issued a policy that covered her, regardless of whether or not plaintiff answered the questions on the application to the best of his knowledge and belief. Defendant's underwriter, Vicki Fain (Fain), also testified that if defendant had been made aware of Anna's health status, no policy would have been issued to cover her. Although Anna was deceased at the time of trial, her death was not related to the claim made by plaintiff.

Plaintiff testified that as a result of defendant's denial of his claim, he became nervous, upset, and anxious, he had shakiness and difficulty speaking, and he had sought advice from a "heart doctor" for these problems. As a result of defendant's refusal to pay his claim, plaintiff filed a five-count complaint. Defendant filed affirmative defenses that alleged misrepresentations in the insurance application and a preexisting ...


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