Bates v. Jackson Nat. Life Ins. Co.

• Decision Date: 28 May 1996
• Docket Number: Civil Action No. H-94-3480.
• Citation: 927 F. Supp. 1015
• Parties: Jerry BATES and Brian Bates, Plaintiffs, v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

927 F. Supp. 1015

Jerry BATES and Brian Bates, Plaintiffs, v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant.

Civil Action No. H-94-3480.

United States District Court, S.D. Texas.

May 28, 1996.

Thomas Clarke, Thomas Clarke & Associates, Houston, TX, for Plaintiffs.

Arthur M. Meyer, Jr. and J. David Apple, Brown McCarroll & Oaks Hartline, Dallas, TX, for Defendant.

MEMORANDUM AND ORDER

CRONE, United States Magistrate Judge.

Pending before the court is Defendant Jackson National Life Insurance Company's ("Jackson National") Motion for Summary Judgment (# 22).

Having reviewed the pending motion, the submissions of the parties, the pleadings, and the applicable law, this court is of the opinion that Jackson National's motion should be GRANTED IN PART and DENIED IN PART.

I. Background

This is a suit brought by the beneficiaries of a life insurance policy to recover the policy proceeds. Plaintiffs Jerry Bates ("Jerry") and Brian Bates ("Brian") seek to collect the benefits of a $100,000.00 life insurance policy, which was purchased by their deceased father, Jerry Samuel Bates ("Mr. Bates").

On October 30, 1991, Mr. Bates was examined by Dr. Harish K. Pariana ("Dr. Pariana"), who diagnosed Mr. Bates as having left phlebothrombosis — an inflammation of the deep veins in his left leg, which is indicative of a blood clot. Dr. Pariana advised Mr. Bates of his condition and prescribed him medications, Ecotrin and Disalcid, to keep his blood thin and to help reduce the inflammation and resulting pain. In order to rule out any other conditions or ailments from which he might have been suffering, Dr. Pariana ordered a health profile of Mr. Bates, which included a blood profile and a urinalysis. The blood and urine samples were taken in Dr. Pariana's office.

On November 1, 1991, Dr. Pariana examined Mr. Bates again. During this second examination, Dr. Pariana discussed with Mr. Bates the results of his blood and urine tests. Mr. Bates' blood profile revealed high glucose levels, which is indicative of diabetes, and the urinalysis showed signs of ketones, which are secreted only by diabetics. Based on the results of these tests, Dr. Pariana diagnosed and advised Mr. Bates that he had diabetes mellitus. In order to treat Mr. Bates' diabetic condition, Dr. Pariana prescribed an oral antidiabetic medication, Micronase, which enhances the secretion of insulin.

On November 12, 1991, Mr. Bates submitted an application to Jackson National for a $100,000.00 term life insurance policy. Mr. Bates completed the application during a meeting with Patricia M. Galloway ("Galloway"), an independent insurance agent. Mr. Bates answered the health questions contained in Part II of the application and signed it. According to Jackson National, Mr. Bates did not disclose to Galloway his recent examinations, treatments, or diagnoses by Dr. Pariana. In Part II, Question 1(a) and (b) of the application, Mr. Bates represented that within the past five years he had not consulted, been examined, or been treated by any physician or practitioner and that he had not submitted to an x-ray, electrocardiogram, or any laboratory test or study. Furthermore, in Part II, Question 2(b), (e), and (f) of the application, Mr. Bates represented that within the past ten years he had not been told that he had any disease or abnormality of the heart, blood, or blood vessels; that he had sugar or albumin in the urine; or that he had diabetes. Because Mr. Bates was only applying for $100,000.00 in coverage, a paramedic examination was not required by Jackson National.

Jackson National approved the application Mr. Bates submitted and issued him a life insurance policy on November 22, 1991. The application was attached to and made a part of the policy. Subsequently, the policy was delivered to Mr. Bates. After the policy was issued and delivered to Mr. Bates, Galloway went over the policy with him. According to a change of beneficiary request form dated December 11, 1991, Jerry and Brian were named as the primary beneficiaries of the policy.

On November 11, 1992, Mr. Bates died of a gun shot wound inflicted by an ex-lover of his girlfriend/common law wife. At the time of Mr. Bates' death, all premiums accrued under the policy had been paid. On December 2, 1992, Jackson National received a claim to the insurance proceeds from Jerry and Brian. Jackson denied liability under the policy on December 8, 1992. By letter dated February 26, 1993, Jackson National advised Jerry and Brian that it was denying their claim to the insurance proceeds due to Mr. Bates' alleged material misrepresentations.

Jerry and Brian initiated this action in state court on August 10, 1994, alleging that "insurer's denial or delay of this claim was groundless and brought in bad faith; and therefore, Plaintiff is enitled sic under Ins. Code art sic 21.21 to recover treble the amount of the amounts involved." Jerry and Brian further allege that they agreed to pay their attorney a reasonable fee and that "under section 38.001 of the Civil Practice and Remedies Code, Plaintiffs can recover these fees, since the claim is under a written contract." Jackson National removed the case to this court on the basis of diversity of citizenship.

II. Analysis

A. Summary Judgment Standard

Rule 56(c) provides that "summary judgment shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). The party seeking summary judgment bears the initial burden of informing the court of the basis for its motion and identifying those portions of the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits, if any, which it believes demonstrate the absence of a genuine issue of material fact. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 2552-53, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986); Williams v. Adams, 836 F.2d 958, 960 (5th Cir.1988). Once a proper motion has been made, the non-moving party may not rest upon mere allegations or denials in the pleadings, but must set forth specific facts showing the existence of a genuine issue for trial. Celotex Corp., 477 U.S. at 322-23, 106 S.Ct. at 2552-53; Anderson, 477 U.S. at 257, 106 S.Ct. at 2514-15; Topalian v. Ehrman, 954 F.2d 1125, 1131 (5th Cir.), cert. denied, 506 U.S. 825, 113 S.Ct. 82, 121 L.Ed.2d 46 (1992). The controverted evidence must be viewed in the light most favorable to the non-movant, and all reasonable doubts must be resolved against the moving party. Palmer v. BRG of Ga., Inc., 498 U.S. 46, 49 n. 5, 111 S.Ct. 401, 402 n. 5, 112 L.Ed.2d 349 (1990); Anderson, 477 U.S. at 255, 106 S.Ct. at 2513-14; Judwin Properties, Inc. v. United States Fire Ins. Co., 973 F.2d 432, 435 (5th Cir.1992). Summary judgment is mandated if the non-movant fails to make a showing sufficient to establish the existence of an element essential to his case on which he bears the burden of proof at trial. Celotex Corp., 477 U.S. at 322, 106 S.Ct. at 2552. "In such situation, there can be `no genuine issue as to any material fact,' since a complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial." Id. at 323, 106 S.Ct. at 2552.

B. Breach of Contract

Jerry and Brian assert that Jackson National breached its contract when it denied their claim for the proceeds of the insurance policy. In its motion for summary judgment, Jackson National contends that Mr. Bates' failure to advise it of his true medical condition constituted a material misrepresentation for which the policy could be voided.

Under Texas law, there are five elements an insurance carrier must plead and prove in order to establish a misrepresentation defense:

(1) the making of a representation;

(2) the falsity of the representation;

(3) reliance on the misrepresentation by the insurer;

(4) the intent to deceive on the part of the insured in making the misrepresentation; and

(5) the materiality of the misrepresentation.

Mayes v. Massachusetts Mut. Life Ins. Co., 608 S.W.2d 612, 616 (Tex.1980); accord Lee v. National Life Assurance Co., 632 F.2d 524, 527 (5th Cir.1980) (citing Southern Farm Bureau Life Ins. Co. v. Reed, 563 S.W.2d 634, 636 (Tex.Civ.App. — Eastland 1978, writ ref'd n.r.e.)); Garcia v. John Hancock Variable Life Ins. Co., 859 S.W.2d 427, 431 (Tex.App. — San Antonio 1993, writ denied); Flowers v. United Ins. Co. of Am., 807 S.W.2d 783, 785 (Tex.App. — Houston 14th Dist. 1991, no writ); Tam Nu La v. Aetna Life Ins. Co., 781 S.W.2d 630, 634 (Tex. App. — Houston 14th Dist. 1989, writ dism'd); Cartusciello v. Allied Life Ins. Co., 661 S.W.2d 285, 288 (Tex.App. — Houston 1st Dist. 1983, no writ); Estate of Diggs v. Enterprise Life Ins. Co., 646 S.W.2d 573, 574 (Tex.App. — Houston 1st Dist. 1982, writ ref'd n.r.e.).

Jerry and Brian concede in their response to Jackson National's motion for summary judgment that three of the five elements are not in dispute. Jerry and Brian state that the undisputed elements are "a) that the application submitted on behalf of plaintiffs' father contained representations that; b) misrepresented the state of his health in that it failed to mention his visits to Dr. Pariana, and that the Dr. had told him he suffered from the disease diabetes; and c) that defendant relied on these representations in issuing the policy." Jerry and Brian, however, contest the remaining factors — that Mr. Bates acted intentionally with the purpose of deceiving the defendant and that the misrepresentations were material.

With respect to the fourth and fifth elements — Mr. Bates' intent to deceive and the materiality of the representations — Jackson National argues that Mr....