Stephens v. Guardian Life Ins. Co. of America

• Decision Date: 28 September 1984
• Docket Number: No. 83-7562,83-7562
• Citation: 742 F.2d 1329
• Parties: Brenda STEPHENS, as representative of the Estate of Mary Louise Downer, deceased, Plaintiff-Appellant, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a corporation, Defendant-Appellee.
• Court: U.S. Court of Appeals — Eleventh Circuit

Page 1329

742 F.2d 1329

Brenda STEPHENS, as representative of the Estate of Mary Louise Downer, deceased, Plaintiff-Appellant, v. The GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, a corporation, Defendant-Appellee.

No. 83-7562.

United States Court of Appeals Eleventh Circuit.

Sept. 28, 1984.

Terry Gillis, Joe Kellett, Fort Payne, Ala., for plaintiff-appellant.

James S. Sledge, Gadsden, Ala., for defendant-appellee.

Appeal from the United States District Court for the Northern District of Alabama.

Before HILL and HENDERSON, Circuit Judges, and WISDOM ^*, Senior Circuit Judge.

ALBERT J. HENDERSON, Circuit Judge:

In this diversity suit governed by Alabama law, Brenda Stephens, administratrix of the estate of Mary Louise Downer, appeals from the grant of summary judgment by the United States District Court for the Northern District of Alabama to the defendant-appellee, Guardian Life Insurance Company of America (Guardian), in an action seeking damages for alleged breach of a medical insurance policy issued by Guardian to Ms. Downer.

On November 15, 1976, Mary Louise Downer, a 45-year-old mill worker, visited Dr. Thomas Pineda in Fort Payne, Alabama, complaining of body weakness and abdominal pain and giving a history of emphysema and ulcers. Dr. Pineda admitted her to the hospital on December 6, 1976, and diagnosed (1) a sliding hiatal hernia (2) emphysema (3) duodenitis and (4) a fibroid uterus. He recommended a hysterectomy but postponed surgery until her chronic breathing difficulty could be evaluated by a specialist to determine if the use of anesthesia would pose any special risk. After Ms. Downer was discharged from the hospital, Dr. Pineda referred her to Dr. Sheldon Kushner, a surgeon in Birmingham, where she could consult a pulmonary specialist. (Pineda deposition 6-22, 27-28).

On February 3, 1977, Dr. Kushner diagnosed a fibroid tumor, emphysema with "fairly severe" pulmonary impairment and excessive coughing without chest pain. He suggested that she see Dr. Marcus Lawrence, who, after an examination, confirmed the findings of Drs. Kushner and Pineda of chronic pulmonary disease and bronchitis. He noted her history of emphysema but added that he could not rule out the possibility of byssinosis, or "mill fever," a chronic industrial disease associated with prolonged inhalation of cotton dust, sometimes complicated by emphysema. He also found that Ms. Downer suffered from first degree AV block, a relatively insignificant, asymptomatic heartbeat irregularity. (Pineda deposition pp. 23-25, Def. Ex. 5) (Lineberry deposition Def. Ex. 4-7). On March 25, 1977, Dr. Kushner performed the total abdominal hysterectomy. The pathology report revealed a benign tumor. (Lineberry deposition, Def. Ex. 4-7).

On February 1, 1980, Ms. Downer secured employment at Hairel's Hosiery in Fort Payne. She did not apply then for hospitalization coverage through her employer's group health insurance plan. (R. 108).

Later that year, on August 27, 1980, she consulted Dr. Giles Bastille, another Fort Payne physician. She gave as history her hysterectomy and ovariectomy in 1977, an allergy to streptomycin and recent "hot flashes" which developed after she had stopped taking hormone tablets in May of 1980. (Bastille deposition at 26). She also complained of vertigo and lower back pain. By her next visit on September 3, 1980, her dizziness had moderated and her pain had disappeared. But two weeks later she became afflicted with a sore throat and coughing. By September 25, 1980 she had overcome both of these ailments, as well as her dizziness.

The next significant event occurred on March 3, 1981. Ms. Downer applied for hospitalization insurance coverage through her employer's group health insurance plan with Guardian. The application included questions concerning her past and present health. (R. 131).

On March 16, 1981 Ms. Downer complained to Dr. Bastille of aching over her body, headaches and neck pain, exhaustion, a sensation of coldness, coughing accompanied by chest pain, stomach pain, shortness of breath and the illusion of lights or stars. The headaches and neck pain had existed for only two days but the fatigue had been evident for about a month. Dr. Bastille thought the remaining symptoms were "there for about maybe a month, but [he could not] be sure of that." (Bastille deposition 24-25).

Guardian received the application for medical insurance on March 18, 1981. (R. 131). It was approved and went into effect on April 1, 1981.

Dr. Bastille again examined Ms. Downer in the hospital on April 19, 1981. He found a mass in one lung and another in her brain. She was discharged and referred to a Birmingham neurosurgeon, Dr. Clayton Davie. (Bastille deposition at 6-7). Dr. Davie examined her on April 23, 1981 and afterwards made a diagnosis of lung cancer that had spread to five points of her brain. From May 11, 1981 on she was considered a terminal patient. (Bastille deposition 27; Davie deposition 5). Despite the expenditure of more than $22,000.00 in hospitalization, chemotherapy and comfort measures, Ms. Downer died on April 8, 1982.

In response to Ms. Downer's submission of medical and hospitalization claims beginning in May of 1981, Guardian initiated an investigation of her health problem before and after her application for medical insurance. Upon completion of the investigation, Guardian decided to rescind coverage on the ground that Ms. Downer had supplied false answers to health questions in the insurance application. Relying on the testimony of Dr. Stephen Rowe, an expert on medical insurance, Dr. D.K. Lineberry, who attended Ms. Downer during her terminal illness, and Dr. Bastille, Guardian concluded that she had given false or misleading replies to the following four questions contained in the insurance application concerning her health and medical history:

17. Are you now or do you contemplate receiving medical treatment?

18. Have you consulted a physician or been treated in a hospital within the last five years?

19. To the best of your knowledge and belief, are you now ill?

20. Have you ever had heart trouble, chest pain ... stomach trouble ... tumor or cancer ... or any other injury or health impairment?

In answer to questions 17, 19 and 20, Ms. Downer answered "No." In her reply to question 18, she stated: "Dr. Giles Bastille Fort Payne, Ala. 30967--inner ear infection--anti-biotics cleared up--April of 1980. Dr. Sheldon Kushner East End Hospital Birmingham, Alabama--hysterectomy--no positive signs." Guardian contends that Ms. Downer must have known she was ill on March 3, 1981 when she applied for the insurance because she advised Dr. Bastille on March 16, 1981 that most of her symptoms had been present for about a month. The company also faults her failure to reveal her earlier hospitalization in Fort Payne during which Dr. Pineda diagnosed other ailments, particularly her emphysema. It urges that her negative answer to the inquiry in question 19 with respect to her knowledge of any present illness was likewise misleading based on her complaints to Dr. Bastille on March 16, 1981. Finally, Guardian maintains that Ms. Downer failed to disclose her prior chest pains, stomach problems, uterine tumor and emphysema in her reply to question 20. According to Guardian, had she made known her true medical condition at the time of her application, it would have declined to issue the policy.

In support of its motion for summary judgment, Guardian submitted the deposition of Dr. Rowe, a physician specializing in insurance medicine and the medical director for a major insurance company. He noted that the emphysema and the ulcers definitely were material to the risk of hospitalization. (Rowe deposition 45). The appellant does not dispute the materiality of these conditions. Dr. Rowe further testified that the ulcer and emphysema so increased the risk of hospitalization that, had he been an underwriter for Guardian and known these facts, he would not have recommended coverage. (Rowe deposition 44-46).

Dr. Rowe added that upon reading Ms. Downer's somewhat bald description of her hysterectomy he, as an underwriter, would have asked for proof of diagnosis and a pathology report. Appellant's counsel followed up this remark during his cross-examination.

Q. I believe you mentioned that if you'd had this application and seen this reference to a hysterectomy and no positive signs, you would have requested to see the medical records before you would have decided whether or not to issue the policy.

A. I would have asked for an ... attending physician's statement .... This gives you a lot of information that kind of opens up Pandora's Box.

....

Q. As a matter of fact, most of the things that you've talked about in this case were in Dr. Kushner's notes, weren't they?

A. Yes.

....

Q. [I]n this case you would have written Dr. Kushner and the hospital to find out what had gone on.

A. You can then grab the string. If I see that name of Sheldon Kushner, East End Hospital, Birmingham, Alabama, and a date, I've got all I need. I can take that string and start pulling it out. It opens up a lot of information.

Q. And you would have found these things that you said in your opinion should have been revealed on there?

A. Yes, sir.

(Rowe deposition 33, 47-49).

The complaint was originally filed in the Circuit Court of DeKalb County in February, 1982 but subsequently was removed by Guardian to the United States District Court for the Northern District of Alabama pursuant to the provisions of 28 U.S.C. Sec. 1441 (1976). Guardian filed its motion for summary judgment on September 8, 1983, which motion was granted by the district court on September 12, 1983. This appeal followed.

The standard of review of a district court's grant of summary judgment is whether the evidence, when viewed in the light most favorable to the non-moving party, presents no genuine issue of material fact and entitles the moving party to judgment as a matter...