Wohlman v. Paul Revere Life Ins. Co. ( 1992 )

UNITED STATES COURT OF APPEALS
for the Fifth Circuit
_____________________________________
No. 92-4541
Summary Calendar
_____________________________________
Marla Wohlman,
Plaintiff-Counter
Defendant-Appellant,
VERSUS
Paul Revere Life Insurance Company,
Defendant-Counter
Claimant-Appellee.
______________________________________________________
Appeal from the United States District Court
for the Western District of Louisiana
(90 CV 721)
______________________________________________________
(November 23, 1992)
Before JOLLY, DUHÉ, BARKSDALE, Circuit Judges.
PER CURIAM:1
Appellant, Dr. Marla Wohlman, appeals the district court's
judgment in favor of Paul Revere Insurance Company, Appellee,
holding that Wohlman's disability income insurance policy with the
Appellee was void ab initio as a result of misrepresentations made
in her application for the policy. Additionally, the court
rendered judgment against Wohlman requiring her to reimburse Paul
1
Local Rule 47.5 provides: "The publication of opinions
that have no precedential value and merely decide particular cases
on the basis of well-settled principles of law imposes needless
expense on the public and burdens on the legal profession."
Pursuant to that Rule, the Court has determined that this opinion
should not be published.
Revere $11,233.24 it had paid her in benefits, and costs. We find
no error and affirm.
Background
The following facts were found by the district court. In
April 1987, Dr. Wohlman applied for disability income insurance
with Paul Revere. At the time she was married to Dr. W. Zeichner,
who had previously purchased a disability income policy from Paul
Revere and encouraged Dr. Wohlman to do the same. In completing
the application, Dr. Wohlman was asked if she had ever used
"stimulants, hallucinogens, narcotics or any controlled substance
other than prescribed by a physician, or been counseled or treated
for excess use of alcohol or drugs?" Dr. Wohlman answered "no",
even though she had previously experimented with marijuana,
cocaine, and ecstacy. Dr. Wohlman, however, had never been
counseled or treated for the excess use of drugs or alcohol. She
claims that all prior drug use had ceased almost two years prior to
the date of the application.
The insurance agent did not explain to Dr. Wohlman that
previous drug use would result in rejection of her application.
Dr. Wohlman claims that she did not realize that her policy would
be rejected and answered "no" because she felt the question
violated her privacy. She felt that her prior experimental drug
use was of no significance with respect to her application for
disability income insurance.
2
Paul Revere bases much of its case on the testimony of Dr.
Zeichner, now divorced from Dr. Wohlman, and statements Dr. Wohlman
made to physicians two years after applying for the policy. Dr.
Zeichner testified that Dr. Wohlman told him of drug use prior to
their marriage and that he has personal knowledge of her smoking
marijuana and using cocaine, and purchasing and consuming an
illegal drug commonly referred to as "ecstacy." Dr. Zeichner
testified that his personal knowledge of Dr. Wohlman's drug use
predated her entry into medical school in 1980 and continued until
they moved to Shreveport, Louisiana, in 1985. Dr. Wohlman and Dr.
Zeichner were divorced in 1988.
Paul Revere also relies on medical records from drug
rehabilitation centers in which Dr. Wohlman was a patient after her
application for insurance. On February 26, 1989, Dr. Wohlman
became disabled as defined in the policy when she put her left
forearm through a window in her home while hallucinating under the
influence of alcohol and other drugs. The Shreveport police
arrested her for possession of cocaine and transported her to the
LSU Medical Center where she was treated for her injury. While
receiving treatment, Dr. Wohlman told the treating physician that
she had not used any cocaine that day and that her previous use had
been approximately a week earlier. As a result of the police
charges, Dr. Wohlman was suspended from the LSU residency program
and her license to practice medicine was suspended.
In order to be reinstated into the LSU surgical residency
program and regain her medical license, Dr. Wohlman was required to
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enter an in-patient drug abuse treatment program, submit to
urinalysis drug screening and undergo psychiatric treatment. She
admitted herself into the Jackson Recovery Center in Mississippi in
March 1989. She told the physician there that she had abused
cocaine approximately 10 times between the ages of 17 and 30, and
had abused marijuana and hashish infrequently. She also admitted
to once using ecstacy and to periodically using Halcion to help her
sleep. She indicated on a drug questionnaire that her last use of
cocaine was on February 26, 1989.2 Doctors at that facility
diagnosed chemical dependency, however, Dr. Wohlman discharged
herself without completing the treatment program.
In April 1989, Dr. Wohlman met with a Paul Revere field
representative concerning her disability. She told the
representative that she had tried marijuana once in high school and
cocaine once in college, but was too busy working to do drugs and
alcohol.
In June 1989, she was evaluated by Dr. A. Singdahlsen, a
psychiatrist in Shreveport. In September 1989, Dr. Wohlman was
admitted to Timberlawn Psychiatric Hospital in Dallas for referral
to Timberlawn's health professionals program for evaluation of
possible substance abuse disorder. Once again, Dr. Wohlman
described her past drug use differently to both of these
professionals.
2
February 26 was the date of her accident in which she
denied using cocaine to the treating physician.
4
Dr. Singdahlsen treated Wohlman through May 1990, when Dr.
Wohlman informed Dr. Singdahlsen that she was doing well and had no
depression. At Dr. Wohlman's request, Dr. Singdahlsen certified to
the Louisiana Board of Medical Examiners on October 12, 1989, that
Wohlman was competent to practice medicine and surgery.
On December 14, 1989, Paul Revere reviewed Timberlawn
Psychiatric Hospital medical records and determined that, had Paul
Revere known at the time of the application of Dr. Wohlman's prior
cocaine use, Paul Revere would not have issued a disability income
insurance policy to her. In December, Paul Revere notified Dr.
Wohlman that her policy was being rescinded and tendered her a
refund of $1,117.66 for previously paid premiums. At that time,
Paul Revere had paid a total of $11,233.34 in disability benefits.
Discussion
Dr. Wohlman admits that she lied in applying for her policy
when answering the question concerning prior drug use. Paul Revere
contends that this false statement is sufficient to bar recovery
under the policy.
Because plaintiff's intent to deceive and understanding of the
materiality of her misrepresentation to Paul Revere are both fact
findings, Fed R. Civ. P. 52(a) determines that the clear error
standard of review applies. "[E]specially where, as here, the
factual determination is made by resolving conflicts in the
evidence, requiring that essential credibility determinations be
made, this Court will defer to the trier of fact." Fontenot v.
Global Marine, Inc., 703 F.2d 867, 872 (5th Cir. 1983). Finally,
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"[t]he burden of showing that the findings are clearly erroneous
. . . is on the party attacking them." Seaton v. Sills, 403 F.2d
710, 711 (5th Cir. 1968); see also Terrell v. Geldstein Co., Inc.,
468 F.2d 910, 911 (5th Cir. 1972).
Under La. Rev. Stat. 22:619, an insurance company cannot avoid
liability under the policy solely as a result of a false statement
given by the insured in an application for insurance.
The statute requires not only that the insurance company prove
that the statement was false, but also that the false statement was
made with the intent to deceive and that such statement materially
affected the acceptance of the risk by the insurer or the hazard
assumed. Coleman v. Occidental Life Insurance Co. of N. C., 418
So.2d 645, 646 (La. 1982); Clark v. Golden Rule Ins. Co., 887 F.2d
1276, 1281 (5th Cir. 1989). The burden of proof rests with the
insurer. Coleman, 418 So.2d at 646.
"Intent to deceive may involve either knowledge of the falsity
of the statement and its materiality to the risk or circumstances
in which an insured must have known the statement to be material to
the risk." Parfait v. Minnesota Mutual Life Ins. Co., 311 So.2d
558, 560 (La. App. 4th Cir. 1975), writ ref'd. 313 So.2d 847(1975); see also Cousin v. Page, 372 So.2d 1231, 1233 (La. 1979).
Absent direct proof, the insurance company may prove that the
insured had the actual intent to deceive by showing that there were
facts and circumstances surrounding the application process
"indicating the insured's knowledge of the falsity of the
representations made in the application and his recognition of the
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materiality of his misrepresentations or from circumstances which
create a reasonable assumption that the insured recognized the
materiality." Cousin, 372 So.2d at 1233; see also Ned v. Magnolia
Life Ins., 590 So.2d 733, 735 (La. App. 3d Cir. 1991).
The test of materiality involves considering whether knowledge
of the facts would have influenced the insurer in determining
whether to assume the risk or in fixing the applicable premium.
Fagen v. National Home Life Assurance Co., 473 So.2d 918, 920 (La.
App. 4th Cir. 1985); Jones v. United Savings Life Ins. Co., 486
So.2d 1110, 1113 (La. App. 2d Cir. 1986). If the information given
by the applicant is false, but the insurance company would have
issued the policy anyway, then it is not material. Jamshidi v.
Shelter Mutual Ins. Co., 471 So.2d 1141, 1143 (La. App. 3d Cir.
1985); Manzella v. Paul Revere Life Ins. Co., 872 F.2d 96 (5th Cir.
1989).
Dr. Wohlman argues that she did not realize the materiality of
the false statements she made nor did she have the actual intent to
deceive Paul Revere. We disagree. We find that there was ample
evidence to support the conclusions of the trial court.
Dr. Wohlman's preapplication drug use alone would have
materially affected Paul Revere's decision to write the policy.
Paul Revere presented evidence, unrefuted by Wohlman, that had it
known of her preapplication drug use it would not have issued the
policy. Dr. Wohlman understood that each question asked in the
application was material to Paul Revere. She knew when she filled
out the application that she could explain any negative answer
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given to a question, but she chose not to do so. Dr. Wohlman also
admitted that, unless she told the Paul Revere representative about
her prior drug use, nothing on the application would alert Paul
Revere to her previous drug use. We find no error in the trial
courts holding that Dr. Wohlman's prior cocaine use would have
materially effected Paul Revere's decision to issue the policy.
Dr. Wohlman's intent to deceive is amply supported by her
recognition of the materiality of her misrepresentation regarding
her pre-application drug use. She understood that Paul Revere
wanted to know if her drug use was material or significant enough
to affect her insurability, but she chose to deny Paul Revere this
opportunity. Additionally, the trial court, in assessing the
credibility of Dr. Wohlman's testimony, did not believe that her
prior drug use was as limited as she claimed. The factual
determinations made by resolving conflicts in the evidence required
that essential credibility determinations be made, therefore this
Court must defer to the conclusions of the trial court. Fontenot,
703 F.2d at 872. We believe that the circumstances created a
reasonable assumption that the insured recognized the materiality
of her misrepresentations.
For the foregoing reasons, the judgment of the district court
is
AFFIRMED.
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