Kirk v. Kemper Investors Life Ins. Co.

• Decision Date: 08 August 2006
• Docket Number: Civil. Action No. H-05-0501.
• Citation: 448 F.Supp.2d 828
• Parties: Walter Boyce KIRK, Jr., et al, Plaintiffs, v. KEMPER INVESTORS LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Southern District of Texas

448 F.Supp.2d 828

Walter Boyce KIRK, Jr., et al, Plaintiffs, v. KEMPER INVESTORS LIFE INSURANCE COMPANY, Defendant.

Civil. Action No. H-05-0501.

United States District Court, S.D. Texas, Houston Division.

August 8, 2006.

Bruce Allan Rokohl, Attorney at Law, Houston, TX, for Plaintiff.

Laura S. Favaloro, Newman Favaloro & Troegel, Houston, TX, Leo M. Spellacy, Jr., Cleveland, OH, for Defendant.

MEMORANDUM AND ORDER

ELLISON, District Judge.

Pending before the Court are Defendant's Motion for Summary Judgment on the issue of misrepresentation (Doc. # 27) and Motion for Summary Judgment on the issue of waiver (Doc. # 35). For the reasons set forth below, the Motion for Summary Judgment on the issue of misrepresentation is GRANTED IN PART and DENIED IN PART, and the Motion for Summary Judgment on the issue of waiver is DENIED.

I. BACKGROUND

This case arises from a life insurance policy issued by Defendant Kemper Investors Life Insurance Company ("KILICO") to Walta G. Kirk ("Ms.Kirk"), on March 14, 2002. Ms. Kirk passed away on August 31, 2003, while the policy was in effect. Because her death occurred within two years of the policy's issuance, KILICO conducted a routine investigation, which revealed that Ms. Kirk had been treated for chest pain, respiratory disorder, mental disorder, and uncontrolled high blood pressure. Ms. Kirk had denied that she had ever had or been treated for any of these conditions in her application for the KILCO life insurance policy. Based on these alleged misrepresentations, KILICO denied payment of any benefits on the policy.

Following Ms. Kirk's death, the primary beneficiary of the KILICO policy, Ashley Robin Kirk, transferred his rights and interest as beneficiary to Plaintiffs Walter Boyce Kirk, Jr. and Clarence Robin Kirk ("Plaintiffs"). Plaintiffs then brought the instant suit, claiming that KILICO breached the insurance contract by refusing to pay the amount owed under the policy. KILICO removed the suit to federal court on the basis of diversity of citizenship and has now filed two motions for summary judgment on Plaintiffs' claims. In the first, KILICO contends that summary judgment is appropriate because it has proved all elements of the defense of misrepresentation. In the second, KILICO urges that Plaintiffs lack standing to bring their claims because Ashley Kirk, the policy's beneficiary, waived his rights to any benefits by cashing KILICO's premium refund check. With respect to KILICO's first motion, the Court finds that KILICO has proved the elements of a misrepresentation defense, except for the element of intent to deceive. Accordingly, summary judgment is granted only as to those elements of misrepresentation that KILICO has proved. With respect to KILICO's second motion, the Court finds that genuine issues of material fact exist as to whether or not Ashley Kirk waived his rights to benefits under the policy, and accordingly, that summary judgment is not warranted.

II. ANALYSIS

A. Summary Judgment Standard

A motion for summary judgment under Federal Rule of Civil Procedure 56 requires the Court to determine whether the moving party is entitled to judgment as a matter of law, based on the evidence thus far presented. See Fed.R.Civ.P. 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 judgment as a matter of law." Kee v. City of Rowlett, 247 F.3d 206, 210 (5th Cir.2001) (quotations omitted). A genuine issue of material facts exists if a reasonable jury could enter a verdict for the nonmoving party. Crawford v. Formosa Plastics Corp., 234 F.3d 899, 902 (5th Cir.2000). The Court views all evidence in the light most favorable to the nonmoving party and draws all reasonable inferences in that party's favor. Id.

"[A] complete failure of proof concerning an essential element of the nonmoving party's case necessarily renders all other facts immaterial" and "mandates the entry of summary judgment" for the moving party. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If the moving party shows that there is a lack of evidence to support the nonmoving party's claims, the nonmoving party "must go beyond the pleadings and designate specific facts showing that there is a genuine issue for trial." Kee, 247 F.3d at 210 (quotation omitted). The nonmovant cannot satisfy this burden with conclusory allegations, unsubstantiated assertions, or only a scintilla of evidence. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir.1994) (en bane) (per curiam).

B. Motion for Summary Judgment on the Issue of Misrepresentation

Under Texas law, an insurer may avoid liability on a life insurance policy because of the misrepresentation of the insured. Mayes v. Mass. Mut. Life Ins. Co., 608 S.W.2d 612, 616 (Tex.1980). In order to assert a misrepresentation defense, the insurer must prove five elements, including: (1) the making of a representation; (2) the falsity of the representation; (3) reliance thereon by the insurer; (4) the intent to deceive on the part of the insured in making the same; and (5) the materiality of the representation. Id.; Albany Ins. Co. v. Anh Thi Kieu, 927 F.2d 882, 891 (5th Cir.1991).

Here, KILICO asserts that the insured, Ms. Kirk, misrepresented her health in her insurance policy application with respect to four medical conditions: chest pain, respiratory disorder, mental disorder, and uncontrolled high blood pressure. As KILICO points out, the application for the KILICO insurance policy specifically asked whether Ms. Kirk had ever had or been treated for a variety of medical conditions, including the four listed above. Ms. Kirk checked the "no" box corresponding to each of the conditions. KILCO contends that medical evidence shows that Ms. Kirk suffered from and had been treated for the four conditions, and that the deposition testimony of Plaintiffs and other family members demonstrates that Ms. Kirk was aware that she suffered from these conditions. KILICO further contends that Ms. Kirk's misrepresentations were material, that it relied upon the misrepresentations in granting Ms. Kirk's application for insurance, and that Ms. Kirk intended to deceive KILICO by answering the questions on the policy application, as to the four medical conditions, in the negative.

Plaintiffs do not deny that KILICO has met its burden of proving a defense of misrepresentation with respect to three of the five required elements, namely, that Ms. Kirk's application contained representations, that these representations were false, and that the representations were material. In their response to KILICO's summary judgment motion, Plaintiffs contend only that the remaining elements, of KILICO's reliance on the representations and of Ms. Kirk's intent to deceive, have not been proved. Plaintiffs urge that genuine issues of material fact with respect to these elements preclude a summary judgment for KILICO. The Court will address the elements of reliance and intent to deceive in turn.

1. Objections to Summary Judgment Evidence

First, however, Plaintiffs have raised two objections to KILICO's summary judgment evidence. Plaintiffs initially challenge KILICO's reliance on Ms. Kirk's medical records, arguing that while Plaintiffs have stipulated to the authenticity of the records, they have not stipulated to their admissibility or waived hearsay objections. KILICO responds by pointing to a discussion of the parties' stipulation with respect to the medical records from the February 8, 2006 deposition of Walter Kirk, Jr.¹ This conversation clarifies that while Plaintiffs stipulated to the authenticity of the medical records, they expressly reserved their objection to the admissibility of the records, on grounds of hearsay or otherwise. Under the Federal Rules of Evidence, the authenticity of a particular piece of evidence and its admissibility under a hearsay exception are treated as separate issues. See FED.R.EVID. 803 (listing exceptions to the hearsay rule); FED. R. EVID. 901 (setting forth the requirement of authentication). Accordingly, it is difficult to see how Plaintiffs' stipulation to the records' authenticity could possibly be construed as a stipulation that the records are not hearsay, particularly when Plaintiffs expressly reserved the right to object to the admissibility of the records on hearsay grounds. While KILICO contends that it is not relying on any arguably inadmissible hearsay contained within the records, the records themselves are hearsay, absent a stipulation or showing that they fall under the exception for business records or one of the other hearsay exceptions. The Court need not resolve this objection at this time, however, as it does not rely on the medical records in deciding KILICO's motion for summary judgment on the issue of misrepresentation.

Second, Plaintiffs object to the form of a question posed by KILICO's counsel to Clarence Kirk at his deposition. With respect to Ms. Kirk's suffering from chest pains and having a respiratory disorder, Clarence Kirk was asked, "[t]hat was something she was aware of, right?" Clarence Kirk Dep. 37:7, Feb. 8, 2006. Plaintiffs object that this question called for Clarence Kirk to speculate as to Ms. Kirk's knowledge. Plaintiffs' objection is OVERRULED. Prior to this question, Clarence Kirk testified that he had engaged in conversations with Ms. Kirk about her health, including her chest pains and respiratory disorder. See Clarence Kirk Dep. 13:9-18, 14:7-15:7. Because Clarence Kirk had personal knowledge of Ms. Kirk's awareness of her conditions, this question did not call for speculation and was proper.

2. Reliance

An insurer's actual knowledge of a misrepresentation by an insured will defeat a defense based upon misrepresentation. Koval Indus. v....