Townsend v. The Nw. Mut. Life Ins. Co.
| Decision Date | 28 February 2022 |
| Docket Number | Civil Action 20-cv-02809-KLM |
| Parties | KAREN TOWNSEND, Plaintiff, v. THE NORTHWESTERN MUTUAL LIFE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — District of Colorado |
This matter is before the Court on the Motion for Summary Judgment of Defendant The Northwestern Mutual Life Insurance Company [#41][1] (“Defendant's Motion”) Plaintiff's Motion for Partial Summary Judgment [#44] (“Plaintiff's Motion”) (“summary judgment motions”) and Defendant's Rule 702 Motion to Exclude Opinions of Plaintiff's Proffered Expert Laura Parker [#37] (the “Motion to Exclude”) (collectively “Motions”). The primary issue to be determined in connection with the summary judgment motions is whether Defendant Northwestern Mutual Life Insurance Company (“Northwestern”) was entitled to deny coverage and rescind the life insurance policies at issue in this case based on a material misstatement by Plaintiff's deceased husband Darren Townsend about drug use. This turns on the admissibility of the medical records indicating such drug use, and a finding on this issue will both determine whether summary judgment is appropriate on Plaintiff's breach of contract claim and impact the bad faith claim. The opinion of Laura Parker, who has been retained as an expert on Northwestern's handling of Plaintiff's claim addresses the bad faith claim as well as other topics pertinent to the summary judgment motions.
The Court has reviewed the Motions [#37, #41, #44], the Responses [#40, #50, #49], the Replies [#45, #54, #55], the case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, Defendant's Motion [#41] is granted. Plaintiff's Motion [#44] is denied. The Motion to Exclude [#37] is granted in part and denied as moot in part.
Unless otherwise noted, the facts set forth below are deemed to be undisputed. The Court deems a fact to be disputed only when it is denied in compliance with Section III.B of the KLM Civil Motions Practice Standards [#20].[2] The Court has not cited to the evidence supporting undisputed facts, unless quoting the evidence or when the Court deems the evidence to be particularly instructive as to a fact. Further, the Court has considered all the material facts, even though it has not discussed all of them in this Order. Some of the facts are discussed in Section III, infra, rather than in this section.
Plaintiff was married to Darren Townsend. Mr. Townsend died by suicide on April 18, 2019.
Northwestern issued Policy No. 22219582, insuring the life of Mr. Townsend (“Individual Policy”), and Policy No. 22247352, insuring the lives of Plaintiff and Mr. Townsend (id., Ex. B) (“Survivorship Policy”) (collectively “Policies”), both providing life insurance coverage according to their terms and conditions. Plaintiff Karen Townsend was the beneficiary on the Individual Policy.
Both Policies include the following provision, under Section 1.4, Incontestability:
. . . [T]he Company will not contest this Policy after the Policy has been in force, during the lifetime of the Insured, for two years from the Date of Issue . . . . In issuing the insurance, the Company has relied on the application(s). While the insurance is contestable, the Company, on the basis of a material misstatement in the application(s), may rescind the insurance or deny a claim.
Def.'s Mot. [#41], Ex. A at 1525; Ex. B at 1544 (emphasis added). Northwestern issued the Policies based on information the Townsends provided in applying for the Policies.
The information provided in the applications for the Policies included a Medical History Questionnaire (“MHQ”) signed on June 6, 2017, by Mr. Townsend. The MHQ stated an answer of “no” to question 4(c): “In the last ten years, have you used . . . cocaine, . . . or any other illegal drug or substance?” Def.'s Mot. [#41], Ex. C at 576. Irina Rountree, who completed the MHQ, stated in her affidavit that she followed her routine practice with Mr. Townsend in connection with the MHQ. Id., Ex. P, ¶¶ 3-8. This included asking Mr. Townsend word-for-word the drug use question on the MHQ, recording his answer word-for-word, and having him review and sign the MHQ. Id.[3] Mr. Townsend also signed Personal Health and Status Declarations (“PHSDs”) dated August 16, 2017, September 20, 2017, and October 26, 2017, stating that the information provided in the MHQ was still correct.
After Mr. Townsend's death, Plaintiff submitted a claim for benefits under the Individual Policy. Northwestern performed what it terms a “contestable review” with respect to application representations made by Mr. Townsend as part of underwriting for the Policies.
Northwestern's review included obtaining records from Mr. Townsend's medical providers through release authorizations for such records, including Highlands Behavioral Health (“Highlands”), a mental health treatment facility.[4] Mr. Townsend had been involuntarily admitted to Highlands on October 15, 2018, after a suicide attempt the previous afternoon. Mr. Townsend was transferred to Highlands by ambulance, on a gurney, after initially presenting to Sky Ridge Medical Center (“Sky Ridge”) for treatment of his slashed wrist. The medical records indicate that Mr. Townsend had consumed four-five alcoholic drinks that afternoon.
The Highlands records included an October 15, 2018, entry within a Comprehensive Assessment Tool report (hereinafter “Highlands Record”) stating that Mr. Townsend answered “yes” to whether he had used any psychoactive or mood-altering substances within the past 12 months, including cocaine.[5] The Highlands Record further stated that Mr. Townsend had used cocaine “1-2 x”, with first use at age 43 and last use in March 2018. Def.'s Mot. [#41], Ex. F. As Mr. Townsend's date of birth was June 7, 1973, the period during which he was age 43 was June 7, 2016 - June 6, 2017.[6] The Court notes, as previously discussed, that the MHQ was signed on June 6, 2017, so drug use at age 43 by Mr. Townsend would contradict his statement that he had not used cocaine within the past ten years. By contrast, drug use at age 44 would not be relevant to the time frame addressed in the MHQ.
Also during its claim investigation, Northwestern interviewed Plaintiff. Plaintiff reported that Mr. Townsend had no history of any difficulties with drug use and had not sought or been advised to seek treatment or counseling for drug use.
Under Northwestern's underwriting standards, a policy applicant's use of cocaine within one year before application results in an automatic decline of the application for life insurance. Information and medical records Northwestern had obtained during underwriting for the Policies did not disclose any cocaine use by Mr. Townsend.
Northwestern denied Plaintiff's claim by letter dated September 11, 2019. In that letter, Northwestern noted the information from the Highland Record stating that Mr. Townsend had used cocaine at age 43. Def.'s Mot. [#41], Ex. K. The letter stated that the Policies would not have been issued had Northwestern been aware of Mr. Townsend's cocaine use during the ten-year period before the MHQ was completed; that the Policies were rescinded and the premiums were being refunded; and that Plaintiff was invited to submit additional information for Northwestern's consideration. Id. Plaintiff did not provide Northwestern with further information regarding Mr. Townsend's cocaine use before filing the present lawsuit.
While Plaintiff states in response to facts in the previous paragraph that the letter (Defendant's Exhibit K) speaks for itself, her only specific denial relates to Northwestern's representation as to the Survivorship Policy. Plaintiff avers as to that issue that the letter states the Survivorship Policy would have been underwritten differently with increased premiums if Mr. Townsend had used cocaine when he was 43. In reply, Defendant asserts, and the Court agrees, that Plaintiff has no factual basis for her denial. Exhibit K states as to this issue, “Had Northwestern Mutual been aware of [Mr. Townsend's] prior history of cocaine use at the time of application, the applications would have been underwritten in a different manner . . . and a different Survivorship policy with increased premiums would have been issued as he would not have been considered individually insurable” (emphasis added). Thus, the Survivorship Policy as issued by Northwestern would not have issued had Northwestern known of Mr. Townsend's cocaine use.
With the Rule 26 disclosures in this action, Plaintiff produced medical records from Mr. Townsend's treatment in the emergency department at HealthOne/Sky Ridge (“Sky Ridge”) shortly before his admission to Highlands. The records included an October 14, 2018, entry within a Behavioral Health Assessment report for Mr. Townsend (“Sky Ridge Record”) stating as to “DRUG USE” that drugs or illegal substances were used within the last 12 months, that the drug was cocaine and was used on an “episodic” basis, that the age of onset of use of the drug was 43 years old, and that it was last used on March 28, 2018. Def.'s Mot. [#41], Ex. L.
Jeremiah (Jero) Repinski, who authored the Highlands Record, gave deposition testimony which included the following: (1) he is a licensed professional counselor and certified addiction counselor (Defendant's Motion [#41], Ex. M, Repinski Dep at 10:7-15[7]); (2) Mr. Repinski wrote down what Mr. Townsend told him regarding age of first use of cocaine; “I wrote down 43, and so I'm led to believe he said 43” (id. 51:2-4; 57:18-23;70:12-13); (3) Mr. Repinski asked more...
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