RUDOLPH (MARTIN), ET AL. VS. SHELTER INSURANCE COMPANIESAnnotate this Case
RENDERED: SEPTEMBER 5, 2008; 10:00 A.M.
NOT TO BE PUBLISHED
ORDERED NOT PUBLISHED BY SUPREME COURT:
FEBRUARY 11, 2009
(FILE NO. 2008-SC-0865-D)
Commonwealth of Kentucky
Court of Appeals
MARTIN RUDOLPH AND
APPEAL FROM GRAVES CIRCUIT COURT
HONORABLE TIMOTHY C. STARK, JUDGE
ACTION NO. 06-CI-00166
SHELTER INSURANCE COMPANIES
VACATING AND REMANDING
** ** ** ** **
BEFORE: CLAYTON AND DIXON, JUDGES; GRAVES, SENIOR JUDGE.
CLAYTON, JUDGE: Martin Rudolph and Jennifer Potter appeal from a Graves
Circuit Court’s order granting summary judgment in favor of Shelter Insurance
Companies (Shelter). Finding error, we vacate the judgment and remand for
On November 30, 2005, a fire destroyed the home of Mr. Rudolph
and Ms. Potter. Thereafter, they filed a claim with their homeowner’s insurance
carrier, Shelter. A background investigation by Shelter revealed that Mr. Rudolph
and Ms. Potter had each been convicted of felony drug offenses. Mr. Rudolph pled
guilty in 1999 to manufacturing methamphetamine, possession of marijuana. Ms.
Potter pled guilty during the same time to first-degree criminal drug possession.
Question 1 of the “applicant’s statement” section of Mr. Rudolph’s
application for insurance asked, “Have you or any member of your household ever
been convicted of or plead guilty to a felony offense?” Shelter rescinded the
insurance contract under the provision in the application that stated, “I understand
if Shelter discovers information contrary to that which has been provided, the
policy may be voided, to the extent permitted by law, and if voided absolutely no
coverage may exist.”
On April 18, 2006, HSBC Mortgage Services Inc. (HSBC) filed a
complaint against Mr. Rudolph and Ms. Potter seeking foreclosure. Mr. Rudolph
filed a motion to add Shelter as a third party defendant. He also filed a third party
complaint against Shelter alleging Shelter was liable under the contract of
insurance on the property.
On July 17, 2006, in a request for admissions submitted by Shelter,
Mr. Rudolph admitted that he signed an application for insurance coverage,
although he did so in a perfunctory manner. Subsequently, on September 7, 2006,
Shelter filed a motion for summary judgment. The trial court denied summary
judgment on the basis that Shelter made no showing that the misrepresentation by
Mr. Rudolph on the application was material to the acceptance of the risk, or to the
hazard assumed by the insurer as required by Kentucky Revised Statutes (KRS)
On February 12, 2007, HSBC’s complaint against Mr. Rudolph and
Ms. Potter was voluntarily dismissed upon a motion by HSBC stating the issue had
been resolved. With Mr. Rudolph’s complaint against Shelter as the only
remaining cause of action, Shelter filed a renewed motion for summary judgment.
In support of the motion, Shelter attached the affidavit of Lori Meyer, a Personal
Lines Underwriting Supervisor with Shelter. Ms. Meyer stated that pursuant to the
underwriting guidelines of Shelter, a felony conviction of any type bars the
applicant from obtaining personal homeowner’s insurance. The trial court granted
Shelter’s motion for summary judgment finding that Mr. Rudolph’s insurance
contract with Shelter was void as a matter of law. This appeal followed.
As a preliminary matter, Shelter argues that Ms. Potter is not a proper
party to this appeal and should be dismissed. We agree. HSBC’s complaint
against Ms. Potter has been dismissed. Further, Ms. Potter was not a party to the
third party complaint against Shelter and was not a signatory to the insurance
application at issue. Thus, we will proceed with only Mr. Rudolph as the
Kentucky Rules of Civil Procedure (CR) 56.03 provides, in pertinent
part that summary judgment “shall be rendered forthwith if the pleadings,
depositions, answers to interrogatories, stipulations, and admissions on file,
together with the affidavits, if any, show that there is no genuine issue as to any
material fact and that the moving party is entitled to a judgment as a matter of
law.” On review of an order for summary judgment, “[t]he record must be viewed
in a light most favorable to the party opposing the motion for summary judgment
and all doubts are to be resolved in his favor.” Steelvest, Inc. v. Scansteel Serv.
Ctr., Inc., 807 S.W.2d 476, 480 (Ky. 1991). “The standard of review on appeal of
a summary judgment is whether the trial court correctly found that there were no
genuine issues as to any material fact and that the moving party was entitled to
judgment as a matter of law.” Scifres v. Kraft, 916 S.W.2d 779, 781 (Ky. App.
KRS 304.14-110 provides in its entirety:
All statements and descriptions in any application
for an insurance policy or annuity contract, by or on
behalf of the insured or annuitant, shall be deemed to be
representations and not warranties. Misrepresentations,
omissions, and incorrect statements shall not prevent a
recovery under the policy or contract unless either:
(1) Fraudulent; or
(2) Material either to the acceptance of the risk, or
to the hazard assumed by the insurer; or
(3) The insurer in good faith would either not have
issued the policy or contract, or would not have
issued it at the same premium rate, or would not
have issued a policy or contract in as large an
amount, or would not have provided coverage with
respect to the hazard resulting in the loss, if the
true facts had been made known to the insurer as
required either by the application for the policy or
contract or otherwise. . . .
It is uncontested that the answer to Question 1 on the applicant’s
statement concerning past felony convictions was material to the decision of
whether or not to cover Mr. Rudolph. However, at issue is whether Mr. Rudolph
made a misrepresentation when he signed the statement accepting the answers as
his own without thoroughly reading the statement or being asked the questions
orally by the agent.
Mr. Rudolph argues the false answer was not a misrepresentation that
would justify rescinding the insurance policy because the agent for Shelter never
asked him whether he had been convicted of a felony and he did not fill out the
answers on the insurance application. Further, Mr. Rudolph asserts the answers
were not his misrepresentation because he only signed the application in a
perfunctory manner without reading the contents.
In support of this argument, Mr. Rudolph cites to the decision in
Ketron v. Lincoln Income Life Insurance Company, 523 S.W.2d 228 (Ky. 1975).
In Ketron, this Court held an insurance company liable for an application
containing false answers because the applicant fully revealed her condition to the
agent, and “did not know the application contained false answers.” Id. at 229.
Ketron relied upon Pennsylvania Life Insurance Co. v. McReynolds, 440 S.W.2d
275, 278-79 (Ky. App. 1969), which details a relevant summary of the law in this
area. It states, in pertinent part,
While the insurance carrier, by inserting
limitations in its application forms, has thus brought the
transaction of obtaining insurance further into the
operation of ordinary contract law, it has not changed the
nature of the applicant who still relies on the agent and is
little more likely to read the application form he signs
than the policy he gets. Especially is this true when it is
the agent who writes in the answers on the application
form which the applicant then signs. If the applicant, or
his agent . . . writes in the answers on the application
form, and then signs it or makes his mark, he obviously is
bound by it as a matter of contract law.
In order to effect a better balance between the
interests and responsibilities of the carrier and the
applicant in the field of nonmedical health and accident
insurance, we no longer will place the full responsibility
on the applicant as stated in Ky. Central Life Ins. Co. v.
Combs, supra [432 S.W.2d 955 (Ky. 1960)] to see that
the application is correctly filled out except where the
applicant, or his agent, inserts the answers on the
application form signed by or for him. Of course if the
applicant knows that false answers are being put down he
will be responsible for them. However, his knowledge of
the falsity may depend on how fully he understands
exactly what information the application questions seek.
Under our statute [KRS 304.14-110]1 misrepresentations
will defeat recovery on the policy if material or
fraudulent. The question is whether there was in fact any
At the time of this opinion KRS 304.14-110 was still under KRS 304.656.
misrepresentation in the circumstances of this case. If
good faith be found, we think there was not.
According to Couch on Insurance, 2d (1959 Ed.)
Section 35:199, “If the insurer’s agent, by misleading
statements, induces the insured to make false answers
and the latter acts in good faith, the insurer is bound[.]
The question whether or not an applicant was, through
ignorance and good faith, misled by the agent into
believing that his answers were truthful, is for the jury to
decide. . . .”
However, Ketron and McReynolds are both distinguishable from the case at hand
because in both those cases the applicant provided the correct answer to the agent,
and for whatever reasons, the agent did not enter the information into the
Shelter directs us to Hornback v. Bankers Life Insurance Company,
176 S.W.3d 699 (Ky. App. 2005), in support of its position that as signatory to the
application, Mr. Rudolph adopted the false answers as his own, and therefore made
material misrepresentations that justify rescinding the insurance application
pursuant to KRS 304.14-110. Hornback provided that, “whether they read the
application or not, [the applicants] are held to have actual or constructive
knowledge of its contents. Further, by signing the application, the [applicants]
adopted the answers as their own.” Id. at 704. However, Hornback is
distinguishable because the agent read the question from the application directly to
Without findings of fact, we are left to guess whether Mr. Rudolph
was asked by the insurance agent whether he or Ms. Potter had been convicted of a
felony prior to signing the application for insurance coverage from Shelter. There
also remains the question of whether Mr. Rudolph signed the application in good
faith, without knowledge of the false answer. Neither McReynolds nor Hornback
address the effect of an insurance agent’s failure to read material questions to an
applicant on the resulting false answers contained within the application.
In Osborne v. American Select Risk Ins. Co., 414 F.2d 118, 122 (6th
Cir. 1969), the 6th Circuit stated, “[t]he District Court found that the disputed
testimony as to whether defendant’s agent asked Osborne the questions was
immaterial, but we in the light of McReynolds find this factor to be material and a
factual question for the jury.” Further, in Cook v. Life Investors Ins. Co. of
America, 126 Fed. Appx. 722, 725 (6th Cir. 2005), the Court noted, “[u]nder
McReynolds, the presence of a material misrepresentation in [the insured’s]
insurance application does not compel a judgment in favor of [insurer] if a
reasonable jury could find (1) that [insurance agent] wrote the false answer to
Question 2 and (2) that [the insured] signed the application in good faith.”
We find that the critical inquiry here is whether the circumstances
surrounding the failure of Shelter’s agent to ask Mr. Rudolph whether he or Ms.
Potter had been convicted of a felony, along with the agent’s filling out of the
application, and Mr. Rudolph’s signing in good faith demonstrated a genuine issue
as to the source of the false answer. Based on the existing case law in Kentucky,
and the persuasive opinions by the Federal 6th Circuit, we feel that it does. In sum,
we think that a jury must decide who was the source of the “NO” answer to
Question 1 on the applicant’s statement and whether Mr. Rudolph was aware of
that false answer when he signed the application.
The judgment of the Graves Circuit Court is vacated and the case
remanded for further proceedings not inconsistent with this opinion.
BRIEF FOR APPELLANTS:
BRIEF FOR APPELLEE:
Dennis L. Null, Jr.
E. Frederick Straub, Jr.
J. Duncan Pitchford
James R. Coltharp, Jr.