Fioretti v. Massachusetts General Life Ins. Co., 90-6530-CIV.

CourtUnited States District Courts. 11th Circuit. United States District Courts. 11th Circuit. Southern District of Florida
Citation892 F. Supp. 1492
Docket NumberNo. 90-6530-CIV.,90-6530-CIV.
Decision Date24 September 1993

Gerald S. Lesher, West Palm Beach, FL, for plaintiff.

Jane Mastrucci, Coral Gables, FL, Mark F. Hughes, Robinson, St. John & Wayne, Newark, NJ, for defendant.


MARCUS, District Judge.

THIS CAUSE was tried without a jury before the undersigned on December 28 and 29, 1993. Plaintiff, Vincent Fioretti is the named beneficiary of a life insurance policy issued by Defendant, Massachusetts General Life Insurance Company ("Mass General") to Plaintiff's brother, Anthony Fioretti. Anthony Fioretti died in Florida on February 28, 1989, and Plaintiff made a claim for the insurance proceeds which Mass General declined. Plaintiff, by this action sues for $1,947,111.00 allegedly due under the policy. Mass General defends against the complaint and counterclaims for rescission of the policy, claiming that it was procured by fraud. Plaintiff seeks to deny this defense and defends against the counterclaim on the basis that the incontestability clause in the policy bars the defense of fraud. Plaintiff is a citizen of Florida and Defendant is incorporated in Massachusetts with its principal place of business in Colorado, and thus the action was properly removed based on diversity jurisdiction, 28 U.S.C. § 1332. Accordingly, pursuant to Fed.R.Civ.P. 52(a) the Court makes the following Findings of Fact and Conclusions of Law.

I. Findings of Fact

1. In November of 1986, Anthony Fioretti applied to Columbian Mutual Life for a $100,000 life insurance policy. The application showed his correct name and his correct birthdate, September 6, 1948. Blood drawn from him in January 1987 tested HIV reactive. As a result, Columbian Mutual never issued a policy insuring Fioretti.

2. On February 10, 1987, Anthony Fioretti applied to Mass General for a life insurance policy. This time, he indicated his name as "C. Tony Fioretti" and falsely stated his date of birth as "3-6-47." D.Ex. 12. Under the heading "Requested Issue Date" he wrote "Date Policy — 8/30/86." Id.

3. The application stated that it was "signed at Tamarac Fla., 2/10/87." Id. It designated the owner of the plan as "Shields & Warendorff Florist, Inc. Pension Plan." Anthony Fioretti, was the president and sole shareholder of Shields & Warendorff Florists, Inc., a florist shop located in New York, New York. It recited the residence of the insured as both New York, New York and Tamarac, Florida. The broker for the policy was Kirsner, Stern & Slavutin, Inc., located in New York, New York, and Stuart Kirsner was the agent on this application. See Pretrial Stip. ¶ 5. The signature of "Stuart Kirsner" appears as "Licensed Agent," but one Suzanne Kaplon-Harmon, a clerk in the broker's New York office, in fact signed Kirsner's name with the permission of Kirsner and other principals of the firm. Kaplon-Harmon never saw Fioretti sign the application, and did not know where it was signed, yet she wrote "Tamarac, Fla." as the being the place the application was signed. See Harmon Depo. at 16-17; Pretrial Stip. ¶ 12.

4. Although Mass General is licensed to do business in Florida, and Florida has approved the relevant policy form, Mass General refused to write the policy on the February application because the designated soliciting agent, Kirsner, was not licensed to do business in Florida.

5. In connection with the first application, Plaintiff conceded at trial that the blood of a person other than the insured was tested for AIDS in July 1987 at the Spring Medical Group in New York City. See D.Ex. 23. Either an impostor appeared for the blood test, or the insured somehow arranged for the substitution of another person's blood sample for his. The blood tested non-reactive to the HIV antibody.

6. On September 8, 1987, a second application was filed by Anthony Fioretti. D.Ex. 24. The application was substantially similar to the February application — proposing "C. Tony Fioretti" as the insured, again designating the Pension Plan as the owner of the policy, reiterating the false birthdate, showing the insured's residence as both New York and Florida, and requesting the policy to run retroactively from August 30, 1986. Significantly, however, this time the application indicated that it was signed in Newark, New Jersey on September 8, 1987. D. Ex. 24. Again, Susan Kaplon-Harmon, a clerk in the broker's New York office, wrote "Newark, New Jersey" on the application, although she did not know whether it had been signed there. Pretrial Stip. at ¶ 15. As it turns out, the policy form was not approved in New Jersey, see Pretrial Stip. at ¶ 16, nevertheless, it was issued there.

7. Mr. Gary Yeargler, the underwriter at Mass General responsible for the Fioretti risk, testified that he relied on the negative blood test for HIV submitted in connection with the first application in approving Anthony Fioretti's second application for life insurance. Mass General relied on the results of the fraudulent blood test in issuing the subject life insurance policy, such that had Anthony Fioretti himself submitted to a blood test as Mass General required, Mass General never would have underwritten the policy.

8. Because some time had lapsed between the test and the approval of the application, Yeargler and Mass General accepted the application subject to Anthony Fioretti's executing a Statement of Good Health and Insurability. Pretrial Stip. at ¶ 17; D.Ex. 26. Anthony Fioretti signed the Statement, and Kaplon-Harmon filled in spaces indicating that the Statement was executed in New Jersey on September 25, 1987. Pretrial Stip. at ¶ 18. By that Statement, the insured represented to the best of his knowledge and belief that:

(1) I have continued in good health.
(2) I have not made an application for insurance which has been declined, postponed or modified.
(3) I have not consulted or been examined by a physician or practitioner.

D.Ex. 26.

9. At the time he signed that Statement, however, Anthony Fioretti knew that he was HIV-positive, had been declined life insurance by Columbian Mutual, and had consulted with at least two doctors about his HIV, Kaposi's sarcoma and AIDS. See Laubenstein Depo. at 33-34, 42-43.

10. The issued policy was backdated to August 30, 1986, as requested on both applications. Pretrial Stip. ¶ 19; D.Ex. 27, at 2 ("Notification of Participation").

11. After the policy had been approved and issued, on December 14, 1987 Anthony Fioretti applied to Mass General for an additional benefit called "Waiver of Premium." In exchange for an additional premium, this benefit provides that the insurer will not require payment of any premiums during the insured's period of total disability. The application for this benefit required that Fioretti answer the following two questions:

(4) Has the insured or any named dependent ... received advice or treatment from a physician or other medical or physical practitioner within the past three years?
(5) To the best of your knowledge and belief does the insured or any listed Dependent have any physical or mental disease or disorder?

D.Ex. 29, at 2. Anthony Fioretti checked the adjacent boxes labelled "no" to each question. Again, this was not true.

12. As a result of Fioretti's request for the additional benefit, Yeargler, on behalf of Mass General, queried the "Medical Information Bureau," an insurance company information network, about Fioretti. The resulting reports flagged the possibility of a health disorder, and as a consequence of that information, Mass General required Anthony Fioretti to submit to another blood test. See D.Ex. 30.

In April of 1988, Anthony Fioretti again somehow substituted someone else's blood, and the blood sample tested negative for the HIV antibody. See D.Ex. 31, 32. Yeargler relied on this report and approved the waiver of premium benefit, but it never went into effect because Fioretti did not pay the additional premium.

13. On February 28, 1989, Anthony Fioretti died in Florida. Pretrial Stip. at ¶ 27. All premiums due prior to that date had been paid. Pretrial Stip. at ¶ 28.

14. Vincent Fioretti filed a claim as the beneficiary under the insurance policy with Mass General. In December 1989, Mass General denied the claim and tendered the premiums paid to counsel for Vincent Fioretti, but the tender was rejected.

15. The issued policy contained the following clause:

This policy will be incontestable after it has been in force during the lifetime of the insured for 2 years from the date of issue except for non-payment of premiums.

D.Ex. 27, at 13.

II. Conclusions of Law

1. Since there is no dispute that HIV-negative blood was fraudulently substituted for the HIV-positive blood of the insured, and since we have found that Mass General would not have underwritten the life insurance policy had Anthony Fioretti's HIV-positive condition been revealed by the required blood test, and since we have found Anthony Fioretti made other fraudulent statements to Mass General in connection with his application, we conclude that Anthony Fioretti fraudulently induced Mass General to enter into the life insurance contract upon which the parties now sue.

2. The question to be resolved is whether the incontestability clause contained in the contract, or in the relevant state-law statutes, bars the pleading of fraud by Mass General under the facts of this case. Plaintiff argues that even accepting that Vincent Fioretti fraudulently induced the life insurance contract, Mass General is barred from raising the defense by the incontestability clause in the contract. Mass General urges us to apply the narrow "imposter exception" which has been recognized by several courts. Such an exception to...

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