APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE WESTERN DISTRICT OF PENNSYLVANIA.
Aldisert and Weis, Circuit Judges and Re,*fn* Chief Judge.
In a jury trial to determine whether benefits were due under a disability insurance policy, the district judge refused a request to instruct the jury on a state statute pertaining to false answers in an application. Because the statute was pertinent, we conclude that the failure to include it in the jury charge was error requiring a new trial.
Connecticut Mutual Life Insurance Company filed suit against its insured, Marilyn Wyman, seeking recission of a disability insurance policy because of false statements in her application form. Wyman filed a separate action to recover continuing benefits under the policy, and the two cases were consolidated for trial. The jury returned a general verdict in favor of the insured which the district court molded into a judgment for an amount not disputed by the parties.
On January 8, 1980, Wyman applied to Connecticut for a disability income policy providing benefits of $1,300 per month. A licensed practical nurse performed a limited physical examination of the applicant and assisted in the preparation of the medical information section of the application. The company approved the application and returned it on February 25, 1980. Ten days later, on March 6, 1980, Wyman filed a claim for benefits, alleging that disability began on January 15, 1980 because of "bronc[h]ial flu, pneumonitis, . . . cracked rib from coughing."
The insurance company paid benefits for two months, but terminated the payments following an investigation. The company produced evidence at the trial that Wyman was not employed as of the date of the application and had not been able to work for at least a month before that time because of disability. Moreover, although her application listed before-tax income of $24,000, her earnings in each of the preceding two years had not exceeded $8,800. There was also evidence that Wyman submitted a claim for benefits on February 25, 1980 under a policy with Travelers Insurance Company and stated a date of disability as "Cont. Nov. 2, 1980 [sic]."*fn1 Travelers had paid benefits for some months before November 1979 because of disability from a surgical procedure Wyman had undergone earlier that year. Travelers also honored the 1980 claim and paid benefits retroactively to November 2, 1979. An attending physician's report submitted to Travelers indicated Wyman had ceased work because of disability on November 2, 1979.
There was also evidence that Wyman had applied to a third company for a waiver of life insurance premiums based on disability that occurred before the Connecticut policy had been issued. Connecticut further contended the number of doctors' visits stated in the application was incorrect, as was the denial of a history of anemia.
Wyman argued that her answers in the application had been made in good faith. She offered explanations for the receipt of benefits from Travelers and for the discrepancy in income reported to Connecticut.
Connecticut asked the trial judge to instruct the jury in accordance with section 622 of the Pennsylvania Insurance Company Law which provides in full: "The falsity of any statement in the application for any policy covered by subdivision (b) of this article shall not bar the right to recovery thereunder, unless such false statement was made with actual intent to deceive, or unless it materially affected either the acceptance of the risk or the hazard assumed by the insurer." PA. STAT. ANN. tit. 40, § 757 (Purdon 1971).
After the charge was completed, the company's counsel questioned the omission of the statute from the instructions. The trial judge responded, "I recognize that and have deliberately chosen not to. You may reserve that."
The sole point raised on appeal by Connecticut is the failure of the district court to charge the jury in accordance with the statute. Wyman argues that the Pennsylvania appellate courts have adopted a different standard for inaccurate answers in insurance applications and that the evidence was sufficient to sustain the verdict in her favor.
We reject the argument that the verdict cured a defect in the charge here. When the correctness or adequacy of a jury instruction is at issue, an appellate court may not review the evidence in the light most favorable to the verdict winner. There can be no deference to a factual finding tainted by legal error. If the jury was misled as to the law on a material point, "we cannot presume that the jury applied the appropriate standard in deciding [an issue]." McPhee ...