O'Donnell v. Fin. Am. Life Ins. Co.
| Citation | 171 F.Supp.3d 711 |
| Decision Date | 21 March 2016 |
| Docket Number | Case No. 2:14-cv-1071 |
| Parties | Sheela K. O'Donnell, Plaintiff, v. Financial American Life Insurance Co., Defendant. |
| Court | U.S. District Court — Southern District of Ohio |
Jeffrey Scott Goldenberg, Robert Brent Sherwood, Todd B. Naylor, Goldenberg Schneider, LPA, Cincinnati, OH, John Michael Snider, Stebelton, Aranda & Snider, Lancaster, OH, for Plaintiff.
Patrick T. Lewis, Baker & Hostetler LLP, Cleveland, OH, Amy D. Fitts, Lauren E. Tucker McCubbin, Lisa A. Weixelman, Polsinelli PC, Kansas City, MO, Rodger L. Eckelberry, Baker & Hostetler, Columbus, OH, for Defendant.
GREGORY L. FROST
This matter is before the Court for consideration of Defendant's motion for summary judgment (ECF No. 36), Plaintiff's response in opposition (ECF No. 51), and Defendant's reply memorandum (ECF No. 55). For the reasons that follow, the Court DENIES the motion.
Defendant Financial American Life Insurance Co. offers credit life insurance policies. Such policies, available to consumers financing credit transactions, offer payments to the consumer's lender in the event the consumer dies or becomes disabled. Defendant offers its policies exclusively at automobile dealerships, where Defendant trains the dealership's employees how to offer the policies to customers. Tri-County Chrysler Dodge Jeep in Health, Ohio (“Tri-County”) was one of these dealerships.
On February 10, 2102, Plaintiff Sheela K. O'Donnell and her late husband, Daniel O'Donnell, Sr., purchased a new automobile from Tri-County. The O'Donnells financed the automobile purchase through Wells Fargo Dealer Service (“Wells Fargo”).
In connection with the purchase, a Tri-County agent solicited the O'Donnells to purchase one of Defendant's policies. The agent told the O'Donnells that it would benefit them to purchase credit life insurance since they were both in their sixties. The agent then presented the O'Donnells with an application for credit life insurance (the “Policy”). The agent did not inform the O'Donnells of any restrictions on their ability to purchase the insurance or otherwise discuss the O'Donnells' suitability for the insurance. The agent similarly did not ask any questions about the O'Donnells' health history.
The parties highlight several of the Policy's provisions. The following provisions relate to the O'Donnells' eligibility for the Policy:
; High Blood Pressure (prescribed and/or taking more than one medication); Edema; Stroke ; Diabetes ; Alcoholism; Drug Abuse; Morbid Obesity (and/or complications directly related to); or a Psychological or Psychiatric Illness; (c) an HIV Positive test result; or (d) weight reduction surgery (had or recommended to have).
...
YOUR CERTIFICATE MAY NOT BE IN FORCE WHEN YOU HAVE A CLAIM! PLEASE READ!
(ECF No. 37-1, at PAGEID # 386.)
Below that clause, the O'Donnells both signed the Policy:
(Id. )
Plaintiff testified that neither she nor Mr. O'Donnell read the Policy before signing it. The Tri-County agent did not instruct the O'Donnells not to read the Application or obstruct the O'Donnells from doing so. Plaintiff testified that she and Mr. O'Donnell had signed other applications for credit life insurance in the past without reading them.
Following the Policy's Eligibility section is a section entitled CERTIFICATE OF INSURANCE. This section states:
We certify that, if we have been paid the premium shown in the Application, you are insured for the coverage shown in the Application, subject to the terms of the Group Policy issued to the Creditor and acceptance by us. Our acceptance will be in accordance with our procedures and practices. Under no circumstances will acceptance occur before sixty (60) days of the receipt of the Application....All benefit payments are made to the Creditor shown in the Application to pay off or reduce your debt. If benefit payments are more than the balance of your loan, we will pay the difference to you or to a named Second Beneficiary....
The PAYMENT OF A DEATH BENEFIT section below the CERTIFICATE OF INSURANCE SECTION states:
If you or the insured Co-Borrower dies while insured, we will pay the amount of insurance then in force after we receive proof of death. Only one death benefit is payable under this Certificate. Payment of a death benefit terminates all insurance coverage under this Certificate. We will not pay more than the decreasing insurance balance of the initial amount of life insurance.
(Id. at PAGEID # 387.)
It is undisputed that the O'Donnells paid a premium of $1,429.56 at the time they signed the Policy. This premium, according to Plaintiff, purchased $30,629.93 worth of credit life insurance over a period of 75 months, payable to Wells Fargo in the event the O'Donnells died or became disabled. Defendant accepted the premium payment, meaning that the O'Donnells became “insured for the coverage shown in the Application, subject to the terms of the Group Policy issued to the Creditor.” (Id. ) Defendant therefore became obligated to “pay the amount of insurance then in force after we receive proof of death” in the event that either of the O'Donnells died while insured. (Id. )
The Policy also contains a GENERAL PROVISIONS section. That section contains the following incontestability provision:
INCONTESTABILITY: We will not contest this insurance: (a) except for non-payment of a premium, after it has been in force two (2) years during the Insured Borrower's lifetime...or (b) during the first two (2) years it is in force unless the contest is based on a written statement signed by the Insured Borrower and furnished to the Insured Borrower or the beneficiary. All statements made by you and your insured Co-Borrower, in the absence of fraud, are deemed representations and not warranties.
(Id. at PAGEID # 388.)
The Policy later contains the following MISSTATED TERMS clause:
MISSTATED TERMS: If we provided an incorrect amount of insurance to you because we were given wrong information, we will amend your coverage to provide the correct amount. Any excess premium will be refunded to the person entitled to it. If we do not refund the excess premium within ninety (90) days of receipt of your initial premium, your coverage will remain in force as submitted.
(Id. ) It is undisputed that Defendant did not contest the Policy at any time before Mr. O'Donnell's death.
Approximately a year and a half after the O'Donnells purchased the Policy, on October 16, 2013, Mr. O'Donnell died. Plaintiff submitted a claim to Defendant for a life benefit payment pursuant to the Policy. The balance owed on the loan at that time was approximately $21,000.
Plaintiff included a certified copy of Mr. O'Donnell's death certificate with her claim. The death certificate lists Mr. O'Donnell's cause of death as myocardial infarction
due to coronary artery disease and hypercholesterolemia. The death certificate also lists conditions contributing to Mr. O'Donnell's death as hypertension, atrial fibrillation, congestive heart failure, peripheral vascular disease, and esophageal cancer.
Defendant requested additional information from Plaintiff. Specifically, Defendant presented Plaintiff with authorization forms to obtain Mr. O'Donnell's medical records. Plaintiff complied and Defendant received the forms, which indicated that Mr. O'Donnell had suffered from and been treated for high blood pressure
, vascular disease, and other disorders within the two years preceding the date on which the O'Donnells signed the Policy.
It is undisputed at this point that the O'Donnells' representation that Mr. O'Donnell met the insurance eligibility requirements set forth in the Policy was false. It is undisputed that both Plaintiff and Mr. O'Donnell were aware that Mr. O'Donnell had been seen, diagnosed, and treated for heart, kidney, circulatory, neurological conditions or high blood pressure
in the two years preceding the date on which they signed the Policy. It likewise is undisputed that the O'Donnells did not inform Defendant about Mr. O'Donnells ineligibility under the Policy at any point prior to Mr. O'Donnell's death.
Upon receiving Defendant's medical forms and determining that Mr. O'Donnell had been ineligible for coverage, Defendant denied Plaintiff's claim. Defendant then sent Wells Fargo a check for $613.19, representing a refund for Mr. O'Donnell's portion of the premium. Defendant also amended the Policy from joint coverage to single coverage. Plaintiff filed this lawsuit shortly thereafter.
Plaintiff alleges that Defendant breached the Policy by denying her claim. Plaintiff contends that Misstated Terms Clause modifies the Incontestability Clause and allowed Defendant to amend the...
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