Radmer et al v. Royal Neighbors of America

Filing 33

ORDER signed by Judge J P Stadtmueller on 8/12/16 granting in part and denying in part 17 Defendant's Motion for Summary Judgment; denying 30 Plaintiffs' Motion to File a Surreply. See Order. (cc: all counsel) (nm)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN
BRIDGET RADMER and
KIMBERLY RADMER,
Case No. 15-CV-770-JPS
Plaintiffs,
v.
ROYAL NEIGHBORS OF AMERICA,

ORDER
Defendant.
In this civil suit, Plaintiffs Bridget Radmer and Kimberly Radmer (“the
Radmers”), allege breach of contract and bad faith insurance claims against
Defendant Royal Neighbors of America (“Royal Neighbors”) for denying
them benefits under a life insurance policy issued to their mother, Irene
Bramm. (Docket #1-2). This matter comes before the Count on Royal
Neighbors’ motion for summary judgment filed on May 31, 2016. (Docket
#17). On June 24, 2016, the Radmers filed their opposition (Docket #24) and,
on July 2, 2016, Royal Neighbors filed its reply (Docket #27). On July 9, 2016,
the Radmers filed a motion to file a surreply. (Docket #30). This matter was
recently reassigned to this branch of the Court on July 20, 2016, due to the
unavailability of Judge Rudolph T. Randa.
To begin, the Court will deny the Radmers’ motion to file a surreply.
The Local Rules do not allow for a surreply without leave of the Court, and,
upon reviewing the parties’ supporting materials, the Court has determined
a surreply is unnecessary in this instance. As such, the motion for summary
judgment is fully briefed and ready for disposition. As discussed in detail
below, the Court will grant the motion as to the bad faith claim and deny the
motion on the breach of contract claim. Material issues of fact exist as to the
breach of contract claim, and this matter will, therefore, proceed to trial.

1.

FACTUAL BACKGROUND
This case involves a dispute surrounding a life insurance policy Royal

Neighbors issued to Irene Bramm in 2013. Ms. Bramm is now deceased, and
the Radmers, Ms. Bramm’s daughters, bring this action as beneficiaries of the
policy. (DPFF ¶¶ 21-22).1 The parties agree on the majority of the background
facts and the Court will note any discrepancies when necessary.
1.1

Relevant Medical History

Ms. Bramm consulted Dr. Jeanne Palmer, an oncologist, on August 11,
2010, upon the advice of her primary doctor because of elevated protein
levels in her body. (DPPF ¶ 1). Dr. Palmer is a physician at Froedtert and the
Medical College of Wisconsin Cancer Center. (PPFF ¶ 44). On September 15,
2010, Dr. Palmer noted that a bone marrow biopsy on Ms. Bramm contained
“evidence of lymphoplasmacytic lymphoma” within the bone marrow.
(DPPF ¶ 2).2 Lymphoma is a form of cancer. (DPFF ¶ 3). Dr. Palmer noted
that Bramm’s elevated levels did “not appear to be resulting in symptoms”
but they would need to do “watchful waiting” and “follow up with repeat
labs in 3 months.” (DPFF ¶ 4).
On March 2, 2011, Dr. Palmer noted that Ms. Bramm “is a 55 year old
female with Lymphoplasmacytic lymphoma/Waldenstrom’s macroglobulinemia who comes in for follow up.” The doctor recommended a follow-up
visit in three months and lab work one week prior to the visit. (DPFF ¶ 5).

1

The cited facts are from the parties’ proposed findings of fact and
responses, unless otherwise indicated. (Docket #19, #24, #29) (defendant’s proposed
findings “DPFF” and plaintiffs’ proposed findings (“PPFF”).
2

The Court notes that there remains some uncertainty as to the exact date
of this incident. Some records indicate it occurred on September 22, 2010. This
uncertainty, however, is immaterial because the parties agree that it happened in
September 2010, regardless of the exact date. (Pls’ Response to DPFF ¶ 2).

Page 2 of 17

On either June 1, 2011, or June 3, 2011, Dr. Palmer reviewed Ms. Bramm’s lab
results and noted that Ms. Bramm “is a 55 year old female seen in follow up
for Lymphoplasmacytic lymphoma/Waldenstrom’s macroglobulinemia.”
The doctor again recommended a follow-up visit in three months and lab
work one week prior to the visit. (DPFF ¶ 6).3
On September 7, 2011, Dr. Palmer reviewed Ms. Bramm’s lab work
during an office visit. Dr. Palmer created a progress note which stated “Date
of

service:

9/7/2011

Diagnosis:

Lymphoplasmacytic

Waldenstrom’s macroglobulinemia.” (DPFF

lymphoma/

¶ 7). The parties dispute

whether the term “diagnosis” here refers to the September 2010 diagnosis or
whether the diagnosis occurred that day. (Pls’ Response to DPFF ¶ 7). On
December 14, 2011, Dr. Palmer again saw Ms. Bramm and reviewed her lab
results. During the visit, Dr. Palmer created a note which stated “Date of
service:

12/14/2011

Diagnosis:

Lymphoplasmacytic

lymphoma/

Waldenstrom’s macroglobulinemia.” The medical record further noted
“Assessment and Plan: 1. Lymphoplasmacytic lymphoma/Waldenstrom’s
macroglobulinemia… 6. She will follow up with a clinic visit in 6 mo, and
labs one week prior.” (DPFF ¶ 8).
On June 29, 2012, Dr. Palmer reviewed Ms. Bramm’s lab test results.
Her medical record stated “Date of service: 6/29/2012 Diagnosis:
Lymphoplasmacytic lymphoma/Waldenstrom’s macroglobulinemia.” The
medical record further noted “Assessment and Plan: 1. Lymphoplasmacytic
lymphoma/Waldenstrom’s macroglobulinemia… 4. She will follow up with
a clinic visit in 6 mo, and labs one week prior.” (DPFF ¶ 9).On December 12,

3

The Radmers believe this visit occurred instead on June 1, 2011. (Pls’
Response to DPFF 6). This discrepancy, however, is immaterial to the issues
presented on summary judgment.

Page 3 of 17

2012, Dr. Palmer reviewed Ms. Bramm’s lab work. The medical record
stated “Date of service: 12/12/2012 Diagnosis: Lymphoplasmacytic
lymphoma/Waldenstrom’s macroglobulinemia.” The medical record further
noted

“Assessment and Plan: 1. Lymphoplasmacytic lymphoma/

Waldenstrom’s macroglobulinemia … 4. She will follow up with a clinic visit
in 6 mo, and labs one week prior. She is to contact the BMT team with any
change in clinical status or concerns.” (DPFF ¶ 10).
On July 5, 2013, Dr. Palmer’s notes state that Ms. Bramm was seen by
Dr. Carlos Arce-Lara, who reviewed Ms. Bramm’s lab test results.
The “Hematology and Oncology Follow up note” stated “Date of service:
7/5/2013

Diagnosis:

Lymphoplasmacytic

lymphoma/Waldenstrom’s

macroglobulinemia.” The medical record further noted “Ms. Bramm is a 55
year old female with “Lymphoplasmacytic lymphoma/Waldenstrom’s
macroglobulinemia who comes in for follow up.” Dr. Arce-Lara
recommended that she “follow up with a clinic visit in 6 mo, and labs one
week prior.” (DPFF ¶ 11). The parties agree that Ms. Bramm was never
treated for internal cancer. (PPFF ¶ 16).
1.2

The Insurance Policy

On August 6, 2013, Ms. Bramm applied for a life insurance policy with
Royal Neighbors through an agent named Ryan Reilly (“Reilly”). (DPFF
¶ 12). The parties dispute whether Reilly was an independent agent or an
agent of Royal Neighbors. (Pls’ Response to DPFF ¶ 12). Ms. Bramm applied
for what is called a “simplified issue life insurance policy” in the sum of
$25,000.00. (PPFF ¶ 4). At the time Ms. Bramm signed this application, she
replaced a $10,000.00 policy in effect that Reilly had processed for her about
a month before. (PPFF ¶ 8).

Page 4 of 17

During their meeting, Reilly read a series of application questions to
Ms. Bramm and he filled out the answers. (PPFF ¶ 6). The parties dispute
whether Ms. Bramm’s daughter, Bridget Radmer, was present during the
meeting; Reilly asserts he has no recollection of her in the room whereas
Bridget Radmer testified she was present. (PPFF ¶ 9 and Def’s Response).
Immediately above question 2 in Part 2, Section 2, entitled “Medical
Questions” the following statement appears in bold and italic type set: “If
any answer to questions 2 through 7 is Yes, the Proposed Insured is not
eligible for ANY coverage.” (DPFF ¶ 13). Among other questions, the
Application asked Ms. Bramm:
6.

During the past 24 months, has the Proposed Insured
been diagnosed as having, or been treated for:
a.

Internal Cancer, Melanoma, or Leukemia?

(DPFF ¶ 14). In response to Question 6.a on the application, the box was
checked “no.” The parties dispute whether it was Reilly or Ms. Bramm who
checked the box. (DPFF

¶ 15 and Pls’ Response). Additionally, the

application contained a statement above Ms. Bramm’s signature that stated
“Agreement/Disclosure: I have read this application for life insurance
including any amendments and supplements and, to the best of my
knowledge and belief, all statements are true and complete.” (DPFF ¶ 16).
Additionally, it stated:
I also agree that:
•

My statements in this application and any
amendment(s), paramedical exam, and
supplement(s) are the basis of any certificate
issued .

Page 5 of 17

•

No information will be deemed to have been
given to Royal Neighbors unless it is stated in
this application and ame nd me nt (s ),
paramedical/medical exam, and any
supplement(s).

(DPFF ¶ 17). In addition to these written statements, Ms. Bramm verified her
answers to the questions in a recorded telephone call with Management
Research Services, Inc., a third party company which verifies an applicant’s
answers to the application questions. (DPFF ¶ 18).
Bridget Radmer testified that Ms. Bramm made her medical conditions
known to the agent, Reilly, prior to signing the application. (PPFF ¶ 10). In
contrast, Royal Neighbors maintains that Ms. Bramm made no mention of
lymphoma at the time of signing the application; specifically, Bridget Radmer
testified only that her mother told the agent that “she had been diagnosed
with cancer more than 24 months before the date of the application.” (Def’s
Response to PPFF ¶ 10). Bridget Radmer further testified that Reilly told her
mother to answer question 6 “no.” (PPFF ¶ 12). Royal Neighbors disputes
these assertions, however, and Reilly maintains that Bridget Radmer was not
present at this meeting. (Def’s Response to PPFF ¶ 12).
On September 10, 2013, Royal Neighbors issued a Whole Life
Insurance Policy, certificate number 10263425 (“the Policy”) to Ms. Bramm.4
Ms. Bramm’s application became part of the Policy pursuant to the “Entire
Contract” provision. (DPFF ¶ 20). Royal Neighbors did no underwriting
prior to issuing the Policy and Ms. Bramm gave authorization to investigate
any of her medical history. (PPFF ¶ 23)
4

The Court notes that the cited proposed finding of fact actually states that
Royal Neighbors issued the policy to a “Ms. Radmer.” However, the Court believes
this to be only a typographical error in light of the parties’ submissions and
arguments.

Page 6 of 17

1.3

Denial of the Policy Claim

On February 5, 2014, Ms. Bramm died. (DPFF ¶ 22). The death
certificate listed “cerebellar hemorrhage” as her immediate cause of death.
(DPFF ¶ 23). On or about February 6, 2014, Royal Neighbors received notice
of Ms. Bramm’s death from the agent, Reilly. (DPFF ¶ 24). On February 21,
2014, Kimberly Radmer, as a beneficiary of the Policy, signed a Statement of
Claimant, with a completed “Attending Physicians and Hospital
Information” form listing—“Dr. Jeanne Palmer, Hematology (Cancer
Treatment).” Because the Policy had been in force for less than two years,
Royal Neighbors sought review of Ms. Bramm’s medical records. (DPFF
¶ 26).
On April 24, 2014, Royal Neighbors reviewed the initial medical
records received, and determined it would need additional records from Dr.
Palmer. (DPFF ¶ 28). Royal Neighbors received the medical records from Dr.
Palmer on May 16, 2014. (DPFF ¶ 29). On June 18, 2014, Royal Neighbors
made an initial determination to deny the claim. (DPFF ¶ 30). Royal
Neighbors informed the Radmers that Ms. Bramm answered “no” to the
question of whether she had been diagnosed as having, or been treated for
Internal Cancer, Melanoma, or Leukemia during the past 24 months. (DPFF
¶ 31). Royal Neighbors explained that it believed that Ms. Bramm had been
diagnosed as having internal cancer during the applicable time frame. (DPFF
¶ 32). Royal Neighbors further explained that if the “true facts” had been
disclosed in the application, Royal Neighbors would not have issued the
Policy. (DPFF ¶ 33).
On July 31, 2014, Royal Neighbors sent a final denial letter to the
Radmers and returned the premium checks. (DPFF ¶ 34). The premium
refund checks were cashed, however, the parties dispute whether the
Page 7 of 17

Radmers cashed the checks. The Radmers maintain that Attorney Sarah
Snyder deposited the checks into the law firm trust account and sent a letter
to Royal Neighbors stating “this is not to be construed as acceptance of your
denial but rather to prevent the checks from going stale and having to
possibly be reissued.” (Pls’ Response to DPFF ¶ 35). On November 25, 2014,
Attorney Sarah Snyder informed Royal Neighbors that Ms. Bramm had
answered question 6 “no” based on the guidance of the its agent, Reilly, and
that Bridget Radmer was present during this exchange and heard this
discussion. (PPFF ¶ 41).
On May 8, 2015, Bridget Radmer and Kimberly Radmer filed this suit
in Washington County Circuit Court, alleging Royal Neighbors has breached
it contract to pay life insurance benefits and acted in bad faith in doing so.
(Docket #1-2). On June 25, 2015, Royal Neighbors removed the case to this
branch of the Court. (Docket #1).
2.

LEGAL STANDARD
“The court shall grant summary judgment if the movant shows

that there is no genuine dispute as to any material fact and the movant is
entitled to judgment as a matter of law.” Fed. R. Civ. P. 56(a); see also
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986); Celotex Corp. v. Catrett,
477 U.S. 317, 324 (1986); Ames v. Home Depot U.S.A., Inc., 629 F.3d 665, 668
(7th Cir. 2011). “Material facts” are those under the applicable substantive
law that “might affect the outcome of the suit.” See Anderson, 477 U.S. at 248.
A dispute over “material fact” is “genuine” if “the evidence is such that a
reasonable jury could return a verdict for the nonmoving party.” Id.
A party asserting that a fact cannot be or is genuinely disputed must
support the assertion by: “(A) citing to particular parts of materials in the
record, including depositions, documents, electronically stored information,
Page 8 of 17

affidavits or declarations, stipulations (including those made for purposes of
the motion only), admissions, interrogatory answers, or other materials; or
(B) showing that the materials cited do not establish the absence or presence
of a genuine dispute, or that an adverse party cannot produce admissible
evidence to support the fact.” Fed. R. Civ. P. 56(c)(1). “An affidavit or
declaration used to support or oppose a motion must be made on personal
knowledge, set out facts that would be admissible in evidence, and show that
the affiant or declarant is competent to testify on the matters stated.” Fed. R.
Civ. P. 56(c)(4).
3.

DISCUSSION
Royal Neighbors’ motion for summary judgment argues that: (1) it

properly rescinded Ms. Bramm’s insurance policy because she made a
material misrepresentation on her application; and (2) the bad faith claim
must be dismissed for the same reason or, alternatively, that it had a
reasonable basis for denying the insurance claim. (Docket #17). The Radmers
oppose the motion and argue that both claims involve factual disputes that
should be decided by a jury. (Docket #23). As discussed below, the Court
finds that: (1) material issues of fact preclude summary judgment on the
breach of contract claim; and (2) Royal Neighbors is entitled to summary
judgment on the bad faith claim.
3.1

Breach of Contract

Royal Neighbors argues it cannot be liable for the breach of contract
claim because it was entitled as a matter of law to rescind Ms. Bramm’s life
insurance policy because she made a material misrepresentation on her
policy application. Specifically, Royal Neighbors argues that Ms. Bramm
made a material misrepresentation when she denied that she had been

Page 9 of 17

diagnosed as having internal cancer within the 24 months preceding the
application. (Def’s Opening Br. at 7, Docket #18).
Because the policy involved in this suit was issued in Wisconsin,
Wisconsin law governs. Lexington Ins. Co. v. Rugg & Knopp, Inc., 165 F.3d
1087, 1090 (7th Cir. 1999); Kremers–Urban Co. v. Am. Employers Ins. Co., 119
Wis.2d 722, 351 N.W.2d 156 (1984). Wis. Stat. § 631.11(1)(b) sets forth the
conditions under which an insurer may rescind a policy on the basis of a
misrepresentation by the insured:
(b)
Misrepresentation or breach of affirmative warranty. No
misrepresentation, and no breach of an affirmative warranty,
that is made by a person other than the insurer or an agent of
the insurer in the negotiation for or procurement of an
insurance contract constitutes grounds for rescission of, or
affects the insurer's obligations under, the policy unless, if a
misrepresentation, the person knew or should have known
that the representation was false, and unless any of the
following applies:
1.
The insurer relies on the misrepresentation or
affirmative warranty and the misrepresentation or affirmative
warranty is either material or made with intent to deceive.
2.
The fact misrepresented or falsely warranted contributes
to the loss.
Put more succinctly, an insurer is entitled to rescission where it can
demonstrate: “‘(1) that (a) a misrepresentation was made and (b) the person
making it knew, or should have known, that it was false; and (2) either (a)(i)
the insurer relied on the misrepresentation, and (ii) that misrepresentation
was material, or (iii) it was made with intent to deceive; or (b) the
misrepresented fact contributed to the loss.’” La Plant v. Household Life Ins.
Co., No. 12-C-684, 2013 WL 3341054, at *2 (E.D. Wis. July 2, 2013) (quoting
Pum v. Wis. Physicians Serv. Ins. Corp., 2007 WI App 10, ¶¶ 9, 13, 298 Wis.2d
Page 10 of 17

497, 727 N.W.2d 346 (Ct. App. 2006) (emphasis in original). In looking to
“whether a statement was false, and whether the person making the
statement knew, or should have known, that the statement was false,” these
issues “are questions of fact for the jury.” Pum, 2007 WI App 10, ¶ 12, “If
there are disputed material facts as to any of these elements, or if differing
inferences as to these elements can be drawn from undisputed facts, [the
insurer] is not entitled to summary judgment.” Pum, 2007 WI App 10, ¶ 9.
(emphasis added).
The Radmers argue that Ms. Bramm did not make a misrepresentation
on her insurance policy because she was not diagnosed with cancer within
the 24-month period prior to her policy application. The question on the
policy application asked whether Ms. Bramm had “been diagnosed as
having, or been treated for” cancer within 24 month. The issue here is the
significance of the phrase “diagnosed as having” in the context of this
question.
In short, the Radmers argue that Ms. Bramm was diagnosed with
lymphoma only once, in September 2010, which was 35 months prior to
filling out the application, and well outside of the 24-month period. In
support, they look to various dictionary definitions of the term “diagnosis.”
For example they refer to: (1) Merriam-Webster dictionary’s simple definition
as “the act of identifying a disease, illness or problem by someone examining
someone or something”; and (2) Black’s Law Dictionary: “1. The
determination of medical condition by physical examination or by study of
its symptoms. 2. The result of such an examination or study.” (Pls’ Opp. at
5-6, Docket #23). As such, they argue that “a diagnosis is made at one time,”
and Ms. Bramm’s lymphoma diagnosis occurred in September 2010. As to
Ms. Bramm’s multiple follow-up visits within the relevant 24-month time
Page 11 of 17

frame, the Radmers argue that those visits did not involve any new
diagnosis, but rather only discussed her initial diagnosis from September
2010. (Pls’ Opp. at 11-12, Docket #23). In light of this reasoning, the Radmers
argue that Ms. Bramm did not make a false statement on her application
because her cancer diagnosis did not occur within 24 months of her
application and she was not receiving any treatment for the cancer. Based on
this interpretation, the Radmers argue a jury could find that Ms. Bramm
answered the question correctly or at least had reason to believe she
answered the question correctly.
In contrast, Royal Neighbors argues that Ms. Bramm’s statement on
the policy application was false because she visited her oncologist at least 5
times during the relevant 24-month period and received a cancer diagnosis
at each visit. In short, Royal Neighbors does not view Ms. Bramm’s cancer
diagnosis as a one time occurrence, but instead views it as something that
occurred on multiple occasions. Ms. Bramm submitted laboratory testing
prior to visits and her oncologist took a medical history and performed a
physical examination during each visit. Royal Neighbors argues that the
oncologist used this information to render a cancer diagnosis at each followup appointment. Royal Neighbors argues that Ms. Bramm would not have
repeatedly visited the oncologist unless it was to receive a current diagnosis
to assess her current state of health. (Def’s Reply at 6, Docket #27). Royal
Neighbors further argues that Ms. Bramm should have known her answer
on the application was false. As a licensed nurse, Ms. Bramm had more
medical knowledge than an average person and would have known she had
been diagnosed with cancer during the 24-month time frame.
Here, the Court will start and end its discussion with the first elements
of the misrepresentation analysis because it finds that factual issues preclude
Page 12 of 17

summary judgment. Wisconsin law makes clear that “whether a statement
was false, and whether the person making the statement knew, or should
have known, that the statement was false, are questions of fact for the jury.”
Pum, 2007 WI App 10, ¶ 12. Thus, to survive summary judgment, the
Radmers need only show that differing inferences can be drawn from the
elements such that a reasonable jury could find in their favor. See id., ¶ 9.
The parties’ competing arguments regarding the meaning of the term
“diagnosis”raises sufficient doubt as to whether Royal Neighbors was
entitled to rescind the contract. Certainly, dictionary definitions “can shed
only partial light on the reasonable understanding of an insured with regard
to words in the context of a particular insurance policy,” Sprangers v.
Greatway Ins. Co., 182 Wis.2d 521, 537, 514 N.W.2d 1, 7 (1994). However, the
Radmers’ reliance on the various definitions shows that a reasonable jury
could find that Ms. Bramm was not “diagnosed” with cancer within the 24month period prior to filling out the application. If a jury finds that Ms.
Bramm was diagnosed with lymphoma only once, in September 2010, then
her diagnosis would not have occurred within the 24-month time frame.
Based on these facts, a reasonable jury could find that Ms. Bramm answered
the question correctly and did not make a false representation on her policy
application.
Moreover, even assuming that the statement was indeed false, a jury
could still find that Ms. Bramm neither knew nor had reason to know that
the statement was false. The question of what Ms. Bram should have known
is an objective test. La Plant, 2013 WL 3341054, at *2. As discussed above, the
parties’ arguments show the two competing interpretations as to whether
Ms. Bramm was “diagnosed” with cancer within the relevant 24-month time
period. Given these interpretations, a reasonable jury could find that Ms.
Page 13 of 17

Bramm misunderstood the question and had no reason to believe she
answered it incorrectly. Although Royal Neighbors argues Ms. Bramm
should have known the answer was false in light of her training as a nurse,
no facts in the record support provide guidance as to how a nurse would
interpret the term “diagnosed” as opposed to a lay person.
Additionally, the parties dispute material facts regarding Ms. Bramm
answering the application questions. Bridget Radmer testified that she was
present in the room with Ms. Bramm and the insurance agent, Reilly. Ms.
Radmer maintains that Ms. Bramm told Reilly about her cancer diagnosis
more than 24 months before the application date, and that Reilly still
instructed Ms. Bramm to answer the question “no.” In contrast, Royal
Neighbors maintains that Ms. Radmer was not in the room with her mother
and further maintains that Ms. Bramm made no mention of lymphoma
during the conversation. (PPFF ¶¶ 10, 12 and Def’s Responses). When taking
the facts in the light most favorable to the Radmers, a jury could easily
conclude that, from Ms. Bramm’s perspective at least, she had no reason to
answer “yes” to the question about receiving a cancer diagnosis within the
last 24 months.
In sum, the Court finds that summary judgment is inappropriate on
the breach of contract claim. Based on the record before the Court, and taking
all inferences in favor of the non-moving party, there are genuine issues of
material fact that require resolution at trial by a fact-finder. A reasonable jury
could find that Ms. Bramm did not make a false statement on her application
or that she did not have reason to know that the answer was false. Thus, the
Court will deny Royal Neighbors’ motion for summary judgment as to the
breach of contract claim.

Page 14 of 17

3.2

Bad Faith Claim

The tort of bad faith is a separate intentional wrong which results from
a breach of a duty imposed by a contractual relationship. Anderson v.
Continental Ins. Co., 85 Wis.2d 675, 687, 271 N.W.2d 368 (1978). It is not a
tortious breach of contract. Id. The Wisconsin Supreme Court has recognized
bad faith claims to help “redress a bargaining power imbalance between
parties to an insurance contract.” McEvoy v. Group Health Coop. of Eau Claire,
213 Wis.2d 507, 518, 570 N.W.2d 397, 402 (1997).
To recover on a claim for bad faith, a plaintiff must prove: (1) “the
absence of a reasonable basis for denying benefits”; and (2) the insurance
company’s “knowledge or reckless disregard of the lack of a reasonable basis
for denying the claim.” Id. at 691. If the duty to pay is “fairly debatable,” that
is, if the company has investigated and developed the facts necessary to
evaluate the claim, and has not recklessly ignored or disregarded the facts
necessary to evaluate the claim, the company is entitled to argue that its
decision to deny benefits is fairly debatable. Id. However, if the company
knowingly fails “to exercise an honest and informed judgment,” such failure
“constitutes the tort of bad faith.” Id. at 692.
Royal Neighbors asserts that the decision to deny the claim was fairly
debatable. Its primary support for this is the Hejsak case. Hejsak v. Great-West
Life & Annuity Ins. Co., 331 F. Supp. 2d 756 (W.D. Wis. 2004). There, the
insured answered “no” to a question on the insurance application asking
whether he had a central nervous system disorder. Id. at 758-59. Upon the
insured’s death, the insurer denied the claim for coverage because the
medical records revealed that he had been diagnosed as “‘physically disabled
by spinal damage at multiple levels,’ [and required] ‘ongoing and regularly
scheduled medical care for multiple medical problems.’” Id. at 759. The
Page 15 of 17

parties disputed whether this diagnosis fell within the definition of a “central
nervous system disorder.” Id. at 762-65. The court agreed with the insurer
that the “discussion of spinal damage in Hejsak’s medical records suggests
that it had a reasonable basis” to deny the claim. Id. at 766. The court found
that “[a]lthough a reasonable person may not view his back injury as a
‘central nervous system disorder[,]’ …another reasonable person working for
the insurer might view it as such.” Id. at 767.
Here, Royal Neighbors is entitled to summary judgment on the bad
faith claim because the Radmers cannot prove the absence of a reasonable
basis for denying the claim. As discussed at length above, two competing
interpretations exist as to whether Ms. Bramm was diagnosed with cancer
within the 24-month time period prior to applying for insurance. Although
a jury may ultimately find a breach of contract, Royal Neighbors has put
forth a reasonable basis for denying the insurance claim. It is undisputed that
Ms. Bramm visited her oncologist 5 times during the relevant 24-month time
period. It is further undisputed that during these visits, Ms. Bramm’s treating
physicians noted “Diagnosis: Lymphoplasmacytic lymphoma/Waldenstrom’s
macroglobulinemia” in her medical records. (DPFF ¶¶ 8-11). As such, the
undisputed facts show that it was reasonable for Royal Neighbors to believe
that Ms. Bramm knew or should have known that she had been diagnosed
with cancer during the relevant 24-month time period. Finally, although the
Radmers argue that Royal Neighbors failed to properly investigate the claim,
the record does not support this assertion. The Radmers allege a poor
investigation because Royal Neighbors failed to inquire about whether Reilly
instructed Ms. Bramm to answer the relevant question “no.” However, Royal
Neighbors received this information in November 2014, which was after

Page 16 of 17

Royal Neighbors had already denied the Radmers’ claim. Thus, this alleged
poor investigation cannot support a claim for bad faith denial of the claim.
The Court finds that the Radmers cannot meet their burden to show
that Royal Neighbors acted in bad faith. See Anderson, 85 Wis.2d at 692, 271
N.W.2d at 377 (insured must establish that there was no reasonable basis for
denying the claim under objective standard). Thus, the Court will grant
Royal Neighbors’ motion as to the bad faith claim.
4.

CONCLUSION
In sum, the Court finds that: (1) material issues of fact preclude

summary judgment on the breach of contract claim; and (2) Royal Neighbors
is entitled to summary judgment on the bad faith claim. As such, the Court
will deny Royal Neighbors’ motion for summary judgment on the breach of
contract claim and grant the motion on the bad faith claim, and this matter
will proceed to trial.
Accordingly,
IT IS ORDERED that Royal Neighbors’ motion for summary
judgment (Docket #17) be and the same is hereby DENIED in part and
GRANTED in part as more thoroughly described above; and
IT IS FURTHER ORDERED that the Radmers’ motion to file a
surreply (Docket #30) be and the same is hereby DENIED.
Dated at Milwaukee, Wisconsin, this 12th day of August, 2016.
BY THE COURT:

J.P. Stadtmueller
U.S. District Judge

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