UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

No. 95-60556 Summary Calendar

THE STATE LIFE INSURANCE COMPANY, Plaintiff-Appellee,

versus

FRANK A. O’BRIEN, Defendant-Appellant.

Appeal from the United States District Court For the Southern District of Mississippi (3:94-CV-196)

January 28, 1997 Before POLITZ, Chief Judge, GARWOOD and STEWART, Circuit Judges.

POLITZ, Chief Judge:*

Frank A. O’Brien appeals a declaratory judgment voiding a disability income

insurance policy. We affirm.

Background

* Pursuant to Local Rule 47.5, the court has determined that this opinion should not be published and is not precedent except under the limited circumstances set forth in Local Rule 47.5.4. O’Brien applied for a disability income insurance policy with State Life on

May 2, 1992. The application was submitted through Homer Parker, an

independent agent not affiliated with State Life. O’Brien admitted that he had a

disability income policy with Woodmen of the World Life Insurance Company and

that he had applied for life insurance. He did not inform State Life that he had also

applied for disability coverage from Life USA. Both O’Brien and Parker signed

the application warranting that all statements contained therein were true and

correct.

State Life retained Systematic Business Services, Inc. to perform a follow-up

telephone interview with O’Brien. In this interview, O’Brien stated that he was

going to cancel his Woodmen of the World policy and replace it with the State Life

policy and that he had not applied for and had no intention of applying for other

disability coverage. Based upon the information in O’Brien’s application and the

follow-up interview State Life issued O’Brien a policy providing $2250 in monthly

disability income benefits.

O’Brien made a claim on the State Life Policy on April 26, 1993, alleging

disability resulting from a fall at the Walmart store in Natchez, Mississippi. The

claim form required that O’Brien name all hospital and disability insurance in

effect. O’Brien did not reveal that he had disability coverage from policies issued

2 by Life USA and Business Men’s Assurance Company, nor that he had actually

increased his coverage under the Woodmen of the World policy from $1800 to

$3700 per month. As a result of these combined policies O’Brien enjoyed total

disability income benefits in the amount of $10,450 per month, an amount greatly

exceeding his prior income and concomitant insurability.

When State Life discovered the actual amount of disability coverage O’Brien

had in force it brought this action, seeking a declaration that O’Brien’s failure to

disclose his additional coverage rendered its policy null and void. After a bench

trial the district court entered judgment in favor of State Life. The district court

found that State Life had proven that O’Brien, with the assistance of Parker and

another insurance agent, had perpetrated a fraudulent scheme to overinsure himself

significantly. In addition, the district court found that because Parker had acted in

collusion with O’Brien, the insurance company was not bound by the agent’s

knowledge of O’Brien’s other policies and therefore not estopped from denying

coverage. O’Brien timely appeals.

Analysis

On appeal O’Brien challenges the legal and factual correctness of the district

court’s decision that Parker’s knowledge may not be imputed to State Life. We

review the district court’s factual findings for clear error and its conclusions of law

3 de novo.1 Because the Mississippi Supreme Court has not specifically decided

whether an insurer is bound by the knowledge of a selling agent where that

knowledge is intentionally withheld out of fraudulent motive, the district court

made an “Erie guess” as to what legal rule the Mississippi Supreme Court would

fashion in this case.

The general rule in Mississippi is that an insurer is bound by the knowledge

of its selling agent.2 In Preferred Life Assurance Society v. Thompson,3 however,

the Mississippi Supreme Court held that when the insurer’s agent, in collusion with

the insured, knowingly provides the insurer with false information, this general rule

does not apply. The district court, while conceding factual distinctions between

Preferred Life and the case at bar, nonetheless held that the Mississippi Supreme

Court would rule that, given the collusive relationship between Parker and O’Brien,

State Life is not bound by Parker’s knowledge. Considering the relevant

Mississippi jurisprudence, and in particular those cases cited in brief, we perceive

no error in the district court’s ruling.

O’Brien also challenges the district court’s finding that Parker and O’Brien

1 Palma v. Verex Assurance, Inc.,

(5th Cir. 1996). 2 Andrew Jackson Life Ins. Co. v. Williams,

(Miss. 1990). 3

(Miss. 1934). 4 acted in concert to defraud State Life. The record reveals that Parker, who

contacted State Life on behalf of O’Brien, had neither before nor since written a

policy with State Life. Parker was the procuring agent for both the State Life and

Life USA policies, yet he mentioned to neither company the existence of the other

policy. Parker, in separate conversations with representatives of Life USA,

repeated certain misrepresentations made by O’Brien during his follow-up

interview with State Life. Parker testified that he knew O’Brien was overinsuring

himself and that if the true extent of O’Brien’s disability coverage was admitted

State Life would not write his policy. Given this record, we can only conclude that

the district court’s factual findings were not clearly erroneous.

AFFIRMED.

5