Buck v. American States Life Ins. Co.

• Decision Date: 13 October 1989
• Docket Number: No. 88-1548C(1).,88-1548C(1).
• Citation: 723 F. Supp. 155
• Parties: Marilyn BUCK, et al., Plaintiffs, v. AMERICAN STATES LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Eastern District of Missouri

723 F. Supp. 155

Marilyn BUCK, et al., Plaintiffs, v. AMERICAN STATES LIFE INSURANCE COMPANY, Defendant.

No. 88-1548C(1).

United States District Court, E.D. Missouri, E.D.

October 13, 1989.

Mark Bossi, Thompson & Mitchell, St. Louis, Mo., for plaintiffs.

Clark Cole/Kenneth Teasdale, Armstrong, Teasdale, Kramer, Vaughn & Schlafly, St. Louis, Mo., for defendant.

MEMORANDUM

NANGLE, Chief Judge.

This matter is now before the Court on the parties' cross motions for summary judgment. The following facts are undisputed:

In 1986, Joseph Buck, president of JoMar Enterprises, Inc., sought a loan of $300,000.00 from the First National Bank of Belleville in order to obtain additional financing for the company. As collateral for the loan, First National Bank required that Buck obtain a $200,000.00 life insurance policy. Buck obtained the policy from American States Life Insurance Company ("American States") in June of 1986 through a Missouri insurance broker. The policy listed First National Bank and Marilyn Buck as beneficiaries. In his application for insurance, Joseph Buck denied that he had consulted any physician in the five years preceding the application. He said that he had no personal physician and that he had last consulted a physician in 1980, but was unsure of the physician's name or address. He denied that he had heart problems, gallbladder problems, ulcer problems or diabetes.

In reality, Joseph Buck had severe health problems and was under the care of a physician. Buck had been hospitalized in 1983 for gastrointestinal bleeding and ulcers. He was taking prescription drugs for heart problems and chronic diabetes. Furthermore, as early as 1985, Buck had been diagnosed as having gallbladder disease.

Joseph Buck died of cancer in August of 1987. First National Bank, which changed its name to Magna Bank National Association ("Magna") in 1988, submitted a claim for the proceeds of the American States policy. After some investigation American States learned of Buck's prior medical history. In December of 1987, American States informed the bank that it was rescinding Buck's policy because of Buck's misrepresentations. American States refunded the premiums that had been paid thus far to Marilyn Buck. Marilyn Buck and Magna then filed the instant action seeking payment of the policy proceeds.

American States is an Indiana corporation. Mrs. Buck is a citizen of the State of Illinois, and Magna is an Illinois corporation. This Court has jurisdiction by reason of diversity. 28 U.S.C. § 1332. In determining whether summary judgment should issue, the facts and inferences from these facts are viewed in the light most favorable to the non-moving party and the burden is placed on the moving party to establish both the absence of a genuine issue of material fact and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 586-87, 106 S.Ct. 1348, 1355-56, 89 L.Ed.2d 538 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 2509-10, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, however, the non-moving party may not rest on the allegations in its pleadings but by affidavit and other evidence must set forth specific facts showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e). See also 10A C. Wright, A. Miller & M. Kane, Federal Practice and Procedure § 2739 (1983).

Recently, the Supreme Court noted that: "Summary judgment procedure is properly regarded not as a disfavored procedural shortcut, but rather as an integral part of the federal rules as a whole, which are designed to `secure the just, speedy and inexpensive determination of every action'." Celotex, 477 U.S. at 327 (quoting Fed.R.Civ.P. 1). Thus, the non-moving party "must do more than show that there is some metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586, 106 S.Ct. at 1356. "Where the record as a whole could not lead a rational trier of fact to find for the non-moving party, there is no `genuine issue for trial'." Id. at 587, 106 S.Ct. at 1356. The Eighth Circuit has acknowledged that the "trilogy of recent Supreme Court opinions" demonstrates that the courts should be "more hospitable to summary judgments than in the past" and that a motion for summary judgment "can be a tool of great utility in removing factually insubstantial cases from crowded dockets, freeing courts' trial time for those cases that really do raise genuine issues of material fact." City of Mt. Pleasant, Iowa v. Associated Electric Cooperative, Inc., 838 F.2d 268, 273 (8th Cir.1988).

The parties' cross motions for summary judgment address the validity of the life insurance policy in light of Joseph Buck's concealment of his medical history in the application. In addition, American States seeks summary judgment against Marilyn Buck under the theory that Mrs. Buck stands to recover none of the policy's proceeds. American States argues that because any proceeds from the policy would be devoted to satisfying the remaining balance of the Bucks' loan with Magna, Mrs. Buck has no interest in the proceeds of the insurance policy and no basis upon which to sue American States. The Court will first consider whether American States was entitled to rescind Joseph Buck's life insurance policy because of the misrepresentations in his application for insurance.

I. AMERICAN STATES' RESCISSION OF THE POLICY

Plaintiffs do not deny that Joseph Buck's statements were misrepresentations. Plaintiff argues, however, that these misrepresentations do not serve to void the policy because the matters that Joseph Buck misrepresented did not actually contribute to Joseph Buck's death. Therefore, plaintiff argues, under the Missouri misrepresentation statute, Mo.Rev.Stat. § 376.580 (1986), American States cannot rely on said misrepresentations to avoid honoring the policy. In order to reach this conclusion, however, the Court must first find that Missouri law controls the disposition of the instant case. Missouri's misrepresentation statute, by its plain language, applies only to policies of insurance on the lives of persons who are citizens of Missouri. Thus, should the Court find that Missouri law applies, it must further conclude that Missouri's misrepresentation statute is unconstitutional, insofar as it deprives non-citizens within its jurisdiction to equal protection of state law. If the Court so finds, then the Court must also find that only the residency requirement of the statute should be stricken as unconstitutional, if plaintiffs' argument is to succeed. Should plaintiffs' position prevail to this juncture, the Court must finally conclude that the misrepresentation statute's admonition that whether the matter represented actually contributed to Joseph Buck's death "shall be a question for the jury," does not apply in the case at bar because the misrepresentations are immaterial as a matter of law. If the Court so finds, then plaintiffs will be entitled to summary judgment.

Defendant, however, challenges plaintiffs' argument at every turn. American States argues first that the law of Illinois, not Missouri, should be used to resolve this matter. Thus, because plaintiffs' argument depends upon the applicability of Missouri law, the Court will first address the issue of choice of law.

A. Choice of Law.

Plaintiffs and American States agree that a federal court sitting in diversity is to apply the choice of law rules of the forum state in order to determine whether the law of the forum state or some other state controls the resolution of the action. See Potter v. St. Louis-San Francisco Railway Co., 622 F.2d 979, 981 (8th Cir. 1980). Plaintiffs assert that Missouri courts apply lex loci contractus analysis in determining whether Missouri law or some other state's law applies to contracts of insurance. American States argues, however, that Missouri courts apply the approach of the Restatement (Second) of Conflict of Laws to contracts cases and that § 192 of the Second Restatement governs the choice of law analysis in the case at bar.

Missouri courts have applied the Second Restatement analysis in cases involving automobile insurance, State Farm Mutual Automobile Insurance Company v. MFA Mutual Insurance Company, 671 S.W.2d 276, 277 (Mo. en banc 1984); Protective Casualty Insurance Co. v. Cook, 734 S.W.2d 898, 905 (Mo.App.1987), and casualty insurance, Crown Center Redevelopment Corp. v. Occidental Fire & Casualty Company of North Carolina, 716 S.W.2d 348, 358 (Mo.App.1986). In addition, the Missouri Court of Appeals held in National Starch and Chemical Corp. v. Newman, 577 S.W.2d 99 (Mo.App.1978), that the Restatement (Second) of Conflicts of Law applies in Missouri to "both tort and contract actions." Id. at 102. This Court, therefore, concludes that the courts of Missouri generally apply the "most significant relationship" test articulated in the Restatement (Second) of Conflict of Laws in resolving choice of law questions with respect to contracts.¹ Thus, this Court will apply the Second Restatement approach to determine whether Missouri law or the law of some other state governs the life insurance contract in question.

Section 192 Restatement (Second) of Conflict of Laws (1971) provides:

The validity of a life insurance contract issued to the insured upon his application and the rights created thereby are determined, in the absence of an effective choice of law by the insured in his application, by the local law of the state where the insured was domiciled at the time the policy was applied for, unless, with respect to the particular issue, some other state has a more significant relationship under the principles stated in § 6 to the transaction and the parties, in which event the local law of the other state will be applied.

In the...