Smith et al v. Liberty Life Insurance Company
Filing
59
ORDER AND REASONS denying 26 Motion for Summary Judgment. Signed by Judge Susie Morgan. (cbn)
UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF LOUISIANA
STACEY A. SMITH, et al.,
Plaintiffs
CIVIL ACTION
VERSUS
No. 11-3171
LIBERTY LIFE INSURANCE CO.,
Defendant
SECTION “E”
ORDER AND REASONS
Before the Court is a motion for summary judgment1 filed by defendant Liberty Life
Insurance Company (“Liberty”). Plaintiffs Stacey A. Smith (“Stacey”) and Orange Smith
“Orange”) oppose Liberty’s motion.2 Pursuant to Court Order,3 Liberty filed a supplemental
memorandum in support of its motion.4 Pursuant to the same Order, plaintiffs filed a
supplemental memorandum in opposition.5
Liberty also filed a reply to plaintiffs’
supplemental memorandum.6 For the reasons set forth below, Liberty’s motion is denied.
BACKGROUND
This dispute arises out of Liberty’s denial of life insurance benefits on behalf of
Stacey’s brother and Orange’s son Alvin Smith (“Alvin”). Liberty contends it has no
obligation to pay any death benefits to Stacey or Orange because Alvin’s policy was void.
On December 11, 2007, Alvin completed an online application for life insurance
1
R. Doc. 26.
2
R. Doc. 30.
3
R. Doc. 32.
4
R. Doc. 36.
5
R. Doc. 43.
6
R. Doc. 49.
1
through Liberty, with Stacey’s assistance. In the application, Alvin named Stacey and
Orange as his beneficiaries.7 The Liberty application contained seven questions relating to
the applicant’s criminal and medical history,8 along with the following statement:
By signing your name below, you agree that (1) you have read
and fully understand all the questions, answers, and statements
given in this application; (2) the statements and answers on
this application are full, complete, and true to the best of your
knowledge; (3) you intend for Liberty Life Insurance Company
to rely on such statements and answers in underwriting your
application for insurance.9
Alvin answered all of the questions in the negative.10 On that same day, Liberty issued a life
insurance policy naming Alvin as the insured and Stacey and Orange as beneficiaries.11
Alvin was shot and killed on March 23, 2009,12 within the two-year contestable
period of the Liberty policy.13 As a result, Liberty conducted an investigation into Alvin’s
application and medical records.14 Dr. Murray McKissick (“Dr. McKissick”), a doctor
employed by Liberty at the time of the investigation, compared Alvin’s answers to his
medical records and other available public records and determined that, in her opinion,
7
See R. Doc. 26-3.
8
Id.
9
Id.
10
Id. It is not entirely clear whether Alvin signed the application, but that issue is not relevant for
purposes of this motion.
11
R. Doc. 26-3.
12
See R. Doc. 1-1 at ¶ IV (Plaintiffs’ petition for damages).
13
See R. Doc. 26-7 at p. 5.
14
R. Doc. 26-2 (Affidavit of Dr. McKissick).
2
Alvin’s application contained a number of false statements.15 Specifically, Dr. McKissick’s
affidavit stated that: (1) Alvin misrepresented his history of tobacco use; (2) Alvin
concealed the fact that he suffered a seizure prior to his application and had been instructed
to undergo further evaluation regarding his seizure but failed to do so; and (3) Alvin
concealed the fact that he was on probation at the time of his application.16 Dr. McKissick
also stated that, had Alvin answered any of the above questions truthfully, Alvin’s
application would have been denied.17 Plaintiffs dispute that Alvin’s answers to the
application questions on these topics were false.18
On November 28, 2012, the Court ordered that Alvin’s records from the State of
Louisiana, Department of Public Safety and Corrections, Division of Probation and Parole,
which Liberty requested, be released to the parties in connection with Liberty’s motion for
summary judgment, and ordered that the parties supplement and/or amend their motion
and opposition as appropriate.19 Liberty supplemented its motion for summary judgment,
in light of the release of these records, to add an argument that Alvin had been convicted
of a felony offense in May 2007, seven months prior to his application, but failed to disclose
that conviction.20 Plaintiffs dispute the fact that Alvin’s May 2007 conviction was a felony
15
Id.
16
Id.
17
R. Doc. 26-2.
18
See R. Doc. 56-2 (Plaintiffs’ Local Rule 56.2 response to Liberty’s statement of undisputed
material facts).
19
R. Doc. 32.
20
See R. Doc. 36-1 (Excerpt from Alvin’s probation records, showing that on May 25, 2007, Alvin
pled guilty as charged in the Orleans Parish Criminal District Court, State of Louisiana, to a violation of
Louisiana Revised Statute 40:966(D)(1)).
3
conviction.21
ANALYSIS
I.
Summary Judgment Standard
Summary judgment is appropriate only “if the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any, show that there
is no genuine issue as to any material fact and that the moving party is entitled to a
judgment as a matter of law.” FED . R. CIV. P. 56 ; see also Celotex Corp. v. Catrett, 477 U.S.
317, 322-23 (1986).
If the dispositive issue is one on which the moving party will bear the burden of proof
at trial, the moving party “must come forward with evidence which would ‘entitle it to a
directed verdict if the evidence went uncontroverted at trial.’” Int'l Shortstop, Inc. v.
Rally's, Inc., 939 F.2d 1257, 1263–64 (5th Cir. 1991). If the moving party fails to carry this
burden, the motion must be denied. If the moving party successfully carries this burden,
the burden then shifts to the non-moving party to show that a genuine issue of material fact
exists. Id. at 322-23. Once the burden has shifted, the non-moving party must direct the
Court’s attention to something in the pleadings or other evidence in the record that sets
forth specific facts sufficient to establish that a genuine issue of material fact does indeed
exist. Id. at 324. The non-moving party cannot simply rely on allegations or blanket
denials of the moving party’s pleadings as a means of establishing a genuine issue of
material fact, but instead must identify specific facts that establish a genuine issue for trial.
Littlefield v. Forney Indep. Sch. Dist., 268 F.3d 275, 282 (5th Cir. 2001). If the dispositive
21
See R. Doc. 43-1 (Plaintiffs’ revised Local Rule 56.2 response to Liberty’s statement of
uncontested material facts).
4
issue is one on which the non-moving party will bear the burden of proof at trial, however,
the moving party may satisfy its burden by simply pointing out that the evidence in the
record is insufficient with respect to an essential element of the non-moving party's claim.
See Celotex, 477 U.S. at 325.
“An issue is material if its resolution could affect the outcome of the action.”
DIRECTV Inc. v. Robson, 420 F.3d 532, 536 (5th Cir. 2005). When assessing whether a
material factual dispute exists, the Court considers “all of the evidence in the record but
refrains from making credibility determinations or weighing the evidence.” Delta & Pine
Land Co. v. Nationwide Agribusiness Ins. Co., 530 F.3d 395, 398 (5th Cir. 2008); see also
Reeves v. Sanderson Plumbing, Inc., 530 U.S. 133, 150-51 (2000).
All reasonable
inferences are drawn in favor of the non-moving party. Little v. Liquid Air Corp., 37 F.3d
1069, 1075 (5th Cir. 1994). There is no genuine issue of material fact if, even viewing the
evidence in the light most favorable to the non-moving party, no reasonable trier of fact
could find for the non-moving party, thus entitling the moving party to judgment as a
matter of law. Smith v. Amedisys, 298 F.3d 434, 440 (5th Cir. 2002).
II.
Louisiana Revised Statute 22:860
Pursuant to Louisiana Revised Statute 22:860,22 formerly cited as Louisiana Revised
22
L A . R EV . S TAT . A N N . § 22:860 provides:
A. Except as provided in Subsection B of this Section, R.S. 22:1314, and 1315, no oral or written
misrepresentation or warranty made in the negotiation of an insurance contract, by the insured or
in his behalf, shall be deemed m aterial or defeat or void the contract or prevent it attaching, unless
the misrepresentation or warranty is made with the intent to deceive.
B. In any application for life, annuity, or health and accident insurance made in writing by the
insured, all statements therein m ade by the insured shall, in the absence of fraud, be deemed
representations and not warranties. The falsity of any such statement shall not bar the right to
recovery under the contract unless either one of the following is true as to the applicant's
statement:
5
Statute 22:619, an insurer is not liable for the death benefit provided by its policy if the
insurer can show that the policy was void ab initio because of misrepresentations made by
the insured in his application for insurance. It is well-settled that an insurer seeking to
invoke this affirmative defense has the burden of proving three elements: (1) that the
insured made a false statement in his insurance application; (2) that the false statement was
material; and (3) that the insured’s false statement was made with an “intent to deceive” the
insurer. State Farm Mut. Auto. Ins. Co. v. Bridges, No. 45,162 (La. App. 2 Cir. 5/19/10);
36 So.3d 1142, 1146.
Under Louisiana law, a misrepresentation is material “if the truth would have
resulted in the insurer not issuing the policy of insurance or issuing the policy at a higher
rate.” Abshire v. Desmoreaux, 07-626 (la. App. 3 Cir. 11/7/07); 970 So.2d 1188, 1195 (citing
Pryor v. State Farm Mut. Auto. Ins. Co., No. 95-187 (La. App. 3 Cir. 8/30/95); 663 So.2d
112, 115; Irving v. U.S. Fidelity & Guar. Co., 606 So.2d 1365 (La. App. 2 Cir. 1992)). If the
insurer would have issued the policy regardless of the truthfulness of an applicant’s
answers, then such misrepresentation is not considered material. Doughty v. Monumental
Life. Ins. Co., No. 02-1608, 2003 WL 21954790, at *6 (E.D. La. June 12, 2003) (Berrigan,
J.) (citing Jamshidi v. Shelter Mut. Ins. Co., 471 So.2d 1141 (La. 1985)).
“Because of the inherent difficulties of proving intent, strict proof of fraud is not
(1)
The false statement was made with actual intent to deceive.
(2)
The false statement materially affected either the acceptance of the risk or the
hazard assumed by the insurer under the policy.
W hile this statute appears to require the insurer to show that the insured’s misrepresentation was made
with intent to deceive or that the insured’s misrepresentation was material, Louisiana jurisprudence
requires an insurer seeking to invoke this affirmative defense to prove both. See Coleman v. Occidental
Life Ins. Co. of N. Carolina, 418 So.2d 645, 646 (La. 1982).
6
required to show intent to deceive.” Bridges, 36 So.3d at 1146. Instead, “the intent to
deceive must be determined from the attending circumstances which indicate the insured's
knowledge of the falsity of the representations made in the application and his recognition
of the materiality thereof, or from circumstances which create a reasonable assumption that
the insured recognized the materiality of the misrepresentations.” Bridges, 36 So.3d at
1146. Because the “intent to deceive” element can only be proven with circumstantial
evidence, it is not easily established at the summary judgment stage. See Guillory v.
Domtar Indus. Inc. v. John Deere Co., 95 F.3d 1320, 1326 (5th Cir. 1996) (“Summary
judgment is rarely proper when an issue of intent is involved.”) That said, “the presence of
an intent issue does not preclude summary judgment: the case must be evaluated like any
other to determine whether a genuine issue of material fact exists.” Id. Indeed, because
summary judgment is not well suited to cases involving state of mind,
the court must be vigilant to draw every reasonable inference
from the evidence in the record in a light most flattering to the
nonmoving party. Summary judgment, to be sure, may be
appropriate, “[e]ven in cases where elusive concepts such as
motive or intent are at issue, . . . if the nonmoving party rests
merely upon conclusory allegations, improbable inferences,
and unsupported speculation.”
Int'l Shortstop, Inc. v. Rally's, Inc., 939 F.2d 1257, 1266 (5th Cir. 1991) (quoting
Medina-Munoz v. R.J. Reynolds Tobacco Co., 896 F.2d 5, 8 (1st Cir. 1990)); see also
Guillory, 95 F.3d at 1326.
III.
Was Alvin’s Policy Void Ab Initio As a Matter of Law?
A.
Arguments of the Parties
As discussed above, Liberty argues in its motion for summary judgment that Alvin
made a number of material misrepresentations on his insurance application, and that each
7
of those misrepresentations was made with intent to deceive. Liberty contends that any one
of those misrepresentations, if made with the requisite intent to deceive and found to be
material, would be sufficient to render Alvin’s policy void ab initio under Louisiana Revised
Statute 22:860.
Plaintiffs argue that Alvin answered the questions posed in the application to the
best of his ability, and that Alvin’s answers were either not false, or even if they were false,
that they were not made with the requisite intent to deceive. Plaintiffs also argue that the
summary judgment evidence does not show the questions in the application were material,
because Dr. McKissick’s affidavit does not clearly indicate that Alvin’s application would
have been denied if he answered certain questions differently. Plaintiffs argue that genuine
issues of material fact remain in dispute with respect to each of the alleged
misrepresentations on Alvin’s application, as well as Alvin’s intent to deceive, and because
Liberty cannot meet its burden at this stage, summary judgment is inappropriate.
B.
Summary Judgment is Not Appropriate
Plaintiffs dispute the following factual assertions: (1) that Alvin misrepresented his
tobacco history or his seizure history; (2) that he had been advised to undergo a “surgical
operation or a diagnostic test or evaluation” and failed to do so; (3) that he was on
probation at the time of his application; and (4) that his May 2007 conviction was a felony
conviction.23 Plaintiffs also argue that, to the extent Alvin’s answers to any of the
application questions were false, those false answers were not given with the requisite
intent to deceive, but instead were “true to the best of [Alvin’s] knowledge,” as required by
23
See R. Doc. 43-1; see also R. Doc. 43 (Plaintiffs’ supplemental memorandum in opposition to
motion for summary judgment).
8
the application.24 The Court finds that material issues of fact do indeed exist. As plaintiffs
point out, Liberty’s application is less than clear. Several of the questions posed on the
application are confusing and compound. For example, question one of the application
asked: “In the past 12 months have you ever smoked cigarettes, cigars, pipes or have you
used tobacco or nicotine in any form including snuff, dip, chew, nicotine patch, gum, or
other substitutes?”25 Alvin answered “No.”26 Plaintiffs contend that Alvin did not think he
had to report, in response to a question about tobacco use, the fact that he used marijuana.27
The Court finds that genuine issues of fact exist with respect to whether Alvin’s answer to
question one was false and whether it was made with the requisite intent to deceive.
Question two presented the applicant with a list of medical issues, and the applicant
was asked to check which, if any, of those medical issues he has been treated for, received
medical advice regarding, or been diagnosed with, in the ten years prior to the application.28
One of the medical issues listed is “Epilepsy or Seizures.”29 Alvin did not check the box next
to any of the listed medical issues, and instead checked the box marked “None of these
apply.”30 The summary judgment evidence indicates that Alvin had a drug-related seizure
24
Id.
25
R. Doc. 26-3.
26
Id.
27
See R. Doc. 43-1.
28
R. Doc. 26-3.
29
Id.
30
Id.
9
on June 15, 2007.31 Plaintiffs contend that Alvin did not answer this question falsely,
because he had never been diagnosed with epilepsy, and had suffered only one isolated
seizure, not seizures in the plural, and that even if his answer to this question was false, that
it was not intentionally so, because he thought he was answering the question truthfully.32
As a result, plaintiffs argue that Alvin did not intend to deceive Liberty. Plaintiffs have met
their burden of establishing a genuine issue of fact with respect to whether Alvin’s answer
to question two was false and whether it was made with the requisite intent to deceive.
Question three asked: “In the past 12 months: Have you either been hospitalized for
three or more consecutive days, or Have you missed more than five consecutive days from
work or school other than for vacation or family leave (including normal pregnancy and
delivery) or Have you ever been advised to have a surgical operation or a diagnostic test or
evaluation that has not been completed?”33 Alvin answered “No” to this question.34 After
being treated for his June 2007 seizure, Alvin’s treating physician at the Tulane University
Hospital & Clinic told him to make a follow-up appointment with the Hutchinson
Neurology Clinic.35 Alvin did not schedule the follow-up appointment.36 However,
plaintiffs contend that Alvin did not think the physician’s instruction was such that he had
to answer “Yes” to the “Have you ever been advised to have a surgical operation or a
31
R. Doc. 26-4.
32
R. Doc. 43-1.
33
R. Doc. 26-3.
34
Id.
35
R. Doc. 26-4.
36
R. Doc. 26-2.
10
diagnostic test or evaluation that has not been completed?” portion of question three.37 A
genuine issue of fact exists with respect to whether Alvin’s answer to question three was
false and whether it was made with the requisite intent to deceive.
Question five asked: “Has your driver’s license been suspended or revoked in the past
three years, or Have you been convicted of or pleaded ‘guilty’ or ‘no contest’ to any felony
or DWI/DUI in the past three years, or Are you currently in prison or serving a probation
or parole program, or In the past twelve months, have you had three or more moving
violations?”38 Alvin answered “No” to this question.39 The summary judgment evidence
indicates that Alvin pleaded guilty to a violation of Louisiana Revised Statute 40:966(D)(1)
on May 25, 2007.40 Liberty contends that a violation of that statute is a felony, while
plaintiffs contend that the circumstances surrounding Alvin’s plea and the sentence he
received are such that his guilty plea could not have been to a felony offense.41 Drawing all
reasonable inferences in plaintiffs’ favor, the Court finds that, with respect to the prior
felony conviction portion of question five, a genuine issue of fact exists as to whether Alvin’s
answer to question five was false and whether it was made with the requisite intent to
37
See R. Doc. 43-1.
38
R. Doc. 26-3.
39
Id.
40
R. Doc. 32-1.
41
See R. Doc. 43. Plaintiffs argue that, because Alvin was sentenced to time served, two months
after being arrested, his guilty plea could not have been to a violation of Louisiana Revised Statute
40:966(D)(1), because that statute carries a five year mandatory minimum sentence. Id. Instead,
plaintiffs suggest that Alvin probably pled guilty to a misdemeanor violation of Louisiana Revised Statute
40:966(E)(1), which does not have a mandatory minimum sentence. Id. At the summary judgment stage,
the Court draws all reasonable inferences in plaintiffs’ favor, and the Court finds that plaintiffs’ argument
is a reasonable one. A material issue of fact remains in dispute with respect to whether Alvin was
convicted or pleaded guilty to a felony in the three years prior to his application for insurance and whether
his answer to this question was made with the intent to deceive.
11
deceive.
Finally, the summary judgment evidence also indicates that Alvin was sentenced to
probation for a firearm possession charge on February 28, 2007.42 Plaintiffs argue that
Alvin was sentenced to “inactive probation,” and that Alvin did not realize that he had to
report that in response to question five.43 With respect to the probation portion of question
five, the Court finds that a genuine issue of fact exists as to whether Alvin’s answer was false
and whether it was made with the requisite intent to deceive.
The Court finds that reasonable and fair-minded persons, in the exercise of impartial
judgment, might reach different conclusions as to whether Alvin’s answers to the questions
on the application were false and whether he had the intent to deceive Liberty. As noted by
Judge Berrigan in Doughty, intent is especially difficult to establish on summary judgment
in the life insurance context because the insured is dead.44 2003 WL 21954790, at *6. The
Court recognizes that strict proof of fraud is not required for the intent to deceive element
of Liberty’s affirmative defense, and that, in some cases, intent may be determined from the
attending circumstances surrounding an insured’s application. Bridges, 36 So.3d at 1146.
The Court is also mindful that, at the summary judgment stage, the Court must not weigh
the evidence or make any credibility determinations. Delta & Pine Land, 530 F.3d at 398.
42
R. Doc. 30-7.
43
R. Doc. 43-1.
44
Other judges in this district have expressed this same concern. See Bordelon v. Indep. Order of
Foresters, No. 05-2640, 2006 W L 2513573, at *3 (E.D. La. Aug. 28, 2006) (Duval, J.) (denying summary
judgm ent on basis of disputed issues of fact regarding deceased insured’s intent); W alker v. Mass. Indem .
and Life Ins. Co., No. 93-440, 1993 W L 534190, at *2-3 (E.D. La. Dec. 15, 1993) (Livaudais, J.) (same); but
see James v. Allstate Life Ins. Co., No. 96-3324, 1997 W L 618838, at *4-5 (E.D. La. Oct. 3, 1997) (Duval,
J.) (granting summary judgment in favor of insurer because circumstances surrounding deceased
insured’s application were such that it was obvious that his material misrepresentations on that
application were made with intent to deceive).
12
Drawing all reasonable inferences in plaintiffs’ favor, the Court finds the
circumstances surrounding Alvin’s application are such that it would be inappropriate to
find that, as a matter of law, the policy was void. Plaintiffs have raised genuine issues of
material fact sufficient to defeat Liberty’s motion for summary judgment.
CONCLUSION
Accordingly, IT IS ORDERED that Liberty’s motion for summary judgment be and
hereby is DENIED.
New Orleans, Louisiana, this 11th day of December, 2012.
___
__________________________
SUSIE MORGAN
UNITED STATES DISTRICT JUDGE
13
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