White v. Continental General Ins. Co.
| Decision Date | 30 September 1993 |
| Docket Number | No. 93-CV-0012-B.,93-CV-0012-B. |
| Citation | 831 F. Supp. 1545 |
| Parties | Vic WHITE II; Judy Hursh; Susan Lamberson; and Laurie Davis, Plaintiffs, v. CONTINENTAL GENERAL INSURANCE COMPANY, a Nebraska corporation, Defendant. |
| Court | U.S. District Court — District of Wyoming |
COPYRIGHT MATERIAL OMITTED
Michael B. Rosenthal and John B. "Jack" Speight, of Hathaway, Speight, Kunz & Trautwein, Cheyenne, WY, John E. "Jack" Stanfield, of Smith, Stanfield & Scott, Laramie, WY and Raymond B. Hunkins, of Jones, Jones, Vines & Hunkins, Wheatland, WY, for plaintiffs.
J. Kent Rutledge, of Lathrop & Rutledge, P.C., Cheyenne, WY, for defendant.
ORDER GRANTING IN PART AND DENYING IN PART DEFENDANT CONTINENTAL'S MOTION FOR SUMMARY JUDGMENT
The above-entitled matter having come before the Court upon Defendant Continental General Insurance Company's Motion for Summary Judgment, and the Court having reviewed the materials on file herein both in support of and in opposition to, having heard oral argument from the parties, and being fully advised in the premises, FINDS and ORDERS as follows:
I. Background
This is a lawsuit initially filed by four Wyoming residents against the defendant Continental General Insurance Company ("Continental"), a Nebraska-based health insurance company.1 Plaintiffs Vic White II, Laurie Davis and Susan Lamberson each allege that they had an insurance policy with Continental and that Continental has, in bad faith, refused to pay their respective claims for benefits.
Plaintiffs' complaint, seeking both compensatory and punitive damages, sets forth three separate but related claims on behalf of each plaintiff: breach of the insurance agreement, the tort of bad faith and fraud in the inducement. The matter is currently before the Court on Continental's motion for summary judgment as to each claim of White and Davis, and as to Lamberson's claims for breach of contract and bad faith. In addition, Continental filed a motion to dismiss Lamberson's fraud claim under FED.R.CIV.P. 12(b)(6).
This Court has subject matter jurisdiction under 28 U.S.C. §§ 1332(a)(1), (c)(1)2 (1988), venue is proper in this Court under 28 U.S.C. § 1391(a)(2) (West Supp.1993), and the defendant does not challenge this Court's assertion of personal jurisdiction over it.
The Court notes at the outset that while the plaintiffs joined in this action pursuant FED.R.CIV.P. 20(a), the Court will address the claims of each plaintiff separately for the limited purpose of deciding the motions presently before it.3
Vic White's claims arise out of Continental's rescission of his policy and their subsequent refusal to pay his medical claims. In May of 1990, White met with Continental insurance agent Ruth Bookout, a close friend of his who handled his personal insurance needs. During his meeting with agent Bookout, White received a brochure describing Continental's coverage, and based on Bookout's recommendation that it was "good coverage at a good price" and White's belief that the premiums were fair, he decided to apply. In filling out the application with the assistance of agent Bookout,4 White answered all questions relating to his prior medical history "No." He then signed the application attesting that, inter alia, all of the information that he provided was true and complete to the best of his knowledge, that he was aware that the information provided in the application would be relied on to determine his insurability, and that he had read the agreement before signing it.
Once the application was received by Continental's underwriting department, a brief telephone interview was conducted with White at which time he again responded "No" to all questions concerning his medical history. In reliance on the answers he gave both in his application and during the phone interview, Continental ceased its background investigation and subsequently issued White a policy with an effective date of May 24, 1990. White admitted at his deposition that on receipt of the policy, he failed to review it in spite of the statement on the policy requesting that he do so. In addition, Continental sent a follow-up letter to White asking him to review the policy.
At his deposition, White acknowledged that he never informed Continental of any errors or incomplete answers in his application or his policy.
Upon receipt of his policy, White paid his premiums without incident through December 1991. In the latter part of January 1992, Continental was notified that White had been hospitalized for a thyroid cyst and that a claim would be forthcoming. During a phone conversation, Continental learned for the first time that Mr. White had a history of depression. They were surprised to learn this since White's application stated that he had no prior history of such illnesses. Continental's own underwriting guidelines require the company to decline to insure an applicant who has a history of depression. Continental therefore asserted that if it had known of this condition, it never would have issued a policy to White.
Continental agent Charles Real then began a comprehensive investigation into White's background, which included requesting his medical records from Memorial Hospital of Laramie County as well as from White's personal physician, Dr. Edward Howsher. Review of the records disclosed that White suffered from "manic depression" and was currently taking lithium, a prescription drug. Dr. Howsher responded to agent Real's request for a diagnosis by stating that White had been taking lithium for several years after being hospitalized for a "manic disorder." Real then wrote to White for additional information.
On May 14, 1992, White acknowledged that he had been taking lithium because of a "chemical imbalance" from which he suffered.5 In July 1992, Real wrote to White and advised him that Continental was going to rescind his coverage due to alleged misrepresentations contained in his application for coverage, unless he provided them with documentation to the contrary. White never responded, and later that month, Continental did, in fact, rescind his coverage. The basis for rescission was that White materially misrepresented his medical history and that Continental, in accordance with its own guidelines, would never have issued him a policy had they known of this condition.
Laurie Davis' claims are similar in many respects to the claims of White. They arise out of Continental's rescission of her policy and its subsequent refusal to pay her claims.
Sometime prior to March 20, 1990, Davis met with Continental agent Lisa St. Martin-Cook in Jackson, Wyoming. Based on the recommendations of Cook, Davis applied for coverage. As was the case with White, Davis filled out the application by responding to questions that Cook asked her. In response to the question of whether she was a cigarette smoker Davis responded "No." After they completed this process, Davis signed the application, attesting to the same things that White did. A telephone follow-up interview was conducted shortly thereafter, and Davis again responded "No" when asked if she was a smoker.
Based on her representations, Continental concluded that no further investigation was necessary, and Davis was issued a policy at the non-smoker rate, effective April 1, 1990.
Davis filed several claims with Continental in the following months. It was not until August 1991 that Continental discovered that Davis allegedly misrepresented her answer to the question regarding her cigarette smoking history. During the course of a routine investigation of her medical records as part of another claim she submitted, Continental learned that a Dr. Hayse had advised her to "discontinue cigarettes." The underwriting department was notified, and they indicated that had they known of her smoking history, she would have still been issued a policy, but with a higher monthly premium.
Continental wrote to Davis for information regarding her smoking history, and she responded that she smoked two to five cigarettes a day, on and off, for a period of five years. Based on this information, Continental advised Davis on January 22, 1992 that it would rescind her coverage in twenty days unless contrary information regarding her smoking history was received.6 Since Davis did not respond to this request, her coverage was rescinded.
Susan Lamberson's claims in this suit are slightly different from the claims of White and Davis. Lamberson had health insurance coverage through a group policy which she obtained through the business that she and her former husband owned. After their divorce, her ex-husband purchased a short-term policy for her which expired in May 1991.
In May 1991, Lamberson sought out new health coverage since her prior coverage had expired. She investigated Blue Cross/Blue Shield but testified at her deposition that because they had a 60-day waiting period, she decided to investigate other companies. On June 20, 1991, she contacted Continental agent Gordon Stoddard7 and requested a brochure describing their health coverage. On July 2, 1991, she made an appointment to meet with Stoddard to discuss the possibility of applying for coverage.
At that meeting, Stoddard first went over the brochure that he sent to Lamberson and when he asked her whether she had any question regarding the brochure, she said that she understood everything and that she wanted to apply for coverage. Stoddard then assisted Lamberson with her application by reading her the questions and filling in the answers accordingly. In response to a specific question in the application, she acknowledged that she had experienced a seizure back in 1980 and that she had taken the drug Dilantin since then to control future attacks.
After completing the application, Lamberson elected not to review the answers Stoddard had entered for her; she stated that she understood the...
To continue reading
Request your trial
-
INTERN. SURPLUS LINES v. Univ. of Wyo. Res. Corp.
...Central Wyoming Law Assoc's, P.C. v. Denhardt, 836 F.Supp. 793, 798 (D.Wyo.1993) (Brimmer, J.); White v. Continental General Ins. Co., 831 F.Supp. 1545, 1551-52 (D.Wyo.1993) (Brimmer, J.). "By its very terms, the Rule 56(c) standard provides that the mere existence of some alleged factual d......
-
Hiatt v. Union Pacific R. Co.
...See Central Wyoming Law Assoc's, P.C. v. Denhardt, 836 F.Supp. 793, 798 (D.Wyo.1993) (Brimmer, J.); White v. Continental Gen. Ins. Co., 831 F.Supp. 1545, 1551-52 (D.Wyo.1993) (Brimmer, J.). "By its very terms, the Rule 56(c) standard provides that the mere existence of some alleged factual ......
-
Brandt v. Time Ins. Co.
...cases in support of her argument that the practice of "post-claim underwriting" (see e.g. White v. Continental General Insurance Co., 831 F.Supp. 1545 (D.Wyo.1993)), or "retroactive underwriting" (see e.g. Meyer v. Blue Cross and Blue Shield, 500 N.W.2d 150 (Minn.App.1993)), should preclude......
-
Clajon Production Corp. v. Petera
...Central Wyoming Law Assoc's, P.C. v. Denhardt, 836 F.Supp. 793, 798 (D.Wyo.1993) (Brimmer, J.); White v. Continental General Ins. Co., 831 F.Supp. 1545, 1551-52 (D.Wyo.1993) (Brimmer, J.). "By its very terms, the Rule 56(c) standard provides that the mere existence of some alleged factual d......
-
A Review of Property Insurance Law in Canada and the United States.
...v. Aetna Casualty & Surety Co., 164 Wis.2d 17, 473 N.W.2d 549 (Wis. Ct. App. 1991). Wyoming No. See White v. Cont'l Gen. Ins. Co., 831 F. Supp. 1545 (D. Wyo. 1993) State Difference: in application or in claim Alabama Yes. Before loss, a misrepresentation must be material to an increase ......