In Joyce Cummings v. American General Life Insurance Company, plaintiff sought to recover the proceeds of her deceased’s son’s life insurance policy as the beneficiary. The deceased insured signed and submitted a life insurance policy application. During his in- house inspection interview and on his application he responded “no” when asked whether he had ever used marijuana, cocaine or any other non-prescribed drugs or narcotics. He was issued a life insurance policy which was subsequently terminated for non payment of premiums. The deceased insured then submitted a second application and again answered “no” when asked if within the last five years whether he had used drugs, substance or other controlled materials without a physicians prescription. During a second in-house inspection interview the deceased insured did admit to using marijuana some ten years prior, but did not disclose using cocaine. The insurer issued a second life insurance policy to the deceased insured. A year later, the insured died from a gunshot wound to the head. The insurer investigated the insured’s death and obtained medical records which indicated that the insured had tested positive for cocaine, and other records indicating drug abuse by the insured. The insurer sent a letter to plaintiff and informed her that they were rescinding the life insurance policy.
The plaintiff filed an action to recover the proceeds of her deceased’s son’s life insurance policy. The insurer filed a motion for summary judgment, and denied the plaintiff’s claim to recover the proceeds of the policy because the insured had made material misrepresentations in his life insurance application with regard to prior cocaine use. The insurer argues these knowing material representations made the insurance policy void ab initio. Plaintiff admits that her son misrepresented information, but argued that the misrepresentation was not material. The court found that the deceased insured’s representations were false and made in bad faith. The plaintiff admitted that the deceased had made misrepresentations, and Pennsylvania law has routinely held that misrepresentations regarding alcohol and drug use are deemed to be made in bad faith. The court found that the misrepresentations were material because the insurer presented evidence that if they had known of the insured’s past drug use, they would not have issued any life insurance policy to him. The court stated that any misrepresented fact is material if being disclosed to the insurer it would have caused it to refuse the risk altogether or to demand a higher premium. Therefore, the court concluded that the insurance policy was void and that the insurer is entitled to summary judgment.
Date of Decision: May 7, 2008