Life Insurance Claims Denied Based On A Misrepresentation

Life Insurance lawyers have to know this case.  It is an opinion that has been discussed here recently.  The opinion was issued on November 10, 2021, by the United States Fifth Circuit and is styled, Mirna Guzman v. Allstate Assurance Company.

Saul Guzman died after suffering a seizure at age 28.  Mirna, his wife and beneficiary file to collect on a life insurance policy issued by Allstate.  Allstate denied the claim.  A lawsuit was filed and the local district court granted summary judgment in favor of Allstate.  This Court reverses that decision.

When applying for the insurance policy, Saul disclosed his history of seizures but denied using tobacco or nicotine products.

After Saul’s death, Allstate obtained medical records regarding Saul and most of the records described Saul as a smoker.  Allstate claims that if Saul was a smoker that the policy would not have issued.

Mirna sued for violations of the Texas DTPA and for violations of Texas Insurance Code, Section 542.003.

The district court granted Allstate’s motion determining that there was no genuine dispute of material fact as to whether Saul made (1) a representation; (2) of a material fact; (3) that was false; and (4) upon which Allstate relied.

In it’s analysis of this case the Court pointed out as follows:

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.  Conversely, when we have held self-serving affidavits or depositions insufficient to create a fact issue, it is because their contents were either conclusory, vague, or not based on personal knowledge.

Unlike in other cases, Plaintiff’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.  The affiants 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.  The other affiant 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.

The Court then discussed how Allstate’s evidence was insufficient to meet it’s burden in a summary judgment.


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