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UNITY MUT. LIFE INS. CO. v. MOSES

March 21, 1985

UNITY MUTUAL LIFE INSURANCE CO.
v.
SUSAN S. MOSES, Ind. & as Executrix of the Estate of STEPHEN D. MOSES , and CONTINENTAL BANK.



The opinion of the court was delivered by: KELLY

 KELLY, J.

 The parties to this action have filed cross-motions for summary judgment. The facts pertinent to this matter have been stipulated to by the parties. The plaintiff, Unity Mutual Life Insurance Company, is a New York corporation. Susan Moses is a citizen and resident of Pennsylvania. Continental Bank is a Pennsylvania corporation. The court has jurisdiction over this matter pursuant to 28 U.S.C. § 1332(a)(1).

 Unity Mutual is seeking to rescind a life insurance policy that Dr. Stephen Moses, the late husband of defendant Susan Moses, had purchased approximately two years before his death in 1982. Dr. Moses had assigned the proceeds of the policy to Continental Bank. Pennsylvania law will be applied when necessary.

 FACTS

 In November, 1979, Dr. Stephen Moses was diagnosed as having a metastatic malignant melanoma, an often fatal form of skin cancer, which would later claim his life. Although inflicted with this deadly disease, the doctor continued to perform his normal work routine. In addition to building a private practice, the doctor worked part-time for a small community health center ("health center") located in Philadelphia. Approximately three months after he was diagnosed as suffering from cancer, Dr. Moses and his wife Susan decided to purchase the health center. As part of securing financial backing for this deal, Continental Bank required that the doctor purchase at least an additional $100,000 worth of life insurance over and above what he was carrying at that time. *fn1" The doctor contacted a local insurance broker, whom he had conducted business with previously, and purchased the necessary insurance. *fn2" This transaction occurred in April, 1980, approximately a month and a half after the purchase of the health center.

 As with all underwritten life insurance policies, the doctor was required to answer a number of questions on the current status of his health. The answers are used to determine if the applicant is an acceptable risk for coverage. The information the doctor provided the insurance company was less than truthful in that he stated that he was in good health, that at his last yearly check-up he was "within normal limits" and he specifically denied ever having consulted a physician for cancer. The application also requested that the insured provide the name and address of his personal physician, ostensibly for the purpose of corroborating the medical history of the applicant.

 Upon receipt of the insured's application, Unity Mutual sent a medical questionnaire, commonly referred to as an Attending Physician's Statement ("APS"), to Dr. Lewis at the health center's address. The purpose of the APS was to confirm the medical history as furnished by Dr. Moses. The APS that was returned to Unity Mutual represented that Dr. Moses was seen for routine matters and that his present health condition was excellent. The statement was dated May 10, 1980 and carried a signature purporting to be that of Dr. Lewis. In fact, Dr. Lewis did not sign the APS nor does he have knowledge of who it was that signed his name. On December 23, 1980 Dr. Moses assigned the benefits of his life insurance policy to Continental Bank. On September 1, 1982, more than two years after the effective date of the life insurance policy, the doctor succumbed to cancer. Continental Bank, as beneficiary, supplied Unity Mutual with the necessary papers for processing the claim. The death certificate listed the cause of death as metastatic malignant melanoma. Due to the nature of the death and the lack of any information indicating such a condition existed, Unity Mutual began an investigation into the circumstances under which the policy was issued. As part of the investigation a handwriting expert was hired to compare the signature of Dr. Moses along with that contained on the APS. This expert concluded that the signature of Dr. Lewis was that of Dr. Moses. At that point further information was obtained by Unity Mutual and the true condition of the doctor in 1980 became known. The insurance company then filed suit seeking to rescind the life insurance policy.

 If this was a case where the court was asked to decide whether fraud was committed our task would be straight forward and simple, for it is well settled that fraud taints with illegality and invalidity anything its evil shadow darkens. Iacoponi v. Plisko, 412 Pa. 576, 195 A.2d 362, 365 (1963). But this is not such a case, for Pennsylvania, like most other states, has passed a law which mandates that any life insurance policy delivered in the Commonwealth contain a provision that the policy shall be incontestable after it has been in force two years from its date of issuance. 40 Pa. C.S.A. § 510(c). The policy in question satisfies the two year time requirement. *fn3"

 In accordance with the Pennsylvania statute the policy delivered to Dr. Moses contained the following clause:

 
This policy shall be incontestable after it has been in force during the lifetime of the insured for two years from its effective date except for nonpayment of premiums and except as to any provision for disability or accidental death benefits.

 The plaintiff believes that the manner in which this fraud was perpetrated allows them to void the insurance contract in spite of the clear wording of the incontestability clause. The defendants counter that the provision is absolute in its terms and that the plaintiff may not, ...


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