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Insurance – Life – Application – Misrepresentations – Intent to Defraud – Directed Verdict

 Shenandoah Life Insurance Co. v. Smallwood (Lawyers Weekly No. 011-010-13, 10 pp.) (John C. Few, Ch.J.) (H. Bruce Williams, J., dissenting) Appealed from Sumter County Circuit Court (W. Jeffrey Young, J.) S.C. App.

Holding: The evidence would have supported several explanations for why the decedent gave false answers to questions on his life insurance application about his alcohol and drug use. Therefore, the plaintiff-insurer was not entitled to a directed verdict on its claim to void the decedent’s life insurance policy.

Reversed and remanded.

A jury could reasonably conclude the decedent was attempting to hide his alcohol and drug use from his wife, who did not know he had used drugs and who signed the completed application. He also might have been trying to hide his drug use from his aunt, with whom he was very close and who worked for the insurer.

As to the insurer’s claim that the decedent’s failure to disclose his PTSD was fraudulent, in addition to the fact that the decedent’s wife did not know the decedent thought he had PTSD, there is no evidence the decedent was ever diagnosed with or treated for it — only his statement to two medical providers that he suspected he suffered from it.

The insurer presented no evidence that the decedent, at age 26, associated his alcohol or cocaine use with any increased medical risk. The medical records from the decedent’s visit to Dorn Medical Center reveal that he admitted “drug and alcohol use” to a nurse, and that a doctor assessed it as alcohol and cocaine “abuse.” However, neither the nurse nor the doctor remembered at trial what the decedent said that led them to write what they wrote in the records. Viewed in the light most favorable to the non-moving party, the doctor used the term “abuse” to refer to isolated cocaine and alcohol use. As to any mental disorder, the record contains nothing more than the decedent’s suspicion he had PTSD. These facts support a reasonable inference that the decedent’s failure to disclose the information was not fraudulent.

The simple fact that an answer on a signed application is false does not satisfy an insurer’s burden of proving the applicant made the misrepresentation with the intent to defraud the company.

Reversed and remanded.


(Williams, J.) The undisputed evidence indicates that the decedent reported alcohol and cocaine abuse to a nurse and treating physician just one year prior to completing the insurance application. Further, I believe the association of a prospective insured’s drug and alcohol abuse to an increased medical risk is patently apparent. I believe that, as a matter of law, the decedent’s knowing and willful concealment of his drug and alcohol abuse demonstrated an intent to defraud the insurer and, thus, the trial court did not err in granting the insurer’s motion for a directed verdict.


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