Sheehan v. N.W. Mutual Life Ins. Co.

• Decision Date: 14 November 2000
• Citation: 44 S.W.3d 389
• Parties: (Mo. Banc 2001) Donna S. Sheehan, Appellant, v. Northwestern Mutual Life Insurance Company and the John M. Qualy Agency, Respondent. ED77305
• Court: Missouri Supreme Court

44 S.W.3d 389 (Mo. Banc 2001)

Donna S. Sheehan, Appellant, v. Northwestern Mutual Life Insurance Company and the John M. Qualy Agency, Respondent.

ED77305

Missouri Court of Appeals Eastern District

11/14/2000

Appeal From: Circuit Court of the City of St. Louis, Hon. Michael B. Calvin

Counsel for Appellant: Michael D. O'Keefe

Counsel for Respondent: Thomas B. Weaver and Karen A. Baudendistel

Opinion Summary: Donna Sheehan appeals from the trial court's grant of two summary judgment motions in favor of defendants John M. Qualy Agency and Northwestern Mutual Life Insurance Company claiming: (1) there are genuine issues of material fact as to the fiduciary duties owed to her by Qualy as her insurance agent; (2) the trial court erred in denying leave to amend her petition; (3) the trial court erred in applying Michigan law to her claims against Northwestern; and (4) there are genuine issues of material fact as to her claims and Northwestern's affirmative defense.

Division Three holds: (1) The trial court did not abuse its discretion in denying leave to amend the petition because the trial court took Sheehan's amended petition allegations into account when ruling on Qualy's summary judgment motion. (2) There were no genuine issues of material fact as to the fiduciary duties owed by Qualy to Sheehan. (3) The trial court did not err in applying Michigan law to claims against Northwestern because Michigan had the "most significant relationship" to the cause of action. (4) There was a genuine issue of material fact as to whether the decedent knew that his statements on the paramedical questionnaire were false, thus precluding judgment as a matter of law on Northwestern's affirmative defense of fraudulent misrepresentation.

George W. Draper III, Judge

Donna Sheehan (hereinafter, "Appellant") appeals from the trial court's grant of two summary judgment motions in favor of defendants John M. Qualy Agency (hereinafter, "Qualy") and Northwestern Mutual Life Insurance Company (hereinafter, "Northwestern") claiming: (1) there are genuine issues of material fact as to the fiduciary duties owed to her by Qualy as her insurance agent; (2) the trial court erred in denying leave to amend her petition; (3) the trial court erred in applying Michigan law to her claims against Northwestern; and (4) there are genuine issues of material fact as to her claims and Northwestern's affirmative defense. The judgments of the trial court are affirmed in part, reversed and remanded in part.

Appellant is the beneficiary of a life insurance policy issued by Northwestern in December 1996, on the life of Thomas Sheehan, Appellant's husband (hereinafter, "Decedent"). Decedent engaged Christopher Wright (hereinafter "Wright") as his insurance agent to procure the policy. Wright was an agent working for Qualy and was the Sheehans' family friend. Wright previously purchased various insurance policies for the Sheehans.

Decedent approached Wright about purchasing more life insurance after learning Appellant was pregnant. Wright advised, in a letter dated August 27, 1996, that he was enclosing application signature pages for Decedent to sign and he would work out the details regarding submission of the forms. There is a dispute as to whether Decedent received the entire application or only the signature pages, and whether Decedent signed those pages in blank. Robin Hensley, an associate of Wright's, testified that she filled out all of the information on the first five pages of the application, such as name, address, and other similar information.

After the application was completed, Decedent was scheduled for a paramedical examination. There is also a dispute as to whether Decedent actually participated in the paramedical examination or if the paramedical questionnaire was filled out after Decedent signed the form in blank. Michele Chiaramonte (hereinafter "Chiaramonte"), a licensed practical nurse who conducts paramedical examinations for various insurance companies, including Northwestern, submitted an affidavit stating she had no specific recollection of Decedent's exam. However, she further stated it is her custom and practice during every paramedical examination to ask the applicant each question as it is printed on the questionnaire. The applicant responds, and she records the answers after each question by marking a box either "yes" or "no" consistent with the applicant's answer. If an applicant answers "yes" to a question, Chiaramonte records details about that answer in the space provided based upon the information received from the applicant. After the questionnaire is completed, Chiaramonte gives it to the applicant to review and sign.

The paramedical questionnaire was signed by Decedent and dated December 7, 1996, and the answers represented Decedent was not taking any medication or drugs (legal or illegal, prescription or nonprescription) for any reason. Further, the answers represented Decedent had not used any tranquilizers, sedatives or narcotic drugs in the last ten years, and he had not been advised to have any test, consultation, hospitalization, or surgery that was not completed in the last five years. However, Decedent did reveal he had used "muscle relaxors" in 1995, had been treated by Dr. Edelman, and had a single incident of cocaine use at a bachelor party in 1995.

After submission of all of the insurance materials, Northwestern's underwriters evaluated Decedent's application. Due to Decedent's age and amount of coverage requested, Decedent needed to submit to a full medical examination. The underwriters concluded that regardless of the results of the medical examination, Decedent would not be insured by Northwestern based on the prior positive drug test and his elevated liver enzymes. Therefore, after initially declining coverage, Northwestern submitted Decedent's application for reinsurance with several companies, including Business Men's Assurance Company (hereinafter "BMA"). In February 1997, BMA advised Northwestern it would reinsure a life insurance policy on Decedent. Thereafter, Northwestern issued a life insurance policy to Decedent and delivered it to him in March 1997, with an effective date of December 6, 1996. Enclosed with the policy was a personal health and status declaration, identified as a supplement to the application, that was signed by Decedent stating since the date of the original application, he had not used illegal drugs or legally prescribed drugs except as stated in the original application.

Decedent died on April 17, 1997, from acute morphine intoxication as stated on his death certificate. Northwestern submitted a claim packet to Wright, who in turn forwarded the packet to Appellant with a letter explaining the claim packet had to be completed in order to obtain payment of the policy benefits. In addition to providing proof of death, Appellant provided a signed authorization that enabled Northwestern to obtain Decedent's medical records for the purpose of evaluating the insurance claim. Northwestern used this authorization to obtain records from several of Decedent's treating physicians to process the claim.

The medical records revealed Decedent had a history of drug use that was not disclosed on the paramedical questionnaire. According to medical records and testimony of three of Decedent's physicians, Decedent had been prescribed and was taking vicodin, valium, percodan, and other prescription drugs for several months before completing the paramedical questionnaire in December 1996. These records also revealed Decedent took these drugs in excess of their prescribed dosages. Moreover, Decedent continued to take these prescription drugs after signing the paramedical questionnaire and after signing the personal health and status declaration form in March 1997. After reviewing the medical records, Northwestern notified Appellant on October 30, 1997, that in light of the misrepresentation in Decedent's application as to his prior drug use, it rescinded the life insurance policy.

On November 20, 1997, Appellant filed suit against Qualy and Northwestern. Appellant alleged Qualy was negligent in helping Appellant process her claim for benefits and alleged an action for breach of contract. Appellant alleged any misrepresentations that were contained in the application were Qualy's. On August 24, 1999, Appellant requested leave to amend her petition to add a claim of breach of fiduciary duty against Qualy. The trial judge denied her motion to amend. Moreover, Appellant alleged Northwestern breached the life insurance contract and vexatiously refused to pay the benefits. Northwestern asserted two affirmative defenses, material misrepresentation and fraudulent misrepresentation. The material misrepresentation affirmative defense was struck as a discovery sanction.

On November 5, 1998, Qualy moved for summary judgment, which was granted by the trial court on October 20, 1999. On November 24, 1999, the circuit court also granted Northwestern's summary judgment motion based upon the misrepresentations made in Decedent's application. This appeal followed.

Appellant's first point on appeal claims the trial court erred in granting Qualy's motion for summary judgment and in denying leave to amend her petition to include claims for breach of fiduciary duty and breach of contract. Appellant claims that since leave to amend is freely given, the trial court abused its discretion in not granting her leave. We consider the trial court's denial of Appellant's motion to amend first.

Whether a party will be allowed to amend its pleadings is primarily a matter within the sound discretion of the trial court and is reviewed only for an abuse of discretion. Rhodes v. Westoak Realty & Inv., Inc., 983 S.W.2d 565, 568 (Mo. App. E.D. 1998). Rule 55.33 provides leave to amend a petition "shall be freely given when justice requires." Although the rule stresses liberality in allowing amendments to pleadings,...