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Neiman v. American International Group

December 7, 2009

LONNY L. NEIMAN, JR., PLAINTIFF
v.
AMERICAN INTERNATIONAL GROUP, INC. AND ITS SUBSIDIARY AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE COMPANY, DEFENDANTS



The opinion of the court was delivered by: Sylvia H. Rambo United States District Judge

JUDGE SYLVIA RAMBO

MEMORANDUM

This case concerns a dispute over a term life insurance policy purchased by Larry Null ("Null"), now deceased, from Defendant American General Life and Accident Insurance Company ("American General"). Plaintiff, Null's stepson and beneficiary under the policy, also named Defendant American International Group, Inc ("AIG") as a defendant based on his belief that it is liable to Plaintiff as the parent corporation of American General.

Upon Mr. Null's death on February 22, 2006, American General refused to pay the insurance proceeds. Defendants contend that Null knowingly or in bad faith concealed information concerning his medical history, and that this information was material to its decision to insure Null. Defendants contend that had they known of Null's true medical history they would have rated him higher, thereby increasing his premiums, or declined coverage altogether. Plaintiff brought suit for breach of contract and insurance bad faith. (Doc. 1.) Defendants asserted a counterclaim seeking a declaratory judgment that the policy was void ab initio due to Null's alleged material misrepresentations. (Doc. 6.) The case is scheduled for jury selection on January 4, 2010.

Before the court are the following motions in limine: (1) Plaintiff's motion in limine, (Doc. 35), which is actually five separate requests to exclude certain evidence that he believes is either irrelevant or, if relevant, is unduly prejudicial; (2) Defendants' motion in limine to strike Plaintiff's jury demand, (Doc. 33); (3) Defendants' motion in limine to strike Plaintiff's claim for bad faith, (Doc. 34); and (4) Defendants' motion in limine to dismiss AIG and bar any reference to AIG at the time of trial, (Doc. 32). These motions have been fully briefed and are ripe for disposition.

I. Plaintiff's Motion in Limine

In his motion in limine, Plaintiff argues that Defendants should be precluded from introducing evidence concerning the following: (1) any of Null's medical records subsequent to the date of the Paramedical Supplement- July 20, 2005-or any medical testimony thereon; (2) any evidence that Null lost weight in contradiction to his statements made in the application and Paramedical Supplement; (3) any evidence contained in Null's medical records with respect to the manner of Null's father's death; (4) any reference to the customer satisfaction survey sent after the policy was issued; (5) any reference to the nurse's note stating "Bloody sputum noted yesterday" contained in the April 28, 2005 medical records from Partners in Family Health. The court will address each of these in turn.

A. Medical Records Subsequent to July 20, 2005

Plaintiff seeks to preclude Defendants from introducing any of Null's medical records subsequent to July 20, 2005 because these records are irrelevant to Plaintiff's claims and Defendant's counterclaims and defenses. Plaintiff further argues that if the court determines that these records are relevant, they should not be admitted because they are substantially more prejudicial than probative. Thus, the first step is to determine whether Null's medical records subsequent to July 20, 2005 are relevant to any of the claims before the court.

Federal Rule of Evidence 401 defines relevant evidence as "evidence having any tendency to make the existence of any fact that is of consequence to the determination of the action more probable or less probable than it would be without the evidence." Fed. R. Evid. 401.

It is clear that Null's medical records-either pre-application or post-application-are irrelevant to Plaintiff's breach of contract and bad faith claims asserted in his complaint. The elements of both of these claims do not require any evidence concerning Null's health or the representations that Null made to American General. However, Null's medical records are relevant to Defendants' counterclaim and affirmative defenses. Defendants have asserted that the policy is void ab initio because of misrepresentations made by Null in the application and the Paramedical Supplement. To void an insurance policy under Pennsylvania law, the insurer has the burden to prove that: (1) the insured made a false representation; (2) the insured knew the representation was false when it was made or the insured made the representation in bad faith; and (3) the representation was material to the risk being insured. Justofin v. Metro. Life Ins. Co., 372 F.3d 517, 521 (3d Cir. 2004) (citations omitted).

Plaintiff argues that Null's medical records subsequent to the statements made on the Paramedical Supplement are irrelevant to Defendants' claims because they cannot possible relate to Null's state of mind at the time that he made the statements. While Plaintiff's argument has some intuitive appeal, the standards for relevance are not as strict as Plaintiff would like them to be. Without belaboring the point, the court agrees with Defendants' analysis that "Mr. Null's consultation with various specialists after the Paramedical Supplement is probative of the gravity of [his] failing health and his appreciation of the same as of the time of . . . the Paramedical Supplement because of the temporal proximity of the consultations to [Null's] representations." (Doc. 42 at 6.) That is to say, these consultations may have a tendency to make it more probable that Null appreciated the seriousness of his illnesses at the time of his Paramedical Supplement. Thus, the evidence is relevant.

Even relevant evidence, however, is subject to exclusion by the court if "its probative value is substantially outweighed by the danger of unfair prejudice, confusion of the issues of misleading the jury. . . ." Fed. R. Evid. 403. Here, Plaintiff argues that evidence of Null's subsequent medical records should be excluded from the jury because it would cause the jury to render a decision based on an emotional response rather than the neutral application of principles of law to the facts. The court agrees. Although the evidence of Null's subsequent diagnosis and treatment for lung cancer is relevant, the temporal proximity to his application substantially prejudices Plaintiff's chance at a fair determination by the jury concerning Null's state of mind at the time of his application and the Paramedical Supplement. Ultimately, one of the material issues in this case is whether Null knowingly or in bad faith made false statements in these two documents. Certainly there is ample evidence from Null's pre-Paramedical Supplement medical history which Defendants can draw upon to demonstrate their case. While evidence of Null's post-Paramedical Supplement medical history is probative of his state of mind, it is not as probative as his pre-Paramedical Supplement medical history, and has the very real potential to cause a jury to conclude that he "had to know" that he had cancer when he made the statements in his application. While it may very well be the conclusion of the jury that Null "had to know" that he had cancer, the court is obligated to both parties to ensure that this conclusion, if it is in fact made, is based on the neutral application of the facts to the law not on an emotional response by the jury.

The court concludes that the probative value of the evidence of Null's medical history subsequent to his answers in the Paramedical Statement is substantially outweighed by the danger of unfair prejudice and confusion of the issues. The issue in this case is not when Null was diagnosed with cancer, or that he died within a relatively short period of time from his application for life insurance; instead, the issue is Null's state of mind at the time he completed the application and Paramedical Supplement. Defendants introduction of post-Paramedical Supplement medical records into evidence could very likely lead a jury to emotionally respond that Null "died too soon" after obtaining insurance, and therefore, he had to know that he was sick, instead of basing its decision on what Null knew or did not know at the time he completed the application and Paramedical Supplement.

Accordingly, the court will preclude, based on Federal Rule of Evidence 403, Defendants from introducing any evidence about Null's medical history ...


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