Opinion
Civil Action No: 00-2211 SECTION: "J" (1).
June 15, 2001.
By a minute entry entered on May 3, 2001, this Court granted Defendant's Motion for Summary Judgment. The Court's reasons for granting the motion are stated below.
Background
On April 1, 1998, Metropolitan Life Insurance Company ("MetLife") issued Bryan J. Rowe ("Rowe") a life insurance policy for $250,000. Rowe died on January 22, 1999, due to pulmonary edema and congestion, secondary to drug abuse. Def's Ex. 4, Tab B. Joyce Rowe ("Plaintiff"), who is the named beneficiary of the policy and Rowe's mother, filed a claim with MetLife for recovery of the policy proceeds. The policy language included an incontestability clause which preclude the insurer from contesting the policy except within the first two years after the date of inception. MetLife conducted an investigation to determine applicability of coverage because Rowe's death occurred within the two year contestability period.
Plaintiff provided MetLife with preliminary medical information regarding Rowe's voluntary drug rehabilitation at Addiction Recovery Resources of New Orleans ("ARRNO"). MetLife examined the medical records from ARRNO and determined by Rowe's own admissions that he had a long history of drug and alcohol abuse. MetLife further reviewed the original insurance application and discovered that Rowe answered "No" to a question specifically addressing previous use of illegal drugs. Upon the conclusion that Rowe had misrepresented information regarding prior drug use, MetLife rescinded the policy on the basis that Rowe had made material misrepresentations on the insurance application, rendering the policy void ab initio. Subsequently, all premiums paid toward the policy by Rowe were returned to the Plaintiff.
Plaintiff filed suit asserting that as the beneficiary she was entitled to full recovery of the benefits under the policy. Following discovery, MetLife moved for summary judgment claiming that it would not have issued the policy had it known of Rowe's prior drug history. In opposition, Plaintiff argues that the underwriting department had discretion to issue a policy notwithstanding Rowe's prior drug use.
Discussion
Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is proper once the record shows "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." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). The moving party is entitled to judgment as a matter of law if the nonmoving party has failed to make a sufficient showing of the essential elements of its case for which it has the burden of proof at trial. Id.
MetLife's denial of Plaintiff's claim for benefits following its determination that the policy was Void from inception was based upon Louisiana Revised Statute, § 22:619(B), which states:
In any application for life or health or accident insurance made in writing by the insured, all statements therein made by the insured shall, in the absence of fraud, be deemed representations and not warranties. The falsity of any such statement shall not bar the right to recovery under the contract unless such false statement was made with actual intent to deceive or unless it materially affected either the acceptance of the risk or hazard assumed by the insurer.
La. Stat. Ann. § 22:619(B) (West 1995) emphasis added).
In Gay v. United Benefit Life Insurance Co., the Louisiana Supreme Court interpreted La. R.S. § 22:619(B) to require an insurer, who asserts this statute as a defense, to prove that material misrepresentations were made fraudulently or with intent to deceive and that the misrepresentations materially affected the risk assumed by the insurer. 96 So.2d 497, 498 (La. 1957) (emphasis added). The burden of proof is on the insurer to prove, in addition to the falsity of the statements, two additional elements: (1) materiality and (2) intent to deceive. Watson v. Life Ins. Co. La., 335 So.2d 518, 521 (La.App. 1st Cir. 1976) (quoting Stoma v. Prudential Ins. Co. Am., 281 So.2d 871 (La.App. 3d Cir. 1973)).
Intent to deceive does not require strict proof of fraud. Watson, 335 So.2d at 521. Intent may be determined from either knowledge of the falsity of the statement and its materiality to the risk or circumstances in which insured recognizes the statement to be material to the risk.Wohlman v. Paul Revere Life Ins. Co., 980 F.2d 283, 285 (5th Cir. 1992) (quoting Parfait v. Minnesota Mut. Life Ins. Co., 311 So.2d 558, 560 (La.App. 4th Cir. 1975)). The test of materiality considers whether the misrepresentation affected the acceptance of the risk assumed by the insurer. Wohlman, 980 F.2d at 286. The insurer must unequivocally show that had it had actual knowledge of the misrepresented facts, it would not have issued the policy. Id.
The standard MetLife insurance policy includes questions for the applicant to answer, which are used as the basis for issuing insurance. Question 12(f) of Part A states:
For any Yes answers to Items (a.) through (h.), give details below. Has any person proposed for insurance: (f.) Ever used heroin, cocaine, barbiturates or other drugs, except as prescribed by a physician or other licensed practitioner; or received treatment or advice from a physician or other practitioner regarding the use of alcohol, or the use of drugs except for medical purposes; or received treatment or advice from an organization which assists those who have alcohol or drug problems?See Def.'s Ex. 1, Tab A. Rowe answered "No" to question 12(f) and signed the application, attesting to the accuracy of all the statements and answers within. However, records obtained from ARRNO reveal that Rowe was admitted for drug rehabilitation in November of 1998 for abuse of alcohol, heroin, opiates, barbiturate, sedatives, cocaine and cannabis. While under treatment at ARRNO, Rowe conceded that he had been using drugs since the age of 15, was an intravenous drug user, had a problem with polydrug abuse and had previously been treated for drug abuse.
Given that the intent to deceive element is satisfied by Rowe's admissions in the ARRNO report, which are contrary to the application, the Court must now decide if Rowe's misrepresentation materially affected MetLife's decision to issue the policy.
MetLife asserts that the second prong of La. R.S. § 22:619(B) is satisfied based upon the fact that policy underwriters do not have discretion in issuing life insurance policies to habitual alcohol or drug abusers. See Def.'s Ex. 1, Tab D. MetLife's underwriting guidelines consider numerous factors in issuing policies to persons with previous drug dependencies. Id. These factors include the type, frequency and duration of drug use; history of multi-drug use, treatment or relapse; and the last time in which drugs were taken. Id. The 1994 guidelines specific to cocaine use state "a of three years since last use is required in order to be considered for insurance." Id. Applicants with a history of cocaine relapse within a previous three year period would automatically be declined. Id.
In opposition, Plaintiff argues that Rowe's failure to disclose prior drug use is not material because MetLife's underwriting guidelines were discretionary. According to the affidavit of Eleanor Katz, Senior Underwriting Consultant, policy underwriters are required to strictly follow the proposed guidelines with respect to cocaine use. See Def.'s Ex. 1; See Def.'s Ex. 1, Tab D. Ms. Katz also state4 in her affidavit that had Rowe answered affirmatively to Question 12(f) and revealed his previous drug history, MetLife would have declined his application for life insurance. Id.
After review of the guidelines and affidavits submitted, the Court concludes that MetLife's guidelines left no discretion on the part of the underwriter as to whether the policy would have been issued. Under plain reading of the policy language, MetLife would not have issued the policy had Rowe answered truthfully.
Therefore, Rowe's misrepresentation materially affected the risk assumed by the insurer. In conclusion, since this case presents no genuine issue of material fact, summary judgment in favor of MetLife is appropriate.
Accordingly;
IT IS ORDERED that MetLife's for Summary Judgment (Rec. Doc 14) should be and is hereby GRANTED. Plaintiff's suit is DISMISSED WITH PREJUDICE.