Life Insurance Denial And Material Fact

Here is an opinion from the United States Fifth Circuit that deals with life insurance.  The opinion is styled, Mirna Guzman v. Allstate Assurance Company.

This is an appeal from the District Court wherein the District Court granted summary judgment in favor of Allstate.  This is a review of how the Court reviews the granting of a summary judgment.

Here is some basic background in the case:

Saul Guzman died on January 29, 2019, after suffering a seizure. He was twenty-eight years old.  Mirna, his wife and life insurance beneficiary, filed a claim with Allstate to collect the $250,000 in policy proceeds.  After conducting a routine contestable-claim investigation, Allstate rescinded the policy and refused to pay.  Mirna sued, and the district court granted Allstate’s motion for summary judgment.

Saul Guzman applied for a life insurance policy from Allstate on August 17, 2017.  In his application, Guzman disclosed his history of seizures.  But he denied using tobacco or nicotine products.  In response to the question: “Do you currently use tobacco or nicotine?”, Guzman answered “No.”  And in response to the question: “If ‘no’ . . . have you ever used tobacco or nicotine?”, Guzman also answered “No.”  After receiving some of Guzman’s medical records and the results of his blood and urine tests, Allstate issued him a policy of $250,000 at a “Standard Non Tobacco”
annual premium rate.  Guzman made Mirna, his wife, the beneficiary.

Guzman died on January 29, 2019, after suffering a seizure at work.  Mirna filed a claim with Allstate to recover the policy proceeds, and Allstate began a contestable-claims investigation.  During the investigation, Allstate obtained additional medical records. Upon discovering that most described Guzman as a smoker, Allstate sent the records along for two “underwriting referrals” to determine whether Guzman would have been issued the same policy if he had disclosed that he was a smoker.  Both underwriting referrals determined that Guzman would not have been issued the same policy.  On this basis, Allstate informed Mirna that it was rescinding the contract and gave her a premium refund of $433.84.

Mirna alleges Allstate was wrong in rescinding the policy and sued Allstate for breach of the life insurance contract, and violation of the Texas DTPA, violation of Section 542.003 of the Texas Insurance Code.

The parties chiefly disputed whether Guzman was a smoker at the time he filled out his application.  As evidence that he was, Allstate pointed to Guzman’s medical records, most—though not all—of which described Guzman as a smoker.  In her response, Mirna flatly denied that her husband was a smoker.  She submitted her own deposition and two affidavits, one from her and the other from Guzman’s sister, Martha.  Based on their knowledge of Guzman and the fact that they never saw him smoke or smelled smoke on his person or belongings, both Mirna and Martha denied that he was a smoker.

The district court granted Allstate’s motion for summary judgment based on it’s determination that there was no genuine dispute of material fact as to whether
Guzman made (1) a representation; (2) of a material fact; (3) that was false;
and (4) upon which Allstate relied.

This Court’s review of the granting of the summary judgment is de novoIn doing so, the Court views the evidence in the light most favorable to the nonmovant and construe all reasonable inferences in her favor.  Summary judgment is only appropriate when the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.

When the movant also carries the burden of proof at trial, as when he asserts an affirmative defense, his burden is even higher; he must establish beyond peradventure all of the essential elements of the claim or defense.  Only if the
movant succeeds must the nonmovant designate specific facts showing that
there is a genuine issue for trial.

Finally, courts may not evaluate the credibility of the witnesses, weigh the evidence, or resolve factual disputes.  The sole question is whether a reasonable jury drawing all inferences in favor of the nonmoving party could arrive at a verdict in that party’s favor.

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.

When moving for a motion for summary judgment or responding to one, the way the Courts are to look at the motion is important.

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