Banner Life Insurance Company v. Jacqueline Noel

UNPUBLISHED
UNITED STATES COURT OF APPEALS
FOR THE FOURTH CIRCUIT
No. 12-1329
BANNER LIFE INSURANCE COMPANY,
Plaintiff - Appellee,
v.
JACQUELINE L. NOEL,
Defendant - Appellant.
No. 12-1498
BANNER LIFE INSURANCE COMPANY,
Plaintiff - Appellee,
v.
JACQUELINE L. NOEL,
Defendant - Appellant.
Appeals from the United States District Court for the Eastern
District of Virginia, at Richmond. James R. Spencer, District
Judge. (3:11-cv-00434-JRS)
Argued: December 5, 2012 Decided: January 22, 2013
Before WILKINSON, NIEMEYER and GREGORY, Circuit Judges.
Affirmed by unpublished per curiam opinion.
ARGUED: John Tracy Walker, MCGUIREWOODS, LLP, Richmond,
Virginia, for Appellant. Robert Barnes Delano, Jr., SANDS
ANDERSON, PC, Richmond, Virginia, for Appellee. ON BRIEF:
Joseph E. Blackburn, Jr., BLACKBURN, CONTE, SCHILLING & CLICK,
PC, Richmond, Virginia, for Appellant.
Unpublished opinions are not binding precedent in this circuit.
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PER CURIAM:
Banner Life Insurance Company (Banner) filed for a
declaratory judgment in the United States District Court for the
Eastern District of Virginia seeking to limit its obligations
under a binder of temporary insurance entered into with Gary
Noel. Jacqueline Noel, the beneficiary of the policy, opposed
the action and filed a counter-claim for breach of contract.
Following cross-motions for summary judgment, the district court
granted Banner declaratory judgment limiting its obligations
under the binder to remitting the premium paid by Gary. For the
following reasons, we affirm.
I.
A.
On November 30, 2010, Gary and Jacqueline met with
Banner Life Insurance agent Christopher Roberts to purchase a $1
million life insurance policy on Gary’s life. During the
meeting, Gary completed three documents as part of the
application packet. The first document, labeled Part 1,
contained biographical questions; the second document, labeled
Part 2, examined medical history; and the third document,
entitled “Temporary Insurance Application and Agreement” (TIAA),
allowed for temporary insurance coverage pending approval of the
full policy.
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When filling out Part 2, Gary was required to
truthfully provide information about his medical history.
Despite this, Gary failed to disclose his history of elevated
liver function tests, an abnormal abdominal liver ultrasound,
and that his primary care physician referred him to a
gastroenterologist. Gary also denied having sleep apnea and did
not disclose that his doctor recommended he consult with a sleep
disorder specialist. Jacqueline acknowledges that Gary was
required to disclose this information.
After filling out Part 1 and Part 2, Gary had the
option of filling out the TIAA. The approval of the life
insurance policy was not contingent upon completion of the TIAA.
The TIAA contained four yes or no questions, all of which had to
be answered no to be eligible for temporary coverage. At the
bottom of the TIAA was a provision entitled “Other Limitations,”
which read in pertinent part: “The Insurer’s liability will be
limited to a return of the Amount Remitted if . . . any part of
the life insurance application or this TIAA contains a
misrepresentation material to the Insurer.” Gary answered all
four questions “no,” presumably read the provision at the
bottom, and signed the TIAA. Gary remitted payment for the TIAA
in the amount of $913.90. Banner acknowledges that Gary filled
out the TIAA truthfully.
4
After Gary completed and signed all three documents,
Roberts submitted the application packet to Banner’s
underwriting department. A Banner underwriting consultant, Sean
Lucas, reviewed Gary’s application packet. Because Gary
admitted to a history of hypertension when completing Part 2,
Lucas ordered and obtained a copy of Gary’s medical records from
his primary care physician. Upon review of the records, Lucas
learned of Gary’s undisclosed medical problems, and as a result,
was unable to make a recommendation of approval for Gary’s
application. Before he could approve Gary’s policy, Lucas
requested that Roberts follow up with Gary regarding the
gastroenterologist referral. Roberts obliged, and informed
Lucas on January 31, 2011, that Gary did not follow up on the
referral.
On Thursday, February 3, 2011, Lucas completed his
review of Gary’s application and forwarded it to Banner’s
medical director. He recommended postponing approval of the
policy pending additional follow-up and definitive diagnosis for
the cause of Gary’s elevated liver tests. Gary died sometime
between Sunday, February 6, and Monday, February 7, before
Banner was able to notify Gary that it was postponing issuing
the life insurance policy. On July 5, 2011, Banner sent
Jacqueline a letter denying her claim for benefits under the
TIAA due to the misrepresentations made in Part 2 of the
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application. Enclosed with the letter was a check refunding
Gary’s premium payment.
B.
On July 6, 2011, Banner filed a declaratory judgment
action in the district court seeking to either rescind the TIAA
or have the court declare that its obligations were limited to a
return of the premium paid by Gary. Jacqueline answered,
denying that Banner was entitled to rescission, claiming that
Banner was estopped from rescission, and counterclaiming for
breach of contract and attorneys’ fees. At the close of
discovery both parties moved for summary judgment.
On February 15, 2012, the district court granted
Banner’s motion for summary judgment, asserting that Part 1,
Part 2, and the TIAA formed a single contract; that the
misrepresentations made in Part 2 were material to Banner; and
as a result, Banner’s obligations were limited to returning the
premium paid by Gary per the terms of the TIAA. Banner Life
Ins. Co. v. Noel, 861 F. Supp. 2d 701 (E.D. Va. 2012). In a
corollary matter, on April 5, 2012, the district court awarded
Banner attorneys’ fees for having to defend a motion to compel
discovery.
Jacqueline timely appealed, challenging the district
court’s grant of summary judgment and award of attorneys’ fees.
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II.
Jacqueline first argues that the district court erred
in granting Banner’s motion for summary judgment, limiting
Banner’s obligations to returning the premium paid by Gary. We
review a grant of summary judgment de novo. Henry v. Purnell,
652 F.3d 524, 531 (4th Cir. 2011) (en banc).
The TIAA entered into by Banner and Gary was an
independent binder of insurance. 1 The clause in the TIAA, “Other
Limitations,” instructs that any material misrepresentations
contained in the life insurance application packet as a whole
limits Banner’s obligations under the agreement. Jacqueline
does not argue that there were no misrepresentations in Part 2
of the application. Therefore, the pertinent question before
the Court is whether the misrepresentations were material to
Banner, limiting its obligations under the agreement to
returning the premium paid by Gary.
1
A “binder” is defined as: “An insurer’s memorandum giving
the insured temporary coverage while the application for an
insurance policy is being processed or while the formal policy
is being prepared.” Black’s Law Dictionary 190 (9th ed. 2009).
Despite the district court’s finding to the contrary, the
TIAA was intended to be an independent contract consistent with
Virginia law. See Va. Code. Ann. § 38.2-304; First Protection
Life Ins. Co. v. Compton, 335 S.E.2d 262 (Va. 1985). This error
is inconsequential given that the TIAA incorporates by reference
the entire application packet.
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“A fact is material to the risk to be assumed by an
insurance company if the fact would reasonably influence the
company’s decision whether or not to issue a policy.” Mut. of
Omaha Life Ins. Co. v. Echols, 154 S.E.2d 169, 172 (Va. 1967).
Materiality is assessed from the vantage point of the insurance
company and the effect of a misrepresentation on the company’s
“investigation and decision.” Jefferson Standard Life Ins. Co.
v. Clemmer, 79 F.2d 724, 733 (4th Cir. 1935).
Misrepresentations have been considered material when the
insurer would have issued the policy on different
terms, see Minn. Lawyers Mut. Ins. Co. v. Hancock, 600 F. Supp.
2d 702, 709 (E.D. Va. 2009); or postponed issuing the
policy, see Parkerson v. Fed. Home Life Ins. Co., 797 F. Supp.
1308, 1312, 1314-15 (E.D. Va. 1992).
The evidence on the record shows that the
misrepresentations made by Gary in Part 2 of the life insurance
application packet caused Banner to postpone issuing Gary’s life
insurance policy. Both Lucas and Banner’s Chief Underwriter
testified that an essential element to issuing an insurance
policy is risk assessment, which necessarily depends on the
truthful disclosure of an applicant’s medical history. Lucas
testified that because of Gary’s undisclosed medical history, he
recommended “postpon[ing] [the] case pending additional work up
and definitive diagnosis for cause of elevated liver function
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tests.” As a result of Gary’s omissions, Banner’s Medical
Director agreed with Lucas’s assessment and officially decided
to postpone issuing a policy. 2
It is evident that Gary’s undisclosed medical history
prompted Banner to postpone issuing the insurance policy.
Therefore, Gary’s misrepresentations are considered material
under Virginia Law. See Parkerson, 797 F. Supp. at 1312, 1314-
15 (finding that postponement of a decision shows
materiality); Mut. of Omaha Ins. Co., 154 S.E.2d at 171-73
(same).
Jacqueline tries to limit the terms of the TIAA,
asserting that any misrepresentation must be material to the
issuance of the TIAA itself. The TIAA does not limit
materiality in the manner Jacqueline suggests. The TIAA “Other
Limitations” provision only requires that a misrepresentation be
material to Banner – a material misrepresentation can be found
in any part of the application packet. 3 Accordingly, the
2
Jacqueline implicitly concedes that the misrepresentations
were material to Banner issuing the life insurance policy. See
Appellant’s Br. 19 (“This clearly shows that Banner is relying
on statements made in Part 2 to issue an insurance policy, not
[to] temporarily bind coverage under the TIAA.”).
3
Jacqueline also argues that since Banner found out the
information independent of Gary’s misrepresentations, that they
cannot be considered “material.” This argument is baseless.
What was omitted, no matter how it was discovered, caused Banner
to delay issuing Gary a policy.
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misrepresentations made by Gary in Part 2 of the application
packet were material to Banner issuing Gary’s policy given that
they led to a postponement of Banner’s decision. Under the
plain terms of the TIAA, Banner’s obligations were limited to
remitting the premium. 4
III.
Jacqueline also argues that the district court erred
in granting Banner attorneys’ fees for having to contest a
motion to compel discovery. Jacqueline does not challenge the
court’s ruling on the motion. We review an award of attorneys’
fees for abuse of discretion. Robinson v. Equifax Info. Serv.,
LLC, 560 F.3d 235, 243 (4th Cir. 2009) (citation omitted).
On November 23, 2011, Jacqueline moved to compel
discovery as to the meaning of a term used in Banner’s notation
system. This was in spite of the fact that Banner had
previously answered the same question in an interrogatory and
Jacqueline had the opportunity to depose Banner employees.
4
The parties seek to embroil the Court in a debate on the
principles of equity, asserting a number of equitable remedies
and defenses. Because this dispute is easily resolved per the
unambiguous terms of the contract, we will not be baited into an
unnecessary debate. See Catholic Soc. of Religious Literary
Educ. v. Madison Cnty., 74 F.2d 848, 850 (4th Cir. 1935) (a
“fundamental rule in equity in the federal courts is that a suit
will not lie when there is an adequate remedy at law”).
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Banner opposed the motion, arguing that its initial answer was
sufficient and requesting costs for having to defend the motion.
In an order dated December 15, 2011, the district court denied
Jacqueline’s motion, finding that Banner’s answer to the
interrogatory was sufficient. The district court further
awarded Banner attorneys’ fees in the amount of $1,311 - the
cost of responding to the motion.
The district court essentially awarded attorneys’ fees
because it found that Jacqueline’s motion to compel discovery
was cumulative. Furthermore, the court only awarded attorneys’
fees for the single motion. Because the award of attorneys’
fees was not “clearly wrong,” see Plyer v. Evatt, 902 F.2d 273,
277-78 (4th Cir. 1990), the district court did not abuse its
sound discretion.
IV.
Because the clear terms of the TIAA limit Banner’s
obligations to remitting the premium paid by Gary, and the award
of attorneys’ fees was well within the district court’s
discretion, the district court’s judgment is affirmed.
AFFIRMED.
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