The opinion of the court was delivered by: Judge Conaboy
Pending before the Court is Defendant's "Motion for Summary Judgment of Defendant AAA Life Insurance Company" (Doc. 13). This action arises out of the claim of Plaintiffs Giuseppe Genovese and the Estate of Catherine Genovese ("Plaintiffs") that Defendant AAA Life Insurance Company ("AAA Life" or "Defendant") is obligated to pay Genovese a $100,000 insurance benefit under group term life insurance issued by AAA Life on the life of Mr. Genovese' late wife, Catherine Genovese. Defendant claims that Plaintiffs' claim was denied because Decedent's coverage never became effective because she never paid the required premium and because Decedent made a number of material misrepresentations in her Application for coverage, thereby voiding any coverage she arguably had under the certificate.
Defendant filed the present motion for summary judgment (Doc. 13) on September 30, 2011, and statement of material facts (Doc. 14) and supporting brief (Doc. 15) on October 3, 2011. Plaintiffs filed their Contrary Statement of Material Facts (Doc. 17) on October 12, 2011, and brief in opposition (Doc. 19) on October 14, 2011.*fn1 Defendant filed its reply brief (Doc. 22) on October 21, 2011. Oral argument on this motion was held on November 15, 2011. Accordingly, this matter is ripe for disposition.
For the reasons that follow, we will grant Defendant's Motion for Summary Judgment (Doc. 13) and close this case.
Plaintiffs initially commenced this action in the Pennsylvania Court of Common Pleas for Pike County, Pennsylvania, on June 24, 2011. (Doc. 1-2 at 2.) On February 22, 2011, Defendant removed the action to this Court pursuant to 28 U.S.C. § 1446. (Doc. 1.)
Defendant, AAA Life, is a Michigan insurance corporation that is licensed to sell life insurance in Pennsylvania. (Doc. 15 at 7.) In March 2010, it sent a direct mail advertisement to AAA members, regarding group term life insurance available to members and their spouses at various face amounts. (Id.) Individuals could apply by completing an enclosed one-page application that asked five questions about their health. (Id.) Two of those questions are particularly relevant in this case: they asked if each applicant had used nicotine in any form in the previous 12 months, and whether each applicant had sought treatment for - or been diagnosed with - specified medical conditions during the previous 10 years, including chest pain, high blood pressure, circulatory disorders, or a tumor. (Id.)
Directly above the signature line, the Application warns:
All answers in this application and any questionnaire completed in connection with this application are, to the best of my knowledge and belief, true. I understand the answers will be used to determine if coverage will be issued, and will be part of the Certificate.
If I misstate any of the information above, the Certificate may be voidable from inception . . . Warning: Any person who, with the intent to defraud or knowingly facilitates a fraud against an insurer, submits an application or files a claim containing false or deceptive statements may be guilty of insurance fraud and subject to fines and penalties. (Doc. 15 at 8-9.)
Defendant relied on each applicant's representations in the Application to determine whether the applicant is entitled to coverage, and if so, the appropriate premium for that coverage. (Id. at 7.) Based on its underwriting criteria, with the exception of high blood pressure, applicants who answered "yes" regarding the listed medical conditions were ineligible for the coverage and their applications were denied. (Id.) Applicants who used nicotine within the 12 months of their application were eligible for coverage, but at a premium rate that is approximately double the premium charged to non-nicotine users. (Id. at 7-8.)
Defendant sends each approved applicant an Insurance Certificate that states the terms of the offered coverage, which the applicant has 31 days to examine and consider. (Id. at 8.) If an approved applicant wants to accept the offered coverage, she must provide Defendant with the first premium payment. (Id.) Coverage would only be effective when Defendant received that payment, provided it received the payment within 31 days of the date Defendant issued the Insurance Certificate and during the applicants lifetime. (Id.) If this condition is not satisfied, Defendant's offer of coverage lapses and becomes null and void. (Id.)
On or about March 22, 2010, Decedent applied for $100,000 of coverage on her life, answering "No" to each of the Application's questions. (Doc. 15 at 8.) Based on Decedent's representations, Defendant approved her for the requested coverage at the premium rate reserved for non-nicotine users. (Id. at 9.) According to Defendant, had Decedent stated she had used nicotine in the preceding 12 months, Defendant would have charged her a significantly higher premium, and had she admitted to any of the listed medical conditions, Defendant would have required additional investigation and may have denied coverage altogether. (Id.)
Defendant sent Decedent an Insurance Certificate on April 1, 2010 ("Issue Date"). (Id. at 9.) The Insurance Certificate states, in part:
We consider all statements made by You in the application to be representations and not warranties unless they are fraudulent. (Id.)
The Insurance Certificate stated the Effective Date of coverage would be April 5, 2010, provided AAA Life had received her first premium payment. (Id. at 10.)
In this regard, the Insurance Certificate states:
The first premium due is the Total Initial Modal Premium shown on the Schedule Page. You must pay the first premium within 31 days of the Issue Date and during Your lifetime . . . We will consider the premium paid when it is received at Our mailing address shown on the first page of this Certificate. (Id.)(emphasis added).
In submitting her Application for insurance coverage, Decedent authorized Defendant to charge her premium to her Discover credit card, providing the account number in the Application. (Id.) Defendant attempted to charge Decedent's premium, using the credit card number Decedent had written on the Application, however, according to Defendant, it could not complete the transaction because the credit card number was wrong or AAA Life's agents could not correctly decipher it, and the transaction was refused. (Id. at 10-11.) By letter on April 6, 2010, Defendant notified Decedent it could not complete the transaction and it would invoice her for the outstanding premium or she could try to charge another credit card by completing the enclosed Authorization to Charge the Premium. (Id. at 11; Doc. 13-1 at 28.)
On April 27, 2010, Decedent's daughter, Crystal Genovese, telephoned Defendant and reported that Decedent had died on April 24, 2010. (Id.) Crystal Genovese asked how to make a claim for insurance benefits under the Policy, and the AAA Life representative explained that because she had not paid any premium in her lifetime, Decedent was not covered under the Policy. (Id.)
Thereafter, on April 28, 2010, Defendant received an Authorization to Charge Premium signed by Decedent on April 17, 2010. (Id.) According to Defendant, because it had already been advised of Decedent's death, the offer of coverage was no longer valid and it did not attempt to process the charge. (Id.)
Plaintiffs dispute Defendant's denial of coverage, noting that the Certificate of Insurance Coverage for Decedent was issued on April 1, 2011, and the initial premium was twice tendered, once by signing Defendant's credit card authorization at application, and then again on April 17th by resubmitting Decedent's signed form via mail sent prior to Decedent's death. (Doc. 21 at 2.) Plaintiffs assert that Defendant's manager, Kristen Shopshear, later admitted to Crystal Genovese that Defendant's Third Party Credit Card administrator frequently made mistakes. (Id.)
Plaintiffs also contest Defendant's determination that Decedent's insurance application was fraudulent since (1) her answer that she did not use nicotine products for one year prior to the application was false; and, (2) Decedent failed to disclose a known tumor, which she allegedly had years prior to the application.
Plaintiffs aver by affidavits of Giuseppe Genovese and Crystal Genovese (Docs. 21-1, 21-2) and Defendant's own medical records that Decedent stopped smoking over one year prior to application, and instead was using the prescription drug, Chantix, to avoid nicotine use. (Id. at 2-3.) Further, Plaintiffs argue that in 2004 Decedent was diagnosed with a benign nodule, not a tumor, and she therefore was never aware of or ever had a "tumor." (Id. at
3.) Plaintiffs further argue that Decedent also did not have any heart or circulatory disorders. (Id.)
Moreover, Plaintiffs assert that Defendant's Motion and Affidavits do not support denial of coverage based upon use of nicotine products. (Doc. 19 at 7.) Plaintiffs argue that the evidence submitted demonstrates that if tobacco use were disclosed, the coverage would not be voided but rather issued at a higher premium. (Id.) ...