Keyser v . Met. Life Ins. C o . CV-95-157-JD 05/28/96 UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW HAMPSHIRE

Jennifer Keyser

v. Civil N o . 95-157-JD

Metropolitan Life Ins. C o .

O R D E R

The plaintiff, Jennifer Keyser, brought this action in state court seeking a declaration that she is entitled to benefits as the named beneficiary of a life insurance policy issued by the defendant, Metropolitan Life Insurance Co., to the plaintiff's husband, Barry Keyser. The defendant removed the case to federal court. Before the court are the defendant's motion for summary judgment (document n o . 15) and the defendant's motion to strike portions of the plaintiff's affidavit (document n o . 1 8 ) .

Background1

On January 2 6 , 1993, the plaintiff and her husband met with

Charles Clark, the defendant's sales representative, at the

plaintiff's home. Based on the information he received during

his meeting with the Keysers, Clark prepared an application for a

1 The court's recitation of the facts relevant to the instant motion are either not in dispute or have been alleged by the plaintiff. life insurance policy for Barry Keyser. The defendant approved

the plaintiff's application, and, based on the information

provided therein, issued a preferred/nonsmoker policy to the

plaintiff on February 8 , 1993. The policy issued to Barry Keyser

was attached to and expressly incorporated his application, and

named the plaintiff as the sole beneficiary.

Question 9 of the application requested information

concerning the date the applicant last used cigarettes, cigars,

pipes, or smokeless tobacco, and provided a box marked "never"

next to each item. Clark marked each of the four "never" boxes

on the application. Question 12(f) asked:

Has any person proposed for insurance:

. . . (f) Ever used heroin, cocaine, barbiturates or other drugs, except as prescribed by a physician or other licensed practitioner; or received treatment or advice from a physician or other practitioner regarding the use of alcohol, or the use of drugs except for medical purposes; or received treatment or advice from an organization which assists those who have an alcohol or drug problem?

Clark marked the box marked "no" in response to this question.

At the top of page six, centered and in bold print,

underneath the word "Agreement," the application contains the

following language:

2 I have read the application and agree that all statements and answers are true and complete to the best of my knowledge and belief. The plaintiff's signature appears several inches below.

The parties do not dispute that the answers on the

application to questions 9 and 12(f) were not true. Barry Keyser

used tobacco on an "off-and-on basis for an extended period of

time" until January 1 , 1993, and smoked marijuana before that

date. See Affidavit of Jennifer Keyser ¶¶ 3 , 5 ; Keyser

Deposition at 14. 2 There is also no dispute that the plaintiff

would not have received a nonsmoker/preferred classification, and

thus would have been required to pay a higher premium for a

policy from the defendant, had he revealed the existence and

extent of his smokeless tobacco and marijuana use. See Affidavit

of James Gallagher ¶¶ 7-8, 1 0 . However, the parties do dispute

the manner in which Clark obtained information from Barry Keyser.

Clark has stated that he specifically asked Barry Keyser every

question contained in the application. The plaintiff claims that Clark and Barry Keyser merely "carried on an informal conversa-

tion during which questions were asked." Objection to Motion for

2 Although the plaintiff also has admitted that Barry Keyser used the drug LSD, it is not clear whether he ever used the drug before January 2 6 , 1993, the date he signed the application. Consistent with Rule 5 6 , the court does not consider Barry Keyser's failure to disclose his use of LSD on the application to be a false statement.

3 Summary Judgment at 2 . She claims that Clark never asked her

husband whether he had ever used smokeless tobacco or marijuana,

and that she would remember if Clark had done s o . She has

further testified that her husband had difficulty reading.

On April 9, 1994, Barry Keyser died as a result of a gunshot

wound. The plaintiff demanded that the defendant make payment

under the terms of the policy, but the defendant refused,

claiming that Barry Keyser's death was a suicide and thus not

covered under the terms of the policy. At some point the

defendant also discovered the misrepresentations in the

plaintiff's application. The defendant sent the plaintiff a

check for $306, representing the premiums that had been paid

under the policy. The plaintiff did not accept the check, and

instead initiated this action.

Discussion

The defendant argues that it is entitled to summary judgment because Barry Keyser made, or at least adopted, material

misstatements in his application for a life insurance policy.

The plaintiff claims that her husband answered all of Clark's

questions truthfully, and that she should not be penalized for

Clark's failure to ask whether Barry Keyser used smokeless

tobacco or marijuana.

4 Summary judgment is appropriate when material facts are

undisputed and the moving party is entitled to judgment as a

matter of law. Rodriguez-Garcia v . Davila,

0 , 94 (1st

Cir. 1990) (citing Fed. R. Civ. P. 56(c)). The burden is on the

moving party to establish the lack of a genuine, material factual

issue, Finn v . Consolidated Rail Corp.,

3 , 15 (1st Cir.

1986), and the court must view the record in the light most

favorable to the nonmovant, according the nonmovant all

beneficial inferences discernable from the evidence. Caputo v .

Boston Edison Co.,

1 , 13 (1st Cir. 1991).

New Hampshire law provides that [e]very policy of insurance issued or delivered within this state by any life insurance corporation doing business within the state, together with the applica- tion therefor, a copy of which application shall be endorsed upon or attached to the policy and made a part thereof, shall constitute the entire contract between the parties.

N.H. Rev. Stat. Ann. § ("RSA") 408:9 (1991). "The statute

expresses the public policy of the state that insurance applica- tions should see the light of day and that the policyholder

should have an opportunity to read them." Perkins v . John

Hancock Mutual Life Ins. Co.,

,

0 7 ,

209 (1956). An insurer who includes a completed copy of an

application as part of a life insurance policy it issues may deny

coverage under the policy if the application includes a material

5 misstatement. See id.; Amoskeag Trust C o . v . Prudential Ins.

Co.,

5 4 , 160-63, 185 A . 2 , (1936) (distinguishing

between misrepresentations in applications for coverage, which

must be material to constitute a defense, and warranties, which

justify denying coverage regardless of materiality); c f . RSA

415:9 (1991) (falsity of statement in application for accident

and health insurance bars right to recovery if statement was made

with actual intent to deceive or materially affects acceptance of

risk or hazard assumed by insurer). A statement is material if

it has a bearing on the soundness of the risk. Amoskeag,

6 2 , 185 A . at ; c f . Mutual Benefit Life Ins. C o . v .

Gruette,

1 7 , 3 2 0 ,

7 0 , 872 (1987) ("[T]he test

under RSA 415:9 of the materiality of a false statement made

without actual intent to deceive is whether the statement could

reasonably be considered material in affecting the insurer's

decision to enter into the contract, in estimating the degree or

character of the risk, or in fixing the premium rate thereon.")

(quoting Taylor v . Metropolitan Life Ins. Co.,

, 4 5 8 ,

(1965)).

Here, the record indicates that the application was

incorporated and attached to the policy issued to Barry Keyser,

and that the misstatements in the application were material. The

defendant would not have issued Barry Keyser a preferred/non-

6 smoker policy, and thus would have charged him a greater premium

on a life insurance policy, had his application included infor-

mation about his use of tobacco and smokeless tobacco. As such,

the defendant had a sufficient justification under New Hampshire

law to deny payment of a death benefit to the plaintiff.3

The plaintiff contends that the defendant cannot assert the

misstatements in the application as a defense to nonpayment

because Clark either intentionally or negligently failed to ask

Barry Keyser the appropriate questions in preparing his

application and fraudulently induced him to sign the application.

The argument fails. The New Hampshire Supreme Court has held

that an insurance agent who acts negligently or fraudulently in

preparing an insurance application acts beyond the scope of his

agency and that, in such a situation, the insurer is not

chargeable with the knowledge or constructive knowledge of its

agent. See Boucouvalas v . John Hancock Mutual Life Ins. Co,,

, 1 8 0 , 5 A.2d , (1939); Levesque v . Mutual Life Ins.

Co.,

1 , 4 4 ; 183 A . 8 7 0 , (1936). Thus, even if

3 The court also notes that the plaintiff signed the application and thus "was bound by the representation of truthfulness contained in the application which he signed." Boucouvalas v . John Hancock Mutual Life Ins. Co,,

, 5 A.2d , (1939). But c f . RSA 415:9 (falsity of nonmaterial statement in application for health or accident insurance bars recovery only if statement was made with actual intent to deceive).

7 proven, "fraud or negligence of the soliciting agent avoids

liability under the policy and is a defense of the insurer."

Perkins,

,

. 4 The defendant is

entitled to summary judgment.

Conclusion The defendant's motion for summary judgment (document n o . 15) is granted. The defendant's motion to strike portions of the plaintiff's affidavit (document n o . 18) is moot. The clerk is ordered to close the case.

SO ORDERED.

Joseph A . DiClerico, J r . Chief Judge May 2 8 , 1996 cc: Thomas W . Kelliher, Esquire William D. Pandolph, Esquire Ronald A . Nimkoff, Esquire

4 Although the New Hampshire Supreme Court appears to have acknowledged the harshness of this rule, see Gruette,

, 529 A.2d at 872-73, it has never overruled i t , and the the court declines to depart from settled precedent.

8