LeMaster v. USAA Life Ins. Co.

• Decision Date: 10 April 1996
• Docket Number: No. 95-1124-CIV-T-17E.,95-1124-CIV-T-17E.
• Parties: Luanne LeMASTER, Plaintiff, v. USAA LIFE INSURANCE CO., Defendant.
• Court: U.S. District Court — Middle District of Florida

922 F. Supp. 581

Luanne LeMASTER, Plaintiff, v. USAA LIFE INSURANCE CO., Defendant.

No. 95-1124-CIV-T-17E.

United States District Court, M.D. Florida, Tampa Division.

April 10, 1996.

Kevin Hackett O'Neill, Eugene C. Langford, Timothy N. Tack, Langford & Hill, P.A., Tampa, FL, for Luanne LeMaster.

Kirk M. Gibbons, John R. Bello, Jr., Chorpenning, Good, Gibbons & Cohn, Tampa, FL, for USAA Life Insurance Company.

ORDER ON DEFENDANTS' MOTION FOR SUMMARY JUDGMENT

KOVACHEVICH, Chief Judge.

This action is before the court on the following motions and responses:

1. Defendant, USAA Life Insurance Company's (hereafter "USAA"), motion for summary judgment and memorandum of law in support, filed December 1, 1995. (Docket No. 17)

2. Plaintiff, Luanne LeMaster's (hereafter "Mrs. LeMaster") memorandum of law in opposition to Defendant's motion for summary judgment, filed January 9, 1996. (Docket No. 28)

Facts

On January 13, 1993 William D. LeMaster (hereafter "Mr. LeMaster") applied to USAA for life insurance in the amount of $200,000. The application included a line of questions concerning the well being of the applicant including the following: "Has any proposed insured ... ever ... had or been treated by a physician or consulted with a health advisor for ... cancer...." Mr. LeMaster responded in the negative. As condition to answering the propounded questions, the application required that the proposed insured answer "to the best of his knowledge and belief." In addition, the application included a medical records release form which authorized USAA to obtain any of Mr. LeMaster's medical records over the ensuing two and one half years.

On January 16, 1993, a paramedic working for USAA conducted an examination of Mr. LeMaster which included the taking of an electrocardiogram (hereafter "EKG"). On January 22, USAA requested that Mr. LeMaster fill out an addendum to the original application which in part asked the following question: "to the best of your knowledge and belief do you have or have you ever had or been treated for ... cancer...." Again, Mr. LeMaster answered in the negative. USAA then sent a letter, dated January 28, 1993, to Mr. LeMaster refunding the monthly premiums that he had sent which were originally set at $197.71 per month. The letter stated that USAA needed to review Mr. LeMaster's "medical history" before it could render a decision and requested that Mr. LeMaster provide assistance in obtaining his medical records from Dr. Malpartida and North Florida Regional Medical Center, the health care providers which Mr. LeMaster had disclosed earlier in the application process. The letter further provided that no coverage would be extended until the information was received. USAA asserts that after receiving medical records relating to Mr. LeMaster from Dr. Malpartida on February 8, 1993, and from North Florida Regional Medical Center on February 10, 1993, the company continued to process Mr. LeMaster's application.

The medical records which USAA submitted to the Court indicate that Mr. LeMaster was hospitalized at North Florida Regional Medical Center on February 16, 1993, and that he was discharged February 25, 1993. Sometime during this stay, Mr. LeMaster was diagnosed as having metastic malignant melanoma of which he later died in November, 1993. These medical records also indicate that, during treatment of Mr. LeMaster, "Champus" supplemental medical claims were made with USAA's medical claims department. In addition, Robert Buss, a regional sales manager for USAA, stated in deposition that USAA's computer information system is able to access the status of the medical supplemental coverage for USAA's life insurance policyholders.

On February 26, 1993, the day after Mr. LeMaster's release from North Florida Regional Medical Center, USAA sent its paramedic to Mr. LeMaster's residence to conduct a second examination in which the paramedic took Mr. LeMaster's blood pressure and pulse and administered an EKG. Defendant made no further contact with Mr. LeMaster until March 30, 1993, when USAA sent a letter to Mr. LeMaster indicating that it was unable to extend coverage for the original premium of $197.71 per month. Instead USAA stated that it would be able to extend coverage at an increased premium of $351.05. Although USAA attributes the increased premium to the EKGs performed by the paramedic, the letter did not specify the basis for the increase in premium; rather, it stated that the cost increase was consistent with LeMaster's "medical history." In addition, the letter made no reference to the type of information it received from North Florida Regional Medical Center or when that information was received.

On April 20, 1993, USAA and Mr. LeMaster entered into an issuance agreement for the new premium amount which was subject to USAA's final approval. The agreement, labeled "Request for Amendment of Application," provided for the increase of the insurance premium and stated that the "proposed insured shall provide additional evidence of insurability ... if required by the rules and practices of USAA...." USAA gave its final approval for the policy on May 3, 1993, over three and one half months after Mr. LeMaster submitted the original application.

After her husband's death in November of 1993, Mrs. LeMaster filed a claim for death benefits with USAA. USAA rejected the claim and returned the premiums which it had collected from the inception of the policy. As justification for denying the benefits under the policy, USAA stated that Mr. LeMaster had "committed a material and fraudulent omission during the application process." Mrs. LeMaster then filed this action.

In response to Mr. LeMaster's suit for payment of the benefits under the policy, USAA contends that Mr. LeMaster was under the affirmative duty to disclose the circumstances surrounding his hospitalization since it occurred while the application was still pending. USAA asserts that his failure to provide this information entitles USAA to rescind the policy. Mrs. LeMaster contends that the information contained in the application was correct at the time that the application was submitted. She further contends that USAA misled Mr. LeMaster into believing that the medical information that it had on file was adequate. Moreover, Mrs. LeMaster contends that USAA failed to exercise the level of care commensurate with the standards of insurance industry in ensuring that it had adequate medical information regarding Mr. LeMaster while underwriting the policy.

Summary Judgment Standard

Summary judgment is appropriate if the "pleadings, depositions, answers to interrogatories and admissions on file together with the affidavits if any show that there is no genuine issue of material fact and that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). Only when the moving party has sustained its initial burden of showing the court that there is no genuine issue of material fact, should a court, viewing all the evidence in the light most favorable to the non-moving party, grant a motion for summary judgment in the moving party's favor. Sweat v. Miller Brewing Co., 708 F.2d 655 (11th Cir.1983).

Once the moving party has established the absence of a genuine issue of material fact, to which the non-moving party bears the burden at trial, "Rule 56(e) ... requires the nonmoving party to go beyond the pleadings ... and designate `specific facts showing that there is a genuine issue for trial.'" Celotex Corp. v. Catrett, 477 U.S. 317, 324, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265, 274 (1986). The nonmoving party succeeds in establishing that the issues of fact are "genuine only if a reasonable jury, considering the evidence presented could find for the nonmoving party." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 2510-11, 91 L.Ed.2d 202 (1986).

Discussion

LeMaster asserts that a material issue of fact exists as to whether USAA has waived or is estopped from rescinding the life insurance policy.¹ Florida Statute 627.409 (1995) provides:

(1) Any statement ... made by ... an insured or an annuitant in an application for an insurance policy ... is a representation and not a warranty. A misrepresentation, omission, concealment of fact, or incorrect statement may prevent recovery under the contract or policy only if ...:

(a) The misrepresentation, omission, concealment, or statement is fraudulent or is material either to the acceptance of the risk or to the hazard assumed by the insurer.

(b) If the true facts had been known to the insurer pursuant to a policy requirement or other requirement, the insurer in good faith would not have issued the policy ..., would not have issued it at the same premium rate, or would not have issued it in as large amount....

Notwithstanding this statutory rescission defense, as a general rule in Florida, forfeitures of insurance policies are not favored, especially when the event that gives rise to the insurer's liability has occurred. Johnson v. Life Insurance Co. of Georgia, 52 So.2d 813, 815 (Fla.1951); see Travelers Protective Ass'n of America v. Jones, 91 F.2d 377, 378 (5th Cir.1937). In addition, Florida has recognized the theories of estoppel and waiver in the insurance contract setting. See Gulf Insurance Co. v. Green, 80 So.2d 321 (Fla.1955). "Waiver and estoppel may apply when the insured is deceived or misled to his detriment...." Schrader v. Prudential Insurance Co. of America, 280 F.2d 355, 364 (5th Cir.1960). However, there can be no waiver without express or implied knowledge of that which is to be waived. Green, 80 So.2d at 322. "Waiver and estoppel may apply when the insured is deceived or misled to his detriment...." Schrader v. Prudential Insurance Co. of America, 280 F.2d 355, 364 (5th Cir.1960).

Knowledge on the part of insurer

In Johnson v. Life Insurance Co. of Georgia, an insured's widow filed a claim with the defendant for life insurance benefits...