Neill v. Nationwide Mutual Fire Insurance
2003 Ark. App. LEXIS 134, 98 S.W.3d 448, 81 Ark. App. 67 (2003)
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Rule of Law:
An insurer is not entitled to void an insurance policy on summary judgment based on a material misrepresentation in the application if the insured presents testimony that the insurer's agent failed to ask the relevant question, thereby creating a genuine issue of material fact as to how the misstatement occurred. The insured's signature on a declaration of truth is probative, but not conclusive, evidence of misrepresentation.
Facts:
- On November 18, 1993, Lamar Neill met with Nationwide agent Leon Anderson to apply for homeowners' insurance for a mobile home.
- Anderson asked Neill questions and typed the answers into a computer to generate the application.
- The final application stated "None" in the section for "Past Losses."
- In fact, Neill had previously suffered three fire losses.
- Neill signed the application, which contained a clause declaring the facts were true, without reading it.
- On April 16, 1997, Neill's home was severely damaged by fire.
- Neill filed a claim with Nationwide for insurance benefits.
- During its investigation of the claim, Nationwide learned from Neill about his three prior fire losses.
Procedural Posture:
- Nationwide denied Neill's insurance claim.
- Nationwide filed an action for declaratory relief in the trial court, seeking to void the policy from its inception.
- Neill filed a counterclaim against Nationwide for breach of contract and bad faith.
- The trial court granted summary judgment in favor of Nationwide, voiding the policy.
- Neill, as appellant, appealed the trial court's grant of summary judgment to the Arkansas Court of Appeals; Nationwide is the appellee.
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Issue:
Does a material misrepresentation on a signed insurance application entitle the insurer to summary judgment voiding the policy, when the insured testifies that the insurer's agent filled out the application and never asked the relevant question?
Opinions:
Majority - Andree Layton Roaf
No. A material misrepresentation on a signed application does not entitle the insurer to summary judgment when the insured's testimony creates a genuine issue of material fact as to whether the insurer's agent caused the misstatement. While a person is generally bound by a document they sign, an exception exists where an insurance agent, through fraud, negligence, or mistake, misstates facts that were truthfully conveyed by the insured. This case is distinguishable from precedents like Carmichael, where the insured was deceased and could not testify, and the agent's testimony was uncontroverted. Here, Neill is alive and testified that the agent either did not ask about prior losses or he did not understand the question. Nationwide presented no evidence from its agent to rebut this. Neill's testimony creates a question of fact for a jury to decide, and his signature on the application is merely probative evidence of misrepresentation, not dispositive. Therefore, summary judgment was inappropriate.
Dissenting - Robert J. Gladwin
Yes. Summary judgment should have been granted because the law clearly establishes that a person is bound by the contents of a paper they sign, regardless of whether they read it. Neill signed an application that contained the unambiguous words 'past losses' and 'none' just inches above his signature, and he declared the information to be true. Nationwide was entitled to rely on this signed declaration. The fact of three prior fire losses is undeniably material to the risk. Because Neill failed to meet his burden of presenting sufficient proof to create a material question of fact against the clear evidence of the signed document, the trial court's grant of summary judgment was correct and should be affirmed.
Analysis:
This decision carves out a significant exception to the general rule that a signatory is bound by the contents of a document. It establishes that in the context of an insurance application prepared by an agent, the insured's testimony alone can be sufficient to create a question of fact regarding misrepresentation, thereby defeating a motion for summary judgment. The ruling shifts some burden onto insurers, suggesting they cannot rely solely on a signed application to void a policy if the circumstances of the application process are disputed. This case highlights the tension between the 'duty to read' doctrine and the principle that an insurer can be held responsible for the negligence or errors of its agent.
