Opinion
No. 2-907 / 02-0509
Filed June 13, 2003
Appeal from the Iowa District Court for Warren County, Jerrold W. Jordan, Judge.
Judy Swihart appeals an order granting summary judgment on her action regarding an insurance policy issued to Norman Mortensen. AFFIRMED.
Marc Harding of Harding, Harding, Griffin Hobbs, Des Moines, for appellants.
Philip Dorff of Hopkins Huebner, P.C., Des Moines, for appellee Universal Underwriters Life Insurance Company.
Eric Turner of Turner Law Offices, Des Moines, for appellees Dewey Ford, Inc. and Sheila Murphy.
Considered by Vogel, P.J., and Zimmer and Hecht, JJ.
Judy Swihart appeals an order granting summary judgment on her action regarding an insurance policy issued to Norman Mortensen. We affirm.
I. Background Facts and Proceedings.
On December 29, 1997, Norman Mortensen purchased a credit life insurance policy from Universal Underwriters Insurance Company (Universal) in connection with his lease of a 1998 Ford F-150 pickup from Dewey Ford. Sheila Murphy (now Strand), Dewey Ford's finance manager, was the agent with whom Mortensen worked in the credit application process. The application for insurance stated, in pertinent part:
Your signature below means that you agree, to the best of your knowledge that:
. . . .
2. You are not eligible for this insurance if you have within the last 12 months before the effective date received medical advice or treatment for Cancer or any condition of the Heart, Arteries, Brain, Liver, Kidneys, of Lungs, or for Stroke, Uncontrolled Hypertension, Immune System Disorders, Alcoholism, Drug Dependency or Insulin Dependent Diabetes. This applies to Life Insurance or Disability Insurance.
Murphy discussed this provision with both Mortensen and Judy Swihart, who was also present during the application process. Murphy circled the words "12 months" in the clause when discussing it with them in order to emphasize the point. Mortensen signed the application. Also, when asked whether he had been hospitalized or under a doctor's care within the past twelve months, Mortensen only mentioned his treatment for a broken pelvis in March of 1996. Mortensen was subsequently issued a credit life insurance policy, with Ford Motor Credit named as the creditor beneficiary and Judy Swihart as the second beneficiary.
On December 1, 1998, Mortensen died from an acute GI hemorrhage, hypoprothrombinemia, end stage hepatic failure, and Laenned's cirrhosis (alcohol-induced). Other significant conditions contributing to the death were dilated ischemic cardiomyopathy and severe mitral stenosis/regurgitation.
Judy Swihart, as executor of Mortensen's estate, notified Universal of his death, and Universal began an investigation into the death claim. A review of Mortensen's medical documents revealed he, in fact, had received substantial medical care in the twelve months prior to the effective date of his insurance policy. From November 25, 1997, to December 4, 1997, Mortensen had been hospitalized for congestive heart failure and pulmonary edema. Also, he had visited two primary care physicians for conditions of the heart, arteries, lungs, kidneys, and alcoholism. Based on its investigation, Universal determined Mortensen was not eligible for coverage and denied Swihart's claim, deeming the contract void. Universal rescinded the coverage and returned the life premium of $73.17 to Ford Motor Credit Company.
On March 13, 2000, Swihart filed a petition naming Universal as defendant and seeking to declare the insurance contract valid. She later filed an amended petition adding Dewey Ford and Sheila Murphy as defendants. The district court subsequently granted the defendants' motion for summary judgment and dismissed Swihart's action in its entirety. Swihart appeals.
II. Scope and Standard of Review.
We review a district court's ruling on summary judgment for the correction of errors at law. Kelly v. Iowa Mut. Ins. Co., 620 N.W.2d 637, 641 (Iowa 2001). Summary judgment is appropriate where the moving party shows there are no genuine issues of material fact and it is entitled to judgment as a matter of law. Falad v. Trinity Indus., Inc., 642 N.W.2d 247, 250 (Iowa 2002). In determining whether the moving party has met this burden, we view the record in the light most favorable to the party opposing the motion for summary judgment. Id. The nonmoving party is entitled to every legitimate inference that can be reasonably deduced from the record. Hansen v. Anderson, Wilmarth Van der Maaten, 630 N.W.2d 818, 822-23 (Iowa 2001).
III. Discussion.
On appeal, Swihart contends generally a number of fact issues remain that should preclude summary judgment. In particular, she argues the defendants' issuance of the policy, despite their actual or constructive knowledge of his pre-existing conditions, precludes the defendant from seeking to void the contract. She further asserts a reasonable mind could infer the insurance would not be voidable given the policy language regarding pre-existing conditions and a two-year "incontestability clause."
The defendants respond that the district court correctly granted summary judgment in that, because of Mortensen's misstatement on his life insurance application, he was not eligible for the policy when he signed it. Therefore, the policy should never have been issued and Universal now demands rescission.
A. Rescission of the Contract.
The defendants direct the court to Rubes v. Mega Life Health Insurance Co., Inc., 642 N.W.2d 263 (Iowa 2002), in which an insured (Rubes) brought an action against a health insurer for declaratory judgment of coverage, and the insurer counterclaimed to rescind the policy based on misrepresentations made in the insurance application. In particular, Rubes had falsely denied being cited for driving under the influence of alcohol and having symptoms or treatment for drug or alcohol addiction and respiratory disorders. Id.at 267. After Rubes made insurance claims based on his hospitalization for severe gastrointestinal bleeding and his diagnosis for "cirrhosis probably secondary to hepatitis C infection," the insurance company rescinded his coverage. Id.at 268. On appeal, the supreme court, reversed the district court's ruling to the contrary and held Rubes' material misrepresentations justified rescission of the insurance contract. Id. at 271. We find the case at bar to be similar to Rubes in all material respects.
In general, "fraudulent misrepresentations leading to the creation of a contract give rise to a right of rescission." Robinson v. Perpetual Servs. Corp., 412 N.W.2d 562, 568 (Iowa 1987). A party relying on the doctrine of equitable rescission to avoid a contract must prove five elements: "(1) a representation, (2) falsity, (3) materiality, (4) an intent to induce the other to act or refrain from acting, and (5) justifiable reliance." Rubes, 642 N.W.2d at 269 (citing Hyler v. Garner, 548 N.W.2d 864, 872 (Iowa 1996)).
Here, it is undisputed Mortensen misrepresented his recent, serious medical status when filling in the insurance application. Even Swihart, who was present when Mortensen filled out the application, admitted Sheila Murphy specifically asked whether he had been under a doctor's care within the last twelve months. She further admitted Mortensen did not accurately inform Murphy of his true medical status, having failed to disclose his November 25, 1997, through December 4, 1997, hospitalization. This of course was less than four weeks prior to his visit with Dewey Ford. Mortensen was seen by various other doctors within the previous twelve months for additional maladies which were undisclosed in the insurance application. Moreover, the eligibility language of the contract is clear and undisputed: "You are not eligible for this insurance if you have within the last 12 months . . . received medical advice of treatment. . . ." Murphy and Universal clearly relied on Mortensen's representations in extending coverage to him.
Mortensen did write "Retired/Disabled" under "Current Employer Name."
We therefore conclude the district court properly determined no genuine issue of material fact remains as to whether Mortensen's material misrepresentations justified Universal's rescission of the insurance contract. The district court correctly granted summary judgment on Swihart's claim, and we affirm it on this ground.
B. Incontestability Clause.
Swihart additionally argues a significant fact issue remains with regard to an "incontestability clause," which precludes summary judgment. The clause in question states "[n]o statement made by you relating to your insurability will be used in contesting the validity of the insurance after this insurance has been in force prior to the contest for a period of two years during your lifetime." Although we question whether Swihart has preserved this contention for our review, we nonetheless find it to be without merit. The two-year incontestability period clearly had not run in this case and does not bar the defendants' defense based on Mortensen's misrepresentations. Hf. Freed v. Bankers Life Ins. Co. of Neb., 216 N.W.2d 357, 359 (Iowa 1974) (holding a one-year incontestability clause barred insurer from raising certain defenses).
C. Pre-existing Conditions Clause.
The insurance contract provides that "certain pre-existing conditions occurring within six months of the effective date are not covered." Swihart contends this clause should not preclude coverage because, although Mortensen did have pre-existing heart and lung conditions, the liver condition from which he died was not pre-existing. Having concluded the district court did not err in determining Universal properly rescinded the insurance contract, we find this issue to be without merit.
IV. Conclusion.
We have considered all issues, whether specifically addressed or not, and find them to be without merit. We therefore affirm the ruling granting summary judgment.