480 F.3d 743 (5th Cir. 2007), 05-51609, Assurity Life Ins. Co. v. Grogan

Docket Nº:05-51609.
Citation:480 F.3d 743
Party Name:ASSURITY LIFE INSURANCE COMPANY, Plaintiff-Appellant-Cross-Appellee, v. Varsha GROGAN, individually and as independent executrix of the estate of J.C. Thomas Grogan, deceased, Defendant-Appellee-Cross-Appellant.
Case Date:March 02, 2007
Court:United States Courts of Appeals, Court of Appeals for the Fifth Circuit
 
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Page 743

480 F.3d 743 (5th Cir. 2007)

ASSURITY LIFE INSURANCE COMPANY, Plaintiff-Appellant-Cross-Appellee,

v.

Varsha GROGAN, individually and as independent executrix of the estate of J.C. Thomas Grogan, deceased, Defendant-Appellee-Cross-Appellant.

No. 05-51609.

United States Court of Appeals, Fifth Circuit.

March 2, 2007

Page 744

Marilyn Tanner Hebinck (argued), Royston, Rayzor, Vickery & Williams, Houston, TX, for Assurity Life.

Mark Lyndon Kincaid (argued), Kincaid, Horton & Smith, Austin, TX, for Grogan.

Appeals from the United States District Court for the Western District of Texas.

Before BARKSDALE, DeMOSS and PRADO, Circuit Judges.

DeMOSS, Circuit Judge:

INTRODUCTION

Plaintiff-Appellant Assurity Life Insurance Company ("Assurity") appeals the district court's entry of final judgment in favor of Varsha Grogan entitling her to proceeds from her husband's life insurance policy. Assurity argues that, under Texas law, the policy it issued to Mr. Grogan never took effect because it contains a "good health" condition precedent to its effectiveness; and, Assurity contends, Mr. Grogan was not in good health on the date relevant to the policy's effectiveness. In the alternative, Assurity argues that the policy should be rescinded because Mr. Grogan made material misrepresentations during the application process regarding his general heath and medical history.

Because we find persuasive Assurity's first argument, we need not address its second argument. For the reasons below, we reverse in entirety the district court's judgment in favor of Mrs. Grogan and render judgment in favor of Assurity.

FACTUAL BACKGROUND

On April 4, 2002, Mr. Grogan submitted to Assurity an application for $1,000,000 of whole life insurance on his own life. For reasons unimportant to this appeal, Mr. Grogan's application did not progress in a timely manner; and in June 2002, Assurity notified Mr. Grogan that his application had been closed. But on August 8, 2002, Mr. Grogan sent to Assurity a letter reaffirming his desire to apply for the policy.

On August 26, 2002, Mr. Grogan faxed to Assurity a new application along with another request to reopen his application. The new application is identical to the first in all material respects. The last page of the application provides the following paragraph in bold:

C. In the event the first full premium on the policy applied for is not paid upon the date of this application, the insurance under such policy shall not take effect unless the application is approved by the Company at its Home Office, such policy issued and delivered to the Proposed Insured/Owner, and such first full premium paid during the Proposed Insured's lifetime and continued good health ....

Assurity issued the policy on August 27, 2002, and mailed it...

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