Pedersen v. Chrysler Life Ins. Co., EC87-95-S-D.

• Decision Date: 15 January 1988
• Docket Number: No. EC87-95-S-D.,EC87-95-S-D.
• Citation: 677 F. Supp. 472
• Parties: Mary Alice PEDERSEN, Plaintiff, v. CHRYSLER LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Mississippi

677 F. Supp. 472

Mary Alice PEDERSEN, Plaintiff, v. CHRYSLER LIFE INSURANCE COMPANY, Defendant.

No. EC87-95-S-D.

United States District Court, N.D. Mississippi, E.D.

January 15, 1988.

John L. Long, Billy W. Shelton, Tupelo, Miss., for plaintiff.

Calvin L. Wells, Richard A. Montague, Jr., Wells, Moore, Simmons, Stubblefield & Neeld, Jackson, Miss., for defendant.

OPINION

SENTER, Chief Judge.

Mary Alice Pedersen brings this action pursuant to 28 U.S.C. § 1332 alleging that the defendant insurance company wrongfully denied a claim for life insurance made under the terms of a policy issued by the insurer. This cause comes before the court on defendant's motion for summary judgment.

Factual Background

According to the complaint, Erik W. Pedersen and his wife, Mary Alice Pedersen, purchased a 1985 Plymouth Reliant from a Tupelo car dealer on July 13, 1985. Along with the purchase, the Pedersens also obtained a life insurance policy from Chrysler Life in the event that Erik Pedersen died before paying for the car. Mr. Pedersen paid the premium in a timely fashion, and the insurance policy became effective immediately.

On January 12, 1986, six months after purchasing the new car and the life insurance, Erik Pedersen died from cardiomyopathy and heart failure. Shortly thereafter, Mary Alice Pedersen filed a claim for benefits with Chrysler Life seeking to have the outstanding indebtedness paid off with the proceeds. Chrysler Life denied her claim on April 7, 1986, and Mrs. Pedersen filed suit on March 30, 1987, almost one year later. In addition to contractual damages, Mrs. Pedersen seeks an award of both extracontractual compensatory damages and punitive damages as a result of her insurer's alleged misconduct. Since the parties are diverse and the amount in controversy exceeds ten thousand dollars, this court is vested with subject matter jurisdiction. 28 U.S.C. § 1332.

In his application for life insurance, Erik Pedersen stated, inter alia, that he had not been attended to by a physician for treatment of heart disease within the six-month period preceding the effective date of the policy. This application was signed by Pedersen below the comment that the information contained therein was true and accurate.

When the Pedersens filled out the application, they were assisted by an agent of Chrysler Life, George Sheffield. According to the sworn testimony given by Sheffield during his deposition, he specifically asked if Mr. Pedersen had been hospitalized within the past six months, and was told by Mrs. Petersen that her husband had a heart problem prior to the six month period, but had not been treated within the six-month period. Sheffield further states that he was not aware that this statement was false when he helped the Pedersens fill out their application.

According to Mrs. Pedersen, neither she nor her husband were asked about their health while they filled out the insurance forms. Mrs. Pedersen admits that the application contains incorrect information and is signed by her husband, but states that both she and her husband failed to read it before he signed it. Mrs. Pedersen asserts that she was unaware of any misrepresentation until it was called to her attention later on, and states that she never intended to mislead the company in any event.

Chrysler Life's investigation revealed that Mr. Pedersen was in fact suffering from heart problems when he filled out the application and had visited a physician at least six times between January 21, 1985, and July 31, 1985, and four of the visits were specifically related to heart trouble. Medical records obtained from the North Mississippi Medical Center showed that Mr. Pedersen entered the hospital on March 19, 1985, and April 15, 1985, for treatment of congestive heart failure. Based on these facts, Chrysler Life chose to declare the policy void ab initio and refund all premiums tendered with interest. The ground for this action was that Mr. Pedersen had made material misrepresentations in the course of applying for insurance, thus justifying recission under Mississippi law.

Legal Analysis

The Mississippi legislature has permitted insurance companies doing business in the state to deny claims based upon the defense of material misrepresentation. Miss.Code Ann. § 83-9-11 (1972). If a party applying for insurance makes a misstatement of a material fact in the application, the insurer is entitled to declare the policy issued in reliance thereon void ab initio. Nationwide Mutual Fire Ins. Co. v. Dungan, 634 F.Supp. 674, 681 (S.D.Miss. 1986), affirmed 818 F.2d 1239 (5th Cir. 1987); Dukes v. South Carolina Insurance Co., 590 F.Supp. 1166, 1168-69 (S.D. Miss.1984), affirmed 770 F.2d 545 (5th Cir. 1985).

The Mississippi Supreme Court explained in Fidelity Mutual Life Insurance Co. v. Miazza, 93 Miss. 18, 46 So. 817 (1908), that any contract induced by a misrepresentation or concealment could be avoided by a party, such as an insurance company, which is adversely affected by the misstatement. Id. 46 So. at 819.

If the applicant for insurance undertakes to make a positive statement of fact, if it be material to the risk, such fact must be true. It is not sufficient that he believes it true, but it must be true. It is not sufficient that he believes it true, but it must be so in fact, or the policy will be avoided. Provided, always, that the misstatement be about a material matter. If the applicant is not informed as to any question asked in the application, he should so state, and there can be no misrepresentation.

* * * * * *

This is simply a general principle of contract law which the special nature of insurance contracts does not alter. The parties entered into this contract under a mistake of fact. Had that mistake been shown, the insurance company would not have written the policy. Whether the fact was intentionally or unintentionally misstated by the plaintiffs is unimportant.

Id. 46 So. at 819.

The burden rests on the party seeking to void a contract based upon a material misrepresentation to establish the existence of the factual misstatement and its materiality by clear and convincing evidence. Gardner v. Wilkinson, 643 F.2d 1135, 1136, n. 3 (5th Cir.1981) (applying Mississippi law); Brewster v. Bubba Oustalet, Inc., 231 So.2d 189 (Miss.1970).

In the case at bar, Mrs. Pedersen contends that her husband never read the application before signing it and did not intend to mislead Chrysler Life. Conceding these facts as true, the insurer points out that a person cannot avoid a written contract which he has entered into merely because he failed to read it or have it read to him. Under Mississippi law, unless a party was induced not to read the contract or have it read to him by fraudulent representations made by another party, he will be required to abide by its terms. See, e.g., Continental Jewelry Co. v. Joseph, 140 Miss. 582, 585, 105 So. 639 (1925). Moreover, since an insurer is not required to show an intent to deceive in order to void a policy based on misrepresentations, Mr. Pedersen's good faith is irrelevant to resolving the instant dispute.

Under Rule 56, Fed.R.Civ.P., summary judgment should be granted "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."

In order to defeat a summary judgment motion, the nonmoving party must present evidence which would permit a reasonable trier of fact to find against the moving party. A mere scintilla of evidence is not sufficient to justify denial of a properly supported summary judgment motion. St. Amant v. Benoit, 806 F.2d 1294, 1297 (5th Cir.1987).

A. False Statement of Fact

On the insurance application, Erik Pedersen represented¹ that he had not seen a physician for treatment of, inter alia, heart trouble in the six-month period preceding July 13, 1985, the effective date of the policy.

Chrysler Life's investigation was conducted by Robert L. Porter. In his deposition, a copy of which has been submitted to the court for review, Porter details how he learned of Mr. Pedersen's visits to his treating physician, Dr. Antone Tannehill, for heart trouble between January 21, 1985, and July 13, 1985. Porter also discusses Pedersen's stay in the North Mississippi Medical Center and his treatment there for heart failure on March 19, 1985, and April 15, 1985. Copies of the medical records appear as exhibits to the instant motion and support Porter's statements.

Mrs. Pedersen does not contest the fact that her husband was being treated for heart trouble in the six-month period previously referred to. The court, therefore, finds that Chrysler Life has proven the existence of a misrepresentation by clear and convincing evidence.

B. Materiality of the Misstatement

Maura R. Cook is the manager of the claims department for Chrysler Life. In his affidavit, Cook stated that Chrysler Life relies on the health representations made by customers when applying for insurance. Cook also states that Chrysler Life does not issue a life insurance policy if the applicant has been treated for heart failure within six months prior to the date of the application. Had Chrysler Life known of Erik Pedersen's medical history, Cook asserts that it would not have issued the policy sued on in the present case.

Mrs. Pedersen submits no evidence to refute the assertions of Maura Cook, and the court finds that Chrysler Life has met its burden with regard to the element of materiality.

C. Silence on the Part of the Soliciting Agent as to Prior Medical History

Plaintiff's sole contention is that the soliciting agent failed to ask her or her husband about his prior medical history, and they were completely unaware that such a question was contained in the application when they signed it.

Chrysler Life's soliciting agent, George Sheffield,...