The Estate of Catherine Genovese and Giuseppe Genovese v. AAA Life Insurance Company
Filing
28
MEMORANDUM AND ORDER 1.Defendants Motion for Summary Judgment (Doc. 13) is GRANTED;2.The Clerk of Court is directed to close this case. Signed by Honorable Richard P. Conaboy on 11/21/11. (cc, )
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ESTATE OF CATHERINE GENOVESE
and GIUSEPPE GENOVESE,
:
:CIVIL ACTION NO. 3:11-CV-348
:
Plaintiffs,
:
:
v.
:(JUDGE CONABOY)
:
AAA LIFE INSURANCE COMPANY,
:
:
Defendants.
:
___________________________________________________________________
MEMORANDUM
Pending before the Court is Defendant’s “Motion for Summary
Judgement of Defendant AAA Life Insurance Company” (Doc. 13).
This
action arises out of the claim of Plaintiffs Giuseppe Genovese and
the Estate of Catherine Genovese (“Plaintiffs”) that Defendant AAA
Life Insurance Company (“AAA Life” or “Defendant”) is obligated to
pay Genovese a $100,000 insurance benefit under group term life
insurance issued by AAA Life on the life of Mr. Genovese’ late
wife, Catherine Genovese.
Defendant claims that Plaintiffs’ claim
was denied because Decedent’s coverage never became effective
because she never paid the required premium and because Decedent
made a number of material misrepresentations in her Application for
coverage, thereby voiding any coverage she arguably had under the
certificate.
Defendant filed the present motion for summary judgment (Doc.
13) on September 30, 2011, and statement of material facts (Doc.
14) and supporting brief (Doc. 15) on October 3, 2011.
Plaintiffs
filed their Contrary Statement of Material Facts (Doc. 17) on
October 12, 2011, and brief in opposition (Doc. 19) on October 14,
2011.1
2011.
Defendant filed its reply brief (Doc. 22) on October 21,
Oral argument on this motion was held on November 15, 2011.
Accordingly, this matter is ripe for disposition.
For the reasons that follow, we will grant Defendant’s Motion
for Summary Judgment (Doc. 13) and close this case.
I.
BACKGROUND
Plaintiffs initially commenced this action in the Pennsylvania
Court of Common Pleas for Pike County, Pennsylvania, on June 24,
2011.
(Doc. 1-2 at 2.)
On February 22, 2011, Defendant removed
the action to this Court pursuant to 28 U.S.C. § 1446.
(Doc. 1.)
Defendant, AAA Life, is a Michigan insurance corporation that
is licensed to sell life insurance in Pennsylvania.
7.)
(Doc. 15 at
In March 2010, it sent a direct mail advertisement to AAA
members, regarding group term life insurance available to members
and their spouses at various face amounts.
(Id.)
Individuals
could apply by completing an enclosed one-page application that
asked five questions about their health.
(Id.)
Two of those
questions are particularly relevant in this case: they asked if
each applicant had used nicotine in any form in the previous 12
months, and whether each applicant had sought treatment for - or
been diagnosed with - specified medical conditions during the
1
This document (Doc. 19) was filed incorrectly and deleted by
the Clerk’s Office. Plaintiffs’ Brief in Opposition to Motion for
Summary Judgement was refiled on October 21, 2011, at Document 21.
2
previous 10 years, including chest pain, high blood pressure,
circulatory disorders, or a tumor.
(Id.)
Directly above the signature line, the Application warns:
All answers in this application and any
questionnaire completed in connection with this
application are, to the best of my knowledge and
belief, true. I understand the answers will be
used to determine if coverage will be issued, and
will be part of the Certificate.
If I misstate any of the information above, the
Certificate may be voidable from inception . . .
Warning: Any person who, with the intent to
defraud or knowingly facilitates a fraud against
an insurer, submits an application or files a
claim containing false or deceptive statements may
be guilty of insurance fraud and subject to fines
and penalties.
(Doc. 15 at 8-9.)
Defendant relied on each applicant’s representations in the
Application to determine whether the applicant is entitled to
coverage, and if so, the appropriate premium for that coverage.
(Id. at 7.)
Based on its underwriting criteria, with the exception
of high blood pressure, applicants who answered “yes” regarding the
listed medical conditions were ineligible for the coverage and
their applications were denied.
(Id.)
Applicants who used
nicotine within the 12 months of their application were eligible
for coverage, but at a premium rate that is approximately double
the premium charged to non-nicotine users.
(Id. at 7-8.)
Defendant sends each approved applicant an Insurance
Certificate that states the terms of the offered coverage, which
3
the applicant has 31 days to examine and consider.
(Id. at 8.)
If
an approved applicant wants to accept the offered coverage, she
must provide Defendant with the first premium payment.
(Id.)
Coverage would only be effective when Defendant received that
payment, provided it received the payment within 31 days of the
date Defendant issued the Insurance Certificate and during the
applicants lifetime.
(Id.)
If this condition is not satisfied,
Defendant’s offer of coverage lapses and becomes null and void.
(Id.)
On or about March 22, 2010, Decedent applied for $100,000 of
coverage on her life, answering “No” to each of the Application’s
questions.
(Doc. 15 at 8.)
Based on Decedent’s representations,
Defendant approved her for the requested coverage at the premium
rate reserved for non-nicotine users.
(Id. at 9.)
According to
Defendant, had Decedent stated she had used nicotine in the
preceding 12 months, Defendant would have charged her a
significantly higher premium, and had she admitted to any of the
listed medical conditions, Defendant would have required additional
investigation and may have denied coverage altogether.
(Id.)
Defendant sent Decedent an Insurance Certificate on April 1,
2010 (“Issue Date”).
(Id. at 9.)
The Insurance Certificate
states, in part:
Statements
We consider all statements made by You in the
4
application to be representations and not
warranties unless they are fraudulent.
(Id.)
The Insurance Certificate stated the Effective Date of
coverage would be April 5, 2010, provided AAA Life had received her
first premium payment.
(Id. at 10.)
In this regard, the Insurance Certificate states:
The first premium due is the Total Initial Modal
Premium shown on the Schedule Page. You must pay
the first premium within 31 days of the Issue Date
and during Your lifetime . . . We will consider
the premium paid when it is received at Our
mailing address shown on the first page of this
Certificate.
(Id.)(emphasis added).
In submitting her Application for insurance coverage, Decedent
authorized Defendant to charge her premium to her Discover credit
card, providing the account number in the Application.
(Id.)
Defendant attempted to charge Decedent’s premium, using the credit
card number Decedent had written on the Application, however,
according to Defendant, it could not complete the transaction
because the credit card number was wrong or AAA Life’s agents could
not correctly decipher it, and the transaction was refused.
at 10-11.)
(Id.
By letter on April 6, 2010, Defendant notified Decedent
it could not complete the transaction and it would invoice her for
the outstanding premium or she could try to charge another credit
card by completing the enclosed Authorization to Charge the
Premium.
(Id. at 11; Doc. 13-1 at 28.)
5
On April 27, 2010, Decedent’s daughter, Crystal Genovese,
telephoned Defendant and reported that Decedent had died on April
24, 2010.
(Id.)
Crystal Genovese asked how to make a claim for
insurance benefits under the Policy, and the AAA Life
representative explained that because she had not paid any premium
in her lifetime, Decedent was not covered under the Policy.
(Id.)
Thereafter, on April 28, 2010, Defendant received an
Authorization to Charge Premium signed by Decedent on April 17,
2010.
(Id.)
According to Defendant, because it had already been
advised of Decedent’s death, the offer of coverage was no longer
valid and it did not attempt to process the charge.
(Id.)
Plaintiffs dispute Defendant’s denial of coverage, noting that
the Certificate of Insurance Coverage for Decedent was issued on
April 1, 2011, and the initial premium was twice tendered, once by
signing Defendant’s credit card authorization at application, and
then again on April 17th by resubmitting Decedent’s signed form via
mail sent prior to Decedent’s death.
(Doc. 21 at 2.)
Plaintiffs
assert that Defendant’s manager, Kristen Shopshear, later admitted
to Crystal Genovese that Defendant’s Third Party Credit Card
administrator frequently made mistakes.
(Id.)
Plaintiffs also contest Defendant’s determination that
Decedent’s insurance application was fraudulent since (1) her
answer that she did not use nicotine products for one year prior to
the application was false; and, (2) Decedent failed to disclose a
6
known tumor, which she allegedly had years prior to the
application.
Plaintiffs aver by affidavits of Giuseppe Genovese and Crystal
Genovese (Docs. 21-1, 21-2) and Defendant’s own medical records
that Decedent stopped smoking over one year prior to application,
and instead was using the prescription drug, Chantix, to avoid
nicotine use.
(Id. at 2-3.)
Further, Plaintiffs argue that in
2004 Decedent was diagnosed with a benign nodule, not a tumor, and
she therefore was never aware of or ever had a “tumor.”
3.)
(Id. at
Plaintiffs further argue that Decedent also did not have any
heart or circulatory disorders.
(Id.)
Moreover, Plaintiffs assert that Defendant’s Motion and
Affidavits do not support denial of coverage based upon use of
nicotine products.
(Doc. 19 at 7.)
Plaintiffs argue that the
evidence submitted demonstrates that if tobacco use were disclosed,
the coverage would not be voided but rather issued at a higher
premium.
(Id.)
Therefore, Plaintiffs claim that Defendant cannot
deny coverage on this basis.
II.
(Id.)
LEGAL STANDARD
Summary judgment is proper “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 judgment
as a matter of law.”
See Knabe v. Boury, 114 F.3d 407, 410 n.4 (3d
7
Cir. 1997)(citing Fed. R. Civ. P. 56(c)).
"[T]his standard
provides that the mere existence of some alleged factual dispute
between the parties will not defeat an otherwise properly supported
motion for summary judgment; the requirement is that there be no
genuine issue of material fact."
Anderson v. Liberty Lobby, Inc.,
477 U.S. 242, 247-48 (1986).
A fact is "material" if proof of its existence or nonexistence
would affect the outcome of the lawsuit under the law applicable to
the case.
Id. at 248.
An issue of material fact is "genuine" if
the evidence is such that a reasonable jury might return a verdict
for the non-moving party.
Anderson, 477 U.S. at 257.
In
determining whether a genuine issue of fact exists, a court must
resolve all factual doubts and draw all reasonable inferences in
favor of the nonmoving party.
Conoshenti v. Public Serv. Elec. &
Gas Co., 364 F.3d 135, 140 (3d Cir. 2004) (citation omitted).
The initial burden is on the moving party to show an absence
of a genuine issue of material fact.
The moving party may meet
this burden by “pointing out to the district court [] that there is
an absence of evidence to support the nonmoving party’s case when
the nonmoving party bears the ultimate burden of proof.”
477 U.S. at 325.
Celotex,
The non-moving party may not rest on the bare
allegations contained in his or her pleadings, but is required by
Federal Rule of Civil Procedure 56(e) to go beyond the pleadings by
way of affidavits, depositions, answers to interrogatories or the
8
like in order to demonstrate specific material facts which give
rise to a genuine issue.
324 (1986).
Celotex Corp. v. Catrett, 477 U.S. 317,
When Rule 56(e) shifts the burden of proof to the non-
moving party, that party must produce evidence to show the
existence of every element essential to its case which it bears the
burden of proving at trial.
Equimark Commercial Finance Co. v.
C.I.T. Financial Services Corp., 812 F.2d 141, 144 (3d Cir. 1987).
“In considering a motion for summary judgment, a district
court may not make credibility determinations or engage in any
weighing of evidence.”
Anderson, 477 U.S. at 255.
Therefore, when
evidentiary facts are in dispute, when the credibility of witnesses
may be in issue, or when conflicting evidence must be weighed, a
full trial is usually necessary.
III. DISCUSSION
Defendant brings this motion for summary judgment arguing that
this action should be dismissed and Plaintiffs’ claim denied
because: (1) Decedent failed to satisfy an unambiguous condition
precedent to coverage; and (2) in any event, her material
misrepresentations in the Application preclude coverage in her
case.
A.
We will address these arguments in turn.
First Premium Payment as a Condition Precedent
We find that Decedent failed to satisfy the condition
precedent of the policy of making her first premium payment prior
to her death, and therefore conclude that summary judgment is
9
appropriate in this case.
Under Pennsylvania law, the creation of an insurance contract
requires an offer, an acceptance, and a meeting of the minds.
See
Moser Mfg. Co. v. Donegal & Conoy Mut. Fire Ins. Co., 362 Pa. 110,
66 A.2d 581, 582 (1949).
The intent of parties to a contract is
determined by the unambiguous terms of their contract, giving those
terms their ordinary meanings.
See, e.g., Sunbeam Corp. v. Liberty
Mut. Ins. Co., 566 Pa. 494, 502, 781 A.2d 1189, 1194 (2001);
Chester Carriers, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh,
767 A.2d 555, 559 (Pa. Super. Ct. 2001); Potts v. Metro. Life Ins.
Co., 133 Pa. Super. 397, 406, 2 A.2d 870, 874 (Pa. Super. Ct.
1938).
An insurance contract’s terms are stated in the application
and insurance certificate.
See, e.g., Sunbeam Corp., 566 Pa. at
502, 781 A.2d at 1194; Potts, 133 Pa. Super. at 406, 2 A.2d at 874.
Courts have held that an insured must comply with any
condition precedent stated in the policy in order to obtain
coverage, and the insured is imputed with knowledge of such terms.
Kelly v. Allstate Ins. Co., 138 F. Supp. 657, 662 (E.D. Pa.
2001)(“payment of premiums is said to be the very essence of an
insurance contract; premium payments are a condition precedent”);
Superka v. Valley Forge Life Ins. Co., 44 Pa. D. & C. 4th 92 (Ct.
Com. Pl. 1999).
In this case, it is undisputed that under the policy the
payment of the premium is a condition precedent to coverage.
10
The
Insurance Certificate clearly states that the coverage Defendant
offered Decedent would only become effective if Decedent paid the
requisite premium within 31 days of the Insurance Certificate’s
“Issue Date” and during her lifetime.
It also plainly states that
Decedent’s premium is not paid until Defendant actually receives
the payment at its offices.
Moreover, the Insurance Certificate
states that the offered coverage is automatically withdrawn and
void if the premium is not paid within 31 days of the Issue Date
and during Decedent’s lifetime.
We agree with Defendant that because Defendant never received
the first premium payment from Decedent prior to her death the
offered coverage never became effective and ultimately lapsed at
the time of Decedent’s death.
(Doc. 15 at 17.)
We find Decedent’s
unsuccessful attempts to pay by credit card do not change this
result.
Plaintiffs argue that when a party makes payment, whether by
check, credit card or otherwise, and the Defendant fails to
process, acknowledge or accept the payment, payment is considered
made and the condition of payment is met.
(Doc. 19 at 4 (citing
Sunbeam Corp. v. Liberty Mutual, 566 Pa. 494, 781 A.2d 1189
(2001)).)
According to Plaintiffs, the payment part of the
Decedent’s application, signed and filled in by the Decedent, puts
the burden on the Defendant contractually to comply.
(Id. at 4.)
Plaintiffs argue Defendant’s failure, through a Third Party
11
Administrator, to properly process the credit card was not the
fault of the Decedent.
(Id. at 5.)
We are not persuaded by this argument.
We find that this is
not a case where an insurance company “fails to process,
acknowledge or accept the payment” as Plaintiffs contend.
In fact,
it is undisputed that upon receipt of Decedent’s Application,
Defendant’s agents attempted to process the payment, but it was
rejected.
Likewise, Plaintiffs’ unsupported assertion that Decedent
effectively paid the premium by simply providing her credit card
number is unsupported by law and in contradiction to the
unambiguous language of the Insurance Certificate.
First, the mere
fact that Decedent provided her credit card number, that could not
be processed, is not sufficient to establish that payment was made.
This is akin to payment by a check that is dishonored for
insufficient funds.
See, e.g., Nanda v. Selective Ins. Co., No.
Civ. A. 96-7661, 1997 WL 667151 (E.D. Pa. Oct. 10, 1997); O’Brien
v. Nationwide Mut. Ins. Co., 455 Pa. Super. 568 (1997); American
Hardware Mut. Ins. Co. v. BIM, Inc., 885 F.2d 132 (4th Cir. 1989)(If
payment of the premium is a condition precedent to the insurance
contract, the insured’s tender of a worthless premium check
constitutes a failure of consideration and leaves the condition
precedent unsatisfied.)
Next, as Defendant argues, “the Insurance
Certificate plainly states that a premium payment is effectively
12
paid when AAA Life actually receives it - not when AAA Life
receives what is effectively a promise the premium will be paid on
the applicant’s behalf by a credit card company, along with consent
to charge the credit card and the provision of the account number.”
(Doc. 22 at 13.)
Finding otherwise would result in effectively re-
writing the contract that the parties agreed to.
Further, even if we found that the payment was timely received
when the credit card numbers were first submitted, the inability of
that payment to be processed at a later date would be a basis to
void coverage.
See American Hardware Mut. Ins. Co., 885 F.2d at
137 (4th Cir. 1989) (if insurer has required premium as condition,
insured’s tender of worthless check in satisfaction of resulting
“condition precedent” would render any apparent coverage void ab
initio); Megee v. U.S. Fidelity & Guaranty Co., 391 A.2d 189, 19192 (Del. 1978)(If prepayment of the initial premium is made a
condition precedent, in the absence of a waiver of the provision by
the insurer, the insurance contract is not consummated, nor is the
risk assumed by the insurer, until payment is made); Markel
American Ins. Co. v. Pedraza, 1999 AM.C. 2152, 1999 WL 1293478
(S.D. Fla. 1999)(unsuccessful attempt to pay premium by credit card
does not constitute payment), rev’d in part, vacated in part, 252
F.3d 1359 (11th Cir. 2001)(without opinion); Travelers Indemnity Co.
v. Mirlenbrink, 345 So.2d 417 (Fla. 2nd DCA 1977(insurer not
estopped from returning invalid payment despite cashing insured’s
13
check).)
Moreover, we do not find that Plaintiffs’ assertion that
Defendant’s manager, Kristen Shopshear, admitted to Crystal
Genovese that Defendant’s Third Party Credit Card administrator
frequently made mistakes, creates a material issue of fact as to
whether or not payment was made.
While we are certainly aware of
authority that “an insurer will not be permitted to take advantage
of the failure of the insured to perform a condition precedent
contained in the policy, where the insurer itself is the cause of
the failure to perform the condition”
Wise v. American General
Life Ins. Co., 459 F.3d 443, 448 (3d Cir. 2006) (citing Fratto v.
New Amsterdam Cas. Co., 434 Pa. 136, 252 A.2d 606, 607
(1969)(internal quotations omitted)), we find that this is not a
case where the insurer frustrated the payment or was “the cause of
the failure to perform the condition.”
On April 6, 2010, shortly
after the credit card numbers Decedent provided could not be
processed, Defendant wrote Decedent informing her of the issue and
giving Decedent another opportunity to effectuate payment.
13-1 at 28.)
(Doc.
Therefore, this is not a case where a defendant
insurer sits back and does nothing after a payment could not be
processed while the applicant falsely believes they have coverage.
Additionally, Defendant contends that the credit card numbers
received from Decedent were indecipherable and therefore has a
valid, justifiable argument as to why the initial credit card
14
numbers could not be processed.
We further find that Decedent’s untimely mailing of a second
authorization to charge her credit card does not support
Plaintiffs’ claim in this case.
As noted above, after receiving
correspondence from Defendant that the credit card payment could
not be processed, Decedent signed a second credit card
authorization on April 17, 2010, and resubmitted it to Defendant.
(Doc. 19 at 5.)
According to Plaintiffs, Defendant chose not to process the
second attempted payment because of the intervening death of
insured, although it had been received by mail.
(Id.)
Plaintiffs
argue this is contrary to the written contractual obligation of the
Defendant, and contrary to the tender requirements of premium
payments in the Commonwealth of Pennsylvania.
Again, we are not persuaded.
(Id.)
In the supporting affidavit of
Kristen Shopshear, Defendant asserts that this second authorization
was not received until April 28, 2010, four days after Decedent’s
death.
Plaintiffs do not contest this fact.
Because Defendant’s
offer of coverage to Decedent was effectively null and void at the
time of her death on April 24, 2010, we agree with Defendant that
there was no purpose to attempting to complete this charge.2
2
While we would have liked to see additional corroboration of
Shopshear’s affidavit with a postmarked envelope as further
evidence of the date of receipt, or a detailed explanation as to
how the mail is processed by Defendant, we find the unopposed
affidavit sufficient evidence.
15
Plaintiffs have offered no contradictory evidence that it was
received by Defendant earlier than April 28, 2010.
Moreover, as
Defendant’s counsel explained at oral argument, it would not be
practical to expect an insurance company to keep every postmarked
envelope that comes through the mail.
Furthermore, even if Defendant had charged Decedent’s credit
card pursuant to the second authorization when it received it on
April 28, 2010, as Plaintiffs suggest it should have, that fact
would not change the result in this case.
The Insurance
Certificate plainly states that coverage could only become
effective if it actually received Decedent’s premium payment at its
offices during Decedent’s lifetime.
Obviously, that condition
could no longer be satisfied as of the date of Decedent’s death.
Finally, we find Plaintiffs’s assertion that issuance of the
Insurance Certificate itself created coverage is misguided.
Under
the law, the issuance of the Insurance Certificate equates only to
an offer of insurance, which Decedent had 31 days to consider and
could only accept by paying the premium in her lifetime.
(Id.
(citing Wise v. Am. Gen. Life. Ins. Co., Civ. A. No. 04-3711, 2005
U.S. Dist. LEXIS 4540, *9 (E.D. Pa. 2005)(“issuance of written life
insurance policy was merely proposal to contract)(citing Recupito
v. Inter-Ocean Ins. Co., 362 F. Supp. 577, 580 (D.C. Pa. 1973))).)
Ultimately, having considered the arguments and record
evidence before us, we find there is no issue of material fact as
16
to whether the first premium payment was made in accordance with
the policy.
Because the premium payment was not made prior to
Decedent’s death, the life insurance policy never became effective.
Even construing the facts in the light most favorable to
Plaintiffs, we find no genuine issue of material fact exists
concerning whether this condition precedent to coverage was met.
Accordingly, we will grant Defendant’s motion for summary judgment
on this ground.
B.
Misrepresentations about Smoking and Health
We also find that Decedent’s material misrepresentations of
her nicotine use made in her Application for Life Insurance
preclude coverage and warrant summary judgment in this case.
It is black-letter law that an insurance contract procured
through misrepresentations is void.
An insurer demonstrates such
invalidity of a policy by demonstrating that: (1) the insured made
a false representation; (2) which she knew was false or it was made
in bad faith; and (3) the misrepresentation was material to the
risk being insured.
N.Y. Life Ins. Co. v. Johnson, 923 F.2d 279,
281 (3d Cir. 1991)(citing Lotman v. Security Mut. Life. Ins. Co.,
478 F.2d 868, 870 (3d Cir. 1973)); Shafer v. John Hancock Mut. Ins.
Co., 410 Pa. 394, 398, 189 A.2d 234, 236 (1963); A.G. Allebach,
Inc. v. Hurley, 373 Pa. Super. 42, 52, 540 A.2d 289, 294 (1988).
A misrepresentation - or fraud - is defined as:
“[A]nything calculated to deceive, whether by
single act or combination, or by suppression of
17
truth, or suggestion of what is false, whether it
be by direct falsehood or by innuendo, by speech
or silence, word of mouth or look or gesture.”
Rohm & Haas Co. v. Cont’l Cas. Co., 566 Pa. 464, 477, 781 A.2d
1172, 1179 (2001)(quoting Moser v. Desetta, 527 Pa. 157, 589 A.2d,
682 (1991)).
Misrepresentations are presumptively made in bad faith when
knowingly or recklessly made.
Burkert v. Equitable Life Assurance
Soc’y of Am., 287 F.3d 293, 298 (3d Cir. 2002); Solodky v. Peoples
Benefit Life Ins. Co., Civ. A. No. 05-2555, 2005 U.S. Dist. LEXIS
31236, * 13 (E.D. Pa. Dec. 6, 2005); Am. Home Assurance Co. v. The
Church of Bible Understanding, Civ. A. No. 03-6052, 2006 U.S. Dist.
LEXIS 63859, *18-19 (E.D. Pa. Sept. 6, 2006)(statements made by an
insurance broker are presumptively made in bad faith by the insured
when he signed the application without reviewing it).
Fraud is typically inferred from a case’s facts.
Rohm v. Haas
Co., 566 Pa. at 476-77, 781 A.2d at 1179:
[F]raud “is never proclaimed from the housetops
nor is it done otherwise than surreptitiously with
every effort usually made to conceal the truth of
what is being done. So fraud can rarely if ever
be shown by direct proof. It must necessarily be
largely inferred from the surrounding
circumstances.”
This is particularly true when the facts make it unlikely the
misrepresentation was a mistake.
Solodky, 2005 U.S. Dist. LEXIS
31236, *12 (quoting Derr v. Mut. Life Ins. Co., 351 Pa. 554, 558,
41 A.2d 542, 544 (1945)).
This presumption enables courts to
18
enforce the requirement that an insured “‘impart [her] knowledge to
the company in [her] answer to the question.’”
Id.
A misrepresented fact is material to insurance coverage when
it “‘increases the risk, or which, if disclosed, would have been a
fair reason for demanding a higher premium.’”
N.Y. Life Ins. Co.,
923 F.2d at 282; McCaffrey v. Knights & Ladies of Columbia, 213 Pa.
609, 612 (1906)(“anything which increases the risk cannot be said
to be immaterial”).
Under this rule, courts deem insurance policies obtained
through an insured’s misrepresentation to be void even if the
insurer would have issued the policy had it known the truth, but
only with limitations or at a higher premium.
Id.; accord Rohm &
Haas Co., 566 Pa. at 477, 781 A.2d at 1179; A.G. Allebach, 373 Pa.
Super. at 52-53, 540 A.2d at 295.
Defendant argues that here Decedent’s denial of nicotine
twelve months before her application was false.
(Doc. 15 at 21.)
In support of this argument, Defendant argues that just four months
before she signed the Application, Decedent told her doctor she
continued to smoke one to one and-a-half packs of cigarettes a day.
(Id.)
In addition, on the day of her death, her husband told
emergency medical personnel that she smoked and characterized the
frequency and amount as “a lot.”
(Id.)
Similarly, Decedent’s
medical records contain a long history of similar admissions.
(Id.)
19
Defendant asserts that given these facts a reasonable juror
could not conclude that Decedent’s denial of nicotine use was
truthful or made by mistake.
(Id. at 22.)
According to Defendant,
Decedent knew full well she was lying and did so in bad faith, with
the intent of inducing Defendant into insuring her at a lower
premium that it would have otherwise.
(Id. (citing Rohm & Haas
Co., 566 Pa. at 476-77, 781 A.2d at 1179; Solodky, 2005 U.S. Dist.
LEXIS 31236, at *12).)
Defendant asserts that these
misrepresentations were material because they go directly to the
risk of being insured and the premium amount to be charged for the
coverage.
283).)
(Id. at 22 (citing N.Y. Life Ins. Co., 923 F.2d at
Defendant relied on these misrepresentations when it
approved Decedent’s Application and provided her the premium
reserved to non-smokers, and had it known the truth, it would have
charged her nearly twice the premium as the one she received.
(Id.
at 22.)
In her Application for insurance, Decedent also denied seeking
treatment for or being diagnosed with a tumor, high blood pressure,
or chest pain.
(Id.)
Defendant argues, however, that Decedent’s
medical records reveal these representations were also false.
(Id.)
Defendant asserts that Decedent underwent extensive medical
testing in 2004 concerning a tumor in her left lung.
(Id.)
Further, in 2006, Decedent was diagnosed with high blood pressure
which she acknowledged later when she sought medical treatment for
20
chest pain.
(Id. at 22-23.)
Defendant argues that had Decedent been truthful about her
smoking and medical history, Defendant would have denied her
application or charged her a higher premium.
(Id. at 23.)
Therefore, Defendants argue Decedent’s misrepresentations were
material to the coverage and would have voided any coverage she
received.
(Id. (citing N.Y. Life Ins. Co., 923 F.2d at 282-83;
Cummings v. Am. Gen. Life Ins. Co., Civ. A. No. 06-3468, 2008 U.S.
Dist. LEXIS 37157, at *15 (E.D. Pa. May 7, 2008)).)
In response to this argument, Plaintiffs argue that despite
Defendant’s contentions, material issues of fact remain.
at 6.)
(Doc. 21
First, Plaintiffs argue a dispute of fact exists as to
whether the Decedent used nicotine products during a twelve month
period prior to application.
(Id.)
According to Plaintiffs, there
is no evidence direct, indirect, or otherwise, of nicotine product
use during the relevant period.
(Id.)
Plaintiffs argue that any
reference in the medical records to Decedent smoking related to her
history prior to the relevant time period.
(Id.)
With regard to the tumor, Plaintiffs argue the alleged failure
to disclose the fact of a prior tumor is not supported by
Defendant’s evidence as submitted.
(Doc. 19 at 7.)
According to
Plaintiffs, there is no proof offered that Decedent had a tumor,
but rather a benign nodule, non-cancerous and with no resulting
treatments.
(Id.)
Contrary to Defendant’s allegations, Plaintiffs
21
argue, the medical records clearly and repeatedly note the
existence of a benign nodule, or lung nodule, solitary pulmonary
nodule, or soft tissue nodule, but none state that a tumor existed.
(Id.)
Finally, Plaintiffs argue the evidence read in the light most
favorable to Plaintiff shows no evidence of, or knowledge by
Decedent of, the existence of other medical conditions warranting
denial of coverage.
(Id.)
Plaintiff argues that Defendant has not
submitted irrefutable proof of fraud.
(Id.)
Again, even when construing the facts in the light most
favorable to Plaintiff, we find summary judgment appropriate here.
Pivotal to this determination is Decedent’s own admission about her
nicotine use to her physician on December 16, 2009.
Here, while
getting medical care for a chronic cough, Decedent unequivocally
stated that she “continues to smoke 1 to 1 ½ ppd” just four months
prior to her death and within the relevant 12-month pre-application
time frame.
Importantly, Plaintiffs do not challenge the
authenticity or accuracy of this document and there is no viable
dispute about whether Decedent made this statement.
While Plaintiffs offer the affidavits of Guiseppe and Crystal
Genovese in opposition to this evidence, we find these affidavits
nebulous at best.
The affidavits merely claim that they did not
personally witness Decedent smoking after January 2009.
However,
lacking from the nondescript affidavits is any indication that they
22
would have a basis to know if Decedent was still smoking.
“They do
not claim they were in a position to see her smoking or that it was
somehow impossible - or even difficult - for Decedent to hide her
smoking from them.”
(Doc. 22 at 4.)
As Defendant argues, regardless of whether Decedent hid her
smoking from Plaintiffs, the undisputed fact remains that she told
her physician in December of that year that she was smoking.
We
agree with Defendant that “there is no basis to support a
suggestion that Plaintiffs’ purposed non-observations are somehow
more reliable on the issue of Decedent’s smoking than Decedent’s
own, unequivocal, statement to her physician, which she made while
seeking medical care.”
(Doc. 22 at 6.)
Accordingly, we find Decedent’s admission on December 16,
2009, patently inconsistent with her denial of having used nicotine
in any form in the twelve months prior to March 22, 2010 (the date
of Decedent’s Application), and find her denial of nicotine use on
the Application to be a material misrepresentation.
Finally, we find Plaintiff’s argument that Decedent’s
misrepresentation about her nicotine use should not vitiate the
claimed coverage because Defendant insured applicants who use
nicotine, albeit at a higher premium, similarly unavailing.
As
argued by Defendant, it is clear from the United States Court of
Appeals for the Third Circuit’s decision in N.Y. Life Ins. Co.,
that if an insurer would have charged a higher premium had it known
the misrepresented fact, the misrepresentation is material, and
23
therefore, coverage is void.
923 F.2d at 283.
Although unnecessary based on our determination with regard to
the premium payment issue, we find Decedent’s misrepresentations
about her nicotine use in the Application material.3
Accordingly,
we find such misrepresentation would void the coverage claimed by
Plaintiffs, and therefore grant Defendant’s motion for summary
judgment on this ground.
IV.
CONCLUSION
For the reasons discussed above, Defendant’s Motion for
Summary Judgment (Doc. 13) is granted.
This case will be closed.
An appropriate Order follows.
Dated: November 21, 2011 _________
S/Richard P. Conaboy
RICHARD P. CONABOY
United States District Judge
3
Because we have made our determination on the issues
discussed herein, we will not discuss, nor do we make any finding
on, Defendant’s additional arguments concerning Decedent’s
misrepresentations about other medical conditions.
24
IN THE UNITED STATES DISTRICT COURT
FOR THE MIDDLE DISTRICT OF PENNSYLVANIA
ESTATE OF CATHERINE GENOVESE
and GIUSEPPE GENOVESE,
:
:CIVIL ACTION NO. 3:11-CV-348
:
Plaintiffs,
:
:
v.
:(JUDGE CONABOY)
:
AAA LIFE INSURANCE COMPANY,
:
:
Defendants.
:
___________________________________________________________________
ORDER
AND NOW THIS 21st
day of November 2011, for the reasons
discussed in the accompanying Memorandum, it is hereby Ordered
that:
1.
Defendant’s Motion for Summary Judgment (Doc. 13) is
GRANTED;
2.
The Clerk of Court is directed to close this case.
S/Richard P. Conaboy
RICHARD P. CONABOY
United States District Judge
25
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