Roy v. Northwestern Nat. Life Ins. Co.

• Decision Date: 11 August 1997
• Docket Number: Civil No. S 96-3268.
• Parties: Naaweth ROY, et al., Plaintiffs, v. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — District of Maryland

974 F.Supp. 508

Naaweth ROY, et al., Plaintiffs, v. NORTHWESTERN NATIONAL LIFE INSURANCE COMPANY, Defendant.

Civil No. S 96-3268.

United States District Court, D. Maryland.

August 11, 1997.

COPYRIGHT MATERIAL OMITTED

Malcolm B. Kane, LLoyd, Kane & Wieder, Ellicott City, MD, for Plaintiffs.

C. Michael Deese, Sarah Daly Jackowski, Charapp, Dees & Weiss, LLP, Washington, DC, for Defendant.

MEMORANDUM OPINION

SMALKIN, District Judge.

This matter is before the Court on the parties' cross-motions for summary judgment and their respective responses thereto. No oral argument is deemed necessary. Local Rule 105.6 (D.Md.)

The Plaintiffs, Naaweth Roy, Charles L. Roy, and Doris Roy, the sister and parents of Charles Jason Roy ("Mr. Roy"), have sued the defendant, Northwestern National Life Insurance Company ("NWNL"), for a death benefit under a Temporary Insurance Agreement and Receipt No. 4042 (the "Receipt"), which they claim is due as a result of Mr. Roy's death.¹ The following facts are undisputed.

On December 5, 1995, Mr. Roy, a Maryland resident, applied for life insurance in the amount of $100,000 at the Vienna, Virginia office of Jonathan R. Kurtz, a licensed NWNL agent. Def's Mem. in Supp. of Mot. for S.J. at 2 (hereinafter "Def's Mem.") As part of the application process, Mr. Kurtz read to Mr. Roy each of the questions contained on the application form and recorded Mr. Roy's responses on the form. Id. at 3. Among the questions asked was a series pertaining to Mr. Roy's health and medical history. In his answers, Mr. Roy reported, among other things, that he did not suffer from asthma, that he did not currently use drugs and had not used them in the past, that he was not presently taking any medication, and that no member of his immediate family suffered from high blood pressure. Id. at 4. He identified Dr. Cheng as his doctor and responded "no" when asked whether he had consulted any other physicians for any reason. Id. The only medical condition Mr. Roy noted on his application was an appendix operation in 1978.² Id. Mr. Roy signed the completed application, representing that his responses were accurate and acknowledging that any misrepresentations could result in a loss of coverage. Id. at Ex. A.

Based upon Mr. Roy's answers, Mr. Kurtz determined that Mr. Roy qualified for temporary insurance. Id. at 5. Upon Mr. Roy's payment of the first $200 premium, Mr. Kurtz gave him the Receipt, which provided, in pertinent part, that

Notice: The insurance you applied for is not now in effect. If, at the time all the Conditions in the Receipt have been met, and the Receipt has not ended, we will either: 1) Pay the Temporary Insurance Amount³ if an Event listed in the Table of Benefits (Table) occurs ... (emphasis in original).

A. Conditions ... 2. All parts of the Application, including medical exams and tests, if required, are completed, and no material misstatements were made.

Id. at Ex. C.

Mr. Kurtz explained to Mr. Roy that, on applications for coverage of $100,000 or more, NWNL required applicants to undergo a fasting blood and urine test and that his temporary insurance would not go into effect until he provided the samples to APPS paramedic service for testing. Id. at 7. He also informed Mr. Roy that APPS would contact him to schedule a time to obtain the blood and urine samples. Id. Mr. Kurtz noted on the application that APPS would be conducting the medical examination.

On December 9, 1995, only four days after completing the NWNL application, Mr. Roy was involved in a single-car accident in New Jersey that resulted in his death. Id. Shortly after his death, APPS attempted to contact Mr. Roy to set up an examination date and was informed that he had died. Id. at 7-8. APPS notified Mr. Kurtz who, in turn, notified NWNL. Id. at 8. On December 14, 1995, NWNL received for processing from Mr. Kurtz, Mr. Roy's application for life insurance. Id. The application was denied, because Mr. Roy died before his blood and urine samples could be tested. Id. Mr. Roy's $200 premium was refunded. Id.

Plaintiffs filed a complaint in this Court based on diversity jurisdiction, seeking NWNL's payment of the $100,000 death benefit allegedly due under the Receipt. After discovery was completed, the defendant filed a motion for summary judgment. The plaintiff opposed defendant's motion and, in turn, filed a cross motion for summary judgment. In its motion, the defendant argues that because Mr. Roy had not provided the company with a blood and urine sample, NWNL had no obligation to pay the death benefit upon Mr. Roy's death. Alternatively, the defendant argues that Mr. Roy made material misrepresentations in his application and, had they not been made, NWNL would not have offered him temporary insurance.

The plaintiffs oppose the defendant's motion for summary judgment on the grounds that (1) the Receipt is ambiguous as to whether a medical exam is required and, therefore, must be construed against the insurer; (2) Mr. Roy satisfied the condition; (3) under Virginia law, an insurer may not require a medical exam as a condition of temporary insurance; and (4) Mr. Roy did not make material misrepresentations in his application. In support of their cross motion for summary judgment, the plaintiffs again argue that, under Virginia law, an insurer may not require a medical exam as a condition of temporary insurance. As discussed below, plaintiffs' arguments in opposition to defendant's motion are not availing, and this Court will grant summary judgment in favor of the defendant. For similar reasons, plaintiffs' cross motion for summary judgment will be denied.

I.

Summary judgment may be entered in a civil case if "the pleadings, depositions, answers to interrogatories, and admissions on file, together with affidavits ... show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c).

In considering a motion for summary judgment, a court must consider the facts and draw its inferences in the light most favorable to the party opposing the motion. See Tuck v. Henkel Corp., 973 F.2d 371, 374 (4th Cir.1992), cert. denied, 507 U.S. 918, 113 S.Ct. 1276, 122 L.Ed.2d 671 (1993). Nonetheless, such inferences "must, in every case, fall within the range of reasonable probability and not be so tenuous as to amount to speculation or conjecture." Thompson Everett, Inc. v. National Cable Advert., 57 F.3d 1317, 1323 (4th Cir.1995). The task of the Court is to decide whether there is a genuine issue for trial. "[T]here is no issue for trial unless there is sufficient evidence favoring the nonmoving party for a jury to return a verdict for that party." Anderson v. Liberty Lobby, 477 U.S. 242, 249, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986).

The Court will grant summary judgment if there is "no genuine issue as to any material fact and ... the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c). A fact is material only if, under the governing substantive law, it affects the outcome of the lawsuit. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986). Thus, where the record could not support a finding by the trier of fact for the non-movant, there is no genuine issue for trial and summary judgment is appropriate. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 1356, 89 L.Ed.2d 538 (1986).

II.

The first issue to be decided in this diversity case is choice of law. In determining choice-of-law issues, a federal court in a diversity case "must apply the conflict of law rules of the state in which it sits." Nationwide Mut. Ins. Co. v. Wendler, 796 F.Supp. 201, 202 (D.Md.1992). In insurance contract cases, Maryland courts generally follow the rule of lex locus contractu, which requires that the construction and validity of a contract be determined by the law of the state where the contract is made. Id. For choice-of-law purposes, a contract is made where the last act necessary to make the contract binding occurs. Sting Sec., Inc. v. First Mercury Syndicate, Inc., 791 F.Supp. 555, 558 (D.Md.1992). Typically, "this is where the policy is delivered and the premiums are paid." Id.; Commercial Union Ins. v. Porter Hayden, 97 Md.App. 442, 451-452, 630 A.2d 261, 266 (1993), vacated and remanded on other grounds, 339 Md. 150, 661 A.2d 691 (1995).

Although it is unclear where the blood and urine tests were to be conducted, arguably the last act necessary to make the temporary insurance contract binding, Mr. Roy paid the first premium and was given a copy of the Receipt in Virginia. Therefore, it would appear that Virginia law would apply in this case.

The plaintiffs argue, however, that in this case a limited exception to the lex locus contractu rule applies, the result being that Maryland law governs this action. Under the exception, application of a foreign state's law is rejected when "a contractual provision is contrary to Maryland public policy." All-state Ins. Co. v. Hart, 327 Md. 526, 530, 611 A.2d 100, 102 (1992). The plaintiffs contend that application of Virginia law would violate the public policy reflected in Md. Ann. Code, art. 48A, § 377A (1994), which provides:

No life insurance policy ... shall be delivered or issued for delivery in this State if it contains any of the following provisions:

1. A provision that the contract is to be construed according to the laws of any other state or country.

In order to override the lex locus contractu rule, "the public policy must be very strong and not merely a situation in which Maryland law is different from the law of another jurisdiction." Allstate Ins. Co. v. Hart, 327 Md. at 530, 611 A.2d at 102. The plaintiffs bear a heavy burden in urging rejection of foreign law on the ground of public policy. Id.

This Court has not located any cases in which § 377A has provided the basis for an exception...