Equitable Life Assur. Soc. of U.S. v. Poe, 96-2366

• Decision Date: 06 May 1998
• Docket Number: No. 96-2366,96-2366
• Citation: 143 F.3d 1013
• Parties: EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES, Plaintiff-Appellant, v. Jeffrey M. POE, Defendant-Appellee.
• Court: U.S. Court of Appeals — Sixth Circuit

Page 1013

143 F.3d 1013

EQUITABLE LIFE ASSURANCE SOCIETY OF THE UNITED STATES Plaintiff-Appellant, v. Jeffrey M. POE, Defendant-Appellee.

No. 96-2366.

United States Court of Appeals, Sixth Circuit.

Argued Dec. 5, 1997.

Decided May 6, 1998.

Stephen J. Hitchcock (argued and briefed), Cox, Hodgman & Giarmarco, Troy, MI, for Plaintiff-Appellant.

Merrill H. Gordon (argued and briefed), Farmington Hills, MI, for Defendant-Appellee.

Before: BOGGS, MOORE, and FARRIS, ^* Circuit Judges.

OPINION

MOORE, Circuit Judge.

Plaintiff-Appellant, Equitable Life Assurance Society of the United States ("Equitable Life"), appeals the district court's decision granting summary judgment to defendant-appellee, Jeffrey M. Poe ("Poe"), in this diversity action concerning a disability insurance contract dispute. For the reasons that follow, we affirm.

I. FACTS & PROCEDURAL HISTORY

Most of the relevant facts are undisputed. In July 1992, Equitable Life issued a disability insurance policy (the "Policy" or the "initial Policy") to Poe, then a practicing attorney, based upon an application that was filled out by Equitable Life's insurance agent Robert Poe, who is also Poe's uncle. Joint Appendix (J.A.) at 20 (Policy No. 92-711-702), 235, 356 (Poe Dep. at 6, 127). Question 3h on the application for the Policy asked if the proposed insured had ever been treated for or had any known indication of "[a]ny disease or disorder of eyes, ears, nose, throat or speech." J.A. at 17 (Application Part I at 2). According to Poe, the insurance agent, who was told by Poe that he had been consulting various doctors about his hearing problems, nevertheless answered the above question in the negative. ¹ J.A. at 454-55 (Poe Dep. at 133-34) (Ex. 10). Although Equitable Life has not conceded this disclosure issue, both Poe and the agent stand by this version of the story. J.A. at 403-05, 416 (recount of Robert Poe Dep. at 88, 132). The agent has also stated that he was the one who signed the application. J.A. at 404 (recount of Robert Poe Dep. at 132). Records indicate that Poe had a history of hearing problems and had a consultation with a medical professional about such problems as early as 1979. J.A. at 260 (Poe Dep. at 31). In October 1992, the Policy lapsed for non-payment of premium. J.A. at 390 (Klein Dep. at 83) (Ex 6). On October 1, 1993, Poe submitted a request for reinstatement of his Policy. J.A. at 192 (Request for Reinstatement) (Ex. 2). On this application, Poe was asked in question 4b if "[w]ithin the last 5 years, [he had] consulted a physician, or been examined or treated at a hospital or other medical facility." Poe answered this question in the affirmative, explaining that he had seen a doctor for a routine audiogram and that there was no change. J.A. at 193 (Request for Reinstatement) (Ex. 2). The reinstated Policy became effective January 14, 1994. J.A. at 390 (Klein Dep. at 83) (Ex. 6). In December 1994, Poe filed a claim for disability alleging total disability as a result of severe hearing loss. J.A. at 198 (Claim Application).

Equitable Life rejected Poe's claim under the Policy (J.A. at 42-43 (Counter-Compl. at pp 11, 24); 139-40 (Pl./Counter-Def.'s Answer to Counter-Compl. at pp 11, 24)) and thereafter filed a complaint in federal court alleging fraudulent misstatement ² and noncoverage of a pre-existing condition and requesting rescission or a determination that Poe's disability claim was not covered under the Policy. J.A. at 12, 73 (Compl.; 1st Am. Compl.). Poe responded by filing a counter-claim alleging breach of contract and bad faith dealings by Equitable Life. J.A. at 41 (Counter-Compl.). When both parties filed motions for summary judgment on their respective complaints, the district court denied Equitable Life's partial motion but granted Poe's motion. J.A. at 155, 391 (Mots. for Summ. J.), 78 (Order). Equitable Life timely appealed the district court's order and judgment. J.A. at 104 (Notice of Appeal). The district court had original jurisdiction based on diversity of citizenship ³ under 28 U.S.C. § 1332. This court has appellate jurisdiction, pursuant to 28 U.S.C. § 1291, over the timely appeal of the district court's final judgment in the instant case.

On appeal, Equitable Life makes three claims, upon all of which it must prevail if it is to show that Poe's disability claim can properly be denied under the terms of the Policy: (1) that Poe's disability is a "pre-existing condition" not covered pursuant to the Policy's reinstatement provision; (2) that the Policy's incontestability clause does not bar Equitable Life from denying coverage of Poe's disability as a "preexisting condition"; and (3) that, assuming Poe's prior hearing condition was disclosed to Equitable Life's agent, this condition can still be considered a "pre-existing condition" as defined in the Policy. Because we ultimately conclude that the Policy's incontestability clause does bar Equitable Life from denying coverage of Poe's disability, we need not rule on the two other issues. Accordingly, the following discussion will focus primarily on an analysis of the Policy's incontestability clause.

II. ANALYSIS

A. Standard of Review and Choice of Law

This court will review de novo the district court's grant of summary judgment. See Eastman Kodak Co. v. Image Technical Servs., Inc., 504 U.S. 451, 465 n. 10, 112 S.Ct. 2072, 2082 n. 10, 119 L.Ed.2d 265 (1992); Sargi v. Kent City Bd. of Educ., 70 F.3d 907, 910 (6th Cir.1995). We will, therefore, apply the same legal standard, Federal Rule of Civil Procedure 56(c), that is utilized by the district court. See Sheet Metal Workers Local 141 Supplemental Unemployment Benefit Trust Fund v. United States, 64 F.3d 245, 248 (6th Cir.1995), cert. denied, 516 U.S. 1049, 116 S.Ct. 713, 133 L.Ed.2d 668 (1996). Pursuant to Rule 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See also Canderm Pharmacal, Ltd. v. Elder Pharms., Inc., 862 F.2d 597, 601 (6th Cir.1988). In other words, a grant of summary judgment is affirmed on appeal only if three criteria are met: (1) the district court applied the proper law; (2) the district court made no errors applying the law to the facts; and (3) there are no genuine issues of material fact. See Lantech, Inc. v. Keip Machine Co., 32 F.3d 542, 545 (Fed.Cir.1994).

Pursuant to the well-known doctrine of Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938), a federal judge sitting in a diversity action must apply the same substantive law that would be applied if the action had been brought in a state court of the jurisdiction in which the federal court is located. Therefore, in determining what laws of contract construction to follow, this court will look to Michigan choice of law rules, which require a court to balance the expectations of the parties to a contract with the interests of the states involved to determine which state's law to apply. See Chrysler Corp. v. Skyline Indus. Servs., Inc., 448 Mich. 113, 528 N.W.2d 698, 703 (1995). This rule indicates that in a situation such as the one presented by the instant case Michigan courts would choose to apply their own laws of contract construction, and both parties have assumed that Michigan law is applicable in this case.

To begin with, the terms of a provision that is clear and unambiguous must be "taken and understood in [its] plain, ordinary, and popular sense." Michigan Mut. Ins. Co. v. Dowell, 204 Mich.App. 81, 514 N.W.2d 185, 188 (1994), appeal denied, 447 Mich. 971, 523 N.W.2d 627 (1994); see also Regents of the Univ. of Mich. v. Employees of Agency Rent-A-Car Hosp. Ass'n, 122 F.3d 336, 339 (6th Cir.1997). Such provisions are "not open to construction and must be enforced as written." Cochran v. Ernst & Young, 758 F.Supp. 1548, 1554 (E.D.Mich.1991). A contract is ambiguous when its terms are reasonably and fairly susceptible to multiple understandings and meanings. See Parameter Driven Software, Inc. v. Massachusetts Bay Ins. Co., 25 F.3d 332, 336 (6th Cir.1994); Michigan Mut. Ins., 514 N.W.2d at 188. Mere disagreement among parties as to the meaning of such terms does not constitute ambiguity. See Steinmetz Elec. Contractors Ass'n v. Local Union No. 58 Int'l Bhd. of Elec. Workers, AFL-CIO, 517 F.Supp. 428, 432 (E.D.Mich.1981). Whether or not ambiguity exists with respect to a contract provision is a question of law for this court to decide. See id. It is well-established in Michigan courts that an ambiguous insurance contract provision must be construed against the drafting insurer and in favor of the insured. See Ray Indus., Inc. v. Liberty Mut. Ins. Co., 974 F.2d 754, 759 (6th Cir.1992); Fire Ins. Exch. v. Diehl, 450 Mich. 678, 545 N.W.2d 602, 606 (1996). Moreover, the Michigan Supreme Court has stated that it will "strictly construe against an insurer exceptions in an insurance policy that preclude coverage for the general risk." Vanguard Ins. Co. v. Clarke, 438 Mich. 463, 475 N.W.2d 48, 52 (1991). On the other hand, contract language should not be given a technical or strained meaning, and courts should not rewrite contract language for the parties. See Comerica Bank v. Lexington Ins. Co., 3 F.3d 939, 943-44 (6th Cir.1993) (citing Jones v. Farm Bureau Mut. Ins. Co., 172 Mich.App. 24, 431 N.W.2d 242 (1988)); Florida Canada Corp. v. Union Carbide & Carbon Corp., 280 F.2d 193, 196 (6th Cir.), cert. denied, 364 U.S. 902, 81 S.Ct. 234, 5 L.Ed.2d 194 (1960).

B. Reinstatement Provision

Equitable Life's first claim on appeal relates to the Policy's reinstatement provision (the "Reinstatement Provision") which states that:

[t]he reinstated policy will not cover any Loss for which before the date of reinstatement: a) a Doctor gave or recommended medical advice or...