Wischmeyer v. Paul Revere Life Ins. Co., IP88-1428-C.

CourtUnited States District Courts. 7th Circuit. United States District Court (Southern District of Indiana)
Citation725 F. Supp. 995
Docket NumberNo. IP88-1428-C.,IP88-1428-C.
Decision Date27 November 1989

James McNeal, Indianapolis, Ind., for plaintiff.

Robert P. Johnstone, Michael A. Klein, Barnes & Thornburg, Indianapolis, Ind., for defendant.


McKINNEY, District Judge.

This diversity action comes before the Court on the plaintiff's motion for summary judgment and motion to dismiss affirmative defenses and counterclaim. The motions raise questions concerning whether incontestability clauses in a disability policy preclude the insurer from denying payments because of alleged misrepresentations by the insured of financial status and prior medical history. The issues raised have been fully briefed and the parties have submitted supporting evidence. For the reasons set forth below, the Court DENIES the plaintiff's motions.


On April 1, 1986, plaintiff Warren Wischmeyer met with insurance agent John Kirch of Paul Revere Life Insurance to apply for a contract of disability insurance. At their meeting agent Kirsch asked Wischmeyer a number of questions and Kirsch then completed an application for a disability policy on Wischmeyer's behalf. Wischmeyer then signed the application that same day.

In the application, Wischmeyer listed the name and address of his personal physician, who is Dr. Duggan, and gave the date and reason "for last consultation" as February of 1986 for cold and flu. He denied that he was under observation or treatment or taking medication, denied being examined or having consulted any physician other than Dr. Duggan, and also denied that he had been under observation in a hospital within the last five years or had had an x-ray, EKG, blood or urine test, or other lab test. He listed his earned income as $25,000 for 1986 and $20,000 for 1985. He also stated that his unearned income did not exceed $5,000 per year.

In fact, though, Wischmeyer had been a patient at St. Francis Hospital from December 17 through December 25, 1984, and was treated for muscle aching, cramping, fatigue, headaches, and difficulty with concentration. Several lab studies were done including an EEG, EMG, serum protein electrophoresis, CBC, sed rate, PTT, urinalysis, CPK, aldolase, and a CT scan of the head among others. In September of 1985, the plaintiff had an outpatient procedure at St. Francis where he underwent a cystoscopy. Had Paul Revere Insurance known these facts, its decision to insure the plaintiff would have been impacted.

Plaintiff's actual financial condition was different than that contained in the application. Plaintiff made only $512 of earned income in 1986 and $999 in 1985. In 1985 and 1986 he actually had unearned income exceeding $5,000. Had the insurer known of these facts, its decision to insure the plaintiff would have been affected, for the insurer had a policy requiring applicants to have earned income of at least $15,000, and persons with high levels of unearned income are less likely to qualify for disability income protection.

Soon after the disability insurance application was completed, the defendant issued a policy of coverage to the plaintiff. The policy states that coverage began on March 23, 1986. Plaintiff received the policy in April or May of 1986. The policy provided disability insurance coverage for total disability, which means that "because of Injury or Sickness:

a. You are unable to perform the important duties of Your regular occupation; and
b. You are not engaged in any other gainful occupation; and
c. You are under the regular and personal care of a Physician.

The policy further defined "Sickness" as "sickness or disease which first manifests itself after the Date of Issue and while Your Policy is in force."

The policy defined a pre-existing condition as a sickness or physical condition for which, prior to the date of issue, symptoms existed "that would cause an ordinarily prudent person to seek diagnosis, care, or treatment; or medical advice or treatment was recommended by or received from a physician." The policy stated that the insurer "will not pay benefits for a Pre-existing Condition if it was not disclosed on Your application."

In Part Ten of the insurance contract there is an "Incontestable" clause, which reads as follows:

a. After your policy has been in force for two years, excluding any time You are Disabled, We cannot contest the statements in the application.
b. No claim for loss incurred or Disability beginning after two years from the Date of Issue will be reduced or denied because a disease or physical condition existed before the Date of Issue unless it is excluded by name or specific description.

Although the insurer had the right to do so, it did not secure plaintiff's medical records from Dr. Duggan, nor did it give plaintiff a physical examination.

In October of 1986, after the policy had been in force for several months, Wischmeyer began seeing Dr. Kincaid, a neurologist, and continued to see him periodically thereafter. On July 1, 1988, Wischmeyer submitted a proof of loss claim upon Paul Revere Insurance, along with an accompanying disability statement from Dr. Kincaid. The disability statement recited that disability was due to fibromyalgia, which is chronic post viral fatigue syndrome.

After receiving the proof of claim, Paul Revere Insurance denied the claim. Plaintiff then filed this lawsuit on December 14, 1988, and on February 8, 1989, Paul Revere Insurance filed its Answer and Counterclaim setting forth several affirmative defenses. After the Amended Complaint was filed in this action, defendant renewed its defenses. Relevant to this motion are the following three affirmative defenses, which can be summarized as follows:

1. Second Defense:
Charges plaintiff with misrepresentation of medical and financial information on the insurance application.
2. Third Defense:
Asserts that the "claimed sickness was not covered because it did not first manifest itself after the date of issue and while the Policy was in force."
3. Fourth Defense:
Asserts that the "claimed sickness is a pre-existing condition which was not disclosed on the application."

In its accompanying counterclaim, Paul Revere seeks to rescind the policy on the same grounds set forth in its defenses.

Plaintiff has now moved for summary judgment on the affirmative defenses, arguing that the insurer is precluded from litigating these issues because of the policy's two-year incontestability clause. Further, plaintiff seeks dismissal of the rescission counterclaim for the same reasons. Because the dismissal motion is accompanied with supporting evidence, the Court will treat the motion to dismiss as a motion for summary judgment.

Thus, the issues before the Court today are whether the insurer's inter-related defenses of lack of coverage (Third and Fourth Defense) and misrepresentation of a pre-existing condition (Second and Fourth Defense), along with the accompanying counterclaim, are barred by the incontestability clause of the policy. After setting forth the relevant summary judgment standards, these issues will be addressed.


Under Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment "shall be rendered forthwith if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Since the Supreme Court's trilogy of decisions on summary judgment, see Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); and Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986), it is clear that the mandatory aspects of Rule 56 must be followed by the district courts, and, as a result, summary judgment must be entered where appropriate.

Decisions of the Seventh Circuit reflect this change in attitude as well. See, e.g., Herman v. City of Chicago, 870 F.2d 400, 404 (7th Cir.1989); Spellman v. Commissioner, 845 F.2d 148, 152 (7th Cir.1988); Collins v. Associated Pathologists, Ltd., 844 F.2d 473 (7th Cir.1988). In short, it is the advocates, not the courts, who must press their claims and vigorously oppose the motion for summary judgment. See, e.g., Herman v. City of Chicago, 870 F.2d 400, 404 (7th Cir.1989) (courts need not scour record to support a party's claim at summary judgment; adversaries are to pursue their cases and courts are to rule accordingly).

With these standards at hand, the Court will address the substantive questions raised.


Despite the lengthy recitation of facts, this is a straightforward coverage case. Yet, as is indicated by the parties' diametrically opposed briefs and the fact that the disability insurer in this case takes the unusual position (and wisely so) that the plaintiff has been disabled for some time, resolution of the present motion is not without its difficulties. The subtleties of the case cause additional problems because there is but sparse Indiana law addressing the questions raised. Nonetheless, if the issues are analyzed one at a time, the end results are much clearer.

A. Section 10.2(a) of the incontestable clause does not bar the insurer's defenses because the clause specifically excludes any time the insured was disabled from the two year incontestable period, and it is a question of fact whether the plaintiff was disabled within that two year period.

In bringing the present motions, the plaintiff has focused on the incontestability clause of Section 10.2(b), which speaks to pre-existing conditions. Before addressing that aspect...

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