Life Insurance Claim Denial – 5th Circuit

Life insurance claim denial cases are usually based on the insurance company’s assertion that the insured made misrepresentations in the life insurance application.  A 2021, opinion from the United States 5th Circuit needs to be read when handling these types of cases.  The opinion is styled, Mirna Guzman v. Allstate Assurance Company.

In this case, Saul Guzman died after suffering a seizure.  He was 28 years old.  Mirna, Sauls wife and the beneficiary of the policy made a claim for policy proceeds.  Allstate rescinded the policy and refused to pay and a lawsuit resulted.  Allstate filed a motion for summary judgment and the District Court granted the motion in favor of Allstate.  This Court reversed that ruling.

In the life insurance application process, Saul answered a question in the negative about using tobacco or nicotine.  Evidence appears to show the answer should have been yes.

Guzman made two tobacco-related representations on his insurance application.  First, he denied being a “smoker.”  Second, he denied that he had “ever used tobacco or nicotine.”  A “misrepresentation” requires that one of these statements was false at the time the representation was made.  If the answers to the questions in the application were untrue at the time they were given, the untrue answers
constituted misrepresentations.  This misrepresentation must also be material.  A representation is material if it actually induces the insurance
company to assume the risk.”  The principal inquiry in determining materiality is whether the insurer would have accepted the risk if the true facts had been disclosed.

The district court erred in holding that there was no genuine issue of material fact about whether Guzman was a smoker at the time of his application.  After noting Allstate’s evidence of Guzman’s medical records, the court turned to Mirna’s and Martha’s affidavits.  The court determined that because the affidavits and deposition were “self-serving” they must be supported by other facts in the record.  Finding none, the court held the evidence insufficient to create a fact issue.  This was wrong for two reasons.

First, “self-serving” affidavits and depositions may create fact issues even if not supported by the rest of the record.  Where self-interested affidavits are otherwise competent evidence, they may not be discounted just because they happen to be self-interested.  Indeed, evidence proffered by one side to . . . defeat a motion for summary judgment will inevitably appear self-serving.  But self-serving evidence may not be discounted on that basis alone.  How much weight to credit self-interested evidence is a question of credibility, which judges may not evaluate at the summary judgment stage.

Rather, self-serving evidence must only comport with the standard requirements of Federal Rule of Civil Procedure 56.  Self-serving affidavits and declarations, like all summary judgment evidence, must “be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.”  And these facts must be particularized, not vague or conclusory.

When these requirements are met, self-serving evidence is sufficient to create a genuine issue of material fact.

Mirna’s and Martha’s affidavits are competent summary judgment evidence.  They are based on personal knowledge, set out facts that are admissible in evidence, are given by competent witnesses, and are particularized rather than vague or conclusory.  Mirna and Martha testify about their personal experiences with Guzman.  In her deposition and affidavit, Mirna claimed that Guzman was not a smoker; that she was often with Guzman and would know if he smoked; that she is “able to tell whether people use tobacco because they have a peculiar and specific smoke smell”; and that neither Guzman nor his belongings, including his clothes and truck, ever smelled like smoke.  Martha made substantially similar claims in her own affidavit.  Though self-serving, this testimony is sufficient to—and does—
create a genuine dispute of material fact.

In addition, Allstate has not identified definitively the sources of the medical records’ information.  It is not clear whether it was Guzman, or someone else, who said he was a smoker and, if it was someone else, whether they were correct.  It is similarly unclear whether any “smoker” designations were carried over into the medical records from prior visits.  Taken together, Mirna’s evidence and the remainder of the record are more than sufficient to create a fact issue about whether Guzman was a smoker when he applied for life insurance.

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