Fortney v. The Lincoln National Life Insurance Company

Filing 40

ORDER granting Plaintiff's 28 Motion for Partial Summary Judgment. Defendant's 32 Motion for Summary Judgment is GRANTED in part and DENIED in part. It is GRANTED as to Plaintiff's statutory claim for bad faith penalties and atto rney fees but DENIED as to Plaintiff's claim for benefits under the Policy. In light of these rulings, Defendant is ORDERED TO SHOW CAUSE within fourteen days of the date of entry of this Order why its Counterclaim should not be dismissed. Signed by Judge Richard W. Story on 7/15/2013. (cem)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF GEORGIA
ATLANTA DIVISION
ADRIANA C. FORTNEY,

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Plaintiff,
v.
THE LINCOLN NATIONAL
LIFE INSURANCE COMPANY,
Defendant.

CIVIL ACTION NO.
1:11-CV-4337-RWS

ORDER
This case comes before the Court on Plaintiff’s Motion for Partial
Summary Judgment and Motion to Dismiss Defendant’s Counterclaim [28] and
Defendant’s Motion for Summary Judgment [32]. After reviewing the record,
the Court enters the following Order.
Background
I.

Factual Summary
This case arises out of a dispute over life insurance proceeds to which

Plaintiff allegedly is entitled. Except where otherwise indicated, the following
facts are undisputed.

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On or about May 8, 2009, Plaintiff’s husband, Michael Fortney (“Mr.
Fortney”) signed and submitted an application for life insurance to Defendant.
(Def.’s Statement of Material Facts To Which There Is No Genuine Issue To Be
Tried (“Defs.’ SMF”), Dkt. [32-12] ¶ 1.) On June 2, 2009, after reviewing Mr.
Fortney’s medical records from his physician, Dr. Sanford Schwartz (“Dr.
Schwartz”), Defendant issued Mr. Fortney a policy in the amount of $500,000,
naming Plaintiff as beneficiary (the “Policy”). (Pl.’s Statement of Material
Facts To Which There Is No Genuine Issue To Be Tried (“Pl.’s SMF”), Dkt.
[28-26] ¶¶ 1, 4.) The “effective date” listed on the Policy was June 2, 2009 and
the “maturity or date of expiry” was listed as June 2, 2050. (Stip. of
Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 3-4 of 25.)
Defendant sent the Policy to insurance agent Melissa Colvin (“Colvin”),
who received it on or before June 12, 2009. (Pl.’s SMF, Dkt. [28-26] ¶ 5.)
“Along with the Policy, Defendant prepared and mailed three other documents
for Mr. Fortney to sign: (1) an Amendment to Application for Insurance,
supplementing information from the original application; (2) a Policy Receipt;
and (3) an Electronic Funds Transfer Authorization, for automatic withdrawal
of future monthly premium payments from Mr. Fortney’s checking account
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each month.” (Id. ¶ 6.) Colvin scheduled an appointment for Mr. Fortney to
take delivery of the Policy and pay the first month’s premium on June 17, 2009.
(Id. ¶ 5.)
On Monday June 15, 2009, two days prior to his scheduled appointment
with Colvin, Mr. Fortney saw his physician, Dr. Schwartz, complaining of a
sore throat and cough productive of dark sputum that had lasted for several
days. (Id. ¶ 9.) Dr. Schwartz diagnosed Mr. Fortney with sinusitus and
prescribed him antibiotics. (Id.; 6/6/2012 Dep. of Dr. Schwartz (“Schwartz
Dep.”), Ex. 2, Dkt. [31-1] at 69 of 120.) He also conducted an X-ray of Mr.
Fortney’s chest, which revealed an “anterior mediastinal abnormality more
apparent with appearance of a nodule.” (Def.’s SMF, Dkt. [32-12] ¶ 32.) Dr.
Schwartz indicated that the X-ray was “[p]ossibly abnormal,” referred Mr.
Fortney for a CT scan, and scheduled a follow-up appointment for June 18,
2009. (Id. ¶ 36; Pl.’s SMF, Dkt. [28-26] ¶¶ 10-11.) On the same day as his
appointment with Dr. Schwartz, Mr. Fortney went to St. Joseph’s hospital for
the CT scan. (Def.’s SMF, Dkt. [32-12] ¶ 37.)
On June 17, 2009, Mr. Fortney attended his previously scheduled
appointment with insurance agent Colvin. (Pl.’s SMF, Dkt. [28-26] ¶ 13.) At
3

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that time, Mr. Fortney took delivery of the Policy, signed, inter alia, the
Amendment to Application of Insurance (“Amendment”), and delivered to
Colvin a check for the first month’s premium payment. (Id. ¶ 14; Def.’s SMF,
Dkt. [32-12] ¶ 24.) The original application and Amendment were attached to
and made part of the Policy. (Def.’s SMF, Dkt. [32-12] ¶ 23.) Colvin
forwarded the delivery documents signed by Mr. Fortney and the first premium
check to Michelle Faulk at Capitas Financial, who then forwarded them to
Defendant. (Id. ¶ 26.) Defendant received the signed delivery documents and
first premium check on June 22, 2009 and on that date issued an endorsement to
Mr. Fortney’s policy (the “Endorsement”). (Id. ¶ 27; Stip. of Undisputed Facts,
Ex. F (Endorsement), Dkt. [27-6].) The Endorsement provided that the
effective date of Mr. Fortney’s policy had been changed from June 2, 2009 to
June 22, 2009 “to reflect the receipt of the premium required for coverage.”
(Stip. of Undisputed Facts, Ex. F (Endorsement), Dkt. [27-6] at 2 of 3.) The
Endorsement further provided that it was “attached to” and “part of” the Policy.
(Id. at 3 of 3.)
On June 18, 2009, the day after he took delivery of the Policy, signed the
delivery documents, and issued a check for the first premium payment, Mr.
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Fortney returned to Dr. Schwartz’s office for a follow-up visit. (Pl.’s SMF,
Dkt. [28-26] ¶ 15.) At that time, he was informed by Dr. Schwartz that due to
the results of the CT scan, Mr. Fortney should have a biopsy to determine the
condition of his lung. (Id.) Dr. Schwartz told Mr. Fortney that it could be
something or could be nothing. (Id.) He did not mention the possibility that
Mr. Fortney could have lung cancer. (Id.)
On June 23, 2009, Mr. Fortney underwent a needle biopsy of his right
lung. (Id. ¶ 17.) On June 25, 2009, Mr. Fortney was informed by Dr. Schwartz,
for the first time, that he had lung cancer. (Id. ¶ 18.) Mr. Fortney died on
December 7, 2009 as a result of lung carcinoma. (Id. ¶ 10; Def.’s SMF, Dkt.
[32-12] ¶ 49.) On March 30, 2011, Plaintiff made a claim for death benefits
under the Policy. (Def.’s SMF, Dkt. [32-12] ¶ 50.)
On April 15, 2011, Defendant sent Plaintiff a letter denying her claim for
benefits under the Policy on grounds of “material misrepresentations” in Mr.
Fortney’s insurance application and in the Amendment. (Stip. of Undisputed
Facts, Ex. K (Apr. 15, 2011 Letter), Dkt. [27-11].) In particular, Defendant
pointed to Mr. Fortney’s failure to disclose that “a CXR (chest x-ray) was
conducted on June 15, 2009, which revealed a lung nodule”; “a CT scan of the
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chest was scheduled and performed on June 18, 2009”; and [a] needle biopsy of
the lung nodule was performed on June 23, 2009, indicating adenocarcinoma of
the lung.” (Id. at 2 of 11.) The letter continued,
The medical information pre-dates the amendment for this
insurance and was not disclosed in answer to Question 11 of the
Application. This information was also not disclosed on the
Amendment dated June 17, 2009. If the information outlined
above had been disclosed, [Defendant] would not have issued this
policy as applied for.
(Id.) The letter also made reference to Question 3 of the Health Summary
portion of the insurance application, found on page 3A.2 (Id.)
Following the denial of Plaintiff’s claim, Plaintiff filed this case to
recover the life insurance benefits under the Policy, together with interest and

1

Defendant states that the reference to Question 1 of the application was a
mistake and that the intended reference was to Question 62. (Def.’s Resp. to Pl.’s
SMF, Dkt. [36] ¶ 20 (citing Affidavit of Sherri Lynn Wicker (“Wicker Aff.”), Def.’s
Mot. for Summ. J., Ex. 5, Dkt. [32-6] ¶¶ 9-12).) Question 1 of the Application asked
for the name of the Proposed Insured, and Question 62 asked for the name, address,
and phone number of any physician seen by the Proposed Insured within the past five
years. (Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 16, 18 of 25.)
2

Question 3 of the Health Summary, found on page 3A of the application,
asked whether the Proposed Insured had “had or been advised by a licensed medical
professional to have a check-up, EKG, x-ray, blood or urine test or any other
diagnostic test” or if the Proposed Insured was “now planning to seek medical advice
or treatment for any reason.” (Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1]
at 19 of 25.)
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attorney fees, and a statutory penalty for bad faith. (Compl., Dkt. [1-1] ¶¶ 2526.) Defendant filed a Counterclaim for rescission of the Policy under
O.C.G.A. § 33-24-7(b)3 and for a declaration by this Court that the Policy was
void ab initio and of no effect. (See generally Def.’s Answer & Counterclaim,
Dkt. [2] ¶¶ 57-71 (“Counterclaim”).) Both parties now move for summary
judgment. Plaintiff moves for partial summary judgment, seeking judgment as

3

This provision states:

Misrepresentations, omissions, concealment of facts, and incorrect
statements shall not prevent a recovery under the policy or contract
unless:
(1)

Fraudulent;

(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 a policy or
contract or would not have issued a policy or contract in as large
an amount or at the premium rate as applied for or would not
have provided coverage with respect to the hazard resulting in the
loss if the true facts had been known to the insurer as required
either by the application for the policy or contract or otherwise.

Defendant moves for summary judgment on its Counterclaim pursuant to O.C.G.A. §
33-24-7(b)(2) and (3). (See generally Mem. in Supp. of Def.’s Mot. for Summ. J.
(“Def.’s Mem.”), Dkt. [32-1] at 16-24.)
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a matter of law on her claim for benefits under the Policy.4 (Pl.’s Mot. for
Summ. J., Dkt. [28] at 1-2.) Plaintiff also moves to dismiss Defendant’s
Counterclaim. (Id.) Defendant moves for summary judgment on all of
Plaintiff’s claims and on its Counterclaim. (Def.’s Mot. for Summ. J., Dkt. [32]
¶ 4.)
II.

The Parties’ Arguments
Plaintiff raises, among other arguments, the following in support of her

motion for summary judgment on her claim for benefits under the Policy. First
and foremost, Plaintiff argues that the Policy went into effect on June 2, 2009,
the “effective date” listed on the Policy. (Pl.’s Br. in Supp. of Pl.’s Mot. for
Partial Summ. J. & to Dismiss Def.’s Counteclaim (“Pl.’s Br.”), Dkt. [28-2] at
2, 5, 7-13; Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 4 of 25.)
Thus, Plaintiff contends, because the Policy was in effect on June 2, 2009, Mr.
Fortney was under no obligation to provide additional medical information to
Defendant obtained after that date. (Id.) In further support of this argument,
Plaintiff points out that the “Maturity or Date of Expiry” listed on the Policy

4

Plaintiff does not move for summary judgment on her statutory claim for a
bad faith penalty and attorney fees. (Pl.’s Mot. for Summ. J., Dkt. [28] at 1.)
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was June 2, 2050 and that Defendant withdrew Mr. Fortney’s monthly premium
payments on approximately the third of each month, starting on July 3, 2009
(after the first premium payment had been paid). (Id. at 10-11.)
Second, Plaintiff argues that even if the Policy did not go into effect on
June 2, 2009 but, rather, on a later date, Defendant’s defense of
misrepresentation fails because Mr. Fortney was under no obligation to disclose
to Defendant subsequent medical information, in particular, that he had
undergone a chest x-ray on June 15, 2009 and subsequent CT scan. (Id. at 1315.) Plaintiff contends that the language in the insurance application relied on
by Defendant—obligating Mr. Fortney “upon receipt of the contract” to “notify
[Defendant] immediately if any information in the application is
incorrect”—only required Mr. Fortney to ensure that the information in the
insurance application was correct as of the date it was completed—May 8,
2009. (Id. at 5-6, 13-15.)
Defendant contends, on the other hand, that the insurance application
contained several misrepresentations, omissions, and incorrect statements
regarding Mr. Fortney’s health, rendering the Policy void ab initio and entitling
Defendants to rescission under O.C.G.A. § 33-24-7(b)(2) and (3). (See
9

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generally Defs.’ Mem. in Opp’n to Pl.’s Mot. for Partial Summ. J. and to
Dismiss Def.’s Counterclaim (“Def.’s Opp’n Br.”), Dkt. [35] & Mem. in Supp.
of Def.’s Mot. for Summ. J. (“Def.’s Mem.”), Dkt. [32-1].) To this end,
Defendant argues that the earliest the Policy could have gone into effect was
June 17, 2009—the date on which Mr. Fortney took delivery of the Policy,
signed the Amendment, and issued the first premium payment.5 (Def.’s Opp’n
Br., Dkt. [35] at 11-13.) In support of this argument, Defendant points to the
“Agreement and Acknowledgment” section of the insurance application, which
provides,
I/We [Mr. Fortney] . . . agree that . . . insurance will take effect
under the Policy only when: 1) the Policy has been delivered to
and accepted by me/us; 2) the initial premium has been paid in full
during the lifetime of the Proposed Insured(s); and 3) the Proposed
Insured(s) remain in the same state of health and insurability as
described in each part of the application at the time conditions 1)
and 2) are met.
(Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 20 of 25.) Defendant
also points out that the insurance application obligated Mr. Fortney “upon
receipt of the contract” to “notify [Defendant] immediately if any information

5

Defendant also states that “arguably, the true ‘effective date’ was June 22,
2009,” the date on which the Endorsement was issued. (Def.’s Opp’n Br., Dkt. [35] at
11.)
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in the application is incorrect.” (Def.’s Mem., Dkt. [32-1] at 21 (citing Stip. of
Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 20 of 25).)
Defendant argues that as of June 15, 2009, two days before the Policy’s
earliest possible effective date, the insurance application contained several
misrepresentations and omissions regarding Mr. Fortney’s health, in light of
Mr. Fortney’s failure to disclose his June 15, 2009 appointment with Dr.
Schwartz and the subsequent chest x-ray and CT scan. (Def.’s Mem., Dkt. [321] at 18-21; Def.’s Opp’n Br., Dkt. [35] at 6-9.) Specifically, Defendant
contends that the following questions in the application were false as of June
15, 2009:
Question 62:

Provide full name/address/phone number of
personal physician(s) and any other physicians
seen within the past 5 years.
a.

Date and reason for last visit:

b.

Tests performed and treatment received:

(Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 18.)
Question 3:

Have you had or been advised by a licensed
medical professional to have a check-up, EKG,
x-ray, blood or urine test or any other
diagnostic test or are you now planning to seek
medical advice or treatment for any reason?
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(Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 19.)
Question 5:

In the past 10 years, have you had any
indication of, or been treated by a medical
professional for:
b.

Any tumor, cancer, cysts, melanoma,
lymphoma or any disorder of the lymph
nodes?6

e.

. . . [A]ny . . . disorder of the respiratory
system?

l.

Any mental or physical disorder or
medically or surgically treated condition
not listed above?

(Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 19.)
(Def.’s Mem., Dkt. [32-1] at 18-21.) On the basis of these purported
misrepresentations or falsities, Defendant contends the Policy is subject to
rescission and thus seeks judgment as a matter of law on Plaintiff’s claims and
on Defendant’s counterclaim.

6

Defendant argues that this particular question was false not only as of June
15, 2009 but also on the date Mr. Fortney applied for insurance, May 8, 2009. (Def.’s
Mem., Dkt. [32-1] at 18.) In support of this contention, Defendant relies on the
opinion of its expert, Dr. Fadlo Khuri, that Mr. Fortney had lung cancer on May 8,
2009. (Id. at 18-19.) This argument is discussed in footnote 7, infra.
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Discussion
I.

The Parties’ Motions for Summary Judgment [28], [32]
A.

Legal Standard

Federal Rule of Civil Procedure 56 requires that summary judgment be
granted “if the movant shows that there is no genuine dispute as to any material
fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). “The moving party bears ‘the initial responsibility of informing the . . .
court of the basis for its motion, and identifying those portions of the pleadings,
depositions, answers to interrogatories, and admissions on file, together with the
affidavits, if any, which it believes demonstrate the absence of a genuine issue
of material fact.’” Hickson Corp. v. N. Crossarm Co., 357 F.3d 1256, 1259
(11th Cir. 2004) (quoting Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986)).
Where the moving party makes such a showing, the burden shifts to the nonmovant, who must go beyond the pleadings and present affirmative evidence to
show that a genuine issue of material fact does exist. Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 257 (1986).
The applicable substantive law identifies which facts are material. Id. at
248. A fact is not material if a dispute over that fact will not affect the outcome
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of the suit under the governing law. Id. An issue is genuine when the evidence
is such that a reasonable jury could return a verdict for the non-moving party.
Id. at 249-50.
In resolving a motion for summary judgment, the court must view all
evidence and draw all reasonable inferences in the light most favorable to the
non-moving party. Patton v. Triad Guar. Ins. Corp., 277 F.3d 1294, 1296 (11th
Cir. 2002). But, the court is bound only to draw those inferences which are
reasonable. “Where the record taken as a whole could not lead a rational trier
of fact to find for the non-moving party, there is no genuine issue for trial.”
Allen v. Tyson Foods, Inc., 121 F.3d 642, 646 (11th Cir. 1997) (quoting
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986)).
“If the evidence is merely colorable, or is not significantly probative, summary
judgment may be granted.” Anderson, 477 U.S. at 249-50 (internal citations
omitted); see also Matsushita, 475 U.S. at 586 (once the moving party has met
its burden under Rule 56(a), the nonmoving party “must do more than simply
show there is some metaphysical doubt as to the material facts”).
Finally, the filing of cross-motions for summary judgment does not give
rise to any presumption that no genuine issues of material fact exist. Rather,
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“[c]ross-motions must be considered separately, as each movant bears the
burden of establishing that no genuine issue of material fact exists and that it is
entitled to judgment as a matter of law.” Shaw Constructors v. ICF Kaiser
Eng’rs, Inc., 395 F.3d 533, 538-39 (5th Cir. 2004).

B.

Analysis
1.

Plaintiff’s Claim for Benefits under the Policy

The Court agrees with Plaintiff that the Policy went into effect on June 2,
2009 and therefore that Mr. Fortney was under no obligation to disclose to
Defendant subsequent medical information, including Mr. Fortney’s June 15,
2009 appointment with Dr. Schwartz, his chest x-ray, or his CT scan. As
Defendant points out, the insurance application, which was made part of the
Policy, contained the following language concerning when insurance would
take effect under the Policy:
[I]nsurance will take effect under the Policy only when: 1) the
Policy has been delivered to and accepted by me/us; 2) the initial
premium has been paid in full during the lifetime of the Proposed
Insured(s); and 3) the Proposed Insured(s) remain in the same state
of health and insurability as described in each part of the
application at the time conditions 1) and 2) are met.

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(Stip. of Undisputed Facts, Ex. A (Policy), Dkt. [27-1] at 20 of 25.) The
application further provided:
I confirm upon receipt of the contract I will review the answers
recorded on the application. I will notify [Defendant] immediately
if any information in the application is incorrect. Caution: If your
answers on this application are incorrect or untrue, the Company
may have the right to deny benefits or rescind coverage under the
policy . . . .
(Id.) Despite these conditions, however, the Policy bore an “effective date” of
June 2, 2009. (Id. at 4 of 25.) The Georgia Supreme Court has held that in such
instances, where conditions precedent to liability contained in an insurance
application conflict with a date certain on which insurance coverage is to go
into effect, the date certain controls. Sw. Life v. Middle Ga. Neurological
Specialists, 416 S.E.2d 496, 498 (Ga. Ct. App. 1992).
In Southwestern Life, the insured submitted applications for insurance,
which contained the following clause:
. . . [T]he policy will be effective when it is delivered to and
accepted by the Applicant only if (a) the first premium has been
paid, and (b) all answers recorded in this application represent
without material change complete and true answers to the same
questions as if they were asked at the time of delivery of the policy
applied for . . . .

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Id. at 496-97 (emphasis added). Policies of insurance subsequently were issued
and stated, “The policy date is the effective date for all coverage provided in the
original application.” Id. at 497. The policy date was listed as March 28. Id.
Before the policies could be delivered, the insured suffered a heart attack and
died. Id. The beneficiaries of the policies filed suit to recover the policy
proceeds. Id.
The insurance company argued “that coverage was not in effect at the
time of [the proposed insured’s] death because the conditions precedent to
liability that were included in the application were not met”—namely, delivery
of the policies to the insured. Id. at 498. While recognizing that “an insurance
company may validly define conditions precedent to liability,” the Georgia
Supreme Court rejected this argument. Id. The court noted, “Where both the
application and the issued policy state conditions precedent to liability, and the
policy has no conflicting provision, such conditions will be enforced by
Georgia courts.” Id. The court continued, “However, where the conditions
precedent to liability that are described in the application or policy are
contradicted by a specified date on which insurance coverage is to take effect,
the date certain controls.” Id. (emphasis added). Thus, the court rejected the
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insurance company’s argument and found that it “incurred the absolute duty to
perform under the contract on March 28, the stated ‘effective date’ of the
policy.” Id.
In light of the ruling in Southwestern Life, the Court concludes that the
effective date stated in the Policy controls, notwithstanding the contrary
conditions set out in the application. Insurance coverage under the Policy thus
went into effect on June 2, 2009. Because the Policy was in effect as of this
date, Mr. Fortney was under no obligation to disclose to Defendant medical
information obtained after this date.7 Mr. Fortney’s failure to disclose this

7

Relying on the report of its expert, Dr. Khuri, Defendant also argues that the
Policy was void on June 2, 2009 because information in the application was false or
misrepresented as of that date. (Def.’s Mem., Dkt. [32-1] at 18; Def.’s Opp’n Br.,
Dkt. [35] at 6-7.) In particular, Defendant argues:
The application asked . . . whether Mr. Fortney in the past 10 years had
any indication of, or had been treated by a licensed medical professional
for any tumor, cancer, cysts, melanoma, lymphoma or any disorder of
the lymph nodes, which Mr. Fortney denied. . . . This answer was false
regardless of the good faith and/or subjective belief of Mr. Fortney at
the time he completed the application. . . . Fortney had at least stage II
lung cancer by May 8, 2009, based on evidence of undocumented stage
IIB disease by June 15, 2009, and stage IIIA disease by surgical biopsy
on July 20, 2009.
(Def.’s Mem., Dkt. [32-1] at 18; Def.’s Opp’n Br., Dkt. [35] at 6-7 (internal quotation
marks and citations omitted).) Defendant maintains this argument while conceding
that Mr. Fortney was not diagnosed with lung cancer—or informed that he may have
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lung cancer—until June 25, 2009. (Def.’s Resp. to Pl.’s SMF, Dkt. [36] ¶ 18; see also
Def.’s Mem., Dkt. [32-1] at 18 (arguing Mr. Fortney’s good faith and/or subjective
belief at the time he completed the application is irrelevant to whether the application
answers were false).)
Defendant appears to be correct that an insurance policy may be avoided on
grounds of falsehoods or misrepresentations contained in the insurance application,
even if the prospective insured acted in good faith or lacked knowledge as to the
falsehood or misrepresentation. For example, in White v. American Family Life
Assurance Company, a life insurance policy was held to be void because of material
misrepresentations made in the insurance application and despite the Whites’ good
faith in making the application. 643 S.E.2d 298, 300 (Ga. Ct. App. 2007). The
application asked, “Has anyone to be covered ever been diagnosed with or received
treatment for impaired kidney function or other listed maladies by a member of the
medical profession,” to which the Whites answered “no.” Id. at 299 (internal
quotation marks omitted). They also answered “no” a question regarding “whether
either of them had been diagnosed with, received treatment for, or been prescribed
medication for kidney disease within the last five years.” Id. (internal quotation marks
omitted). After the policy was issued, however, medical records revealed that Mr.
White “had been diagnosed with impaired kidney function (resulting from his
diabetes), and that only three months prior to the completion of the insurance
application, his doctor had confirmed to him orally and in writing that he was taking
medication to prevent further loss of kidney function.” Id.
The Whites introduced evidence at trial that although Mr. White “had been
diagnosed and treated with medication for impaired kidney function and kidney
disease . . . [they] believed the treatment was only related to his diabetes and were
unaware of any kidney problems at the time they completed the insurance
application.” Id. The court, however, held that under O.C.G.A. § 33-24-7(b)(2) and
(3), the insurer need only show that a representation was false and material; the court
held that it is “immaterial whether the applicant acted in good faith in completing the
application.” Id. (internal quotes and citations omitted). The other cases cited by
Defendant—e.g., Davis v. John Hancock Mut. Life Ins. Co., 413 S.E.2d 224 (Ga. Ct.
App. 1991) and Worley v. State Farm Mut. Auto. Ins. Co., 432 S.E.2d 244, 246 (Ga.
Ct. App. 1993)—stand for the same principle as White. (Applying this principle, the
court in Davis held that an insurance application contained material
misrepresentations, voiding the policy, when it failed to disclose that the prospective
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information therefore does not render the Policy void. Plaintiff’s Motion for
Partial Summary Judgment [28] therefore is GRANTED as to her claim for
benefits under the Policy, and Defendant’s Motion for Summary Judgment [32]
on this claim is DENIED.
2.

Defendant’s Counterclaim for Rescission

In light of the Court’s ruling in Part I.B.1, supra, that the Policy went into
insured was suffering from leukemia, which was undiagnosed at the time the
application was made. 413 S.E.2d at 226-27. The application asked whether the
prospective insured was “in good health” or “ever had any major illness” such as
cancer. Id. at 225.)
These cases do not compel the conclusion, urged by Defendant, that Mr.
Fortney’s insurance application was false on June 2, 2009. They stand for the
proposition that an insurance policy may be avoided because of a falsehood or
misrepresentation contained in the insurance application, even if the prospective
insured made the application in good faith and/or was unaware that information in the
application was misrepresented or false. In this case, the insurance application asked
whether Mr. Fortney in the past ten years had had “any indication of, or been treated
by a licensed medical professional for . . . any tumor, cancer, cysts, melanoma,
lymphoma or any disorder of the lymph nodes[.]” Thus, pretermitting the issue
whether Mr. Fortney actually had cancer on June 2, 2009, the answer “no” to this
question was not false or a misrepresentation, as there is no evidence in the record that
Mr. Fortney had had any “indication of” or had “been treated by a licensed medical
professional for” lung cancer as of June 2, 2009. On the contrary, Defendant
concedes that Mr. Fortney was first informed of his lung cancer on June 25, 2009,
after which he obtained treatment for the first time. (Def.’s Resp. to Pl.’s SMF, Dkt.
[36] ¶ 18.) The opinion of Defendant’s expert—based on an ex post review of Mr.
Fortney’s medical information—that Mr. Fortney did, in fact, have lung cancer prior
to June 2, 2009, does not make the application answer false or a misrepresentation.

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effect on June 2, 2009 and that Plaintiff is entitled to benefits thereunder,
Defendant’s Motion for Summary Judgment [32] on its Counterclaim for
rescission is DENIED.
3.

Plaintiff’s Claim for Bad Faith Penalties & Attorney Fees

Pursuant to O.C.G.A. § 33-4-6, Plaintiff seeks to recover a bad faith
penalty and attorney fees based on Defendant’s refusal to pay her claim.
(Compl., Dkt. [1-1] ¶ 26.) Defendant moves for summary judgment on this
claim. (Def.’s Mem., Dkt. [32-1] at 24-25.)
“To support a cause of action for bad faith penalties and attorney fees
against an insurance company for refusal to pay a claim, it must be shown that
the refusal was made in bad faith.” Fortson v. Cotton States Mut. Ins. Co., 308
S.E.2d 382, 384 (Ga. Ct. App. 1983) (citing O.C.G.A. § 33-4-6). “The insured
bears the burden of proving bad faith, which is defined as any frivolous and
unfounded refusal in law or in fact to comply with the demand of the
policyholder to pay according to the terms of the policy.” Id. (internal
quotations and citation omitted). Because O.C.G.A. § 33-4-6 is penal in nature,
it must be strictly construed, and the right to recovery must be clearly shown.
Id.
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“[B]ad faith is shown by evidence that, under the terms of the policy . . .
the insurer had no ‘good cause’ for resisting . . . payment.” Worsham v.
Provident Cos., 249 F. Supp. 2d 1325, 1341 (N.D. Ga. 2002) (internal quotation
marks and citation omitted). Where the insurance company had any reasonable
ground on which to contest a claim, penalties for bad faith are not available.
Fortson, 308 S.E.2d at 385. “The mere fact of nonpayment is not evidence of
bad faith, nor is any burden thereby cast on the insurer to prove good faith.”
Fla. Int’l Indemnity Co. v. Osgood, 503 S.E.2d 371, 375 (Ga. Ct. App. 1998)
(internal quotation marks and citation omitted). “Ordinarily, the question of
good or bad faith is for a jury, but when there is no evidence of unfounded
reason for the nonpayment . . . the court should disallow imposition of bad faith
penalties.” Id. (internal quotation marks and citation omitted).
The Court finds that Plaintiff has failed to produce evidence that
Defendant acted in bad faith when it refused to pay Plaintiff’s claim under the
Policy. On the contrary, the evidence shows that Defendant refused to pay
Plaintiff’s claim based on its determination that Mr. Fortney failed to disclose
material information regarding his health and medical history. As stated in Part
I.B.1, supra, the Court has found this determination to be in error, as the Policy
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was in effect prior to Mr. Fortney obtaining the medical information about
which Defendant complains. Although the Court has found Defendant’s
position to be without merit, it was not frivolous or unfounded, and there is no
other evidence in the record to suggest it was taken in bad faith. Accordingly,
Defendant’s Motion for Summary Judgment [32] is GRANTED on Plaintiff’s
statutory claim for bad faith and attorney fees.
II.

Plaintiff’s Motion to Dismiss Defendant’s Counterclaim [28]
Plaintiff moves to dismiss Defendant’s Counterclaim under Federal Rule

of Civil Procedure (“Rule”) 12(b)(6). (Dkt. [28-2] at 17-20.) Defendant
contends that the motion to dismiss is “untimely and procedurally barred” under
Rule 12 because it was filed after Plaintiff filed an Answer to Defendant’s
Counterclaim. (Def.’s Opp’n Br., Dkt. [35] at 25.) Plaintiff does not appear to
disagree with this argument, stating in her Reply Brief,
In light of Defendant’s argument found at page 25 of Defendant’s
Memorandum Plaintiff respectfully requests leave of this court to
consider Plaintiff’s Motion to Dismiss Defendant’s Counterclaim
at this time or, alternatively, asks this Court to treat Plaintiff’s
Motion regarding Defendant’s couterclaim as a Motion for
Summary Judgment.
(Dkt. [37] at 15.)

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As Plaintiff appears to concede, Defendant is correct that Plaintiff’s
Motion to Dismiss is procedurally improper. Rule 12(b) provides, “A motion
asserting [a Rule 12(b)] defense[ ] must be made before pleading if a responsive
pleading is allowed.” Fed. R. Civ. P. 12(b). Thus, Plaintiff’s Rule 12(b)(6)
Motion to Dismiss should have been made before Plaintiff filed her Answer to
Defendant’s Counterclaim. In light of the Court’s rulings in Part I, supra,
however, granting Plaintiff’s Motion for Summary Judgment on her claim for
benefits under the Policy and denying Defendant’s Motion for Summary
Judgment on its Counterclaim for rescission, it appears to the Court that
Defendant’s Counterclaim should be subject to dismissal. Accordingly,
Defendant is ORDERED TO SHOW CAUSE within fourteen days of the date
of entry of this Order why the Court should not dismiss its Counterclaim.
Conclusion
In accordance with the foregoing, Plaintiff’s Motion for Partial Summary
Judgment [28] is GRANTED. Defendant’s Motion for Summary Judgment
[32] is GRANTED in part and DENIED in part. It is GRANTED as to
Plaintiff’s statutory claim for bad faith penalties and attorney fees but DENIED
as to Plaintiff’s claim for benefits under the Policy. In light of these rulings,
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Defendant is ORDERED TO SHOW CAUSE within fourteen days of the date
of entry of this Order why its Counterclaim should not be dismissed.

SO ORDERED, this 15th

day of July, 2013.

________________________________
RICHARD W. STORY
United States District Judge

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