Opinion
Civil Action No. 04-1261, Section I/3.
April 13, 2005
ORDER AND REASONS
Before the Court is a motion for summary judgment filed on behalf of defendant, Protective Life Insurance Company, pursuant to Rule 56 of the Federal Rules of Civil Procedure. For the reasons set forth below, defendant's motion is GRANTED.
Background
This case arises out of an application for insurance filed by decedent James Howard for a term life insurance policy from defendant Protective Life Insurance Company ("Protective"). On March 25, 2004, plaintiff Regina Howard, decedent's wife, filed this lawsuit against Protective in state court alleging negligent delay in processing her husband's insurance application. On May 3, 2004, defendant removed plaintiff's action to this court. Defendant then filed this motion for summary judgment arguing that (1) plaintiff cannot proceed on a negligent delay in processing claim as decedent would not have been able to obtain insurance from another source; (2) decedent materially misrepresented information in the application; and (3) no insurance contract came into existence because the language of the insurance contract unambiguously states that the full first premium must be paid while the insured is alive and in the same health that the insured was in on the date of application.Relevant Facts
On or about April 3, 2003, decedent submitted a signed application for a $100,000.00 term life insurance policy to Mr. Gene Cannon, an insurance agent for Protective. As part of his application for life insurance, decedent was required to undergo a medical exam which was conducted on April 28, 2003. The insurance application also specifically contained the following requirements:(d) No insurance shall take effect unless:
(1) a policy is delivered to the Owner;
(2) the full first premium is paid while the proposed insured(s) is (are) alive; and
(3) there has been no change in health and insurability from that described in this application. . . . No agent or medical examiner has any authority to waive or to alter these terms and conditions or to bind coverage under any other circumstances.
Rec. Doc. No. 11, exhibit A-1.
On May 15, 2003, before the life insurance policy was issued, decedent was admitted to Lakeland Medical Center with complaints of abdominal pain and constipation and an abnormal CT scan. On May 19, 2003, decedent was given a preliminary diagnosis of cancer and on May 22 or 23, 2003, decedent was definitively diagnosed with pancreatic cancer.
Rec. Doc. No. 11, defendant's statement of uncontested facts, ¶ 13.
Rec. Doc. No. 11, defendant's statement of uncontested facts, ¶ 13. On May 19, 2003, decedent was diagnosed with Peritoneal Metatastic Disease. Id. at ¶ 17.
Rec. Doc. No. 12, exhibit F, plaintiff's deposition, p. 40.
More than two weeks after decedent was admitted to the hospital and diagnosed with cancer, on June 4, 2003, decedent's wife forwarded Mr. Cannon an authorization to withdraw funds from her bank account to pay the first premium on a ten (10) year term life insurance policy. Later that day, after submitting the authorization, plaintiff telephoned Mr. Cannon to verify that he had received the authorization for payment and she asked, "Are we now insured?" to which Mr. Cannon replied, "Yes, you are insured."
Rec. Doc. No. 11, ¶ 21. On June 4, 2003, well after decedent's diagnosis with cancer and admittance to the hospital, plaintiff inquired about a ten year term life insurance policy which had a less expensive premium rather than the fifteen year policy originally applied for by decedent. Plaintiff authorized payment for the ten year term life insurance policy with a lower first full premium in light of the fact that her "husband was sick." Rec. Doc. No. 12, exhibit F, pp. 77-78.
It is undisputed that decedent's insurance application was pending during the period of time between decedent's April 28, 2003, medical exam and June 4, 2003, when plaintiff authorized payment. The parties were in contact during that time through defendant's insurance agent, and plaintiff and decedent had been notified that the application was being processed and that the insurer was awaiting a legible medical report from a Doctor Ithed. Rec. Doc. No. 12, exhibit F, pp. 26-28.
Rec. Doc. No. 12, exhibit F, pp. 45-49, 82. Plaintiff further contends that during this telephone call she gave Mr. Cannon no information, false or otherwise, about her husband's health despite the fact that he had been diagnosed with pancreatic cancer and that he was in the hospital with gastrointestinal bleeding. Id. at pp. 29-30; see Rec. Doc. No. 11, defendant's statement of uncontested facts, ¶ 19.
Unfortunately, four days later, on June 8, 2003, decedent died of pancreatic cancer. However, Protective did not issue the policy until June 10, 2003, or mail it to plaintiff until June 12, 2003. On June 16, 2003, defendant debited plaintiff's bank account for the first premium, twelve days after plaintiff's authorization for payment and eight days after decedent's death.
Rec. Doc. No. 11, ¶ 4.
Rec. Doc. No. 12, exhibit F, p. 100.
Law and Analysis
Pursuant to Rule 56 of the Federal Rules of Civil Procedure, summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the record which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). The moving party need not produce evidence negating the existence of a material fact, but need only point out the absence of evidence supporting the nonmoving party's case. Celotex, 477 U.S. at 322-23, 106 S. Ct. at 2554; Fontenot v. Upjohn Co., 780 F.2d 1190, 1195 (5th Cir. 1986).
Once the moving party carries its burden pursuant to Rule 56(c), the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct. 1348, 1356, 89 L. Ed. 2d 538 (1986). That burden is not satisfied by creating merely some metaphysical doubt as to the material facts, by conclusory allegations, unsubstantiated assertions or by only a scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994) (citations omitted). The nonmovant may not rest upon the pleadings, but must identify specific facts that establish a genuine issue exists for trial. Id. The materiality of facts is determined by "the substantive law's identification of which facts are critical and which facts are irrelevant." Anderson v. Liberty Lobby, Inc. 477 U.S. 242, 248, 106 S. Ct. 2505, 2510, 91 L. Ed. 2d 202 (1986). Therefore, a fact is material if it "might affect the outcome of the suit under the governing law." Id. A dispute about a material fact is genuine if "the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Id. "Where the record taken as a whole could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Matsushita, 475 U.S. at 587, 106 S. Ct. at 1356.
In order to demonstrate that summary judgment should not lie, the nonmoving party must "go beyond the pleadings and by her own affidavits, or by the 'depositions, answers to interrogatories, and admissions on file,' designate 'specific facts showing that there is a genuine issue for trial.'" Celotex Corp., 477 U.S. at 324, 106 S. Ct. at 2553; Auguster v. Vermillion Parish School Board, 249 F.3d 400, 402 (5th Cir. 2001). A court will resolve factual controversies in favor of the nonmoving party, "but only when there is an actual controversy, that is, when both parties have submitted evidence of contradictory facts." Little, 37 F.3d at 1075. The Court will not, however, in the absence of any proof, assume that the nonmoving party could or would prove the necessary facts. See id. (citing Lujan v. Nat'l Wildlife Fed'n, 497 U.S. 871, 888, 110 S. Ct. 3177, 3188, 111 L. Ed. 2d 695 (1990)).
[T]he plain language of Rule 56(c) "mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial. In such a situation, there can be "no genuine issue as to any material fact," since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial.Celotex, 477 U.S. at 322-23, 106 S. Ct. at 2552; see Munoz v. Orr, 200 F.3d 291, 307 (5th Cir. 2000) ("A complete failure of proof as to one element requires summary judgment against the entirety of the claim.") (citation omitted).
The Life Insurance Policy
Plaintiff contends that summary judgment is precluded because a genuine issue of material fact exists with respect to whether defendant negligently and unreasonably delayed in processing decedent's application and whether the policy would have issued but for defendant's neglect.
Rec. Doc. No. 12.
Defendant contends that even if the time period between decedent's application and issuance of the policy was unreasonable, the plaintiff has not shown that decedent would have been able to secure insurance from another source. In support, defendant submits numerous medical reports regarding decedent's health during the period between his application and policy issuance. Defendant also contends that plaintiff's claim fails because the insurance application contained a health and insurability clause which required that the decedent's health remain unchanged before the policy issued. In support of both arguments, defendant notes that decedent was first given a preliminary diagnosis of cancer on May 19, 2003, just three weeks after his application-based medical examination.
Defendant also argues that its duty of promptness to plaintiff had not yet arisen because the first premium was not actually withdrawn from plaintiff's bank account until June 16, 2003, eight days after the insured's death. See Lamarque v. Massachusetts Indem. Life Ins. Co., 794 F.2d 194, 196 (5th Cir. 1986) (insurer's duty of promptness does not arise until one full premium payment is made); Antoine v. Sentry Life Ins. Co., 352 So. 2d 768, 770 (La.App. 3d Cir. 1977). Plaintiff argues that her June 4, 2003 authorization to withdraw funds to pay the premium triggered defendant's duty of promptness. Even assuming that defendant owed a duty of promptness on June 4, 2003, for the reasons discussed infra, the Court finds plaintiff's unreasonable delay claim unavailing.
Plaintiff contends that defendant waived its right to assert the insurance application's health clause as a defense by the actions of its agent. Specifically, plaintiff notes that on June 4, 2003, she contacted Mr. Cannon after submitting the authorization for payment of the first policy premium, and he told her that her husband was insured under the policy. Citing Carney v. Lone Star Life Ins. Co., 540 So. 2d 415, 418 (La.App. 1st Cir. 1989), plaintiff contends that defendant cannot argue that a policy would not have been issued because defendant in fact issued a policy, thereby waiving any uninsurability defense.
In Carney, the court disallowed the insurer's defense that the applicant was uninsurable based on "defendant's own grossly unreasonable conduct" in processing the applicant's application. Id. at 417. However, plaintiff's reliance on Carney for the proposition that an insurer is barred from asserting an uninsurability defense because it ultimately issued a policy is misplaced.
Plaintiff correctly recognizes that under certain circumstances, an agent's actions may waive certain defenses of an insurer. See Key v. Cherokee Credit Life Ins. Co., 298 So. 2d 892, 894 (La.App. 3d Cir. 1974) (reasonable reliance on representations of insurance agent estopped insurer from asserting uninsurability). However, an agent's actions will not waive defenses of an insurer when the provisions of the application make it clear that no contract of insurance exists until specific conditions have been met. See Independent Fire Ins. Co. v. Lea, 782 F. Supp. 1144, 1154-56 (E.D. La. 1992); Sanders v. Hartford Life Ins. Co., 350 So. 2d 945, 947 (La.App. 2d Cir. 1977) (even if an agent makes representations, where the agent's absence of authority was clearly set forth in the application, such conduct on the agent's part will not prevent the insurer from denying the existence of coverage).
In this case, the insurance application provided that the insured's health could not change before the policy issued. In addition, the application for insurance expressly stated that "no agent can make, alter or discharge any contract . . . or waive Protective Life's rights or requirements." Therefore, notwithstanding Mr. Cannon's alleged assurance that decedent's insurance was effective upon plaintiff's authorization for the first premium payment, defendant is not prevented from asserting the defense that the decedent was not in insurable health before the time of policy issuance.
Rec. Doc. 11, exhibit A-1, p. 4, ¶ (c).
"An insurance policy is a contract that constitutes the law between the parties." Marcus v. Hanover Ins. Co., 740 So. 2d 603, 606 (La. 1999) (citing Pareti v. Sentry Indem. Co., 536 So. 2d 417, 421 (La. 1988)). If the policy wording at issue is clear and expresses the intent of the parties, the agreement must be enforced as written. See Marcus, 74C So. 2d at 606; La.R.S. § 22:654 ("Every insurance contract shall be construed according to the entirety of its terms and conditions as set forth in the policy. . . ."); Albritton v. Fireman's Fund Ins. Co., 70 So. 2d 111 (La. 1953).
The Protective life insurance policy states:
Policy A Legal Contract. This policy is a legal contract between the Owner [decedent] and the Company [Protective]. The entire contract consists of the application (and any supplemental applications) and the policy, which includes any attached riders. Any application for reinstatement becomes a part of this policy if the reinstatement is approved by the Company. The Company has issued this policy in return for the application and the payment of premiums. Any change or waiver of its terms must be in writing and signed by Company's president . . . to be effective.
Rec. Doc. No. 11, exhibit A, p. 4.
Louisiana courts recognize the validity of health clauses in insurance contracts. See Taylor v. Sec. Indus. Ins. Co., 454 So. 2d 1260, 1263 (La.App. 2d Cir. 1984) ("'sound health' clauses do not violate public policy, and are therefore legally enforceable); Borer v. Sec. Indus. Life Ins. Co., 245 So. 2d 5, 7 (La.App. 1st Cir. 1971); Shuff v. Life Cas. Ins. Co. of Tenn., 114 So. 637, 639 (La. 1927). An insurer must show by clear and convincing evidence that the insured was not in sound health on the effective date of the policy before rendering a life insurance policy ineffective on the basis of a "sound health" clause. See Swain v. Life Ins. Co. of Louisiana, 537 So. 2d 1297, 1301 (La.App. 2d Cir. 1989). Permissible inferences which may be made in ordinary cases may not be made in cases involving "sound health" policies. Ryan v. Sec. Indus. Ins. Co., 386 So. 2d 939, 942 (La.App. 3d Cir. 1980). Furthermore, the insurer must adduce date specific proof that the insured was not in sound health at the precise time stipulated by the policy as determinative. See Taylor, 454 So. 2d at 1263.
Pursuant to the life insurance application, delivery of the policy and payment of the full first premium during the insured's life were conditions precedent to the decedent's life insurance policy taking effect. Defendant contends that neither delivery nor payment of the first premium occurred until after June 8, 2003, the date of Mr. Howard's death. Plaintiff argues that delivery and payment occurred on June 4, 2003, when she authorized payment of the first premium and received an assurance from defendant's agent that her husband was insured. Assuming that Mr. Cannon's oral representation constituted delivery of the policy and plaintiff's authorization for payment constituted legal payment, the first two conditions precedent for insurance would be met. However, as a third condition precedent to decedent's insurance policy being effective, the application also expressly states that there could be no change in the health of the applicant between the time of application and issuance of the policy.
Under Louisiana law, delivery is required for an insurance contract to be binding. Actual delivery, however, is not essential unless expressly made so by the terms of the agreement. John v. Gourmet Pizzas, Inc., 778 So. 2d 1223, 1226 (La.App. 4th Cir. 2001). The test for whether an insurance policy has or has not been delivered after its issuance so as to complete the contract and give it binding effect:
does not depend upon its manual delivery to, or possession by, insured, but rather upon the intention of the parties as manifested by their acts or words. The test of a sufficient delivery is whether the company or its agent intentionally parts with control or dominion of the policy or places it in the control or dominion of the insured or some person acting for him with the purpose of thereby making a valid and binding contract of insurance.Pruitt v. Great Southern Life Ins. Co., 12 So. 2d 261, 262 (La. 1942).
Defendant argues that delivery was not effected before decedent's death. However, plaintiff has presented evidence which suggests that when Mr. Cannon assured her that the policy was effective, although actual delivery had not occurred, sufficient delivery had been effected through the agent's acts or words.
Decedent's medical reports indicate that he was first diagnosed with cancer on May 19, 2003. During the insurance underwriting period, decedent received medical care and chemotherapy and he was under the care of multiple physicians. The decedent's health had significantly changed after the April 28, 2003, medical exam performed at decedent's home. On May 19, 2003, only three weeks after decedent's home exam (April 28, 2003) and less than six weeks after his initial application (April 3, 2003), he was diagnosed with cancer. Accordingly, based on the terms of the insurance policy and application, the Court finds that the policy never took effect because of decedent's material change in health and insurability before issuance of the policy.
Rec. Doc. No. 11, exhibits D and E.
Plaintiff intimates that she owed no duty to disclose her husband's health condition to Protective after he was diagnosed with cancer, but before his policy issued. Plaintiff also emphasizes that she made no misrepresentations to Protective or its agent in any communication with them. The Court has serious doubts about plaintiff's contention that Louisiana law does not require an applicant to inform an insurer of a material change in his health. See Walden v. Louisiana Ins. Co., 12 La. 134 (1838) ("[t]he underwriter has an undoubted right to be informed of every circumstance, which, creating or increasing the risk against which insurance is sought, may induce him to decline the insurance, or demand a higher premium." The United States Supreme Court has similarly recognized that principles of fair dealing "would seem to require [an applicant] to make a full disclosure" if, "while the company deliberates, he discovers facts which make portions of his application no longer true." Stipcich v. Metropolitan Life Ins. Co., 277 U.S. 311, 316, 48 S. Ct. 512, 513-14, 72 L. Ed. 895 (1928).
Unreasonable Delay Claim
In Louisiana, courts have long recognized the existence of a negligence claim for unreasonable delay in processing an insurance application. See Thomas v. Life Ins. Co. of Ga., 55 So. 2d 705, 706-07 (La. 1951). In order to establish an unreasonable delay claim, plaintiff must show that during the insurer's delay an insurable applicant would have applied elsewhere or could have received coverage from some other insurer. Gagnon v. Aetna Life Ins. Co., Civ.A. No. 93-1650, 1994 WL 25535, *1-*2 (E.D. La. Jan. 25, 1994); Antoine v. Sentry Life Ins. Co., 352 So. 2d 768, 770-71 (La.App. 3d Cir. 1977); Lamarque v. Massachusetts Indemnity Life Ins. Co., 794 F.2d 194, 196 (5th Cir. 1986) (citing Thomas, 55 So. 2d at 706-07)). What is a reasonable period depends upon the facts in each case, and the burden is on plaintiff to show that a policy would have issued but for the delay caused by the neglect of the insurer. Davis and Landry, Inc. v. Guaranty Income Life Ins. Co., 442 So. 2d 621, 623 (La.App. 1st Cir. 1983). "In addition, for plaintiff to have a claim under Louisiana law for unreasonable delay, the delay in processing the application must prevent plaintiff from obtaining insurance elsewhere." Gagnon, 1994 WL 25535, *3 (citing Antoine, 352 So. 2d at 770).
In spite of decedent's change in health, it is plaintiff's contention that if she and her husband had known how long it would take to process the insurance application, they could and would have sought insurance from another source before decedent's cancer diagnosis on May 19, 2003. However, plaintiff has failed to come forward with any evidence establishing that the decedent could have obtained insurance from another source within the time frame that defendant was processing decedent's application.
Furthermore, even if plaintiff could establish that the decedent could have obtained insurance elsewhere, in order to defeat summary judgment, plaintiff would need to identify evidence which would create a genuine issue of material fact with respect to defendant's unreasonableness in processing the decedent's application. Because the insurance policy required that there be no change in decedent's health, plaintiff can only prevail if she can show that it was unreasonable that Protective failed to issue an insurance policy before the decedent's cancer diagnosis on May 19, 2003. Analyzing the facts of this case, the Court finds that defendant's processing decedent's insurance application for more than six weeks from the date of his initial application and three weeks beyond the date of his medical exam is not unreasonable as a matter of law. See Duplissey v. Southern United Life Ins. Co., 385 So. 2d 540, 544 (La.App. 3d Cir. 1980) (held that 19 day delay was not unreasonable); Sanders v. Hartford Ins. Co., 350 So. 2d 945, 947 (La.App. 2d Cir. 1977) (held that 146 days, or 4 1/2 months, from date of application was not unreasonable); Duke v. Valley Forge Life Ins. Co., 341 So. 2d 1366 (La.App. 4th Cir. 1977) (held that a delay of 47 days was not unreasonable).
Plaintiff also argues that attorney's fees should be awarded in addition to the fees statutorily set out in Louisiana's Revised Statutes. Because the Court has determined that defendant is entitled to summary judgment, the Court does not address plaintiff's claim for attorney's fees.
For the above and foregoing reasons,
IT IS ORDERED that defendant's motion for summary judgment is GRANTED and plaintiff's claims are DISMISSED WITH PREJUDICE.