Ney v. Farm Bureau Life Ins. Co.
| Decision Date | 29 May 2015 |
| Docket Number | 111,016. |
| Citation | 51 Kan.App.2d 562,350 P.3d 1126 |
| Parties | Michael NEY, Appellant, v. FARM BUREAU LIFE INSURANCE COMPANY, Appellee. |
| Court | Kansas Court of Appeals |
Michael J. Wyatt, of Mann Law Offices, of Hutchinson, for appellant.
Arthur S. Chalmers, of Hite, Fanning & Honeyman L.L.P., of Wichita, for appellee.
Before STANDRIDGE, P.J., GREEN, J., and JOHNSON, S.J.
After the death of Shawn Ney (Shawn), his father, Michael Ney (Michael), filed a claim under a life insurance contract naming Shawn as the insured and Michael as the sole beneficiary. Farm Bureau Life Insurance Company (FBL) denied payment of the death benefit under the policy. Michael then filed a lawsuit seeking the policy value of the death benefit. The district court granted summary judgment in favor of FBL. On appeal from the court's judgment, Michael argues the district court erroneously relied on K.S.A. 40–420(9) to find that FBL could contest payment of the death benefit under a life insurance policy despite the fact that the policy did not affirmatively authorize FBL to do so. Michael also argues on appeal that the misrepresentations made by his son in the application for reinstatement of the lapsed policy were not material under K.S.A. 40–418.
Shawn was the insured under a $250,000 life insurance policy issued by FBL on June 25, 2009 (the Policy). On July 10, 2010, Shawn shot his wife and another man, killing the man. Shawn and his wife divorced in September 2010. After the divorce, Shawn removed his wife as a beneficiary under the Policy and instead made Michael the primary beneficiary.
In August 2010, the Policy lapsed due to nonpayment of premiums. FBL sent a lapse notice informing Shawn that the Policy was no longer in force. The notice stated that Shawn could apply to reinstate the Policy by answering certain questions contained in the notice and returning it to FBL along with payment of the unpaid premiums, plus interest. Michael received the notice and took it and other documents to Shawn at the jail where Shawn was being held prior to his trial.
Michael did not deliver the documents to Shawn directly but rather gave them to a staff person at the jail who, in turn, brought them to Shawn. Michael waited 15 or 20 minutes for Shawn to complete the paperwork. Shawn was required to complete a portion of the notice that read:
Shawn signed the lapse notice on September 16, 2010. He did not list any exceptions to his representations. FBL received Shawn's application to reinstate the Policy, i.e., the completed lapse notice, on September 24, 2010. On the basis of Shawn's representations in the application, FBL reinstated the Policy on September 25, 2010. Shawn died on December 10, 2011.
As the sole beneficiary of the Policy, Michael filed a claim with FBL in late December 2011. FBL performed an investigation after it received the claim. As a result of this investigation, FBL discovered that, contrary to Shawn's representations in his application to reinstate the Policy, Shawn had been examined and treated by several doctors after June 25, 2009. For example, FBL learned that Shawn visited several doctors between June 2010 and September 2010 and received diagnoses or treatment for a number of medical issues, including anxiety, depression, bipolar disorder, diabetes, migraine headaches, chest pain, and suicidal ideation. FBL also learned that Shawn was evaluated by a licensed psychologist on August 23, 2010, and September 13, 2010, in order to determine his competency to stand trial.
In May 2012, FBL denied Michael's claim and rescinded the Policy. Michael filed a petition naming Farm Bureau Financial Services and Arthur Neil Cordre, the local insurance agent who accepted Shawn's reinstatement application, as defendants. After discovering that he had sued the wrong entity, the court permitted Michael to substitute FBL as a defendant in place of Farm Bureau Financial Services. Thereafter, Michael, FBL, and Cordre filed cross-motions for summary judgment.
In support of his motion for summary judgment, Michael argued the following language in the Policy effectively prohibited FBL from denying Michael's claim and rescinding the Policy: “[FBL] will not contest payment of the death benefit for any reason after this policy has been in force during your lifetime for two years from the date of issue....” Although the Policy specifically allowed an insured to reinstate the Policy within 5 years of the due date for an unpaid premium under certain conditions, Michael noted that the Policy did not contain any specific language allowing FBL to contest a claim for any period after the Policy was reinstated.
In response to Michael's motion for summary judgment, FBL acknowledged that the Policy did not include specific language allowing it to contest a claim or rescind the Policy after reinstatement but asserted that the absence of such language was irrelevant because it had a right to rescind the policy ab initio under the common law. FBL also argued that K.S.A. 40–420(9) provided a statutory right to rescind the policy on the basis of fraud or misrepresentation of material facts pertaining to the reinstatement.
The district court granted FBL's motion for summary judgment and denied Michael's motion. Relying on K.S.A. 40–420(9), the court held the reinstated policy was contestable on account of fraud or misrepresentation of material facts pertaining to the reinstatement for 2 years, which was the same contestability period stated in the Policy when it was originally issued. Finding no reasonable juror could conclude that Shawn intended anything other than suicide when he overdosed on medication he was taking to treat his depression, the court held that the omissions in Shawn's application for reinstatement were material under K.S.A. 40–418 and that, as a result, the Policy was rendered void.
Michael filed a notice of appeal on December 2, 2013. In March 2014, at the request of Michael and Cordre, Michael's case against Cordre individually was dismissed with prejudice by the district court.
When the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, 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, summary judgment is appropriate. The district court must resolve all facts and inferences which may reasonably be drawn from the evidence in favor of the nonmoving party. When opposing a motion for summary judgment, an adverse party must come forward with evidence to establish a dispute as to a material fact. In order to preclude summary judgment, the facts subject to the dispute must be material to the conclusive issues in the case. On appeal, the same rules apply; summary judgment must be denied if reasonable minds could differ as to the conclusions drawn from the evidence. Waste Connections of Kansas, Inc. v. Ritchie Corp., 296 Kan. 943, 962, 298 P.3d 250 (2013).
Michael argues that it is he, and not FBL, that was entitled to summary judgment. He argues that because the Policy did not specifically authorize FBL to contest payment of the death benefit at any time after the initial 2–year contestability period, FBL may not deny his claim or rescind the Policy.
The parties do not dispute that the contract is silent as to any right of FBL to contest payment of the death benefit or rescind the policy after the initial 2–year contestability period. At first glance, the contractual clause establishing that initial contestability period appears to be absolute, stating that FBL “will not contest payment of the death benefit for any reason after this policy has been in force during Your lifetime for two years from the date of issue....” (Emphasis added.) But in addition to the language of the Policy itself, the Kansas insurance statutes provide important guidance.
K.S.A. 40–420 lists several provisions that must be included in all life insurance policies issued in Kansas except for industrial insurance, annuities, and pure endowments. The Policy did not fit into any of these exceptions, so the requirements listed in K.S.A. 40–420 must be read into the Policy. See Missouri Medical Ins. Co. v. Wong, 234 Kan. 811, 819, 676 P.2d 113 (1984) (). For instance, K.S.A. 40–420(2) requires that all policies contain:
“(2) A provision that, except as otherwise expressly provided by law, the policy together with the application, if a copy thereof be endorsed upon or attached to the policy, shall constitute the entire contract between the parties and shall be incontestable after it has been in force during the lifetime of the insured for a period of not more than two years from its date, except for nonpayment of premiums ....” (Emphasis added.)
The Policy, in apparent compliance with this subsection, contains a clause limiting FBL's right to contest payment of the death benefit to a 2–year period following issuance of the policy.
More relevant to the issue presented on appeal is K.S.A. 40–420(9), which requires insurance policies contain the following:
“A provision that if in event of default in premium payments the value of the policy shall have been applied to the purchase of other insurance as provided in this section, and if such insurance shall be in force and the original policy shall not have been surrendered to the company and canceled,...
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...that the hospital provide such evidence if it wished to avoid summary judgment against it. See Ney v. Farm Bureau Life Ins. Co. , 51 Kan.App.2d 562, 566, 350 P.3d 1126 (2015), rev. denied 303 Kan. 1078 (2016). As the case has arrived before us on appeal, however, the hospital has not yet be......