Dallas and Fort Worth Life insurance attorneys need to read this 2006, opinion from the United States District Court, Southern District of Texas, Houston Division. The style of the case is, Kirk v. Kemper Investors Life Insurance Company.
This case arises from a life insurance policy issued by Defendant Kemper Investors Life Insurance Company (“KILICO”) to Walta Kirk. Ms. Kirk passed away while the policy was in effect. Because her death occurred within two years of the policy’s issuance, KILICO conducted a routine investigation, which revealed that Ms. Kirk had been treated for chest pain, respiratory disorder, mental disorder, and uncontrolled high blood pressure. Ms. Kirk had denied that she had ever had or been treated for any of these conditions in her application for the KILICO life insurance policy. Based on these alleged misrepresentations, KILICO denied payment of any benefits on the policy.
An insurer’s actual knowledge of a misrepresentation by an insured will defeat a defense based upon misrepresentation. It is not enough, however, for a party seeking to collect insurance benefits to show that the insurer could have discovered the misrepresentations through due diligence or proper care. Rather, only actual knowledge on the part of the insurer will prevent the insurer from showing that it relied on a misrepresentation made by the insured.
KILICO claims, through the affidavit testimony of its Chief Underwriter, Lynn Patterson, that it did not know of Ms. Kirk’s undisclosed medical history relating to chest pain, respiratory disorder, mental disorder, and uncontrolled high blood pressure until its investigation following her death. Plaintiffs assert, on the contrary, that Daphne McIlveen, the KILICO agent who issued the life insurance policy to Ms. Kirk, was a close friend of Ms. Kirk and her family and was aware of Ms. Kirk’s health conditions. Plaintiffs contend that McIlveen’s knowledge should be imputed to KILICO, and that a genuine issue of fact thus exists with respect to KILICO’s reliance on the misrepresentations in Ms. Kirk’s application.
Plaintiffs are correct that the knowledge of an agent acquired in the performance of her duties is imputable to the principle. KILICO does not dispute that McIlveen acted as its agent in issuing the life insurance policy to Ms. Kirk. Accordingly, McIlveen’s knowledge at the time of the policy’s issuance will be imputed to KILICO. Plaintiffs’ contention that McIlveen had knowledge of Ms. Kirk’s misrepresented health conditions at the time that she issued the policy, however, does not find sufficient support in the evidence presented.
First, Plaintiffs have failed to produce evidence showing that McIlveen knew of Ms. Kirk’s ailments at the time that she issued the insurance policy in March 2002. Plaintiffs point out that McIlveen and Ms. Kirk were close friends, and that McIlveen attended many Kirk family functions, from approximately 1998 until 2003. This, of course, encompasses the period of time prior to the issuance of the insurance policy in March 2002. That McIllveen was friends with Ms. Kirk and attended Kirk family functions, however, does not demonstrate that McIllveen was necessarily familiar with Ms. Kirk’s particular medical conditions prior to March 2002. Plaintiffs also assert that, between 1999 and March 2002, McIllveen and Clarence Kirk discussed Ms. Kirk’s taking the drug Phen-fen to lose weight and eventually filing a lawsuit and receiving a sizable settlement from the drug’s manufacturer and distributors because the medicine had caused Ms. Kirk to have health problems. This, likewise, does not demonstrate that McIlveen was familiar with Ms. Kirk’s particular health problems prior to March 2002. In fact, McIllveen testified that she was unaware of what side effects could be caused by Phen-fen.
Plaintiffs additionally point to McIlveen’s knowledge that Ms. Kirk had gone to the hospital for chest pains. As Plaintiffs themselves acknowledge, however, McIlveen testified that she could not remember when this occurred. Although she could remember that Ms. Kirk experienced chest pains when she was living in her new home on Whitestone Lane, which Ms. Kirk had purchased in 2001, McIlveen also testified that, “I don’t know if it was before or after I sold her that policy.” With respect to a conversation McIlveen had with Cynthia Naylor regarding Ms. Kirk’s heart condition, McIlveen similarly testified that she was not sure if the conversation had occurred prior to March 2002. McIlveen’s uncertainty as to when she became aware of Ms. Kirk’s chest pains and heart condition is not enough to create a genuine issue of fact with respect to KILICO’s actual knowledge of Ms. Kirk’s condition.
In order to prove the reliance element of its defense of misrepresentation, it is sufficient for KILICO to show that it relied on any one of the four misrepresentations made by Ms. Kirk. Thus, to defeat KILICO’s showing of reliance, Plaintiffs would need to show actual knowledge on the part of KILICO or McIlveen as to each of the four medical conditions. Because Plaintiffs have not presented any evidence that McIlveen was specifically aware of Ms. Kirk’s suffering from respiratory disorder, mental disorder, or uncontrolled high blood pressure, they have failed to raise a factual issue as to KILICO’s reliance on Ms. Kirk’s misrepresentations. The Court therefore found that KILICO has proved the reliance element of its misrepresentation defense.