787 F.3d 813 (6th Cir. 2015), 14-3869, Ramsey v. Penn Mut. Life Ins. Co.
|Citation:||787 F.3d 813, 91 Fed.R.Serv.3d 1453|
|Opinion Judge:||BERNICE BOUIE DONALD, Circuit Judge.|
|Party Name:||BARBARA RAMSEY, Plaintiff-Appellant, v. PENN MUTUAL LIFE INSURANCE COMPANY, Defendant-Appellee|
|Attorney:||Joseph William Diemert, Jr., DIEMERT & ASSOCIATES CO., L.P.A., Cleveland, Ohio, for Appellant. Jeffrey D. Fincun, WESTON HURD LLP, Cleveland, Ohio, for Appellee. Joseph William Diemert, Jr., Daniel A. Powell, DIEMERT & ASSOCIATES CO., L.P.A., Cleveland, Ohio, for Appellant. Jeffrey D. Fincun, Kar...|
|Judge Panel:||Before: CLAY, KETHLEDGE, and DONALD, Circuit Judges.|
|Case Date:||June 01, 2015|
|Court:||United States Courts of Appeals, Court of Appeals for the Sixth Circuit|
Ramsey applied for $2 million in life insurance from Penn. His application indicated that he was a Cleveland firefighter and had last seen his physician for a checkup in 2006. During a medical examination by a nurse, Ramsey disclosed that he suffered from chronic ulcerative colitis; in 1984 a colorectal surgeon had surgically removed Ramsey’s colon to alleviate his symptoms. After reviewing his... (see full summary)
Argued April 29, 2015
Appeal from the United States District Court for the Northern District of Ohio at Cleveland. No. 1:12-cv-01738--William H. Baughman, Jr., Magistrate Judge.
In this case, Defendant-Appellee Penn Mutual Life Insurance Company (" Penn Mutual" ) refused to pay death benefits to Plaintiff-Appellant Barbara Ramsey (" Plaintiff" ) upon the death of her husband, John Ramsey (" Mr. Ramsey" ). The district court concluded that Mr. Ramsey had failed to inform Penn Mutual of a change in the status of his health prior to the delivery of his life-insurance policy, thereby breaching a representation in the contract and permitting Penn Mutual to deny payment of benefits. Ramsey v. Penn Mut. Life Ins. Co., 36 F.Supp.3d 761, 770-71 (N.D. Ohio 2014). On that basis, the district court granted summary judgment to Penn Mutual. Id. at 773. We REVERSE.
The parties have stipulated to the following facts. On February 10, 2010, Mr. Ramsey applied for $2 million in life insurance from Penn Mutual. The application
consisted of two parts. Part I, completed and signed by Mr. Ramsey, indicated that he was a firefighter for the City of Cleveland for sixteen years, that his wife was his primary beneficiary, and that he had last seen his personal physician for a checkup in February 2006. Part I also contained the following representation:
I[ ], the Proposed Insured[ ], . . . represent that the statements and answers in this part I of the application are written as made by me[ ] and are complete and true to the best of my [ ] knowledge and belief. I[,] the Proposed Insured[ ], . . . agree that they will be a part of the contract of insurance if issued; that I[ ] will be bound by such statements and answers, and that [Penn Mutual], believing them to be true, will rely and act upon them. I[ ] also understand and agree that:
1. Subject to the provisions of the temporary insurance agreement attached to this application, no insurance will be in force until the first premium is paid in full and the policy is delivered while the health, habits, occupation and other facts relating to the Proposed Insured[ ] . . . are the same as described in this Part I of the application, any Part II required by [Penn Mutual] and any amendments or supplements to them.
Part II of the application, entitled " Medical Examiner's Report," involved a medical examination of Mr. Ramsey at his home by a licensed professional nurse. The Medical Examiner's Report contained a series of medical history questions. As relevant to this appeal, question 2(e) of the application asked whether Mr. Ramsey had " ever been treated for or had any indicator of . . . [j]aundice, intestinal bleeding, ulcer, hernia, colitis, recurrent indigestion or other disorder of the stomach, intestines, liver or gall bladder?" Mr. Ramsey disclosed that he suffered from chronic ulcerative colitis, providing the following explanatory details: " 1984. COLITIS. COLON -- INTESTINAL RESECTION[.] HOSPITAL X 4 DAYS. FULL RECOVERY 6 MOS. IAN LAVERY . . . LAST SEEN 2006. BX DONE. NORMAL FINDINGS[.]" Penn Mutual's underwriting guidelines define ulcerative colitis as " [a]n inflammatory disease of the mucosa of the large bowel," with symptoms including " [r]ectal bleeding, diarrhea, cramping, abdominal pain, anorexia and weight loss . . . ." Since at least 1981, Mr. Ramsey had suffered from chronic ulcerative colitis, which " occurs in a minority of patients." In 1984, Dr. Ian Lavery--a colorectal surgeon at the Cleveland Clinic--surgically removed Mr. Ramsey's colon in order to alleviate his colitis symptoms. According to Penn Mutual's underwriting guidelines, that procedure--called a " resection" --" is now rarely performed as persistent or recurrent symptoms almost invariably occur, and there is a risk of cancer developing in the rectal stump."
As with Part I, Mr. Ramsey signed Part II of the application, which contained the following representation:
I represent that the statements and answers in this Part II are written as made by me and are full, complete and true to the best of my knowledge and belief. I agree that they will be a part of the contract of insurance if issued, that I will be bound by such statements and answers, and that Penn Mutual . .., believing them to be true, will rely and act upon them.
Penn Mutual then proceeded with its underwriting process. On February 19, 2010, one of Penn Mutual's underwriters determined that, based on Mr. Ramsey's disclosures in question 2(e), Penn Mutual could not immediately approve his application.
With Mr. Ramsey's authorization, Penn Mutual obtained various medical records, including biopsy reports prepared by Dr. Lavery in 2001 and 2004 that indicated the presence of chronic ulcerative colitis. In mid-April 2010, based on Mr. Ramsey's history of ulcerative colitis, Penn Mutual offered him a $2 million policy with a " Table 2" rating, which is one of the lowest ratings Penn Mutual offers and which entails an above-average premium.
On April 28, 2010, Dr. Lavery examined Mr. Ramsey at the Cleveland Clinic. Dr. Lavery's notes indicated that Mr. Ramsey suffered from ulcerative colitis " for 20+ yrs but has had no treatment for 10-12 yrs," and that his April 28 visit was precipitated by " frequent bloody [bowel movements] and feel[ing] bad." Dr. Lavery prescribed several medications in order to ease Mr. Ramsey's symptoms. On May 17, 2010, Mr. Ramsey visited Dr. Lavery for a follow-up examination. Dr. Lavery's notes indicated that Mr. Ramsey's medications had brought about " some improvement in his symptoms," but that he was " still having 15+ loose stools a day."
On June 1, 2010, Penn Mutual drafted and Mr. Ramsey signed two amendments to his application. The amendments changed the value of Mr. Ramsey's term-life policy to $500,000; added a whole-life policy of $400,000; and added a $150,000 " Benefit Increase Rider." The June 1 amendments also altered Mr. Ramsey's answer to question 2(e) as follows:
Have you ever been treated for or had any indication of: Jaundice, intestinal bleeding, ulcer, hernia, colitis, recurrent indigestion or other disorder of the stomach, intestines, liver or gall bladder? Yes, I had a colon resection in 1984 due to colitis. My last colonoscopy was in 2004. I have not had a colon[o]scopy since 2004 and have had no gastrointestinal problems since that time.
On June 16, 2010, Mr. Ramsey visited Dr. Roop Kaw for an examination in anticipation of a proctectomy1 by Dr. Lavery scheduled for June 24, 2010. Dr. Kaw's notes indicated that " [t]he condition requiring this surgery" was " [d]iarrhea and rectal bleeding [for] 5 months," and Dr. Lavery testified that the surgery was not exploratory and was intended only to relieve Mr. Ramsey's colitis symptoms. However, during the surgery on June 24, 2010, Dr. Lavery discovered peritoneal seeding in Mr. Ramsey's pelvis, which Dr. Lavery determined was " a carcinoma that had probably come from the rectum." Dr. Lavery aborted the proctectomy procedure after determining " that to proceed was inappropriate as [Mr. Ramsey] would need chemoradiotherapy for the rectal tumor."
Mr. Ramsey was diagnosed with stage IV metastatic rectal cancer, which his doctors determined was incurable. He died on September 20, 2011, due to complications from that cancer.
Plaintiff submitted an application for death benefits to Penn Mutual on September 21, 2011.2 On February 27, 2012, Penn Mutual denied Plaintiff's application for benefits. Specifically, Penn Mutual stated:
Mr. Ramsey knew of his treatments between the time of application and the delivery of the policies, and knew that they rendered untrue the statement in the application that he " had no gastrointestinal problems since (2004)." The records from Dr. Lavery, of the Cleveland
Clinic, indicated that Mr. Ramsey was clearly having gastrointestinal problems between the time of application and the delivery of the policies.
Because Mr. Ramsey's health was not the same at delivery as described in the application signed on February 10, 2010, or the application amendment signed on June 1, 2010, the condition precedent requiring it to be the same prevents insurance from being in force under the policies. Also, based on the misrepresentations in the application, which Mr. Ramsey had a continuing obligation to correct, and the misrepresentations in the application amendment, Penn Mutual rescinds the policies pursuant to Ohio Rev[.] Code Section 3911.06 by returning premiums.
Penn Mutual returned $14,761.45 in premiums to Plaintiff.
On June 6, 2012, Plaintiff filed suit against Penn Mutual in the Court of Common Pleas for Cuyahoga County, Ohio. The complaint alleged breach of contract and sought compensatory and punitive damages. Penn Mutual removed the action to the United States District Court for the Northern District of Ohio. Pursuant to 28 U.S.C. § 636(c)(1), the parties consented to...
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