Fernandez v. Bankers Nat. Life Ins. Co.

• Decision Date: 19 July 1990
• Docket Number: No. 89-5485,89-5485
• Parties: Luisa M. FERNANDEZ, Plaintiff-Appellant, v. BANKERS NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 559

906 F.2d 559

Luisa M. FERNANDEZ, Plaintiff-Appellant, v. BANKERS NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 89-5485.

United States Court of Appeals,

Eleventh Circuit.

July 19, 1990.

As Corrected Sept. 25, 1990.

James D. Camp, III, Terrence P. O'Connor, Ft. Lauderdale, Fla., for plaintiff-appellant.

Donna S. Waters, Miami, Fla., for defendant-appellee.

Appeal from the United States District Court for the Southern District of Florida.

Before FAY and KRAVITCH, Circuit Judges, and KAUFMAN ^*, Senior District Judge.

FAY, Circuit Judge:

This case concerns a beneficiary's claim to the proceeds of a life insurance policy, when the insured decedent died of a terminal illness unknown at the time of insurance application. Finding that the insured decedent's omission of previous medical history constituted a material misrepresentation, the district court granted summary judgment for defendant-appellee Bankers National Life Insurance Company (Bankers) prior to denying as moot plaintiff-appellant Luisa M. Fernandez's motion to compel discovery of allegedly pertinent documents. Plaintiff-appellant appeals the district court's granting summary judgment for Bankers as well as granting summary judgment before ruling on the motion to compel discovery. Because we have determined that the district court should have ruled on the motion to compel discovery before ruling on the summary judgment motion and that genuine issues of material fact exist, we reverse and remand for proceedings consistent with this opinion.

I. FACTUAL AND PROCEDURAL BACKGROUND

The insured decedent, Daniel C. Fernandez, was employed by Charles Weiss, M.D. & Associates, P.A. in Miami Beach, Florida. Dr. Weiss, chairman of orthopedics and rehabilitation at Mount Sinai Hospital, provided a non-contributory pension and life insurance plan for his employees. Upon becoming eligible for participation in the plan, Daniel Fernandez, a single male, obtained a $250,000.00 life insurance policy from Bankers. He designated his sister, plaintiff-appellant Luisa M. Fernandez, as his beneficiary.

Daniel Fernandez applied for a life insurance policy with Bankers on September 19, 1985. In response to application questions regarding his health, Fernandez responded that he had not been treated for any illnesses, diseases or injuries during the past ten years and that, within the past five years, he had submitted to annual physical examinations, the results of which were normal. The pension plan and office administrator, who saw Daniel Fernandez at least biweekly, testified that he had "no reason to believe" that Fernandez was telling "anything other than the truth" on his application for life insurance. ¹ After reviewing Fernandez's application, Bankers issued the life insurance policy effective December 24, 1985. On January 5, 1986, Fernandez submitted an amendment to the information that he had supplied Bankers and listed two elective surgeries.

Daniel Fernandez died on September 19, 1986, of respiratory distress, seizure disorder, and toxoplasmosis of the brain. The parties do not dispute that these complications resulted from Acquired Immune Deficiency Syndrome (AIDS). Under the life insurance plan with Bankers, the insured's benefit is one hundred percent nonforfeitable if termination of employment is the result of death. ²

Following the claim on the policy on behalf of the beneficiary by Dr. Weiss as plan trustee, Bankers extensively examined the medical history of Daniel Fernandez, since his death was within the two-year contestable period from the date of policy issuance. In denying the claim, Bankers' policy administrator detailed Daniel Fernandez's reasons for seeing various doctors from October, 1975 to August, 1985. ³ There is no mention of AIDS in this compiled medical history. The last doctor who saw Daniel Fernandez before he applied for the life insurance policy with Bankers treated him on August 12, 1985, for herpes zoster, or shingles, and noted that Fernandez was "[d]oing fine." ⁴ Bankers explained that knowledge of Fernandez's discovered medical history would have caused them to request additional information, including a blood test. Finding "material misrepresentations of medical history," Bankers claimed that they were prevented from requesting medical testing under routine underwriting procedures. ⁵

This action, originally filed by plaintiff-appellant in state court, was removed by Bankers to federal court based on diversity jurisdiction. ⁶ Bankers moved for summary judgment and filed the affidavits of Charles J. Kindermann, Bankers' manager and director of underwriting when the Fernandez claim was denied, and Jan Perrine, Bankers' claims supervisor. Kindermann's affidavit states that Fernandez's medical records revealed that he "had been treated in the past for herpes, had numerous blood tests and was last seen by a doctor in August, 1985, for herpes approximately one month prior to his application." ⁷ Kindermann claims that the omission of this information "materially affected the acceptance of the risk" by Bankers and that disclosure would have caused Bankers to require additional information, based upon which Bankers would have either declined to issue the policy or would have issued the policy under different terms. ⁸ Perrine's affidavit states that the claim "was specifically denied and the policy premium returned to the trustee since the condition which ultimately caused DANIEL FERNANDEZ' demise existed prior to the application date, was known to DANIEL FERNANDEZ, but was not revealed on the life insurance application notwithstanding the fact that said information was requested." ⁹

The district court denied Bankers' summary judgment motion and extended discovery. The case subsequently was reassigned to another district judge. During extended discovery, the depositions of Kindermann and Perrine were taken.

Kindermann testified that he made the decision to deny the Fernandez claim and that he consulted Perrine and underwriting manuals in making his decision. ¹⁰ He also reviewed Daniel Fernandez's medical history, the same medical history reviewed by Perrine, and found no specific mention of AIDS. ¹¹ Kindermann attested that the primary reason for denying the claim was herpes zoster and that AIDS was not a factor. ¹² He stated that no questions were asked concerning AIDS on the Bankers' application in September, 1985. ¹³ Subsequently, questions concerning AIDS or AIDS-related conditions have been added to the Bankers' life insurance application. Kindermann conceded that at least one other AIDS case had been reviewed during the two-year contestable period resulting in the claim being honored. ¹⁴ He acknowledged that neither prior episodes of gonorrhea, from which Fernandez apparently had recovered, nor venereal diseases generally were involved in his evaluation of the claim. ¹⁵ He stated that if "there was no medical history and the Herpes Zoster had not been there and he died of AIDS and the information on the application would have been honest, the claim would have been paid." ¹⁶

Interestingly, Perrine began work at Bankers in September, 1987, following the decision by Kindermann to deny the Fernandez claim. ¹⁷ Perrine verified that her affidavit reference to an existing condition at the time of Daniel Fernandez's application and the cause of his death was AIDS. ¹⁸ She claimed that the presence of AIDS was evident in Daniel Fernandez' medical records obtained by Bankers. ¹⁹ She conceded, however, that she had no specific recollection of seeing a notation regarding AIDS in those medical records or of tests for AIDS being administered prior to Fernandez's insurance application. ²⁰ While the medical records do not state that AIDS was discussed with Fernandez, Perrine contends that the record of treatment shows that he had AIDS. ²¹ Furthermore, Perrine's review of Daniel Fernandez's medical records did not reveal a diagnosis of AIDS or that his having AIDS was known to him prior to his insurance application. ²² Perrine acknowledged that her position did not include the determination of whether an omission from medical records was material. ²³ At oral argument, appellee Bankers conceded that there was no record evidence to show that Daniel Fernandez had or knew that he had AIDS when he applied for the subject life insurance policy.

Bankers filed a renewed motion for summary judgment, which contains basically the same supporting documents as its first summary judgment motion with the notable exceptions that Perrine's affidavit was omitted, a different Kindermann affidavit was filed, and the Kindermann and Perrine depositions were included. In his second affidavit, Kindermann notes that the medical records of Daniel Fernandez showed that he had been treated for herpes and gonorrhea, had numerous blood tests and was last seen by a doctor for herpes in August, 1985. ²⁴ While Kindermann again states that Fernandez's medical history omissions "materially affected the acceptance of the risk" by Bankers, he supplements that disclosure of the diagnosis of herpes zoster on August 12, 1985, would have caused Bankers to request "an attending physician[']s statement and a blood profile test including tests for the HTLV-III Antibody." ²⁵ Consequently, Kindermann avers that the policy either would not have been issued or would have been issued under different terms and conditions. The underwriting manual page and exhibit to the Kindermann affidavit lists herpes zoster with ailments such as athlete's foot, influenza and warts as "infections in which recovery is usually without significant residual disability." ²⁶

While Bankers' summary judgment motion was pending before the district court, plaintiff-appellant moved to compel the production of requested documents. The documents requested were all approved and disapproved Bankers' life insurance applications from August, 1984, through December, 1985. Bankers responded that the...