Dishman v. American General Assurance Co.
| Decision Date | 03 April 2002 |
| Docket Number | No. C 01-3002-MWB.,C 01-3002-MWB. |
| Citation | 193 F.Supp.2d 1119 |
| Parties | Judy K. DISHMAN, Plaintiff, v. AMERICAN GENERAL ASSURANCE COMPANY, f/k/a U.S. Life Credit Life Insurance Company, Defendant. |
| Court | U.S. District Court — Northern District of Iowa |
Joel J. Yunek, Laird, Heiny, McManigal, Winga, Duffy & Sambaugh, P.L.C., Mason City, IA, for Plaintiff.
Michael W. Thrall, Nyemaster, Goode, Voigts, West, Hansell & O'Brien, P.C., Des Moines, IA, for Defendant.
TABLE OF CONTENTS
I. BACKGROUND ............................................................ 1121
II. LEGAL ANALYSIS ........................................................ 1122
A. AGAC's Motion To Reconsider ........................................ 1122
1. Authority to reconsider the summary judgment ruling ............. 1122
2. The effect of the Rubes decision ................................ 1123
B. Other Trial-Related Matters ........................................ 1127
1. AGAC's motion to set the order of proof for trial ............... 1127
2. Location of trial ............................................... 1128
III. CONCLUSION ............................................................ 1128
This matter comes before the court pursuant to the April 1, 2002, motion of defendant American General Assurance Company (AGAC) to reconsider portions of the court's February 19, 2002, ruling on cross-motions for partial summary judgment, see Dishman v. American Gen. Assur. Co., 187 F.Supp.2d 1073 (N.D.Iowa 2002), in light of a subsequent decision of the Iowa Supreme Court in Rubes v. Mega Life & Health Ins. Co., Inc., No. 135/01-0433, 642 N.W.2d 263 (2002), petition for reh'g pending. This matter also comes before the court pursuant to AGAC's March 27, 2002 motion to set the order of proof for trial. Plaintiff Dishman has not yet responded to either motion. Although the court is ordinarily receptive to motions to reconsider, and ordinarily tries to provide the parties with all reasonable opportunities to present arguments upon all motions, trial in this matter is set to begin on April 15, 2002. Therefore, in order to facilitate the parties' preparations for trial and to avoid any delay of the trial, the court will address both of AGAC's motions without waiting for plaintiff Dishman's responses or hearing further arguments.
In this action, plaintiff Judy K. Dishman originally asserted claims of breach of contract, breach of reasonable expectations, and first-party bad faith arising from AGAC's failure to pay claims on two of three credit life insurance polices following the death of her husband, Randall Dishman. AGAC's primary defense to each of these claims was that Mr. Dishman misrepresented that he was in "good health" on the credit life insurance applications, where he was suffering from the serious effects of post-polio syndrome, including frequent bouts of what had been diagnosed as "congestive heart failure." In its February 19, 2002, ruling, the court granted AGAC's motion for summary judgment on Mrs. Dishman's "reasonable expectations" and "first-party bad faith" claims, which neither party has moved to reconsider. Rather, AGAC has moved to reconsider the court's disposition of the parties' cross-motions regarding Mrs. Dishman's breach-of-contract claim.
As to that claim, in its February 19, 2002, ruling, the court concluded that the parties nowhere disputed the elements of Mrs. Dishman's breach-of-contract claim; rather, what was truly at issue was AGAC's affirmative defense of fraudulent misrepresentation. Prior to oral arguments on the parties' cross-motions for summary judgment, the court notified the parties that it was the court's belief that the elements of AGAC's affirmative defense of fraudulent misrepresentation to Mrs. Dishman's breach-of-contract claim were set out in Higgins v. Blue Cross of Western Iowa and South Dakota, 319 N.W.2d 232 (Iowa 1982). That is, such a defense is established if the insurer proves the following by clear, convincing, and satisfactory evidence: (1) the applicant made a false representation or non-disclosure in connection with his application for insurance; (2) the representation or non-disclosure was material to the transaction, that is, the representation or non-disclosure materially affected the risk assumed by the insurer; (3) the applicant made the representation with actual knowledge of its falsity or reckless disregard of whether it was true or false or the applicant knowingly withheld material information; (4) the applicant intended to deceive the insurer; (5) the insurer relied on the applicant's representation or non-disclosure in issuing the insurance contract; and (6) the insurer would not have issued the insurance contract if it had known the true facts. Higgins, 319 N.W.2d at 236-37 (). At the oral arguments on the cross-motions for summary judgment, the parties concurred in this statement of the elements of AGAC's affirmative defense to Mrs. Dishman's breach-of-contract claim.
In its analysis of the parties' cross-motions for summary judgment on this defense, the court concluded, first, that Mr. Dishman's statement that he was in "good health" at the time of the applications was false as a matter of law, where he was suffering from serious effects of post-polio syndrome at the time he made the applications and thus was suffering from what must be called a "disease" that was quite plainly "`a vice in the constitution or [ailment] so serious as to have some bearing on the general health and continuance of health.'" Dishman, 187 F.Supp.2d at 1088 (quoting Service Life Insurance Company of Omaha, Nebraska v. McCullough, 234 Iowa 817, 13 N.W.2d 440, 447 (1944)). However, the court concluded that, "[a]lthough perhaps tenuously and just barely," Mrs. Dishman had generated genuine issues of material fact on the elements of "knowledge of falsity" and "intent to deceive" with regard to the "good health" representations. These genuine issues of material fact were generated by evidence that Mr. Dishman could "subjectively," or even "reasonably," have believed that he was in "good health," because he had controlled his post-polio syndrome and resulting chronic conditions for many years, was able to maintain full-time employment, and made no effort to hide the fact that he had had polio and continued to suffer some consequences from the disease. Id. at 1089. In so concluding, the court noted the fact that "intent" is the quintessential jury question, and that AGAC's affirmative defense was subject to the heightened burden of proof by clear, convincing, and satisfactory evidence. Id. Moreover, the court declined to hold that the "materiality," "reliance," and "would not have issued" elements had been established as a matter of law, notwithstanding record evidence supporting AGAC's contentions, because some of that evidence was equivocal, and because the court had sua sponte raised issues concerning these elements of the defense, which meant that Mrs. Dishman may not have had a full and fair opportunity to marshal evidence regarding these elements prior to oral arguments. Id. at 1090. Thus, the court stated that it "will consider these elements still at issue at trial." Id.
AGAC has moved the court to reconsider its conclusions regarding AGAC's affirmative defense and instead grant summary judgment in AGAC's favor on Mrs. Dishman's breach-of-contract claim, because AGAC contends that the Iowa Supreme Court's subsequent decision in Rubes v. Mega Life & Health Ins. Co., Inc., No. 135/01-0433, 642 N.W.2d 263 (Iowa Feb. 27, 2002), makes clear that the elements of the misrepresentation defense that the court found were genuinely at issue here, "knowledge of falsity" and "intent to deceive," are not, as a matter of law, elements of AGAC's affirmative defense at all. AGAC argues that, "[w]hile not expressly overruling Higgins, the Iowa Supreme Court [in Rubes] squarely addressed the elements a defendant must prove when it relies on the doctrine of equitable rescission to avoid a contact," and held that neither proof of intent to deceive nor scienter is required. AGAC's Brief In Support Of Motion To Reconsider at 1-2. Rather, AGAC argues, the intent that must be established is simply an intent to induce the other to act, an element that is not subject to any genuine issue of material fact here, where the "good health" representation was made for no other reason than to induce AGAC to issue the credit life insurance policies.
As this court recently explained in EEOC v. American Home Products Corp., 165 F.Supp.2d 886 (N.D.Iowa 2001), although the Federal Rules of Civil Procedure do not seem to provide any basis for a motion to reconsider this court's grant of partial summary judgment, that means that this court actually has more, rather than less, discretion to alter or amend such an interlocutory order than is provided by either Rule 59(e) or Rule 60(b) of the Federal Rules of Civil Procedure. See American Home Prods. Corp., 165 F.Supp.2d at 892. This court has also held that courts retain the power to reconsider and revise an order denying summary judgment, which is also interlocutory in nature, up until the time a final judgment is entered. See Longstreth v. Copple, 189 F.R.D. 401, 403 (N.D.Iowa 1999). The court, therefore, has the authority to reconsider, alter, or amend the challenged portions of its February 19, 2002, ruling, should it decide it is appropriate or necessary to do so.
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