Present:   All the Justices

SHUNDA N. SMITH, ET AL.
                              OPINION BY JUSTICE A. CHRISTIAN COMPTON
v.   Record No. 982070                       June 11, 1999

COLONIAL INSURANCE COMPANY
OF CALIFORNIA


             FROM THE CIRCUIT COURT OF AUGUSTA COUNTY
                       Thomas H. Wood, Judge

      This is a motor vehicle insurance case in which the insured

made material misrepresentations when applying for insurance.

The sole issue on appeal is whether the trial court correctly

decided that the parol evidence rule did not apply to testimony

about questions asked of the insured and the insured's verbal

answers to those questions during the application process.

      In March 1993, appellant Catherine Smith applied for

automobile liability insurance in Staunton with an agent of

appellee Colonial Insurance Company of California.     Based on

oral and written statements made by Smith, the insurer issued a

"Family Automobile Policy" covering a 1979 Chevrolet pick-up

truck.

      In December 1993, while the policy was in effect, appellant

Shunda Smith, Catherine Smith's daughter, allegedly was injured

on Interstate 81 in Augusta County while in a motor vehicle that

was struck by another vehicle operated by an uninsured motorist.

As a result of the accident, the daughter made a demand upon
Colonial for uninsured motorist coverage under the policy issued

to her mother.

     In October 1996, the insurer filed the present motion for

declaratory judgment naming the Smiths as defendants.   The

insurer alleged that, following investigation of the accident,

it learned Catherine Smith had made material misrepresentations

when applying for the policy.   The insurer asked for a judgment

declaring that the policy was void ab initio and that coverage

was not owed to Shunda Smith.

     Following an April 1998 evidentiary hearing, the trial

court, sitting without a jury, ruled the insurer had proved by

clear and convincing evidence that Catherine Smith had made

material misrepresentations when applying for the policy.     Thus,

the court entered the declaratory judgment the insurer sought.

The Smiths appeal.

     We shall summarize the evidence in the light most favorable

to the insurer, which prevailed below, according to settled

principles of appellate review.   On March 8, 1993, Catherine

Smith met with an agent of the insurer and sought motor vehicle

liability coverage on the 1979 pick-up truck.   At trial, over

the Smiths' objection, the agent testified about the series of

questions asked of Catherine Smith posed to enable the insurer

to determine its "exposure" and whether to issue a policy of

insurance.


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     Among the subjects covered in the questions were the

ownership of the vehicle and whether there were others in

Smith's household who were licensed motor vehicle operators.

Responding to the agent's questions, Smith said the vehicle was

titled in her name and that there were no other licensed drivers

in her household.   This information was "input" into the agent's

computer, transmitted to the insurer's underwriting department,

and reflected in an application form printed by the computer

that was signed by Smith.   Based on the information Smith

furnished the agent, the policy was issued effective March 8.

     The insurer later learned, however, that when Smith applied

for the insurance she was not the actual owner of the vehicle,

but that it was owned by an unlicensed driver who did not live

with her.   If the insurer had learned this fact at any time

after issuance of the policy, it would have cancelled the

policy.   The insurer also learned later that Shunda Smith, a

licensed driver, was living with her mother at the time she

applied for the policy.   If the insurer had known this fact at

the time, the premium charged would have increased by about 50%.

     Upon consideration of the evidence, the trial court found

the insurer had met the requirements of Code § 38.2-309, which

provides that statements in an application for an insurance

policy shall bar recovery under the policy if it is "clearly




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proved" that such statements were "material to the risk when

assumed" and were "untrue."

     On appeal, the Smiths concede that the trial court had

"sufficient evidence to support its decision."   The Smiths

argue, however, the insurer attempted to prove that the

application form signed by Catherine Smith was "incomplete"

because, they note, the form did not contain all the questions

asked of her or her answers.    Nonetheless, they point out, it

contained above her signature the language "on the basis of

statements contained herein."   "Basically," the Smiths say,

"Colonial contends that Smith made oral misrepresentations to

its agent and that misrepresentation is indicated by the lack of

certain information on the application."   This "missing

information," according to the Smiths, "if ever requested, may

have been contained in the agent's computer program but never

printed on the application or insurance contract Colonial

entered into with Smith."

     The Smiths also rely on a "merger" theory in which they

contend all misleading statements "Smith made prior to her

signing the application were merged" into the contract of

insurance.   According to the Smiths:   "Colonial relies on

alleged statements made to the insurance agent and not on

information found on the application in order to add to and

alter the contents of the insurance contract of the parties."


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The Smiths contend, building on their "merger" theory, that

"[t]he trial court's admission of parol evidence to add to or

reform the terms of the contract was legal error."

     We do not agree with any of the Smiths' contentions.     Their

argument demonstrates a misconception of insurance law and

practice generally and the application process for motor vehicle

liability insurance in particular.

     In the first place, there is no requirement that an

application for liability insurance be solely in writing; it may

be oral, it may be written, or, as in this case, partly oral and

partly written.   See Franklin Fire Ins. Co. v. Bolling, 173 Va.

228, 233, 3 S.E.2d 182, 184 (1939); North River Ins. Co. v.

Lewis, 137 Va. 322, 324-27, 119 S.E. 43, 44-45 (1923).

     In the second place, an application for insurance is merely

an offer to enter into a contract.   Hayes v. Durham Life Ins.

Co., 198 Va. 670, 672-73, 96 S.E.2d 109, 111 (1957).    The

insurance policy is the contract between the parties.    Hence,

this application for motor vehicle liability insurance did not

"merge" into the policy contract that ultimately was issued by

the insurer based upon representations in the application.

     In the third place, the parol evidence rule applies to

written contracts.   Amos v. Coffey, 228 Va. 88, 91-92, 320

S.E.2d 335, 337 (1984).   Therefore, the rule has no relevance to




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an application for liability insurance because, as we have said,

the application is a mere offer.

        Although the written portion of the application in this

case is not a model of clarity and does not contain the actual

questions posed by the agent, it is nevertheless the embodiment

of the discussion between the applicant and the agent.    Thus,

the written form, as well as the oral testimony explaining the

completion of the form, were properly considered by the trial

court as evidence that material misrepresentations had been

made.

        Accordingly, we hold the trial court did not err and we

will affirm the judgment below.

                                                           Affirmed.




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