Fox v. Catholic Knights Ins. Society

• Decision Date: 03 July 2003
• Docket Number: No. 01-1469.,01-1469.
• Parties: Austin J. FOX, a minor, by Matthew T. Fricker, guardian ad litem, Plaintiff-Appellant, v. CATHOLIC KNIGHTS INSURANCE SOCIETY, a Wisconsin corporation, Defendant-Respondent-Petitioner.
• Court: Wisconsin Supreme Court

263 Wis.2d 207

2003 WI 87

665 N.W.2d 181

Austin J. FOX, a minor, by Matthew T. Fricker, guardian ad litem, Plaintiff-Appellant, v. CATHOLIC KNIGHTS INSURANCE SOCIETY, a Wisconsin corporation, Defendant-Respondent-Petitioner.

No. 01-1469.

Supreme Court of Wisconsin.

Oral argument December 17, 2002.

Decided July 3, 2003.

For the defendant-respondent-petitioner there were briefs by Paul J. Pytlik, Michelle M. Stoeck, and Hills Legal Group, Ltd., Waukesha, and oral argument by Paul J. Pytlik.

For the plaintiff-appellant there was a brief by George P. Kersten and Kersten & McKinnon, S.C., Milwaukee, and oral argument by George P. Kersten.

An amicus curiae brief was filed by Anne Berleman Kearney and Appellate Consulting Group, Milwaukee; Christopher W. Brownell and Thrivent Financial for Lutherans, Appleton; and Paul F. Heaton and The Northwestern Mutual Life Insurance Company, Milwaukee, on behalf of the Northwestern Mutual Life Insurance Company and Thrivent Financial for Lutherans.

¶ 1. JON P. WILCOX, J.

Catholic Knights Insurance Society (CKIS) petitions this court for review of a published opinion of the court of appeals, Fox v. Catholic Knights Insurance Society, 2002 WI App 117, 254 Wis. 2d 632, 649 N.W.2d 307. The court of appeals, in a split decision, reversed an order of the Milwaukee County Circuit Court, Timothy G. Dugan, Judge, that granted summary judgment in favor of CKIS. The court of appeals held that coverage existed under an insurance policy even though the policyholder died before completing a required blood test and that under Wis. Stat. § 631.11(3) (1997-98),¹ CKIS is prevented from refusing to pay benefits claimed under the insurance policy.

¶ 2. Austin Fox (Fox), a minor, through his guardian ad litem, brought suit against CKIS, alleging breach of contract after CKIS denied his claim for benefits under the life insurance policy for which his father had applied. Patrick Fox (Patrick), Fox's father, applied for a life insurance policy and listed Fox as the primary beneficiary. Patrick filled out the application and paid the initial premium. The application included a section entitled "Receipt for Payment and Conditional Insurance Agreement." This section noted that coverage under the agreement would not begin until certain conditions were satisfied. One of these was completion of a medical study, a blood test. Unfortunately, Patrick was killed in an automobile accident before completing the blood test. Because the blood test was never done, CKIS denied coverage, claiming that the policy had never gone into effect.

¶ 3. Both parties filed motions for summary judgment in the circuit court. The circuit court ruled in favor of CKIS, finding that no insurance policy was in effect and that Wis. Stat. § 631.11(3) only related to conditions subsequent and, as such, did not apply. Fox appealed, and a divided court of appeals reversed. CKIS then petitioned this court for review, which we granted.

¶ 4. Two related issues arise before this court: (1) whether there was an effective conditional insurance agreement in place at the time of Patrick's death; and (2) whether Wis. Stat. § 631.11(3) applies in this case such that in order to avoid coverage, CKIS must show the failure to complete the blood test increased its risk. We now reverse the court of appeals' decision and hold that the circuit court's granting of summary judgment in favor of CKIS was appropriate. We hold that no effective insurance policy was in place at the time of Patrick's death and that, as a result, Wis. Stat. § 631.11 is inapplicable.

I

¶ 5. The relevant facts of this case are undisputed. On May 21, 1997, Patrick completed an "Application for Membership and Life Insurance" for a $150,000 term life insurance policy from CKIS. In the application, Patrick named Austin Fox, his then two-year-old son, as the primary beneficiary. On that date, Patrick also paid $31.94 as a first premium.

¶ 6. The application contains a section titled "Receipt for Payment and Conditional Insurance Agreement." This section provides, in relevant part:

Terms and Conditions of Agreement

A. Coverage Amount.

The amount of insurance that is in effect by this Agreement for each Proposed Insured is the amount shown in the application, but in no event shall CKIS' liability under this and any other Agreements be more than $300,000 for each Proposed Insured.

B. Coverage Limitations

. . . .

2. No coverage shall be in force if the person(s) proposed to be insured is not a risk insurable in accordance with CKIS rules, limits and standards for the plans and amounts applied for without any modification as to plan, amount, riders and/or the rate of premium paid.

3. No coverage shall be in effect if there is any material misrepresentation in the application.

. . . .

C. When Coverage Begins (subject to the Limitations in section B above)

Coverage under this Agreement begins on the latest of the following dates:

—The date of this application

—The date of this Agreement

—The effective date specifically requested in the application

—The date of completion of all examinations and medical studies required by the rules and practices of CKIS.

. . . .

(Bold and italics in original.)

¶ 7. Another section of the application entitled "Agent's Report" required the agent to mark which of several medical requirements applied to the applicant. On Patrick's application, the agent marked only the box for the blood test.² In that section, the agent also affirmed that he had explained the Conditional Insurance Agreement to the applicant. The agent working with Patrick noted in the Agent's Report that he explained the Conditional Agreement. Later, this agent also submitted an affidavit to the circuit court in which he stated that he had fully explained to Patrick the terms and conditions of the Conditional Insurance Agreement and specifically informed him of "the need to complete the required medical studies before the insurance would begin."

¶ 8. Patrick initially set an appointment to get the required medical examination on May 30, 1997. Prior to the appointment, however, he canceled and rescheduled the testing for the afternoon of June 6, 1997.

¶ 9. Unfortunately, early on June 6, 1997, Patrick was killed in a motor vehicle accident. The accident occurred before he completed the required medical testing. However, shortly after his death, the coroner drew a blood sample from Patrick's body and sent it to the Wisconsin State Laboratory of Hygiene for evaluation to determine if alcohol was involved in the accident.

¶ 10. After receiving notice of Patrick's death, CKIS denied coverage and refused to pay any benefits based on Patrick's application. CKIS wrote to Patrick's father and explained that because the blood draw never took place, the life insurance policy never took effect. CKIS refunded the initial premium paid.

¶ 11. On August 19, 1997, at the request of Patrick's family, Attorney Thomas Graham wrote CKIS to request that the insurance company use the postmortem blood sample to test the insurability of Patrick. CKIS declined the request on the basis that the blood draw was required before the policy could go into effect and that blood drawn after death was not usable for the purpose of determining insurability. A CKIS Vice President, Fred Muenkel, wrote:

Based on the language of the life insurance application which Mr. Fox signed, no policy was ever in place for Mr. Fox before he died, and, therefore, Catholic Knights has no coverage obligations. The Application for Membership and Life Insurance which was signed by Mr. Fox and witnessed by Catholic Knights' Agent, Larry Hopke, required Mr. Fox to acknowledge that "the Society reserves the right to require a medical examination and medical studies of any person proposed for coverage." Moreover, Mr. Fox gave his written authorization in the Application for Catholic Knights to obtain medical and non-medical information which "the Society will use ... to determine eligibility for insurance coverage." Finally, and most importantly, Mr. Hopke states that he gave Mr. Fox a Receipt for Payment and Conditional Insurance Agreement which clearly states that coverage will [not] begin until "the date of completion of all examinations and medical studies required by the rules and practices of CKIS."

The Catholic Knights Rate Book ... specifies that a blood profile is a routine requirement for all applications for coverage in excess of $99,999. Mr. Fox applied for $150,000 in coverage, and, therefore, a blood profile was a condition of our Conditional Insurance Agreement form, without which a final decision for insurance coverage could not be made. The [R]ate Book explains that the blood profile is to be done by one of our paramedical providers, with a complete analysis done according to our prescribed protocol by Osborne Laboratories.

The agent, Mr. Hopke, attests that he fully explained the terms of the Conditional Agreement to Mr. Fox, including the requirement that a blood draw would be needed from Mr. Fox before coverage could become effective....

Based on the above, we must decline your request that we contact the state crime lab to obtain a blood sample taken [from] Mr. Fox after his death to determine insurability of Mr. Fox. The purpose of the blood profile is to determine insurability of an applicant.... There is no basis in law or under the Insurance Application that would obligate Catholic Knights to have blood drawn and profiled after an applicant's death to determine insurability....

¶ 12. Austin Fox, through a guardian ad litem, then brought an action against CKIS to recover the benefits under the policy. Both parties brought motions for summary judgment in the circuit court. Fox claimed that the policy's condition of the blood test was fulfilled when blood drawn from Patrick after his death was made available to the insurance company. He also argued CKIS could not avoid its obligation because the company could...