Angela Foster v. United of Omaha Life Ins C , 442 F. App'x 922 ( 2011 )


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  •      Case: 10-31016     Document: 00511616202         Page: 1     Date Filed: 09/28/2011
    IN THE UNITED STATES COURT OF APPEALS
    FOR THE FIFTH CIRCUIT  United States Court of Appeals
    Fifth Circuit
    FILED
    September 28, 2011
    No. 10-31016                        Lyle W. Cayce
    Clerk
    ANGELA LEE WARREN FOSTER, Individually and as Trustee of the
    ELEANOR F. WARREN FAMILY TRUST, SHONDA FAYE WARREN
    LABORDE, WINDY WARREN DARBY, and GEORGE W. WARREN, JR.
    Plaintiffs-Appellees/Cross-
    Appellants
    v.
    UNITED OF OMAHA LIFE INSURANCE COMPANY
    Defendant-Appellant/Cross-
    Appellee
    Appeal from the United States District Court
    for the Western District of Louisiana
    USDC No. 6:08-CV-01170
    Before WIENER, CLEMENT, and ELROD, Circuit Judges.
    PER CURIAM:*
    Before her death, Eleanor Warren, through a trust created in her name,
    applied for a life insurance policy from United of Omaha Life Insurance
    Company (“United”) but omitted mention of her lung condition, heart condition,
    and recent visits to three physicians. After Warren’s death, United rescinded
    *
    Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
    be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
    R. 47.5.4.
    Case: 10-31016    Document: 00511616202      Page: 2   Date Filed: 09/28/2011
    No. 10-31016
    the policy because of these omissions. Plaintiffs-Appellees, Warren’s children
    (“Plaintiffs”), sued United under the policy.      The district court held that
    Plaintiffs were entitled to recover under the policy because, among other
    reasons, Warren had no intent to deceive United. We affirm the district court’s
    ruling that Plaintiffs are entitled to recover under the policy, its award of legal
    interest, and its ruling that Plaintiffs are not entitled to statutory penalties.
    I. FACTS & PROCEEDINGS
    In 2001, Eleanor Warren, the Plaintiffs’ mother, created a trust (“the
    Trust”) for the benefit of her children. Since 2003, one of Warren’s daughters,
    Angela Lee Warren Foster, has served as Trustee. Until 2005, the Trust owned
    a life insurance policy issued by Northwestern Mutual providing insurance
    benefits in the amount of $1 million to be paid to the Trust following Warren’s
    death.
    In 2005, the Smith Insurance Agency (“Smith Agency”) suggested to
    Warren that the Trust would be able to save money on insurance premiums by
    seeking a different insurer. The Trust first submitted an application for a
    replacement policy to Banner Life Insurance (“Banner”). On this application,
    Warren indicated that she had two treating physicians, Drs. Crackower and
    Steuben.   She did not indicate on the application that she had received
    treatment for heart disease, chest pain, or lung ailments. Banner offered to
    issue a $1 million term policy, but for a higher than standard rate premium
    because of Warren’s abnormal EKG and blood test results.
    Through the Smith Agency, the Trust then submitted a life insurance
    application to United. Brandon Smith and Jessica Breaux, employees of the
    Smith Agency, reproduced the information from the Banner application onto the
    United application. Warren was not interviewed or physically examined for this
    application, but Smith asserts that he reviewed the application with Warren
    2
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    over the telephone. United requested a report on Warren from the MIB Group,
    a non-profit organization of life insurance companies that collects information
    on behalf of its members. The MIB report included a code indicating that
    Warren suffered from chronic obstructive pulmonary disease (“COPD”) as
    reported in 2001. United also requested the medical records of Dr. Crackower,
    Warren’s family physician, for the period between June and October 2005. After
    this investigation, the Smith Agency sent Warren and Foster the signature
    pages, but not the medical history section, of the United application, and Warren
    and Foster signed those pages.
    Two weeks after she signed the application, Warren sought treatment
    from a new physician, Dr. Malek, for shortness of breath and wheezing on
    exertion. After ordering tests, Dr. Malek prescribed several drugs, an inhaler,
    oxygen, and a vaccine. Warren then saw Dr. Malek’s partner, Dr. Fei, who
    prescribed further treatment for the same condition. Meanwhile, at Smith’s
    suggestion, Warren agreed to seek a $2 million rather than a $1 million policy.
    Some time after United had approved Warren for a $2 million policy, Dr. Malek
    referred her to a third new doctor, Dr. Mounir, who concluded that Warren was
    at a high risk for cardiovascular disease.
    The day after her appointment with Dr. Mounir, Warren met Smith for
    lunch to accept delivery of the United policy. Warren gave Smith a check for the
    first premium and signed the delivery receipt, which states that it constitutes
    an addendum to the policy. Foster never signed the addendum, although there
    was a space for the signature of the trustee. The addendum states that Warren
    had “no change in health” and had “not consulted a health care provider or been
    hospitalized” since the date of application. The addendum also contains the
    following statement:
    I/We understand that United of Omaha Life Insurance Company is
    relying upon the information set forth in this Addendum and has
    3
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    made execution and delivery of this Addendum a condition of
    delivery of this Policy. Incorrect or misleading information provided
    herein may void this Policy from its effective date.
    Warren died from lung cancer on June 1, 2007. When processing the
    Trust’s claim on the policy, United opened an investigation and learned of
    Warren’s visits to Drs. Malek, Fei, and Mounir. Based on this information,
    United rescinded the policy and refunded the premiums paid.
    The following June, Plaintiffs filed suit against United seeking full
    payment of the $2 million life insurance policy as well as penalties based on the
    allegation that United denied the claim without just cause. After a trial on the
    briefs, the district court concluded that Plaintiffs were entitled to recover the
    insurance proceeds but not statutory penalties. United filed a notice of appeal.
    Shortly thereafter, Plaintiffs cross-appealed the portion of the judgment
    dismissing their claim for statutory penalties.
    II. STANDARD OF REVIEW
    When a judgment from a bench trial is appealed, we review questions of
    law de novo.1 The findings of fact from a bench trial are reviewed for clear error,
    regardless whether they are based on oral testimony or documentary evidence.2
    Nevertheless:
    When, as is the case here, the evidence relied upon by the district
    court in making its findings consists solely of documents in the
    record, the burden of establishing clear error is not so great as
    where the court engaged in the judging of witness credibility or in
    some other way was in a superior vantage point for finding facts.3
    1
    French v. Allstate Indem. Co., 
    637 F.3d 571
    , 577 (5th Cir. 2011).
    2
    FED. R. CIV. P. 52(a)(6); Hall v. Nat’l Gypsum Co., 
    105 F.3d 225
    , 228 (5th Cir. 1997).
    3
    
    Hall, 105 F.3d at 228
    ; see also Volkswagen of Am., Inc. v. Jahre, 
    472 F.2d 557
    , 558-59
    (5th Cir. 1973).
    4
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    This is because, as we have noted, “we view precisely the same evidence as did
    the trial judge, from the same vantage point, neither tribunal being aided by
    those advantages in assessing witness credibility that flow from observing
    demeanor, reactions, and manner of testifying.”4
    III. ANALYSIS
    A.      Insurance Proceeds
    The district court held that United waived its right to rescind Warren’s life
    insurance policy for misrepresentations in her original application by failing to
    conduct an adequate investigation in light of that which it knew about Warren’s
    health. The district court also concluded that those misrepresentations cannot
    be charged to Warren in any event because the application was completed by
    Smith. These conclusions are not presently at issue, as United conceded at oral
    argument that it could not rescind the policy based on misrepresentations in
    Warren’s original application.
    Rather, United contends that the addendum to the insurance policy
    contains misrepresentations that entitle it to rescind the policy. To deny
    coverage for misrepresentations in a life insurance application, United must
    establish that (1) Warren’s statements were false, (2) her misrepresentations
    were made with an actual intent to deceive, and (3) her false statements
    materially affected its acceptance of risk.5 In determining whether an applicant
    intended to deceive the insurer, a court must examine whether “attending
    4
    Cooper v. Dep’t of Navy of U.S., 
    594 F.2d 484
    , 486 (5th Cir. 1979).
    5
    La. Rev. Stat. § 22:860; Johnson v. Occidental Life Ins. Co. of Ca., 
    368 So. 2d 1032
    ,
    1036 (La. 1979) (holding that each of these elements must be met in order to rescind policy,
    notwithstanding the apparently disjunctive language of the statute); Swain ex rel. Estate of
    Swain v. Life Ins. Co. of La., 
    537 So. 2d 1297
    , 1299 (La. Ct. App. 1989) (same).
    5
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    circumstances” indicate that the insured had knowledge of the falsity and
    materiality of the misrepresentations.6
    The district court found that, even if the statements in the addendum to
    the effect that Warren had “no change in health” and had “not consulted a health
    care provider or been hospitalized” since signing the original application were
    inaccurate and material, United failed to establish that Warren made these
    statements with intent to deceive. Whether an insured intended to deceive an
    insurer is a factual finding that we review for clear error.7 The district court
    based its conclusion that Warren did not intend to deceive United on the
    following discrete facts. First, Warren had suffered from the same ailments for
    at least five years, and Drs. Mounir and Malek testified that Warren underwent
    no change in health between the submission of the application and the delivery
    of the policy. Second, the court found Smith to be not entirely credible because
    of multiple inaccuracies and equivocations in his deposition testimony. This,
    reasoned the district court, gave it cause to question whether Smith thoroughly
    reviewed the addendum with Warren during the delivery, which took place over
    lunch in a public restaurant.            Third, Warren previously had in place an
    incontestable life insurance policy with Northwestern Mutual, and she switched
    policies only at Smith’s suggestion. Fourth, when asked specific questions about
    her medical history in a telephone interview, Warren answered truthfully. The
    district court did not commit clear error in finding that, for these reasons, United
    failed to show that Warren intended to deceive it when she signed the
    addendum.8
    6
    
    Johnson, 368 So. 2d at 1036
    (quoting Watson v. Life Ins. Co. of La., 
    335 So. 2d 518
    , 521
    (La. Ct. App. 1976)) .
    7
    Wohlman v. Paul Revere Life Ins. Co., 
    980 F.2d 283
    , 285 (5th Cir. 1992).
    8
    See 
    Swain, 537 So. 2d at 1300
    (insufficient evidence that insured had intent to deceive
    because, among other reasons, “he was not asked to nor did he read the application before
    6
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    United also asserts that the addendum made Warren’s truthful disclosure
    of her medical history a condition precedent to coverage under the policy. Under
    Louisiana law, a suspensive condition, or condition precedent, is “a fact upon
    which the rights and duties of the parties depend.”9 Louisiana courts “do not
    construe stipulations in a contract as suspensive conditions unless the express
    contract language compels such construction.”10
    Here, the addendum states that “execution and delivery of this Addendum”
    is “a condition of delivery of this Policy.” The parties do not dispute that Warren
    executed the addendum and that the addendum was delivered to United.11 The
    addendum further states: “Incorrect or misleading information provided herein
    may void this Policy from its effective date.” (emphasis added). This permissive
    language does not expressly compel the construction that complete disclosure is
    a condition precedent to coverage. Further, the circumstances under which a
    misrepresentation enables an insurer to rescind a policy are set out in Louisiana
    law, as 
    discussed supra
    .12 Because the district court did not commit clear error
    in finding that Warren had no intent to deceive United when she signed the
    addendum, Plaintiffs are entitled to recover under the policy.13
    signing it”); see also State Farm Mut. Auto. Ins. Co. v. Bridges, 
    36 So. 3d 1142
    , 1148 (La. Ct.
    App. 2010) (insured did not intend to deceive insurer “when he was unaware of what was in
    the form”).
    9
    LA. CIV. CODE. art. 1767 cmt. (f).
    10
    Tilley v. Lowery, 
    511 So. 2d 1245
    , 1247 (La. Ct. App. 1987).
    11
    We need not address Plaintiffs’ argument that the addendum did not go into effect
    because Angela Lee Warren Foster, the Trustee, never signed it. We also note that neither
    party argues that the policy as a whole did not go into effect because Foster never signed the
    addendum.
    12
    See La. Rev. Stat. § 22:860(A) (limiting the kinds of misrepresentations that “shall
    be deemed material or defeat or void the contract or prevent it attaching”) (emphasis added).
    13
    United’s reliance upon Holmes v. Jefferson Pilot Financial Insurance Co., 
    907 So. 2d 185
    (La. Ct. App. 2005), is misplaced. In Holmes, the potential insured completed an
    7
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    B.      Interest
    United seeks a reduction in the legal interest, totaling $60,000, that
    accrued during the time this matter was under advisement by the district court.
    United appeals to “basic fundamental principles of fairness and equity,” but
    there is no authority to support United’s position.14 Thus, we affirm the district
    court’s award of legal interest in this matter.
    C.      Penalty
    Plaintiffs have asserted an additional claim for penalties under former
    Louisiana Revised Statute § 22:656.15 Under that statute:
    All death claims arising under policies of insurance issued or
    delivered within this state shall be settled by the insurer within
    sixty days after the date of receipt of due proof of death, and if the
    insurer fails to do so without just cause, the amount due shall bear
    interest at the rate of eight percent per annum from date of receipt
    of due proof of death by the insurer until paid.
    Louisiana courts have held that “[a]n insurer’s refusal to pay can be found to be
    not ‘without just cause’ even though its defense is not subsequently upheld in
    application for a life insurance policy and signed a conditional receipt that required him to
    undergo a medical examination, among other requirements, before the policy could go into
    effect. 
    Id. at 186-87.
    Holmes died before he could undergo the medical examination. The
    court held that because Holmes had not fulfilled all of the conditions specified in the receipt
    at the time of his death, the insurer had not accepted the application and there was no
    coverage. 
    Id. at 190.
    In the present case, by contrast, United accepted Warren’s application,
    including the addendum. Whether United can nonetheless rescind the policy because of
    misrepresentations in the addendum is determined by referring to Louisiana law, as 
    discussed supra
    .
    14
    See Trans-Global Alloy Ltd. v. First Nat’l Bank of Jefferson Parish, 
    583 So. 2d 443
    ,
    457-58 (La. 1991) (under the civil law, prejudgment interest is required in order to make a
    plaintiff whole).
    15
    Now renumbered La. Rev. Stat. § 22:1811 by Acts 2008, No. 415 § 1, eff. Jan. 1, 2009.
    8
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    court”16 and that a penalty should not be imposed if the insurer was justified in
    believing that it had found sufficient reasons to deny the claim.17
    United’s investigation revealed substantial omissions by Warren as to the
    state of her health and her visits to additional physicians. Even though its
    defenses have not ultimately prevailed, United was not without just cause in
    withholding payment under the policy, so we affirm the district court’s decision
    not to impose penalties.
    IV. CONCLUSION
    The district court did not commit clear error in finding that Warren had
    no intent to deceive United when she signed the addendum to the life insurance
    policy. We therefore affirm the district court’s ruling that Plaintiffs are entitled
    to recover from United under the policy. We also affirm the district court’s
    award of legal interest. Additionally, we affirm the district court’s ruling that
    Plaintiffs are not entitled to recover statutory penalties from United.
    AFFIRMED.
    16
    Bertrand v. Protective Life Ins. Co., 
    419 So. 2d 1254
    , 1260 (La. Ct. App. 1982) (citing
    Ducote v. Life Ins. Co. of La., 
    245 So. 2d 531
    (La. Ct. App. 1971); see also Hendricks v. Conn.
    Gen. Life Ins. Co., 
    244 So. 2d 249
    (La. Ct. App. 1971)).
    17
    
    Bertrand, 419 So. 2d at 1259
    ; cf. 
    Swain, 537 So. 2d at 1304
    (penalties were justified
    when an investigation “would have revealed to the defendant that its defenses were spurious”).
    9