KEITH MULROONEY and HOLLY MULROONEY, husband and wife, Plaintiffs,
LIFE INSURANCE COMPANY OF THE SOUTHWEST, FRANK L. TOMAZINE, PIKE CREEK FINANCIAL GROUP, INC. Defendants.
John A. Parkins, Jr. Superior Court Judge
This case is about the consequences of signing an insurance application without first reading it. The Mulrooneys' application for insurance contained an incorrect statement of Mrs. Mulrooney's height which was written on the application by the agent of the insurer. The Mulrooneys concede that they were told that the statements on the application were important, that the policy might be voided if any of them were incorrect, and that they should read the application before signing it. Nonetheless, Mrs. Mulrooney merely glanced at the application and signed it without correcting the misstatement of her height. Four months later, Mrs. Mulrooney suffered a non-fatal stroke. The insurer now seeks to void the policy because of the material misstatement of Mrs. Mulrooney's height. The court holds that the Mulrooneys are bound by the misrepresentations contained in the application they signed. The Mulrooneys do not dispute the misrepresentation about her height and the insurer is therefore entitled to void the policy.
A. Procedural History
The Mulrooneys have brought suit against Life Insurance Company of the Southwest ("LSW"), a local insurance agency, Pike Creek Financial Group, and Frank Tomazine, an insurance agent employed by Pike Creek. In 2008 the Mulrooneys purchased, through Mr. Tomazine, an LSW life insurance policy on the life of Mr. Mulrooney with a rider naming Mrs. Mulrooney as an other insured. It is undisputed, and the court so finds, that Mr. Tomazine and Pike Creek were acting as the agents of LSW at all times pertinent to this dispute.
The LSW policy contained an accelerated benefits rider which provided that under certain circumstances the insureds could receive some portion of the death benefits even if the insured did not die. Four months after they purchased the policy Mrs. Mulrooney suffered a non-fatal stroke which they contend entitles them to benefits under the accelerated benefits rider. LSW denied coverage claiming, among other things, that Mrs. Mulrooney materially misstated her height on the insurance application. The Mulrooneys deny this and also claim that any misstatement on the application was attributable to Mr. Tomazine, who filled out the application forms for the Mulrooneys before they signed them.
After being told they would receive no benefits the Mulrooneys brought suit against Mr. Tomazine, Pike Creek and LSW. They charge Mr. Tomazine and Pike Creek with breach of contract and negligence, and they assert claims of breach of contract and bad faith against LSW which filed a counterclaim seeking a declaratory judgment that it is entitled to void the policy because of several alleged misrepresentations in the applications by the Mulrooneys. After discovery all of the defendants have moved for summary judgment. In their motion Pike Creek and Mr. Tomazine together argue, among other things, that they owed no duty of care to the Mulrooneys and they had no contractual relationship with them. LSW argues that, because of Mrs. Mulrooneys alleged misrepresentation of her height, it is entitled to void the policy.
Today the court finds from the undisputed facts that Mrs. Mulrooney materially misrepresented her height in the application and, therefore, LSW is entitled to void the policy. As a result of this holding, the Mulrooneys bad faith claims against LSW are moot. The court will momentarily defer ruling on the Tomazine/Pike Creek motion in order to give the parties an opportunity to comment on the effect, if any, of today's ruling on the claims against these defendants.
B. Background Facts
The following are undisputed facts taken from the record. These facts are based, for the most part, on the Mulrooneys' deposition testimony. There are occasional facts based upon testimony of others, but in each instance the Mulrooneys offer no evidence to dispute that testimony. Not all of the facts described here are material and some are included simply to provide context. The facts which the court deems to be material are repeated in summary fashion in the next section of the opinion.
The Mulrooneys look for replacement life insurance
In 2008, Family Benefits Marketing Company (which is not a party to this litigation) mailed to Plaintiffs and others an unsolicited flyer advertising life insurance. The flyer asked the recipient (in this case the Mulrooneys) to fill out a brief questionnaire at the bottom and return it if they were interested. The Mulrooneys were interested in replacing their existing $100, 000 policy with Prudential because they had just purchased a home and wanted a policy with limits of $250, 000 to cover their new mortgage and pay funeral expenses. Accordingly, they returned the questionnaire to Family Benefits, which in turn forwarded it to defendant Pike Creek Financial Group.
Shortly after receiving the Mulrooneys' expression of interest an employee of Pike Creek, Kim Gotschall, telephoned the Mulrooneys and interviewed Mr. Mulrooney over the phone using questions from a pre-prepared script as her guide. Those questions called for, among other things, information about the applicants' height and weight. According to Ms. Gotschall, she routinely made notes of such conversations on the script, and she did so during her conversation with Mr. Mulrooney.
The notion Mrs. Mulrooney was 5 feet 8 inches tall
There are two contemporaneous documents which show that after her telephone call with Mr. Mulrooney, Ms. Gotschall believed that Mrs. Mulrooney was 5 feet 8 inches tall. The first is the note made by Ms. Gotschall during the interview wherein Ms. Gotschall wrote that Mrs. Mulrooney was five feet eight and weighed 275 pounds. The second is an email sent shortly thereafter by Ms. Gotschall to two potential underwriters. In that email Ms. Gotschall wrote:
I have a 26 year old female who is 5' 8" and 275 pounds-no meds-non smoker-no medical issues. Please rate.
There is no evidence that defendant Mr. Tomazine was aware of Mrs. Mulrooney's ostensible height and weight at the time Ms. Gotschall conducted the telephone interview and sent the email to the underwriters.
The meeting between Tomazine and the Mulrooneys
LSW responded to Ms. Gotschall's email saying it would consider issuing a policy to the Mulrooneys. Someone at Pike Creek then scheduled a meeting between Mr. Tomazine and the Mulrooneys. The meeting took place in the living room of their home on July 15, 2008. Mr. Tomazine and the Mulrooneys (occasionally joined by their infant and toddler) were the only persons at the meeting. According to the Mulrooneys, the first portion of the meeting consisted of Mr. Tomazine asking some questions about their insurance needs and describing insurance products which were available. During the second phase of the meeting, Mr. Tomazine asked each of the Mulrooneys medical questions "from a sheet" and wrote down their answers on that sheet. (The Mulrooneys did not have a copy of the papers when Mr. Tomazine was filling them out.) From time to time the Mulrooney's asked for clarification about the scope of the questions and they recount that occasionally Mr. Tomazine told them certain information need not be disclosed.
The Mulrooneys advanced one version in their complaint of what occurred at that meeting and also testified about it in their depositions. Those versions differ in some respects, but the discrepancies are not material to the issue now before the court. For example, in their amended complaint they allege:
Tomazine asked Holly about her height and weight. Holly stated that she was not sure of her exact measurements. Tomazine suggested that she consult her driver's license. Holly gave Tomazine her driver's license. Tomazine then entered Holly's height and weight on the . . . application.
At her deposition, on the other hand, Mrs. Mulrooney testified she distinctly recalled telling Mr. Tomazine that she was 5 feet 4 and weighed approximately 275 pounds. She did testify that Mr. Tomazine asked for her driver's license which she gave to him. Her driver's license could not, however, have been the source of Mrs. Mulrooney's weight listed on the application. That license, which was issued less than four months before the meeting, listed Mrs. Mulrooney's weight as only 174 pounds.
The completed application form
Mr. and Mrs. Mulrooney signed separate, but identical, two page application forms which were filled out by Mr. Tomazine at the time he met with them. Both pages contained spaces where information was to be written in, as well as questions to be checked off with yes or no answers. The questions on the first page related primarily to personal and background information (such as the names of the beneficiaries), whereas the second page was devoted to health questions. The top portion of that page contained a blank where the applicant was to supply his or her height and weight. There is no dispute that Mr. Tomazine listed in the appropriate spaces her height as "5' 8"" and her weight as "275." Following that is a series of 19 maladies which the applicant is to disclose whether "in the last 10 years [the applicant has] been diagnosed, treated, taken medication for, or know of any indication of any" of the listed maladies. The applicant is to check a box marked "yes" or a box marked "no" for each of the conditions listed. Following that there are five questions soliciting yes or no checks for past and anticipated future medical testing. The form asks for brief information about parents and siblings including their "State of Health." Finally, the form provides space where "yes" answers should be explained. There is nothing vague or confusing about the questions Mrs. Mulrooney is alleged to have falsely answered, particularly the question about her height. Indeed, when asked at her deposition Mrs. Mulrooney agreed that the pertinent questions were not confusing.
The application signed by Mrs. Mulrooney contained several alleged errors or omissions. As noted, a check-off form in the application asked "in the last 10 years have you been diagnosed, treated, taken medication for, or know of having any indication of any:"
c. Emphysema, Pleurisy, Asthma or Lung Disease;
f. Nervous disorders or headaches;
g. Spine, Bones, Muscles, Joints, Skin or Gland Disorder;
i. Veins, Arteries, Blood or Blood Pressure Disorder.
Mrs. Mulrooney answered "No" to each of these questions. But her medical records and deposition testimony show that:
• Emphysema, pleurisy, asthma or lung disease.
Mrs. Mulrooney had, in her own words, a "long history" of breathing problems. Although she denied in her deposition she ever had asthma, she admitted to having difficulty breathing in the presence of allergens and in cold weather. In October, 2006 she was taken to the emergency room because of her difficulty breathing. The physicians there diagnosed her with asthma. Other medical records written before the Mulrooneys completed the insurance application also show a diagnosis of asthma. In a history taken by Dr. Bae, the neurologist who treated Mrs. Mulrooney for her stroke, he recorded that Mrs. Mulrooney had a history of asthma. Finally Mrs. Mulrooney had been regularly using the medication albuterol which she administered through a nebulizer, which is a common treatment for asthma.
• Nervous disorders or headaches.
A November 2008 Emergency Room record recites Mrs. Mulrooney had a history of migraines.
• Spine, bones . . . disorder
In 2007 Mrs. Mulrooney went to the emergency room complaining of pain that "felt like fire" from her neck down. She was diagnosed with a cervical radiculopathy.
• Blood pressure disorder
A 2007 note written by Mrs. Mulrooney's obstetrician during her pregnancy states she had high blood pressure. Mrs. Mulrooney was referred to her family doctor for treatment.
The application also asked about medications Mrs. Mulrooney used. She listed "meds to keep triglycerides low" and "meds for acid reflux." She made no mention, however, of the albuterol she used from time to time. Mrs. Mulrooney offers justifications for these apparent omissions, including that Mr. Tomazine told her the omitted information need not be disclosed on the application. Fortunately the court need not consider the significance, if any, of these alleged omissions.
For purposes of the instant motion, LSW has chosen to use a rifle and not a shotgun, and relies only upon the misstatement of Mrs. Mulrooney's height. The court will therefore limit its consideration to the responses provided by Mrs. Mulrooney about her height. The answer written on the form indicates that she was 5 feet 8 inches tall and weighed 275 pounds. Plaintiffs admit that Mrs. Mulrooney is not 5 feet 8 inches tall, but is in fact between 5 feet four inches and 5 feet five. When shown the application at her deposition she testified she had no idea why Mr. Tomazine wrote she was 5 feet 8. With respect to the stated weight of 275 pounds, LSW has adduced evidence that, less than four months after the application was signed, Mrs. Mulrooney weighed 322 pounds when she was taken to the hospital for her stroke. Still, because this is a motion for summary judgment the court will consider the 275 pounds stated by Mrs. Mulrooney to be accurate.
Mrs. Mulrooney is aware of the importance of accuracy
It is undisputed that Mrs. Mulrooney was well aware of the significance of her answers and that they be full and complete. Mr. Tomazine testified at his deposition that after filling out the form he reminded the Mulrooneys of the importance of the application's accuracy and advised them they should read the form before signing it. According to Mr. Tomazine:
When I get to the end of the application proves. . . I want to cover my butt. Okay? And so when I get to the end, I basically say to the client, what you are signing is every question I have asked you is truthful to the best of your knowledge. You have not withheld any information that is pertinent to the underwriting of this insurance policy. You are giving the insurance company permission to look at things like the Medical Information Bureau. You are certifying that the Social Security number you gave me is yours and not somebody else's. You are acknowledging receipt of your conditional receipt and your FCR report. But, most importantly, Lisa, what you are signing is that not only did you provide me with accurate information, but it has been recorded accurately as well. So before you sign, I need you to review, initial, review, and sign.
Mrs. Mulrooney confirmed at her deposition that Mr. Tomazine told them of the importance of correct answers.
Q. Before you signed the application did Mr. Tomazine make a statement to you to the effect that what you were signing is every question I have asked you is truthful to the best of your knowledge, you have not withheld any information that is pertinent to the underwriting of this insurance policy?
A. Yes, I remember that.
Q. He did make that statement to you?
Q. Did he go on to say something to the effect that, most importantly, what you are signing is that not only did you provide me with accurate information but ...