Gann v. Household Life Insurance Company
ORDER denying 11 Motion for Summary Judgment; denying 17 Motion for Partial Summary Judgment. Signed by Chief Judge Brian S. Miller on 1/3/2014. (jak)
IN THE UNITED STATES DISTRICT COURT
FOR THE EASTERN DISTRICT OF ARKANSAS
CASE NO. 3:13CV00071 BSM
Plaintiff Crystal Gann’s motion for summary judgment [Doc. No. 11] is denied.
Defendant Household Life Insurance Company’s motion for partial summary judgment [Doc.
No. 17] is also denied.
I. FACTUAL BACKGROUND
The undisputed facts are as follows. On February 26, 2010, Alice Griffin completed
an electronic application for an insurance policy with defendant Household Life Insurance
Company (“Household”). On the application, Griffin was required to state whether or not
she was receiving disability benefits. Although she had been receiving disability benefits
since September of 2004 for mood disorders and muscle, ligament and fascia disorders,
Griffin stated that she was not receiving benefits, and Household issued the policy.
On February 7, 2012, Griffin died of pneumonia and plaintiff Crystal Gann, the named
beneficiary, requested the policy proceeds. Because Griffin died within the policy’s two-year
contestability period, Household initiated a claims investigation. On October 17, 2012,
Household informed Gann that it was denying coverage because the investigation revealed
that Griffin had been receiving disability benefits. Household then rescinded the policy and
declared it void.
On March 4, 2013, Gann filed suit, alleging breach of contract, unjust enrichment, bad
faith and outrage. On August 1, 2013, Gann moved for summary judgment on all claims.
Household responded and moved for partial summary judgment on the breach of contract and
unjust enrichment claims. On October 25, 2013, Gann’s outrage claim was dismissed. See
Doc. No. 31.
II. LEGAL STANDARD
Summary judgment is appropriate when there is no genuine dispute as to any material
fact and the moving party is entitled to judgment as a matter of law. See Fed. R. Civ. P.
56(a); Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986); Anderson v. Liberty Lobby
Inc., 477 U.S. 242, 249-50 (1986). Once the moving party demonstrates that there is no
genuine dispute of material fact, the non-moving party may not rest upon the mere allegations
or denials in his pleadings. Holden v. Hirner, 663 F.3d 336, 340 (8th Cir. 2011). Instead,
the non-moving party must produce admissible evidence demonstrating a genuine factual
dispute that must be resolved at trial. Id. Importantly, when considering a motion for
summary judgment, all reasonable inferences must be drawn in the light most favorable to
the nonmoving party. Holland v. Sam's Club, 487 F.3d 641, 643 (8th Cir. 2007).
Additionally, the evidence is not weighed, and no credibility determinations are made.
Jenkins v. Winter, 540 F.3d 742, 750 (8th Cir. 2008).
Gann’s motion for summary judgment is denied. Gann argues that Household must
prove that Griffin’s misrepresentation was material and that it relied on the misrepresentation
before it is entitled to rescind the policy. Gann asserts that because Griffin received
disability benefits for mood and muscle disorders and her cause of death was pneumonia, no
causal connection exists between her misrepresentation and her death. Therefore, Gann
argues that the misrepresentation was not material and Household is not entitled to rescind.
As Gann correctly points out, Arkansas law states that in an action to rescind, “a
misrepresentation is material if there is a causal relationship between the misrepresentation
and the hazard resulting in a loss under the policy or contract.” Ark. Code Ann. § 23-79107(c). The problem with Gann’s argument, however, is that the statute, as it existed when
this contract was entered in 2010, also provided for rescission based on a misrepresentation,
omission, concealment or incorrect statement, if the insurer in good faith would not have
issued the policy “...if the facts had been made known to the insurer as required by the
application for the policy....” Ark. Code Ann. § 23-79-107(a)(3) (Suppl. 2001).
Here, Household asserts that it would not have in good faith issued the policy if
Griffin had disclosed on the application that she was receiving disability benefits. In
support, it offers the testimony of Marlene Geske, an underwriter for Household, who states
that Household’s underwriting process is automated and that Griffin’s disclosure that she
was receiving disability benefits would have resulted in automatic denial of her application.
As a result, summary judgment is not appropriate and Gann’s motion [Doc. No. 11] is
Household’s motion for partial summary judgment on Gann’s breach of contract and
unjust enrichment claims is also denied. Although it is now undisputed, based on Geske’s
affidavit, that Household’s underwriting processes are automated and that Griffin’s
application would have been denied if she had not made a misrepresentation on the
application, it is also clear that discovery is still ongoing. Partial summary judgment is not
appropriate until Gann has been given an opportunity to obtain documents and depose
Household’s witnesses to determine whether Geske’s affidavit testimony is accurate.
Consequently, Household’s motion for partial summary judgment [Doc. No. 17] is denied.
For these reasons, Gann’s motion for summary judgment [Doc. No. 11] and
Household’s motion for partial summary judgment [Doc. No. 17] are denied.
IT IS SO ORDERED this 3rd day of January 2014.
UNITED STATES DISTRICT JUDGE
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