Banner Life Ins. Co. v. Noel

• Decision Date: 15 February 2012
• Docket Number: Action No. 3:11–CV–434.
• Citation: 861 F.Supp.2d 701
• Parties: BANNER LIFE INSURANCE CO., Plaintiff, v. Jacqueline L. NOEL, Defendant.
• Court: U.S. District Court — Eastern District of Virginia

861 F.Supp.2d 701

BANNER LIFE INSURANCE CO., Plaintiff,

v.Jacqueline L. NOEL, Defendant.

Action No. 3:11–CV–434.

United States District Court,

E.D. Virginia,

Richmond Division.

Feb. 15, 2012.

Robert Barnes Delano, Jr., Sands Anderson PC, Richmond, VA, for Plaintiff.

Joseph Earl Blackburn, Jr., Blackburn Conte Schilling & Click PC, Richmond, VA, for Defendant.

MEMORANDUM OPINION

JAMES R. SPENCER, District Judge.

THIS MATTER is before the Court on cross motions for summary judgment. For the reasons that follow, the Court will GRANT Banner Life Insurance Company's Motion (Doc. No. 20) and DENY Jacqueline L. Noel's Motion. (Doc. No. 16.)

I. BACKGROUND

A. Case Posture

In this declaratory judgment action, Plaintiff Banner Life Insurance Company (“Banner”) seeks a declaration that its liability is limited to a refund of the premium submitted because Gary C. Noel (“Noel”) made multiple material misrepresentations in his application for life insurance. Banner asks the Court to grant summary judgment in its favor, arguing it has met its burden under Virginia Code section 38.2–309 of clearly proving that Noel made knowingly false representations that were material to Banner's risk and decision whether to postpone or decline issuance of the life insurance policy applied for. Banner also requests that Defendant's estoppel counterclaim be dismissed with prejudice.

Defendant Jacqueline L. Noel (“Ms. Noel”), the beneficiary designated in Noel's life insurance application, asks that the Court grant summary judgment in her favor, arguing she is entitled to $1,000,000 in temporary life insurance coverage because (1) the Temporary Life Insurance Application and Agreement (“TIAA”) is a separate and distinct contract that contains no misrepresentations and (2) none of the misrepresentations alleged by Banner are material.

B. Facts

The following facts are undisputed. On November 30, 2010, Noel met with insurance agent Christopher Roberts to obtain life insurance through Banner. During the course of his meeting with Roberts, Noel completed and signed a Banner Life Insurance Application for a 30–year level term life insurance policy providing $1,000,000 in coverage. In addition to other paperwork related to the application, Noel completed three forms: Part 1, Part 2—Medical History, and the TIAA. Roberts asked Noel each question as it appeared on Part 1 and Part 2, recording Noel's verbal answers. Noel signed Part 1 and Part 2 after all of his answers were recorded. In executing the application, Noel signed the following statement:

I/we have read the application and all statements and answers contained in Part 1 and Part 2 of this application and any supplements thereto, copies of which shall be attached to and made a part of any policy to be issued, are true and complete to the best of my/our knowledge and belief and made to induce Banner Life Insurance Company (the Company) to issue an insurance policy. The statements and answers in the application are the basis for any policy issued by the Company, and no information about me will be considered to have been given to the Company unless it is stated in the application. I agree to notify the Company of any changes to the statements and answers given in any part of the application before accepting delivery of any policy.

No agent or other person has power to: (a) accept risk; (b) make or modify contracts; (c) make, void, waive or change any conditions or provisions of the application, policy or receipt, as applicable; (d) waive any Company rights or requirements; (e) waive any information the Company requests; (f) discharge any contract of insurance; or (g) bind the Company by making promises respecting benefits upon any policy to be issued.

(Banner Ex. A, at 5.)

In the course of completing Part 2, Noel answered the following questions pertinent to this action: (1) whether he had ever been consulted by a member of the medical profession or been diagnosed or treated for (among other things) sleep apnea; (2) whether within the last five years he had been (a) treated by a member of the medical profession, (b) had a diagnostic test, (c) been advised by a member of the medical profession to have medical treatment or diagnostic testing yet to be completed, or (d) been referred to any other member of the medical profession or medical facility; and (3) whether in the last five years he had been diagnosed, treated, tested positive for, or was given any medical advice for any disease or disorder not previously stated on the application. (See Banner Ex. A, at 7–9.) If any of these questions was answered “Yes,” the instructions directed Noel to provide details, including provider, date, symptoms, diagnosis, and treatment. (Banner Ex. A, at 7.)

Noel answered “No” to all of these questions except one; in answer to the question whether he had any diagnostic tests within the last five years, Noel answered “Yes” and indicated that his primary care physician had regular tests run each year to ensure he was healthy.

After completing Part 1, Part 2—Medical History, and signing the above statement, Roberts gave Noel the option of submitting the TIAA. Roberts told Noel that it was ultimately up to Banner as to whether any life insurance coverage was issued. Noel did not ask Roberts any questions about the TIAA. After some further explanation regarding the TIAA from Roberts, Noel completed and executed the TIAA, which provided for a modal premium payment of $913.90 based on a Standard Plus Premium class rating quoted by Roberts. The TIAA included a separate “TEMPORARY INSURANCE APPLICATION” section consisting of four “Yes” or “No” questions and a “TEMPORARY INSURANCE AGREEMENT.” The TIAA's agreement section included the following provisions:

THIS AGREEMENT PROVIDES A LIMITED AMOUNT OF LIFE INSURANCE COVERAGE FOR A LIMITED AMOUNT OF TIME, SUBJECT TO THE TERMS AND CONDITIONS SET FORTH BELOW.

TEMPORARY INSURANCE AGREEMENT

Agreement. Subject to the terms of the policy applied for and this TIAA, the Insurer agrees to pay the Limited Amount to the beneficiaries listed in the Application—Part 1 upon receipt of due proof that the Proposed Insured died, except due to suicide, and provided all eligibility requirements and conditions for coverage under this Agreement have been met. The consideration for temporary insurance is the Temporary InsuranceApplication and payment of an amount equal to the first modal premium for the plan applied for or completion of the payment options form.

...

Other Limitations. The Insurer's liability will be limited to a return of the Amount Remitted if: (1) any part of the life insurance application or this TIAA contains a misrepresentation material to the Insurer; or (2) the Proposed Insured dies by suicide.

(Banner Ex. A, at 10.) In signing the TIAA, Noel certified that he understood and agreed to the following:

I represent that: (1) I have read and received a copy of this TIAA and agree to all of its terms and conditions; (2) I understand and agree that temporary insurance will not begin if any question in this TIAA is answered Yes or left blank and any collection of premium will not activate coverage under this agreement; (3) the answers given in this TIAA are true and correct, and I understand that, if they are false, temporary insurance may be denied or declined; (4) I understand that completing this TIAA does not guarantee that the Insurer will issue a policy on the Proposed Insured's life; (5) I understand that the licensed insurance agent is not authorized to change or waive the terms of this TIAA or to collect premium if the Proposed Insured is ineligible for coverage under this Agreement; and (6) I understand that any premium submitted with this TIAA will be refunded if the Insurer does not approve the requested coverage.

(Banner Ex. A, at 11 (boldface throughout original omitted).) After Noel completed the TIAA, Ms. Noel gave Roberts a check made out to Banner in the amount of $913.90, the amount of the modal premium payment. Roberts relied on “everything” in the section “Part 2—Medical History” in having Noel submit the TIAA.^* If Noel had disclosed something seriously wrong with his health, Roberts would not have offered Noel the option of completing a TIAA, and would not have allowed Noel to submit a TIAA along with its associated initial premium payment.

After he submitted his application, Noel was required to undergo an abbreviated “paramed” that included measurements of height, weight, pulse, and blood. Noel's paramed was completed on December 9, 2010. At the time of the paramed, Noel also gave blood and urine samples for testing. Banner received the lab results from Noel's paramed, which indicated among other things elevated liver function, on December 14, 2010. (Lucas Aff. ¶ 13.)

Banner's underwriting consultant Sean Lucas (“Lucas”) reviewed Noel's application. Upon learning of Noel's disclosed history of hypertension in the application, Lucas ordered Noel's medical records from his primary care physician, Dr. Robert Quarles. Banner received the records on January 1, 2011, and Lucas reviewed them on January 6. (Lucas Aff. ¶¶ 16–17.) These medical records disclosed, among other things, that: (1) Noel had a long history of elevated liver function tests; (2) Noel had an abdominal ultrasound in February 2009 that showed increased echogenicity in the liver suggesting steatosis (infiltration of fat) or fibrosis (thickening or scarring from previous inflammation or injury); and (3) Dr. Quarles had referred Noel to gastroenterologist Dr. Rufus Davis on multiple occasions, and on one occasion ordered Noel to follow up with Davis due to continued elevations in his liver function tests. Banner's laboratory test results from Noel's abbreviated paramed showed Noel's alanine aminotransferase (ALT) level was elevated to 61 and his gamma-glutamyl transferase (GGT) level was elevated to 104, putting Noel outside of the Standard Plus Premium class rating quoted by agent...