Sciranko v. Fidelity & Guar. Life Ins. Co.
| Decision Date | 03 August 2007 |
| Docket Number | No. CV 05-02806-PHX-NVW.,CV 05-02806-PHX-NVW. |
| Citation | 503 F.Supp.2d 1293 |
| Parties | Thomas P. SCIRANKO, Plaintiff, v. FIDELITY & GUARANTY LIFE INSURANCE COMPANY, a Maryland corporation, Defendant. |
| Court | U.S. District Court — District of Arizona |
Charles J. Surrano, III, John Neal Wilborn, Surrano Law Offices, Phoenix, AZ, for Plaintiff.
Brad Kevin Keogh, Litchfield Park, AZ, for Defendant.
Table of Contents
I. Background ....................................................................1296
A. Sciranko's Preexisting Conditions ..........................................1297
B. The Insurance Application ..................................................1298
C. The Terms of the Policy ....................................................1301
D. Sciranko's Disability Claim ................................................1302
II. Standard of Review ............................................................1305
III. The Insurance Application is Admissible as Evidence ...........................1306
IV. There is a Genuine Issue of Material Fact as to Whether Fidelity Breached
the Insurance Contract ........................................................1307
A. There is No Genuine Issue of Material Fact as to Whether the Coverage
Exclusion for Undisclosed Preexisting Conditions Applied on its Own
Terms ......................................................................1307
1. Sciranko's Claimed Disability Resulted from his Preexisting
Conditions ..............................................................1308
2. Sciranko Did Not Disclose his Preexisting Conditions Despite his
Awareness of Them .......................................................1310
a. Although there is a Genuine Dispute Regarding Whether
Sciranko Orally Disclosed his History of Angina, it is Not
Material Because Sciranko Had an Opportunity to Review his
Application and Made no Changes ......................................1310
b. Sciranko Was Aware of His History of ASHD and
Hyperlipidemia but Did Not Disclose Those Conditions .................1312
B. There is a Genuine Issue of Material Fact as to Whether Fidelity's
Denial of Benefits Violated the Incontestability Clause in Sciranko's
Policy .....................................................................1313
1. Sciranko's Incontestability Clause Prohibits a Denial of Benefits
After Two Years for Mere Failure to Disclose a Preexisting
Condition ...............................................................1313
2. The Incontestability Clause Permits a Denial of Benefits After Two
Years in the Case of Fraud, But Fraud Has Not Been Argued on
this Motion .............................................................1319
V. Fidelity Did Not Exhibit Bad Faith in Processing and Denying Sciranko's
Claim .........................................................................1320
A. There is No Genuine Dispute that Fidelity Acted in an Objectively
Reasonable Fashion .........................................................1322
B. Even Assuming that Fidelity Acted Unreasonably, There is No Evidence
that Fidelity Acted in a Consciously Unreasonable Manner ...................1324
Pending before the court is Defendant's Motion for Summary Judgment (Doc. # 34).
This action in diversity raises the question of whether Defendant Fidelity & Guaranty Life Insurance Company ("Fidelity") permissibly denied disability benefits to Plaintiff Thomas P. Sciranko on the ground that he failed to disclose preexisting medical conditions on his insurance application. Fidelity is a Maryland Corporation. Sciranko is a 45 year-old resident of Arizona. The facts are partially disputed.
Sciranko's history of significant health problems dates back to his mid-20s, when he began to experience episodes of what he interpreted to be anxiety attacks. The attacks occurred several times a year and manifested through shortness of breath, sweating, and an uncontrollable, racing heartbeat. Sciranko managed the condition with Valium and the anti-anxiety medication Xanax.
In 1993, Sciranko began to experience moderate chest pain that correlated with physical activity and, unlike his anxiety attacks, moderated with rest. Doc. # 45, Exh. 3 at 37. On December 7, 1993, Knit P. Gosalia, M.D., a board-certified cardiologist and specialist in internal medicine, diagnosed the pain as indicative of angina pectoris and coronary artery disease and prescribed Adalat, a calcium channel-blocking drug that is used to treat both angina and high blood pressure. Id. at 14, 20. Gosalia cannot recall explaining the diagnoses to Sciranko, but he has a "clinical habit" and "blanket policy" of explaining his diagnoses and test results to all of his patients. Doc. # 45, Exh. 4 at 8, 32. Sciranko specifically remembers Gosalia's explanation of the diagnosis of angina, Doc. # 45, Exh. 3 at 42-43, and he remembers independently researching to learn more about that condition, id. at 43, but he cannot recall being told of the additional diagnosis of coronary artery disease, id. at 45. Billing records indicate that Gosalia used a diagnostic code for coronary artery disease to charge Sciranko's insurance carrier for six additional visits involving electrocardiogram testing and other evaluations from February 1994 to January 1996. Doc. # 35, Exh. E at 1; Doc. # 45, Exh. 4 at 37. All other records of Sciranko's visits during this period have been destroyed pursuant to Gosalia's record retention policy, and Sciranko did not receive further care from Gosalia until 2004. Id. at 32.
Meanwhile, Sciranko started to receive his primary medical care from Sudeep S. Punia, M.D., a board-certified internist, in May 1999. In a health history form completed and signed at the time of his first visit, Sciranko explained that his angina was a "serious illness," and he circled "yes" in response to a question asking whether he ever had "heart disease." Doc. # 35, Exh. D. at 1. Puma's notes indicate that Sciranko had a history of arteriosclerotic heart disease ("ASHD"), angina, and hypercholesterolemia, and that his prescriptions included Adalat, aspirin, and. Lipitor. Doc. # 45, Exh. 6 at 223. Describing Sciranko's treatment plan, Punia wrote "continue past medication" and "watch salt and fat in diet." Id. at 224. Punia also indicated an intention to "obtain previous medical records and review" and require Sciranko to receive education and counseling on his coronary artery condition. Id.
Punia examined Sciranko several more times over the course of the next two years. On March 21, 2000, he performed a complete physical examination and assessed that Sciranko continued to suffer from ASHD and hypercholesterolemia. Doc. # 45, Exh. 6 at 220. He prescribed Zocor for Sciranko's cholesterol as a substitute for Lipitor and continued use of Adalat. From another examination on May 18, 2001, Punia wrote that Sciranko had "controlled" blood pressure but suffered from swelling in both legs and discomfort in his upper chest. Id. at 217. He again noted that Sciranko had ASHD and "hyperlipidemia," a term often used interchangeably with hypercholesterolemia, and he scheduled for Sciranko to receive an electrocardiogram. Id. Although normal triglyceride and total cholesterol levels are each less than 200 milligrams per deciliter, blood tests showed that Sciranko's levels were respectively 1489 and 446. Id. at 233. Sciranko was informed of these test results at 10:15am on May 25, 2001. A handwritten note on the results form states, "watch fat and cholesterol in diet." Id. On July 16, 2001, Punia found that Sciranko continued to suffer anxiety attacks associated with "sweating, heart races, [and elevated] breathing." Id. at 216. Although Sciranko had previously smoked cigarettes for years, he quit in August 2001 and switched to a nicotine patch in September 2001. Doc. # 45, Exh. 3 at 88-90.
Sciranko argues that there is a factual dispute as to whether Punia ever informed him of the diagnoses of coronary artery disease and hyperlipidemia between 1999 and 2001. Although Sciranko cannot recall how Punia became aware of the diagnoses, Sciranko is sure that his own unawareness of the diagnoses precluded him from informing Punia, and he recalls that Punia never explained to him that he was diagnosing ASHD, angina, or hypercholesterolemia. Id. at 54-55, 69-70. Punia has a "clinical habit" of discussing diagnoses with patients and presumes that he talked with Sciranko about each of the three heart conditions, but he concedes that it is a "reasonable possibility" that he and Sciranko did not discuss the conditions "at length" during the course of their visits because Gosalia was presumed to be providing treatment. Doc. # 45, Exh. 5 at 23, 25-26, 51. Punia nevertheless testifies that he received his information about each of the three heart conditions from Sciranko himself. Id. at 15-17, 19-20.
On September 26, 2001, Thomas Kearney contacted Sciranko by telephone after learning that Sciranko was interested in purchasing a life insurance policy with a disability income rider. Kearney was an independent contractor who sold policies for Fidelity from approximately 1998 to late 2001 under an agreement with the insurance broker American Classic Agency ("ACA"). He had approximately eleven total years Of prior experience as an insurance salesperson for a number of different companies. His agreement with ACA entitled him to leads on potential customers such as Sciranko in exchange for a fee. When Kearney first started selling for ACA, he received a commission of 65% of the total...
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