Hills v. Savings Bank Life Ins. Co. Of Mass.
| Decision Date | 02 July 2007 |
| Docket Number | 041590 |
| Citation | 2007 MBAR 067 |
| Parties | Elise Hills fka Elise Larner v. Savings Bank Life Insurance Company of Massachusetts |
| Court | Massachusetts Superior Court |
Judge (with first initial, no space for Sullivan, Dorsey, and Walsh): Sanders, Janet L., J.
This is an action seeking payment of proceeds under a life insurance policy issued by the defendant Savings Bank Life Insurance Company of Massachusetts ("SBLI") to Charles Larner, who died on May 1, 2002. The plaintiff Elise Larner (now Elise Hills) is his widow and the named beneficiary under the policy. The case is now before the Court on cross motions for summary judgment. At issue is the interpretation of a "good health" clause in the policy application. For the following reasons, this Court concludes that, as to Count II (alleging breach of contract) the plaintiff's Motion must be ALLOWED, and the defendant's Motion DENIED. As to all remaining Counts the defendant's Motion is ALLOWED.
The undisputed facts material to these motions can be summarized as follows. In November 2001, Mr. Larner, then 50, applied for term life insurance with SBLI. Part One of the Application was filled out on November 8, 2001 with the assistance of Maureen E. Carney, an insurance agent associated with SBLI. The Application stated that Mr. Larner had been laid off from his job at Polaroid, and was looking to "provide financial security for his wife and children," who were named as the beneficiaries.[1] The amount of insurance applied for was $300,000. In a preprinted box on the second page of Part One of the Application, there appears the following language:
I agree that the insurance applied for shall not be effective until the later of the date that the first full premium is paid or the date the application is approved by SBLI, and only then if each person to be insured is in good health on such date.
(Emphasis in original.) There was no discussion at the time the Application was filled out concerning the meaning of the reference to "good health." Carney told Mr. Larner only that the policy would become effective once the underwriter approved his application and he paid his first premium. It is undisputed, however, that as far as Mr. Larner or his family knew, he was in fact in good health when he executed this Application on November 21, 2001.
In order to satisfy itself that Mr. Larner was indeed in good health, SBLI did two things. First, it dispatched a paramedic to Mr. Larner's residence to examine him. The paramedic measured his height and weight, took his blood pressure and pulse, and took blood and urine samples. The test results were all normal. The paramedic also asked Mr. Larner a number of questions concerning his health (as well as that of family members), and his responses to these questions were recorded in Part Two of the Application. Mr. Larner reported that he had last seen his physician in October 2001 for a complete physical examination, which was normal. He also stated that he took Prilosec and suffered from seasonal allergies. Otherwise, his responses indicated that he was in good health as far as he knew: he had never smoked, and had never been treated for or had any indication of rheumatism, cancer, bone disease, or any other serious disorder. He had never been advised to reduce his consumption of alcohol nor had he consumed at any time any barbiturates, narcotics, or other habit-forming drugs. He did not suffer from any sexually transmitted diseases. He was not overweight.
The next thing that SBLI did was get Mr. Larner's medical records. There was nothing in these medical records to indicate to SBLI that Mr. Larner was not in good health. The records did show that Mr. Larner had a long history of gastroesophageal reflux disease ("GERD"), and that he was taking Prilosec for this, as he had stated in the Application. He had seen his doctor last in the fall 2001, as he reported. The record of that visit (described as "routine") stated that Mr. Larner "looks well," and reported "running two to three miles a day" without difficulty. The physician stated that there were "no major concerns" except for the "ongoing dyspepsia and GERD," which had been treated with Prilosec.
On November 27, 2001, Mr. Larner sent SBLI a check for the policy premium. There is no evidence that anything medically significant occurred for the next six weeks. On January 3 2002, SBLI approved the Application and the policy issued a few days later. The insurance policy stated that it included the Application and any attached riders as part of the contract.
It also contained a provision stating that SBLI could contest or cancel the policy for any misrepresentation of fact in the Application. There is no claim in this case that Mr. Larner made any misrepresentations to SBLI or in any way gave it untrue information about his health as he perceived it.
On January 16, 2002, Mr. Larner returned to his doctor after experiencing abdominal cramps the night before. Mr. Larner's doctor referred him to Emerson Hospital for diagnostic tests, suspecting a possible kidney stone. An ultrasound instead showed "multiple hepatic lesions consistent with metastatic disease." The next day, Dr. Dubois at Emerson performed a CAT scan which showed multiple lesions on Mr. Larner's liver and a mass in his pancreas.
He was diagnosed with Stage IV pancreatic cancer, which is the highest level of severity and has a prognosis of survival which is less than a year. Mr. Larner died on May 1, 2002.
Mr. Larner's wife Elise (the plaintiff) promptly submitted a claim to SBLI for death benefits. On June 19, 2002, SBLI denied the claim on the grounds that Mr. Larner could not have been in "good health" as of January 3, 2002 when his Application was approved. Citing the "good health" clause in the Application, SBLI took the position that the policy was void.
It issued the plaintiff a check for $827.28, representing the premiums paid as of that date.
This lawsuit ensued.
The issue before this Court is whether a beneficiary under a life insurance policy can be denied death benefits under a "good health" clause even where the insured did not know at the time that his application was approved that he was suffering from a disease which would ultimately prove to be fatal. The defendant contends that a long line of Massachusetts cases supports its position that the insured's actual good health is a condition precedent to coverage which, if not satisfied, voids the policy even though the health problem was not known until after the policy issued. The plaintiff argues that the Court should interpret this clause from the perspective of the policy holder: if the insured reasonably believed that he was in good health at the time he applied for insurance, then the insurer should not be able to escape its obligations particularly where it had satisfied itself as to the state of the insured's health before it approved the application. Recognizing that the defendant has precedent on its side, this Court is nevertheless of the view that, if the Supreme Judicial Court were to confront this issue today, it would take the plaintiff's position. That is, clauses like the instant one must be interpreted based on what the parties knew and reasonably believed at the time the policy issued, and not on what in fact turned out to be the case based on discoveries made sometime later.
This Court begins its analysis with certain principles in mind. The interpretation of an insurance contract is no different from the interpretation of any other contract: if a provision is free from ambiguity, then the Court must give the words their usual and ordinary meaning. Cody v. Connecticut General Life Insurance Co., 387 Mass. 142, 146 (1982), quoting MacArthur v. Massachusetts Hospital Service Inc., 343 Mass. 670, 672 (1962). Where there are equally plausible interpretations of the policy language, however, then "the insured is entitled to the benefit of the one that is more favorable to it." Trustees of Tufts University v. Commercial Union Insurance Co., 415 Mass. 844, 849 (1993), quoting Hazen Paper Co. v. United States Fidelity & Guaranty Co., 407 Mass. 689, 700 (1990). This makes particularly good sense since the insurer generally drafts the policy language; it is therefore within its power to make clear its intentions and to alleviate any confusion on the insured's part. Finally, it is appropriate for the Court to consider whether an objectively reasonable insured, reading the relevant policy language, would expect to be covered. Hakim v. Massachusetts Insurer's Solvency Fund, 424 Mass. 275, 282 (1997); see also City Fuel Corp., v. National Fire Insurance Co of Hartford, 446 Mass. 638 (2006). This Court applies these principles in weighing the arguments of the parties.
SBLI contends that Mr. Larner's good health was a condition precedent to the formation of a contract of insurance. As a condition precedent as opposed to a representation "good health" (it is argued) means actual good health; the insured's state of mind is totally irrelevant. Certainly, there is support for this position in the case law, although most of these decisions date back to the late nineteenth and early twentieth century. See e.g. Fondi v. Boston Mutual Life Insurance Co., 224 Mass. 6, 7 (1916); Barker v. Metropolitan Life Insurance Co., 188 Mass. 542, 546 (1905); Gallant v. Metropolitan Life Insurance Co., 167 Mass. 79 (1896); see also Ansin v. Mutual Life Insurance Co. of New York, 241 Mass. 107, 110 (1922). If the Court were to use this analysis, then SBLI would prevail: there can be no dispute that Mr....
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