Pierce v. United Home Life Insurance Company et al

Filing 49

Memorandum Opinion and Order granting re 41 MOTION for Summary Judgment. A separate judgment shall issue. Signed by District Judge Tom S. Lee on 11/26/12 (LWE)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF MISSISSIPPI
JACKSON DIVISION
ROLAND PIERCE

PLAINTIFF

VS.

CIVIL ACTION NO. 3:11CV790TSL-MTP

UNITED HOME LIFE INSURANCE COMPANY

DEFENDANT

MEMORANDUM OPINION AND ORDER
This cause is before the court on the motion of defendant
United Home Life Insurance Company (United) for summary judgment
pursuant to Rule 56 of the Federal Rules of Civil Procedure.
Plaintiff Roland Pierce has responded to the motion and the court,
having considered the memoranda of authorities, together with
attachments, submitted by the parties, concludes that the motion
is well taken and should be granted.
Roland Pierce alleges in this case that he is the beneficiary
of a $75,000 life insurance policy issued by United to his father,
Rickey Pierce, on June 15, 2011, just six days prior to Rickey
Pierce’s unexpected death.

He avers that United wrongfully and in

bad faith denied his claim for benefits under the policy, and he
has brought this action seeking to recover policy benefits,
together with punitive damages and attorney’s fees.

In its motion

for summary judgment, United contends that based on the undisputed
facts of record, as a matter of law, it properly denied
plaintiff’s claim for benefits for any one or more of the

following three reasons: (1) there was never a binding insurance
policy because Rickey Pierce, the applicant for coverage, failed
to accept United’s counteroffer for coverage in the manner
required by the insurer; (2) Rickey Pierce failed to sign and
return the policy receipt, which was a condition precedent
necessary to effectuate coverage under the policy; and (3) Rickey
Pierce made material misrepresentations to United in the insurance
application.
The following facts are undisputed.

On May 26, 2011, Rickey

Pierce (Mr. Pierce) signed an application for term life insurance
benefits that named Roland Pierce the beneficiary.

In the

application, Mr. Pierce requested $100,000 in coverage with a
monthly premium of $57.85 under an Express Issue Term Deluxe 20
policy.

This application was first sent to United by United agent

Shawn Harness on May 31, 2011.

On June 2, 2011, a United

representative, Cathy Thompson, advised Harness via email that the
application could not be submitted to underwriting because the
maximum face amount for the type of policy requested was $50,000.
Although Thompson suggested a different product, the following
day, Harness faxed to United an application for the very same
coverage and policy originally requested.

On June 6, 2011, United

informed Harness via email that the application would be submitted
to underwriting for $50,000 in coverage, rather than the $100,000
requested, since that was the maximum face amount of the type of
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policy requested in the application.

Later the same day, Harness

telephoned United and advised that Mr. Pierce desired an Express
Issue Term Plus policy with $75,000 in coverage for a monthly
premium of $65.66.

Two days later, on June 8, United requested

that Harness resubmit the first page of the application to reflect
the desired coverage and policy, and upon receiving no response,
United again contacted Harness on June 10 asking that he resubmit
page one of the application.

Harness faxed an application on June

10, 2011 requesting $100,000 of coverage under two kinds of
policies, Express Term Plus and Premier 20 policy, for a monthly
premium of $57.85.
On June 17, 2011, United’s underwriting department approved
issuance of a policy, and on June 21, 2011, United mailed to Mr.
Pierce an Express Issue Term Plus policy providing $75,000
coverage for a monthly premium of $65.66.

United included with

the policy an application amendment (since the policy did not
conform to the type and amount of coverage reflected in Mr.
Pierce’s existing application), which Mr. Pierce was requested to
sign and return.

The amendment recited, “This amendment is a part

of the policy whose number appears below and must be properly
dated, signed and witnessed before the policy becomes effective.”
United also included a policy receipt, which required that Mr.
Pierce certify that his health condition as stated in the
application remained unchanged the day he received the policy.
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According to United, Mr. Pierce was also required to sign and
return the receipt before coverage under the policy would become
effective.

However, Mr. Pierce never signed or returned the

application amendment or the policy receipt as he unexpectedly
died on the same day the policy, amendment and policy receipt were
mailed to him by United.
United contends that no valid contract for insurance was ever
formed, but further asserts that even if a valid contract was
formed, the policy was void ab initio based on material
misrepresentations made by Mr. Pierce in the application.1
Specifically, at the time of the application on May 26, 2011, Mr.
Pierce represented that he was 5’9” tall and weighed 205 pounds,
and also represented that he did not consume any tobacco products
in the previous twelve months.

In fact, however, Mr. Pierce was

actually 5’6” tall and weighed 261 pounds on May 26, 2011, and he
regularly used tobacco products during the prior twelve months.
Mississippi law holds that
if an applicant for insurance is found to have made a
misstatement of material fact in the application, the
insurer that issued a policy based on the false
application is entitled to void or rescind the policy.
To establish that, as a matter of law, a material
misrepresentation has been made in an insurance

1

The court need not consider whether a contract was
formed – though it seems reasonably clear none was – since it is
apparent that in view of Mr. Pierce’s misrepresentations in the
policy application, United is entitled to rescind any contract
which might have been created.
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application, (1) it must contain answers that are false,
incomplete, or misleading, and (2) the false,
incomplete, or misleading answers must be material to
the risk insured against or contemplated by the policy.
The party seeking to void the insurance contract ...
must establish the existence of a factual
misrepresentation and its materiality by clear and
convincing evidence. Whether the misrepresentation was
intentional, negligent, or the result of mistake or
oversight is of no consequence.
Carroll v. Metropolitan Ins. and Annuity Co., 166 F.3d 802, 805
(5th Cir. 1999) (citations omitted).

“A misrepresentation ... is

material if knowledge of the true facts would have influenced a
prudent insurer in determining whether to accept the risk.”

Id.

at 806.
It is undisputed that the answers in the insurance
application regarding Mr. Pierce’s height, weight and tobacco use
are false, and United has presented uncontroverted evidence that
Mr. Pierce’s representations in the application as to these
matters were material.

Notwithstanding this, plaintiff contends

United has waived its right to rescind the policy based on alleged
misrepresentations because United did not assert any claim of
misrepresentations when it denied payment under the policy.
However, Mississippi law allows an insurer to rely at trial on
additional defenses to coverage that were not originally given as
a basis for the insurer’s refusal to pay a claim.

See Chapman v.

Safeco Ins. Co. of America, 722 F. Supp. 285, 296 (N.D. Miss.
1989) (opining that under Mississippi law, “there is no

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independent rule that an insurance company must rely at trial on
the first reason for refusing to pay the claim given the insured
absent a showing that it has somehow waived the subsequently
raised defense or that circumstances are such that the company
should be estopped from asserting that defense”) (citing Bankers
Life Ins. Co. v. Crenshaw, 483 So. 2d 254, 273 (Miss. 1985), and
Aetna Life & Casualty Co. v. Lavoie, 470 So. 2d 1060 (Ala. 1985)).
Plaintiff has not claimed, much less demonstrated, that the
requirements of either waiver or estoppel are present.
Plaintiff argues, alternatively, that United cannot be heard
to complain about representations as to weight or height given
that its agent, Harness, met with Mr. Pierce to complete the
application and actually completed the application for Mr. Pierce
to sign.

Plaintiff evidently takes the position that United

cannot claim to have been misled since Harness was able to observe
Mr. Pierce’s height and weight for himself and thus would have
known that Mr. Pierce’s responses to the questions in the
application regarding his height and weight were false.

He

further argues that United is estopped from claiming that Mr.
Pierce made misrepresentations since on May 26, 2011, Mr. Pierce
executed an authorization for release of medical information, thus
giving United access to his entire medical history prior to its
issuance of the subject policy.

In the court’s opinion, neither

contention has merit.
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As Judge Jordan recently observed in Evans v. Mendota
Insurance Company,
There exists a long “line of cases that removes the
right to rescind where an insurance agent ‘takes charge
of the preparation of the application’ and records the
information inaccurately.” [Massachusetts Mut. Life Ins.
Co. v. Nicholson, 775 F. Supp. 954, 961 (N.D. Miss.
1991)] (collecting cases) (citations omitted). “These
cases hold that if the agent suggests or advises what is
to be answered, the company cannot void the policy
because the answers were untrue ‘if full disclosures
were made by the applicant to him.’” Id. (quoting
Miller, 484 So.2d at 334). “The application of this
doctrine, however, is subject to the necessary
qualification that the assured must have acted in good
faith, and must have been free of fraudulent concealment
or collusion with the agent of the company....”
Fidelity & Cas. Co. of N.Y. v. Cross, 95 So. 631, 635
(Miss. 1923); accord Nicholson, 775 F. Supp. at 961.
Evans v. Mendota Ins. Co., Civ. Action No. 4:10–CV–27–DPJ–FKB,
2011 WL 765676, at 4 (S.D. Miss. Feb. 25, 2011).

Thus,

Mississippi cases have consistently held that where an agent
completes the application, so long as the agent accurately records
the proposed insured’s responses to questions in the application,
the insurer is entitled to rescind an insurance policy due to the
applicant’s material misrepresentations in the application.

See,

e.g., Evans, 2011 WL 765676 at 5 (granting summary judgment where
there was no evidence that the insurance application contained
“any material misstatements other than the ones provided by Evans
herself”); Turner v. Northwestern Mut. Life Ins. Co., No. Civ. A.
1:94CV156–D–D, 1995 WL 1945466 (N.D. Miss. May 30, 1995) (summary
judgment proper where insured failed to offer evidence that agent
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inaccurately recorded false answer in insurance application
regarding insured’s driving history); Nicholson, 775 F. Supp. at
961 (rescission based on material misrepresentations in insurance
application appropriate where insured offered no evidence that
agent inaccurately recorded false information provided by the
insured).2
Further, United is not estopped from asserting Mr. Pierce’s
misrepresentations as a basis for rescission of the policy merely
because Mr. Pierce provided a medical authorization as part of the
application process.

In Nicholson, supra, the court rejected the

insured’s argument that his execution of a broad medical release
precluded the insurer’s reliance on misrepresentations in the
application to void the policy since the authorization permitted
an investigation that would have revealed that certain responses
in the application were false.

Addressing the argument, the court

stated,
This is not the law in Mississippi. As noted, the
insurance company has the right to rely on the
information contained in the application, [Mattox v.
Western Fidelity Ins. Co., 694 F. Supp. 210 (N.D. Miss.
1988)], as long as the insurance company did not have
“sufficient indications that would have put a prudent
2

As defendant notes, there is no suggestion that Harness
would have known of Mr. Pierce’s tobacco use merely from meeting
with him – and a misrepresentation as to tobacco use alone is
enough to warrant rescission of the policy. Further, the notion
that an agent should disregard an applicant’s own affirmative
responses to questions about his height and weight and instead
rely on his own judgment about these matters imposes an
unreasonable burden on the agent.
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man on notice.” [New York Life Ins. Co. v. Strudel, 243
F.2d 90, 93 (5th Cir. 1957)]. If facts in the
application would cause a prudent insurer “to start an
inquiry, which, if carried out with reasonable
thoroughness, would reveal the truth,” the insurance
company “cannot blind [itself] to the true facts and
choose to ‘rely’ on the misrepresentation.” Id. Counsel
for the defendant focuses on the latter portion of this
rule, but Strudel suggests that something in the
application must have put the insurer on notice in the
first place.
Nicholson, 775 F. Supp. at 960.

Plaintiff has not suggested what

information contained in the application would have put United on
notice that it should investigate further regarding Mr. Pierce’s
height, weight or tobacco usage.

Accordingly, United was entitled

to rely on Mr. Pierce’s representations as to his height and
weight, and his negative response to the question in the
application regarding tobacco usage, and it was not required to
obtain his medical records solely to check the accuracy of his
responses.3
In summary, assuming for the sake of argument that a valid
contract of insurance was formed, the court is of the opinion that
Mr. Pierce’s material misrepresentations on the application allow
United to rescind or void the policy.

Therefore, it is ordered

that United’s motion for summary judgment is granted.
A separate judgment will be entered in accordance with Rule
58 of the Federal Rules of Civil Procedure.
SO ORDERED this 26th day of November, 2012.
3

The few cases cited by plaintiff are inapposite.
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/s/Tom S. Lee
UNITED STATES DISTRICT JUDGE

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