Robertson et al v. Cincinnati Life Insurance Company et al

Filing 115

MEMORANDUM OPINION and ORDER denying Plaintiff's 108 RENEWED MOTION for Order Compelling Discovery. Signed by Magistrate Judge Cheryl A. Eifert on 10/4/2018. (cc: counsel of record) (jsa)

IN THE UNITED STATES DISTRICT COURT
FOR THE SOUTHERN DISTRICT OF WEST VIRGINIA
HUNTINGTON DIVISION
HEATHER ROBERTSON,
individually and as the personal
representative of Jon Robertson,
deceased,
Plaintiff,
v.

Case No.: 3:16-cv-04242

THE CINCINNATI LIFE INSURANCE
COMPANY, a foreign corporation,
Defendant.

MEMORANDUM OPINION and ORDER
Pending is Plaintiff’s Renewed Motion for Order Compelling Discovery and
supporting memorandum. (ECF Nos. 108, 109). Plaintiff seeks an order compelling the
defendant, The Cincinnati Life Insurance Company, to produce financial information
relevant to Plaintiff’s claim for punitive damages. Plaintiff argues that she is “now able to
establish a prima facie case that Defendant’s conduct resulting in the ultimate denial of
her claim for life insurance benefits was grossly negligent, reckless, malicious and/or
intentional.” (Id. at 1). Defendant has filed a response in opposition to the motion, (ECF
No. 111), and Plaintiff has filed a reply memorandum. (ECF No. 113). Therefore, the
motion is fully briefed. Having carefully considered the arguments and supporting
evidence, the undersigned DENIES the Renewed Motion to Compel for the reasons set
forth below.

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I.

Relevant Facts and History
On January 3, 2013, Jon Robertson applied for life insurance from Defendant.

Question No. 30 of the insurance application asked whether “[i]n the last ten years,” Mr.
Robertson “had or [had] been told by a medical professional” that he suffered from any
of twenty or so medical conditions and symptoms, including “chest pain.” (ECF No. 16-1
at 23). Out of the listed conditions and symptoms, Mr. Robertson disclosed only that he
had high blood pressure. (Id.). Question No. 34 of the application asked whether Mr.
Robertson “had ever used tobacco or nicotine products.” If a “yes” answer was given, Mr.
Robertson was instructed to provide information about what products he used; how much
he used; whether he still used them; and when he quit using them, if he no longer used
them. (Id.). Mr. Robertson indicated that he had never used tobacco or nicotine products.
(Id.). At the conclusion of the application form, Mr. Robertson agreed that the answers
he had given were true and complete to the best of his knowledge and belief. (Id. at 24).
He acknowledged that the answers would become part of any policy issued and any false
statement or misrepresentation could result in the loss of coverage under the policy. (Id.).
On January 30, 2013, Defendant issued a policy of insurance on the life of Jon
Robertson, partly in reliance on the information provided by Mr. Robertson in the
application. (ECF No. 16-1 at 2). The policy included an incontestability clause, which
prevented Defendant from challenging a claim made under the policy, except in limited
circumstances, once the policy had been in effect for two years from the date of issue. (Id.
at 15). However, if the insured were to die prior to expiration of the two-year
“contestability” period, Defendant automatically investigated any claim asserted under
the policy. (ECF No. 108-1 at 3-4).

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In September 2014, Jon Robertson developed symptoms of esophageal cancer, a
disease which ultimately claimed his life on January 13, 2015. (ECF No. 109 at 1). A few
weeks after Mr. Robertson’s death, Plaintiff submitted a claim with Defendant under her
husband’s life insurance policy. Because Mr. Robertson died within the contestability
period, Defendant conducted an investigation to verify that the information contained on
the application for insurance was true and accurate. (ECF No. 111 at 3). As part of that
investigation, Defendant obtained medical records from various health care providers
who had seen and treated Jon Robertson in the five years preceding his death. (Id.). Based
upon notations in some of these records, Defendant concluded that Mr. Robertson had
made material misrepresentations in his insurance application. Therefore, Defendant
rescinded the policy and denied Plaintiff’s claim for benefits.
The specific records that led to Defendant’s decision included an office note
detailing a visit Mr. Robertson had with his family physician, Dr. Gregory Holmes of
Valley Health, on December 26, 2012—eight days before Mr. Robertson completed the
insurance application. The office note documented Mr. Robertson’s chief complaints as
body aches, cough, and nasal congestion for two days and stated that he was complaining
that his “chest feels like it has razor blades in it.” (ECF No. 111-3 at 8). A second record
flagged by Defendant was dated January 25, 2013, less than one month after Mr.
Robertson completed the insurance application. This record involved a visit Mr.
Robertson made to Nurse Practitioner Mary Adams at Valley Health and indicated that
Mr. Robertson was following up on chest pain that radiated to his neck, which occurred
once per week and had been present for six months. (ECF No. 111-3 at 10-11). Based on
his symptoms, Mr. Robertson was eventually referred to King’s Daughters Medical Center
for a cardiac work-up. In a third record, prepared on February 6, 2013 by Dr. Eric
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Bronstein, a cardiothoracic surgeon at King’s Daughters Medical Center, and his nurse
practitioner, Mr. Robertson reiterated a history of pain in the left chest that had been
present for five to six months, which would radiate at times into his neck, was aggravated
by exertion, and was alleviated with rest. (ECF No. 111-4 at 5). Finally, other records from
King’s Daughters Medical Center, where Mr. Robertson had a quadruple coronary artery
bypass grafting surgery performed by Dr. Bronstein in February 2013, include notations
that he was a “passive smoker” and a “former smoker” who smoked one cigarette per day.
In view of these notations, all of which appear in medical records prepared within two
months of the application and apply to the period surrounding the application, Defendant
concluded that Mr. Robertson had not provided accurate and complete information
regarding his history of chest pain and nicotine use.
In the letter denying Plaintiff’s claim, Defendant invited Plaintiff to submit any
other information that she wanted Defendant to consider related to the denial of benefits.
Accordingly, Plaintiff’s attorney sent Defendant thirteen affidavits submitted by family
and friends of Jon Robertson, all of whom contended that Mr. Robertson was not a
smoker and had not experienced chest pain prior to the date of his insurance application.
In addition, Nurse Melissa Hankins, who worked for Dr. Holmes, and Nurse Practitioner
Mary Adams signed affidavits denying that Mr. Robertson was a smoker or had chest
pain. A similar affidavit was sent on behalf of Dr. Holmes, although that affidavit was not
signed. (ECF No. 111 at 5). Defendant received the affidavits, but notified Plaintiff on
March 17, 2016 that Defendant had not changed its position. Accordingly, on April 4,
2016, Plaintiff instituted the instant action against Defendant alleging a variety of claims,
including breach of contract, common law bad faith, and violations of the West Virginia
Unfair Trade Practices Act.
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On January 17, 2017, Plaintiff served her first set of discovery requests, which
included requests for the production of Defendant’s financial statements, profit and loss
statements, and income tax returns for the years 2012 through 2016. Defendant objected
to these requests as irrelevant, arguing that Plaintiff was not entitled to discover
Defendant’s financial information until Plaintiff had established a prima facie claim for
punitive damages. In support of its position, Defendant relied upon Robinson v. Quicken
Loans, Inc., No. 3:12-0981, 2013 WL 1704839, at *4 (S.D.W. Va. Apr. 19, 2013). Plaintiff
made a motion to compel the financial documents. The motion was denied, as Plaintiff
had not supplied evidence sufficient to demonstrate a viable punitive damages claim.
(ECF No. 51). Plaintiff presently renews her motion to compel Defendant’s financial
information on the basis that she has now collected evidence sufficient to maintain a
prima facie claim for punitive damages and is thus entitled to the discovery.
II.

Relevant Legal Principles
In Robinson v. Quicken Loans, Inc., supra, this Court found that a plaintiff is

required to make a prima facie claim for punitive damages before being entitled to
discover a defendant’s financial records. Id., at *4. To satisfy this burden, the plaintiff
“must produce some factual evidence in support of [the] claim.” Id. “[S]ufficient
supporting evidence” includes affidavits, documentary evidence, testimony, interrogatory
responses and the like. Id, at n. 3. Merely stating a proper claim for relief, sufficiently
pleading factual allegations, and surviving a motion to dismiss are not adequate to
demonstrate a prima facie case.
In West Virginia, punitive damages may be awarded when a plaintiff establishes
“by clear and convincing evidence that the damages suffered were the result of the
conduct that was carried out by the defendant with actual malice toward the plaintiff or a
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conscious, reckless and outrageous indifference to the health, safety and welfare of
others.” W. Va. Code § 55-7-29 (2015); see, also, Martinez v. Asplundh Tree Expert Co.,
803 S.E.2d 582 (W. Va. 2017) (holding that W. Va. Code § 55-7-29 applies irrespective of
when the cause of action accrued or when the claim or suit is filed). As Defendant points
out, in the context of an insurance company’s refusal to pay an insured’s claim, punitive
damages are available only when the insurer’s refusal to pay “is accompanied by a
malicious intention to injure or defraud.” Hayseeds, Inc. v. State Farm Fire & Cas., 352
S.E.2d 73, 80 (1986).1 The Hayseeds court further explained a plaintiff’s burden as
follows:
[P]unitive damages for failure to settle a property dispute shall not be
awarded against an insurance company unless the policyholder can
establish a high threshold of actual malice in the settlement process. By
“actual malice” we mean that the company actually knew that the
policyholder's claim was proper, but willfully, maliciously and intentionally
denied the claim. We intend this to be a bright line standard, highly
susceptible to summary judgment for the defendant, such as exists in the
law of libel and slander, or the West Virginia law of commercial arbitration.
Unless the policyholder is able to introduce evidence of intentional injury—
not negligence, lack of judgment, incompetence, or bureaucratic
confusion—the issue of punitive damages should not be submitted to the
jury.
Id. at 80-81. Therefore, to make a prima facie claim for punitive damages in the present
action, Plaintiff must supply evidence showing that Defendant knew Plaintiff’s claim for
life insurance benefits was proper, yet nonetheless willfully, maliciously and intentionally
denied the claim.
Here, Defendant rescinded Mr. Robertson’s life insurance policy on the ground
that he made material misrepresentations in the application for insurance. Once the

Although Hayseeds, Inc., involved property insurance, the decision applies equally to life insurance
policies as they are first-party insurance agreements. D’Annunzio v. Sec.-Conn. Life Ins. Co., 410 S.E.2d
275, 279 (W. Va. 1991).

1

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policy was rescinded, Plaintiff’s claim was denied for lack of coverage. “For an insurer to
rescind a policy under West Virginia law on the basis of a misrepresentation made by the
insured, the insurer must establish that the misrepresentation falls under W. Va. Code §
33–6–7.” Massachusetts Mut. Life Ins. Co. v. Jordan, No. 3:10-cv-16, 2011 WL 1770435,
at *3 (S.D.W. Va. May 9, 2011). West Virginia Code § 33–6–7 provides that
misrepresentations, omissions, concealments of fact, or incorrect statements made by an
insured in an application for insurance do not constitute grounds for rescission of the
insurance policy unless: (a) they are fraudulent; or (b) they are material either to the
acceptance of the risk, or the hazard assumed by the insurer; or (c) the insurer in good
faith would either not have issued the policy or would not have issued a policy having the
same terms with respect to the amount or scope of coverage had the true facts been made
known to the insurer. W. Va. Code § 33-6-7. “[F]or an insurer to prevail under § 33–6–
7(a), the insurer must establish the insured's specific intent to deceive the insurer. … For
an insurer to prevail under §§ 33–6–7 (b) or (c), however, the insurer need only show that
the misrepresentation was material.” ALPS Prop. & Cas. Ins. Co. v. Turkaly, No. 2:16-CV10064, 2018 WL 385195, at *3 (S.D.W. Va. Jan. 11, 2018) (citations omitted). Materiality
is determined, based on an objective standard, “by whether the insurer in good faith
would either not have issued a policy in as large an amount, or would not have provided
coverage with respect to the hazard resulting in the loss, if the true facts had been made
known to the insurer as required either by the application for the policy or otherwise.” Id.
(quoting Massachusetts Mut. Life Ins. Co. v. Thompson, 460 S.E.2d 719, 724 (W. Va.
1995)). “[T]here need be no causal connection between the cause of death and the
misrepresentation” for the insurer to prevail under W. Va. Code § 33-6-7. Massachusetts
Mut. Life Ins. Co., 2011 WL 1770435, at *3.
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Applying this legal framework, the undersigned considers the evidence submitted
by Plaintiff.
III.

Plaintiff’s Prima Facie Case for Punitive Damages
Attached to her renewed motion, Plaintiff provides portions of deposition

testimony given by two of Defendant’s Rule 30(b)(6) designees: Jeremy Singer, an
employee in Defendant’s underwriting department, and Ann Binzer, Defendant’s VicePresident of Life Claims. (ECF No. 108-1). Plaintiff argues that this testimony “includes
sufficient evidence upon which a jury could conclude” that Defendant engaged in “grossly
negligent, intentional and/or malicious conduct” when reaching its decision to deny
Plaintiff’s claim for life insurance benefits. In particular, Plaintiff argues that Defendant’s
malicious conduct is manifest in the following actions and inactions:
1.

Defendant failed to have a written claims manual despite Section 114-14-8

of the Rules and Regulations of the West Virginia Insurance Commissioner, which
mandates that “every insurer shall adopt and communicate to all its claims agents written
standards for the prompt investigation and processing of claims.” (ECF No. 109 at 6).
Plaintiff further contends that Defendant’s failure to implement a claims manual violates
West Virginia Code § 33-11-4(9)(c), which holds that an insurer engages in an unfair trade
practice by failing “to adopt standards for the prompt investigation of claims arising
under insurance policies.” (Id.)
2.

Jeremy Singer testified that he decided that Mr. Robertson was a smoker

based on a few odd medical records, despite having collected numerous other medical
records to the contrary. (ECF No. 109 at 7-8). Mr. Singer admitted that an insurance
company is obligated to consider all relevant evidence pertaining to a claim for benefits,
even evidence that supports coverage. Nevertheless, Mr. Singer denied reviewing or
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considering the affidavits from Mr. Robertson’s family and friends, which unequivocally
stated that Mr. Robertson was a non-smoker. Indeed, Mr. Singer testified that he was
never provided with the affidavits by the claims department. (Id.).
3.

Ann Binzer testified that she made the decision to deny Plaintiff’s claim for

benefits on the basis that Mr. Robertson had made material misrepresentations in the
application for insurance regarding his history of chest pain and smoking. (Id. at 8). She
admitted, however, that there was only one physician visit prior to the application in
which Mr. Robertson discussed chest pain, and that visit was for sinusitis, not for any
chest-related condition. (Id. at 8-9). She further admitted that she never asked the
underwriting department if it would have refused to issue the policy if it had known about
that one visit for sinusitis. (Id. at 9). Ms. Binzer agreed that insurance companies are
required to perform thorough investigations before denying claims, yet conceded that she
never made any effort to clarify inconsistencies in Mr. Robertson’s medical records
regarding chest pain and nicotine use before she denied Plaintiff’s claim. Ms. Binzer
admitted that she received dozens of affidavits verifying that Mr. Robertson was not a
smoker and never complained of chest pain before applying for life insurance, yet Ms.
Binzer made no further effort to investigate the claim. To the contrary, she merely stood
on the denial, notwithstanding substantial evidence supporting the validity of Plaintiff’s
claim. (Id. at 10).
In response to Plaintiff’s motion, Defendant argues at the outset that Plaintiff
applies the wrong standard, emphasizing that Plaintiff must supply “some factual
evidence” that Defendant (1) knew Plaintiff’s claim was proper and (2) willfully,
maliciously, and intentionally denied it anyway. (ECF No. 111 at 10). With respect to the
claims manual, Defendant notes that West Virginia Code § 33-11-4-(9)(c) requires only
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“reasonable standards” for the prompt investigation of claims and § 114-14-8 of the Rules
and Regulations of the West Virginia Insurance Commissioner mandates only that there
be “written standards” for the prompt investigation and processing of claims. Neither of
these sections, therefore, require a written claims manual. Defendant asserts that it
produced to Plaintiff in discovery a set of “claim procedural notes,” which constitute
Defendant’s “written standards for the prompt investigation and processing of claims.”
(Id. at 13).
As to Plaintiff’s arguments regarding the testimony of Mr. Singer and Ms. Binzer,
Defendant contends that the picture painted by Plaintiff is skewed by the many
evidentiary gaps left in Plaintiff’s factual recitation. Defendant attaches the complete
deposition transcript of Ms. Binzer, as well as the transcripts of Ms. Robertson and several
medical providers, including Missy Hankins, RN; Mary Adams, NP; and Dr. Eric
Bronstein. (ECF Nos. 111-1, 111-2, 111-3, 111-4, 111-5). Defendant maintains that the
evidence establishes a few critical facts that are fatal to Plaintiff’s punitive damages claim.
First, Mr. Robertson’s medical records, which were collected after his death, contain
entries indicating that Mr. Robertson was a former smoker, who had been suffering from
intermittent chest pain for four to five months before he completed and submitted the life
insurance application to Defendant. Second, if Mr. Robertson had included full and
accurate information on his application about his chest pain and nicotine use, this
information would have been given to Defendant’s underwriters, and the underwriters
would not have issued Mr. Robertson’s life insurance policy. Third, Ms. Binzer denied
Plaintiff’s claim after being advised by the underwriting department that it would not have
issued the policy because of the information in the medical records that conflicted with
the answers in the insurance application. Fourth, although Mr. Singer did not review the
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affidavits of Mr. Robertson’s family and friends, Mr. Singer’s boss, Brad Behringer did
review them, and he advised Ms. Binzer that the underwriting department still would not
have issued the policy based upon the conflicting notations found in Mr. Robertson’s
medical record. Consequently, Defendant contends that Plaintiff has failed to produce any
evidence to satisfy the first prong of a punitive damages claim; that being, that the
Defendant knew Plaintiff’s claim was proper. Since Plaintiff cannot clear that hurdle,
Defendant contends, Plaintiff’s motion should be denied.
IV.

Discussion
There is no dispute that Jon Robertson died within the two-year contestability

period of the life insurance policy issued by Defendant. Consequently, when Plaintiff
made a claim for benefits under the policy, Defendant automatically investigated the
matter. As part of the investigation, Defendant collected Mr. Robertson’s medical records
from various health care providers, including Valley Health, King’s Daughters Medical
Center, and Dr. Eric Bronstein.
In these records, Defendant found several references to Mr. Robertson having
recurrent bouts of chest pain over a period of four to six months both before and after he
applied for life insurance. The chest pain was exacerbated by exertion, relieved by rest,
and sometimes radiated to his neck. The records also documented an episode of pain
approximately one week before Mr. Robertson applied for life insurance that was
described as feeling like razor blades in his chest. In addition to the references to chest
pain, the records included at least one notation that Mr. Robertson was a “former trivial
smoker” who used less than one cigarette per day. Given that the medical records were
prepared in close proximity to Mr. Robertson’s completion of the insurance application
and applied to the time period covered by the application, Defendant determined that Mr.
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Robertson made material misrepresentations in his insurance application.
Defendant’s conclusion was based on specific questions in the application that
asked Mr. Robertson if he had experienced any chest pain in the past ten years, or if he
has ever used any tobacco or nicotine products. Mr. Robertson did not divulge having any
chest pain and did not admit to ever using any nicotine or tobacco products. Ms. Binzer,
who was investigating Plaintiff’s claim, provided the records to Defendant’s underwriters.
The underwriters advised that had they been given the information contained in the
medical record, they would not have issued Mr. Robertson’s life insurance policy.
Plaintiff argues that Defendant’s rescission of the policy and denial of her claim
were grossly negligent or reckless; she certainly may be able to convince a jury of that
position. However, the evidence provided by Plaintiff to date simply does not satisfy the
high threshold of actual malice required to state a prima facie case of punitive damages.
To begin, Plaintiff’s allegation that Defendant violated West Virginia Code § 33-11-4(9)(c)
is not borne out by the record. The statute merely mandates the promulgation of
“standards,” not a claims manual, and Defendant produced in discovery what it contends
are written standards governing claims resolution.
While the deposition excerpts provided by Plaintiff focus largely on the paucity of
evidence proving that Mr. Robertson was a smoker, the record before the Court
establishes that Defendant also based its rescission and denial on Mr. Robertson’s failure
to disclose his ongoing bouts of chest pain, which radiated into his neck and apparently
pre-existed his insurance application by at least a few months. Although Plaintiff
vehemently denies the accuracy of records documenting that Mr. Robertson complained
in January and February 2013 of having five to six months of intermittent chest pain,
these records indeed corroborate Defendant’s belief that Mr. Robertson was and had been
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suffering from chest pain at the time he completed the insurance application. Moreover,
Mr. Robertson underwent a quadruple coronary bypass surgery approximately two
months after applying for life insurance, which tends to lend some credence to the
notations of ongoing left-sided chest pain.
Plaintiff argues that Defendant acted with malice by not performing a more
thorough investigation before denying the claim. However, the claim was denied based
upon the materiality of the notations in the medical record and their inconsistency with
the answers given by Mr. Robertson in the application. Ms. Binzer submitted the medical
information she collected to the underwriting department for an opinion as to whether
that information would have affected the issuance of Mr. Robertson’s life insurance
policy. In response, the underwriting department stated that it would not have issued Mr.
Robertson’s life insurance policy had it been provided with previously undisclosed
information. Put simply, at least in the view of Defendant’s underwriting department, Mr.
Robertson’s failure to disclose his history of chest pain and nicotine use constituted
material misrepresentations, which, alone, justified the rescission.
Mr. Singer, the underwriter, explained how Mr. Robertson’s medical information
was considered “from an underwriting perspective,” stating that when an underwriter
considers whether to issue a life insurance policy, these records are closely considered
and conservatively approached. (ECF No. 108-1 at 17). For example, any reference to
smoking leads to the presumption that the potential insured is a smoker. In the case of
conflicting information, the underwriter does not issue a life insurance policy until
additional investigation is conducted to determine “exactly what is going on.” (Id. at 18).
In this case, Mr. Singer testified that the references in Mr. Robertson’s records to smoking
and chest pain would have been enough to cause the underwriting department to refuse
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to issue a life insurance policy. Although Mr. Singer did not review the affidavits
submitted by Plaintiff after the claim denial, according to the evidence supplied by
Defendant, Mr. Singer’s supervisor reviewed the affidavits and advised that underwriting
still would not have issued the policy.
Plaintiff has not demonstrated with the evidence submitted to date that Defendant
knew Plaintiff’s claim for life insurance benefits was proper, but denied it nonetheless. To
the contrary, Defendant continues to contend that its denial was proper and provides its
rationale based upon Mr. Robertson’s medical records and application. As Plaintiff offers
no evidence that Defendant’s actions rose to the level of actual malice required by West
Virginia law, Plaintiff simply has not met her burden at this point in the litigation.
Therefore, the renewed motion to compel is denied.
The Clerk is directed to provide a copy of this Order to counsel of record.
ENTERED: October 4, 2018

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