On December 18, 2012, the Oklahoma Supreme Court decided Benson v. Leaders Life Insurance Co., 2012 OK 111, ___ P.3d ___. The Benson case involved the interpretation of section 3609 of Title 36, which deals with when an insurer may rescind a policy due to misrepresentations, omissions, concealment of facts, or incorrect statements made in the application for the insurance policy. As noted in the opinion, the Oklahoma Supreme Court has held on several occasions that the statute requires a finding of an “intent to deceive” the insurer before a policy may be avoided by reason of the insured’s false statement or omission in the application. However, in discussing the insurer’s purported failure to use a medical release provided by the insured at the time of application (Id. at ¶ 9), the Benson opinion brings into question other Oklahoma Supreme Court and federal court pronouncements stating that insurers do not have a duty to investigate the statements made in an application to see if they are true.
For example, the Oklahoma Supreme Court has previously stated that the fact that an applicant gave his physician’s name and signed a medical authorization did not provide actual notice to an insurer that it needed to investigate the applicant’s medical history. See Vaughn v. Amer. Nat’l Ins., 543 P.2d 1404, 1406 (Okla. 1975). Likewise, the Court of Civil Appeals has held that an insurer is entitled to rely on the assertions of the insured in the application and does not have a duty to verify the information given. See Hobbs v. Prudential Prop. and Cas. Co., 853 P.2d 252, 255 (Okla. Ct. App. 1993). And the Tenth Circuit has held that it did not find any requirement in Oklahoma law that insurers conduct investigations prior to issuing policies. Hays v. Jackson Nat’l Life Ins. Co., 105 F.3d 583, 590-91 (10th Cir. 1997). The Benson case seems to be a departure from these cases.
So what’s the take-away from Benson? While the Oklahoma Supreme Court has not stated that an insurer has any duty to investigate before issuing a policy, insurers should be aware that asking for and receiving a medical release in the application process may be used as evidence that the insured did not “intend to deceive” under Oklahoma law, even when the insured concealed or misrepresented significant information. In the words of the Benson dissenters: “What is wrong with this picture?”