Supreme Court of California Justia
Docket No. S115495

Filed 7/7/05


Plaintiff and Appellant,
Ct.App. 3 C037789

) Sacramento
Defendant and Appellant.
Super. Ct. No. 99AS04726

After his wife’s death from breast cancer, plaintiff, as beneficiary of his
wife’s life insurance policy, sought to collect the policy proceeds. Defendant
insurance company, however, rescinded the policy and denied plaintiff’s claim. It
asserted that the wife had concealed from the insurer her smoking of cigarettes in
the 36-month period preceding her application, and that had she been truthful it
would not have issued a policy at the “preferred nonsmoker rate.” Plaintiff sued.
The trial court granted the insurer’s motion for summary judgment. We conclude
that whether there was concealment is a disputed material fact, and therefore
summary judgment was improper.
Because plaintiff has appealed from the trial court’s grant of summary
judgment against him, we must “independently examine the record in order to
determine whether triable issues of fact exist to reinstate the action.” (Wiener v.
Southcoast Childcare Centers, Inc. (2004) 32 Cal.4th 1138, 1142; see also

Saelzler v. Advanced Group 400 (2001) 25 Cal.4th 763, 767.) “In performing our
de novo review, we view the evidence in the light most favorable to plaintiff[]”
(Wiener, supra, at p. 1142), and we “liberally construe” plaintiff’s evidence and
“strictly scrutinize” that of defendant “in order to resolve any evidentiary doubts
or ambiguities in [plaintiff’s] favor” (ibid.). Viewed in that light, these are the
facts here:
In 1996, plaintiff Patrick O’Riordan and his wife Amy consulted Robert
Hoyme, an independent insurance agent, for the purpose of replacing their life
insurance policies with term life insurance. Hoyme suggested a policy issued by
defendant Federal Kemper Life Assurance Company (Kemper). In the course of
two meetings with Hoyme, the O’Riordans filled out application forms for
Kemper policies at the preferred nonsmoker rate.
The insurance applications had a medical questionnaire, which asked these
two questions: (1) “Have you smoked cigarettes in the past 36 months?,” and
(2) “Have you used tobacco in any other form in the past 36 months?” According
to plaintiff, his wife, Amy, had smoked for many years but quit in 1991, five years
before submitting her application. Amy told Hoyme that she had been a smoker
and that her previous life insurance policy was a smokers’ policy. She also
mentioned that she “might have had a couple of cigarettes in the last couple of
years.” Hoyme replied: “That’s not really what they’re looking for. They’re
looking for smokers.” He explained that the O’Riordans would have to undergo
blood and urine tests to determine whether their bodies contained any traces of
smoking. Someone – the record does not say whether it was Hoyme or Amy –
checked the boxes marked “No” next to the two questions at issue. A doctor,
approved and paid for by Kemper, examined Amy and took blood and urine
samples, which showed no traces of nicotine.

Although Hoyme had been an independent agent for many years, he had
not previously sold insurance for Kemper. He submitted a request to be appointed
as Kemper’s agent, along with the O’Riordans’ policy application forms, to Cenco
Insurance Marketing Corporation, a general agent for Kemper with authority to
recruit agents. On May 24, 1996, two days after the O’Riordans had filled out
their applications, Cenco approved Hoyme’s request to be appointed a Kemper
agent. On June 28, 1996, Kemper issued a term life insurance policy to Amy at
the preferred nonsmoker rate, listing plaintiff as the beneficiary. Kemper paid
Hoyme a monthly commission as its agent on the policy.
In November 1997, Amy was diagnosed with metastatic breast cancer.
When Amy learned that she had only a short time to live, she began smoking
again. She died on June 26, 1998, two days before the policy’s two-year
contestability period expired.
When plaintiff sought to collect on Amy’s life insurance policy, Kemper
conducted an investigation and learned that in July 1995, less than a year before
Amy applied for the policy, Amy had asked her physician for, and received, a
nicotine patch. The physician’s report stated that although Amy had quit smoking
several years previously, “recently, due to some stressors, she did start to smoke a
little bit again, but is not smoking as much as she smoked previously.” Based
primarily on this information, Kemper concluded that Amy had falsely answered
the application’s questions pertaining to her smoking. It denied plaintiff’s claim,
and it rescinded the policy it had issued to Amy.
Plaintiff then filed this action in superior court against Kemper, Cenco, and
Hoyme. As amended, his complaint sought damages for breach of contract,
breach of the covenant of good faith and fair dealing, negligence, fraud, negligent
misrepresentation, and emotional distress. After plaintiff settled with Hoyme, the

court, at plaintiff’s request, dismissed the complaint against Cenco, leaving only
Kemper as a defendant.
Kemper moved for summary judgment or summary adjudication, claiming
the facts were undisputed that Amy falsely answered the application’s questions
about smoking and tobacco use in the 36 months preceding her application, thus
entitling Kemper to rescind Amy’s life insurance policy. Kemper added that had
Amy told the truth it would not have issued the policy. In his response, plaintiff
admitted that Amy had smoked a couple of cigarettes in 1995 but said that this
was the full extent of her smoking in the 36-month period preceding her
application, and that she had obtained the nicotine patch as a precautionary
measure. Plaintiff asserted that Amy had accurately described her cigarette usage
to Hoyme when she applied for the insurance policy. The trial court granted
Kemper’s motion and entered judgment for Kemper. Plaintiff appealed.
In a two-to-one decision, the Court of Appeal affirmed the judgment.
Justice Nicholson’s lead opinion concluded that even if Amy had smoked only
two cigarettes in the 36 months preceding her application, she concealed the extent
of her cigarette usage because she answered “no” to the questions in the
application pertaining to her cigarette and tobacco usage in that period. The lead
opinion described Kemper’s two questions about Amy’s use of tobacco as “a term
of the [insurance] contract,” which unambiguously required Amy to answer “yes”
to each question if she had smoked even one cigarette during the 36-month period
at issue. Although the lead opinion concluded that insurance salesman Hoyme
was Kemper’s agent when he assisted Amy in answering those two questions, it
reasoned that Hoyme’s actual and ostensible authority “did not extend to
interpreting an unambiguous term in the insurance.”
Justice Blease concurred in the result, but on different grounds. In his
view, based on the report of Amy’s doctor who had given her the nicotine patch,

Amy’s smoking “was not confined to a couple of cigarettes but was a continuous
problem . . . .” Thus, he concluded, she “concealed the true extent of her smoking
. . . which justifies rescission of the policy . . . .”
Justice Hull dissented. He concluded that Kemper was estopped from
asserting any concealment by Amy of her cigarette use, because she did tell
Hoyme, whom Justice Hull viewed as Kemper’s agent, that she had smoked a
couple of cigarettes in the two years before her application. Moreover, Justice
Hull said, Hoyme had “the ostensible authority to advise Amy O’Riordan of the
information the insurance company needed to decide whether to issue a
nonsmoker’s policy . . . .”
We granted plaintiff’s petition for review.
Under California law, every party to an insurance contract must
“communicate to the other, in good faith, all facts within his knowledge which are
. . . material to the contract . . . and which the other has not the means of
ascertaining.” (Ins. Code, § 332.)1 “Materiality” is determined by “the probable
and reasonable influence of the facts upon the party to whom the communication
is due . . . .” (§ 334.)
When an insured has engaged in “concealment,” which is defined by statute
as the “[n]eglect to communicate that which a party knows, and ought to
communicate” (§ 330), the insurer may rescind the policy, even if the act of
concealment was unintentional (§ 331). Similarly, a materially false
representation at the time of, or before, issuance of a policy may result in
rescission of the policy. (§ 359.) Thus, when an applicant for life insurance

All statutory citations are to the Insurance Code unless otherwise stated.

misrepresents his or her history as a smoker in order to obtain a nonsmoker rate,
the insurer may rescind the policy. (Old Line Life Ins. Co. v. Superior Court
(1991) 229 Cal.App.3d 1600, 1603-1606.)
Kemper asserts that the facts are undisputed that Amy concealed the true
extent of her cigarette use during the 36-month period preceding her application
for life insurance. But plaintiff argues that Kemper is estopped from asserting any
concealment by Amy because Hoyme, whom plaintiff claims was Kemper’s agent
when he sold Amy the policy, told Amy she could answer “no” to Kemper’s two
questions inquiring into her smoking during the period at issue. Alternatively,
plaintiff argues that Hoyme had ostensible authority to construe the meaning of
the questions and that in advising Amy to respond “no” to the questions at issue,
he misrepresented their meaning. (See 6 Couch on Insurance (3d ed. 1997)
§ 85:44, p. 85-67 [“If the insurer’s agent construes the questions [in an insurance
application] either by stating what they mean or by specifically stating that certain
information is or is not required, any misrepresentations which result therefrom
are charged to the insurer, the theory being that the insurer’s agent remains the
insurer’s agent even though he or she is assisting the insured.”]; see also 3
Appleman on Insurance 2d (Holmes ed. 1998) § 10.4, p. 12.)
Here, we need not decide the merits of plaintiff’s claims of estoppel and
ostensible authority. As we will explain, regardless of how those questions are
resolved, it is a triable issue of fact whether Amy concealed or failed to
communicate material information to Kemper regarding her use of cigarettes in
the 36 months preceding her application for life insurance at a nonsmoker rate.
Therefore, the trial court erred in granting Kemper’s summary judgment motion.
Pertinent are Amy’s answers to the two questions in Kemper’s medical
questionnaire inquiring into her cigarette and tobacco usage. The first question
asked, “Have you smoked cigarettes in the past 36 months?” That inquiry can

reasonably be construed as an attempt to determine habitual use, not the smoking
of a single cigarette or two during that entire period. Had Kemper intended
disclosure of the latter, it could have inquired into the smoking of “any” cigarette
during the relevant period. The second question asked: “Have you used tobacco
in any other form in the past 36 months?” (Italics added.) Because this question
directly followed the question pertaining to cigarette use, an applicant could
reasonably construe it as inquiring into use of tobacco in any form other than
cigarettes. Therefore, an applicant who, like Amy, has smoked just a couple of
cigarettes but has not used tobacco in any other form during the period at issue
could correctly answer “no” to this question.
Thus, if (as plaintiff maintains) Amy smoked only a cigarette or two during
the 36 months preceding her application and did not use any other tobacco
products, she did not conceal her cigarette usage by answering “no” to the two
questions at issue.
Moreover, even if, as Kemper insists, those two questions required
disclosure of even a single cigarette smoked during the period at issue, Amy did
not conceal that information from Kemper, because she did mention it to Hoyme
when she applied for the life insurance. Although Hoyme was not Kemper’s agent
when he assisted Amy in responding to Kemper’s medical questionnaire, he
became one when his request to be so appointed – submitted with Amy’s
application – was granted. (See generally Ins. Code, § 1704.5.) Once he became
Kemper’s agent, Hoyme had a duty to disclose to Kemper any material
information he had pertaining to Amy’s life insurance policy, and Kemper is
deemed to have knowledge of such facts. (In re Marriage of Cloney (2001) 91
Cal.App.4th 429, 439 [“As a general rule, an agent has a duty to disclose material
matters to his or her principal, and the actual knowledge of the agent is imputed to
the principal.”]; Civ. Code, § 2332 [“As against a principal, both principal and

agent are deemed to have notice of whatever either has notice of, and ought, in
good faith and the exercise of ordinary care and diligence, to communicate to the
other.”].) Therefore, Hoyme’s knowledge of Amy’s smoking of one or two
cigarettes during the 36 months preceding the application was imputed to
Kemper.) “The fact that the knowledge acquired by the agent was not actually
communicated to the principal . . . does not prevent operation of the rule.”
(Columbia Pictures Corp. v. DeToth (1948) 87 Cal.App.2d 620, 630.)
Nor does it matter that Hoyme acquired the information regarding Amy’s
cigarette use before he became Kemper’s agent. “The principal is charged with
knowledge which his agent acquires before the commencement of the relationship
when that knowledge can reasonably be said to be present in the mind of the agent
while acting for the principal.” (Columbia Pictures Corp. v. DeToth, supra, 87
Cal.App.2d at p. 631; see also Schiffman v. Richfield Oil Co. (1937) 8 Cal.2d 211,
220-221; Rest.2d Agency, § 276.) Here, because Hoyme became Kemper’s agent
shortly after acquiring information about Amy’s smoking, his knowledge of her
smoking “can reasonably be said to be present in [his] mind” (Columbia Pictures
Corp., supra, 87 Cal.App.2d at p. 631) while he was acting as Kemper’s agent.
Kemper contends that Amy did not tell Hoyme that she had smoked any
cigarettes during the 36 months preceding the application.2 And Kemper points to
the medical report by Amy’s physician who, at Amy’s request, prescribed a

Although Hoyme testified in his deposition that he did not recall Amy
telling him that she had smoked two cigarettes during the 36 months preceding the
application, he did remember having “some conversation [with Amy] or a
question . . . about, you know, having, you know, a cigarette . . . in the past, you
know, at a special function or something like that . . . .” He also said that he often
told applicants that “if you have one [cigarette] once or twice a year, then it’s
probably not a big deal.”

nicotine patch in the year preceding her application, as evidence that Amy smoked
more than just “a couple” of cigarettes in the period at issue. Based on the
medical report, Justice Blease concluded in his concurring opinion that Kemper
was entitled to summary judgment because Amy’s cigarette use “was not confined
to a couple of cigarettes but was a continuous problem.”
But the question of Amy’s cigarette use is a disputed material fact. In
response to Kemper’s motion for summary judgment, plaintiff declared that Amy
had quit smoking in 1991 (more than three years before her life insurance
application) and, apart from two cigarettes Amy shared with her sister during the
three-year period at issue, she did not resume smoking until after she was
diagnosed with terminal cancer in 1997, the year after submitting her application.
Plaintiff also submitted a corroborating declaration by Amy’s sister, Pamela
Inouye, who said that to her knowledge the only cigarettes Amy smoked from
1991 to 1997 were a couple of cigarettes the two of them shared. When, as here, a
dispositive factual issue is disputed, summary judgment is improper. (Guz v.
Bechtel National, Inc. (2000) 24 Cal.4th 317, 334.)
In their briefs, the parties address the question whether the trial court
should have granted Kemper’s motion for summary adjudication of certain causes
of action in plaintiff’s amended complaint. The Court of Appeal did not address
these issues, for its conclusion that Amy had materially misrepresented the extent
of her smoking during the 36 months preceding her application, thus entitling
Kemper to rescind Amy’s policy, necessarily disposed of plaintiff’s entire
complaint. Nor were these issues encompassed in our grant of review. We
therefore do not consider them here.

We reverse the judgment of the Court of Appeal, and we remand the matter
to that court for further proceedings consistent with this opinion.


See next page for addresses and telephone numbers for counsel who argued in Supreme Court.

Name of Opinion O’Riordan v. Federal Kemper Life Assurance Company

Unpublished Opinion

NP opn. filed 3/17/03 – 3d Dist.
Original Appeal
Original Proceeding
Review Granted

Rehearing Granted


Opinion No.

Date Filed: July 7, 2005


County: Sacramento
Judge: Joe S. Gray


Attorneys for Appellant:

Wohl Sammis Christian & Perkins, Wohl Sammis & Perkins, Alvin R. Wohl, Robin K. Perkins and
Christopher F. Wohl for Plaintiff and Appellant.


Attorneys for Respondent:

Sarrail, Lynch & Hall, Vogl & Meredith, Linda J. Lynch and David A. Firestone for Defendant and

Counsel who argued in Supreme Court (not intended for publication with opinion):

Robin K. Perkins
Wohl Sammis & Perkins
1006 Fourth Street, 4th Floor
Sacramento, CA 95814
(916) 446-2000

David A. Firestone
Vogl & Firestone
456 Montgomery Street, 20th Floor
San Francisco, CA 94104
(415) 398-0200

Opinion Information
Date:Docket Number:
Thu, 07/07/2005S115495

1Oriordan, Patrick (Plaintiff and Appellant)
Represented by Robin Kerry Perkins
Wohl Sammis & Perkins, LLP
1006 4th St 4FL
Sacramento, CA

2Federal Kemper Life Assurance Company (Defendant and Respondent)
Represented by David Allen Firestone
Vogl & Meredith
456 Montgomery St 20FL
San Francisco, CA

3Federal Kemper Life Assurance Company (Defendant and Respondent)
Represented by Denise Christine Standridge
Law Offices of Larry N. Kloenhammer
121 Spear Street Suite 410
San Francisco, CA

Jul 7 2005Opinion: Reversed

Apr 28 2003Petition for review filed
  Appellant ( O' Riordan)
May 1 2003Received Court of Appeal record
May 16 2003Answer to petition for review filed
  By Respondents {Federal Kemper Life Assurance Company et al.,}.
May 27 2003Reply to answer to petition filed
  In Sacramento by counsel for Appellant {Patrick O'Riordan}.
Jun 18 2003Petition for Review Granted (civil case)
  Votes: George, C.J., Kennard, Baxter and Werdegar, JJ.
Jun 24 2003Received Court of Appeal record
  three doghouses
Jul 1 2003Certification of interested entities or persons filed
  By counsel for Respondents {Federal Kemper Life Assurance Co.}.
Jul 18 2003Opening brief on the merits filed
  In Sacramento by counsel for appellant {Patrick O'Riordan}.
Aug 12 2003Request for extension of time filed
  By Respondent asking until September 8, 2003 to file Respondent's Answer Brief on the Merits.
Aug 18 2003Extension of time granted
  To September 8, 2003 to file Respondent's Answer Brief on the Merits.
Sep 8 2003Answer brief on the merits filed
  by defendants and respondents (Federal Kemper Life Assurance Company and Kemper Investors Life Insurance Company)
Sep 29 2003Reply brief filed (case fully briefed)
  by counsel for appellant Patrick O'Riordan, in Sacramento
Apr 1 2005Case ordered on calendar
  5/5/05 @9am, S.F.
Apr 19 2005Received:
  letter from counsel for appellant dated April 18, 2005, re: all claims as to Robert G. Hoyme, were dismissed in March 2001 (copy of dismissal attached to letter).
May 5 2005Cause argued and submitted
Jul 7 2005Opinion filed: Judgment reversed
  And remanded. Opinion by Kennard, J. ----joined by George, C.J., Baxter, Werdegar, Chin & Moreno, JJ.
Aug 9 2005Remittitur issued (civil case)
Aug 12 2005Received:
  Receipt for Remittitur from CA 3.
Aug 12 2005Received:
  substitution of attorney for respondent [attorney Henry C. Wang]

Jul 18 2003Opening brief on the merits filed
Sep 8 2003Answer brief on the merits filed
Sep 29 2003Reply brief filed (case fully briefed)
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