NOVEMBER 2011 BAD FAITH CASES JUDGMENT WHERE INSURED DID NOT SEND PREUMIUM DURING LIFETIME & MISREPRESENTED HEALTH INFORMATION ON APPLICATION (Middle District)

In Estate of Genovese v. AAA Life Insurance Company, the court was faced with a carrier’s motion for summary judgment to dispose of an insured’s claim seeking benefits under a life insurance policy.

The case arises from a life insurance policy purchased by the decedent insured. In 2010, the carrier sent the insured a questionnaire asking several health-related questions. As a part of the document, the decedent wrote that she had not used nicotine in over 12 months and signed the form. Moreover, the carrier requested that the insured submit her initial premium payment. The insured submitted credit card information, but the carrier was unable to process the information. The insured was notified that she would be sent an invoice.

The insured died before submitting payment, however. Three days later, the insured’s estate informed the carrier that it would be submitting payment and requested information in order to submit a claim under the policy. The carrier, having already been apprised of the insured’s death, refused to process the insured’s premium and declined payment to the insured’s estate under the life insurance policy. The insured commenced this action in the Court of Common Pleas for Pike County and the carrier removed to federal court.

The court first addressed the issue of the first premium as a condition precedent to the policy. In this case, it was undisputed that the insured must comply with the first premium payment in order to trigger policy coverage. The insured claimed that the policy was in effect because it intended to pay the premium, but was unable to submit payment via credit card. The court disagreed, likening the insured’s attempted payment to a bounced check. It found that a payment is not actually made until the carrier receives the money.

The court also found that the second attempted payment, made after the insured’s death, was invalid because the individual had already died, nullifying any offer of coverage. Furthermore, the court dismissed the insured’s claims that the carrier’s issuance of an insurance certificate created coverage. The fact that the insured did not pay the first premium within 31 days of the offer of insurance, as required under the policy, was enough in itself to void any suggestion that the decedent was insured. The court concluded that summary judgment was appropriate on this issue.

Next, the court addressed the insured’s misrepresentations about smoking on her application for coverage. Specifically, the carrier alleged that the decedent lied when she claimed no use of nicotine within twelve months on the application. On the day of her death, however, the insured’s husband told emergency medical personnel that she smoked “a lot.”

The insured also reported on her application that she had never sought treatment for high blood pressure, tumors, or chest pain. Yet, medical records reveal that the decedent was in fact treated for these ailments prior to submitting its application to the carrier. The carrier claims that, had the insured applied for insurance in good faith, it would have likely been denied.

The estate contested these claims, arguing that she never had a tumor, but a benign nodule that did not result in any treatments. The estate also alleged that her medical records reporting other health issues were incorrect. The court disagreed, finding that, even viewed in a light most favorable to the insured, the instant facts supported a grant of summary judgment to the carrier.

Accordingly, the court denied the claims brought by the insured’s estate and granted summary judgment to the carrier.

Date of Decision: November 21, 2011

Estate of Genovese v. AAA Life Insurance Company, NO. 3:11-CV-348, U.S. District Court for the Middle District of Pennsylvania, 2011 U.S. Dist. LEXIS 134254 (M.D. Pa. Nov. 21, 2011)(Conaboy, J.)