In Baer v. Union Security Life Insurance Company, the insured applied for credit life insurance in conjunction with a loan.  When applying for insurance, he answered that he had never been medically advised that he had, or had been treated for, heart disease.  The insured passed away approximately two years after applying for the insurance, and the administratrix of his estate made a request for insurance proceeds.  When the insurer obtained medical records, it learned that the insured had been treated for heart disease on several occasions before the insured filled out the insurance application.

The insurer denied the request for insurance proceeds because the insurer incorrectly answered the question on the application, and the administratrix proceeded to file a Complaint that included Counts for breach of contract, negligence, fraud and deceit, and violations of the Pennsylvania Unfair Trade Practices and Consumer Protection Law (UTPCPL).

The Magistrate Judge recommended that the insurer’s Motion for Summary Judgment be granted with respect to all counts, ruling that the insured acted in bad faith and deceived the insurer when he wrote that he had not been treated for heart disease on his insurance application.  The Magistrate stated that all evidence demonstrated that the insured had heart disease and was being treated for it, and that his condition did not deteriorate during the relevant time period did not change these facts.  Therefore, because the insurer demonstrated that the insured knowingly made a false statement that was material to the policy on the application, the policy was void, and the insurer had no responsibility to pay the estate of the insured under the policy.

Date of Decision:  September 16, 2008

Baer v. Union Sec. Life Ins. Co., Civil Action No. 07-473, United States District Court for the Western District of Pennsylvania, 2008 U.S. Dist. LEXIS 115420 (Sept.16, 2008) (Mitchell, U.S.M.J.).

In Clark v. Allstate Insurance Company, the plaintiff was the holder of a homeowner’s insurance policy on a home in Beaver County, Pennsylvania.  Plaintiff’s grandfather had purchased the home and purchased the insurance for his grandson.  The policy was renewed every year through October of 2009, and in February of 2009 the house sustained water damage when the pipes froze.

The plaintiff brought suit against the insurer, alleging breach of contract and bad faith when the insurer failed to provide insurance for the water damage.  Defendant alleged fraud in its answer and a counterclaim, alleging that the plaintiff’s grandfather misrepresented himself when purchasing the insurance.  The May 7 opinion addressed only the defendant’s counterclaim.

The defendant’s counterclaim requested rescission and restitution, and the court noted in its opinion that both allegations are actually remedies as opposed to causes of action.  The court dismissed the counterclaims, but it also allowed the defendant to amend its complaint to simply assert a claim for fraud.  The court said that an insureD could be liable for fraud if (1) the representation was false, (2) the insured knew it to be false or acted in bad faith, and (3) the representation was material to the risk being insured.

Date of Decision: May 7, 2010

Clark v. Allstate Ins. Co, Civil Action No. 10-294, United States District Court for the Western District of Pennsylvania, 2010 U.S. Dist. LEXIS 45933, (W.D. Pa. May 7, 2010) (Lancaster, J.).

In Bonsu v. Jackson National Life Insurance Company, the district court held that the plaintiff’s claims for bad faith and breach of contract failed because the life insurance policy was void ab initio due to the applicant’s misrepresentations in the life insurance application.

The facts underlying this case date back to 2002, when an individual purporting to be Kwaku Asamoah submitted an life insurance application naming his brother, Augustine Bonsu, as the sole beneficiary.  According to the application, Asamoah was thirty-five years of age; had never been diagnosed with a serious medical condition; his driver’s license had never been suspended or revoked; and he had never been convicted of a misdemeanor or felony offense.  Based on the answers he provided, Asamoah was given a “preference plus” policy rating and his semi-annual premium was fixed at $96.90.  On December 27, 2002, the insurer approved the application and issued a $250,000 policy to Asamoah.  

In May 2003, Asamoah allegedly traveled to his native country of Ghana.  On May 13, 2003, however, Bonsu claims that Asamoah died in his sleep of unknown causes. After his allegedly death, Asamoah’s body was never examined by a physician and an autopsy was never performed prior to his burial.  On May 30, 2003, the insurer received a $98 policy premium payment allegedly sent from Asamoah.  Approximately two months later, on July 11, 2003, Bonsu contacted the insurer to report Asamoah’s death.

The insurer’s claims investigator noted several red flags in the case, including Asamoah’s recent application for life insurance, his relative youth and purported good health, and his assertion that he had no preexisting medical conditions.  The insurer started a comprehensive investigation into Asamoah’s death.  The investigator was unable to find any evidence that Asamoah had ever traveled to Ghana, and the alleged death certificate provided by Bonsu was missing important information.  Additionally, the insurer was notified that “Kwaku Asamoah” was a fictitious name used by Bonsu as an alias to commit fraudulent acts, and that Bonsu had been arrested for business fraud, identity fraud, and insurance fraud.

During its investigation, the insurer obtained a copy of Asamoah's Virginia driving record, which indicated that Asamoah’s license was suspended from September 2001 until March 2002 because of a reckless driving conviction.  In the state of Virginia, reckless driving is a misdemeanor.  Asamoah was convicted of a misdemeanor offense and his driver’s license was suspended approximately one year before he filed the life insurance application, which stated that his driver’s license had never been suspended or revoked and that he had never been convicted of a misdemeanor offense.

On June 14, 2004, the insurer denied Bonsu’s claim for life insurance benefits because of its inability “to independently verify Mr. Asamoah’s death after an extensive investigation of the matter.”  Bonsu, the beneficiary of the life insurance policy, sued the insurer seeking benefits and bad faith damages.  The insurer filed a motion for summary judgment arguing that the life insurance contract was void ab initio due to false statements knowingly proffered by Asamoah during the application process, and asserting that its denial of benefits under the policy was reasonable given the information discovered during the investigation.

Under Pennsylvania law, a life insurance policy is void ab initio when (1) the insured made a false representation; (2) the insured knew the representation was false when it was made or made the representation in bad faith; and (3) the representation was material to the risk being insured.  The court found that the first element was satisfied because an individual purporting to be Asamoah made a false representation on the insurance application when he stated that his driver’s license was never suspended and that he had never been convicted of a misdemeanor offense.  In determining the second element, the court stated that it could presume that Asamoah knew the answers he provided were untruthful due to the short period of time between his license suspension and his false responses, as well as the unequivocal nature of the questions posed and response requested.  The court found that the third element was satisfied because Asamoah’s misrepresentation resulted in a significantly lower premium, and that it was material to the risk assumed by the insurer.  The policy underwriter testified that had Asamoah provided truthful responses to the questions concerning his prior conviction and license suspension, he would have been given a “Standard” policy rating with a higher premium, and not a “Preferred Plus' policy rating.”

In granting the insurer’s motion for summary judgment, the court concluded as follows: “In sum, a rational juror viewing the record evidence could reach only one conclusion: Asamoah knowingly provided false responses to [the insurer]’s policy questionnaire, and these responses caused [the insurer] to fix Asamoah’s premium at rate below that which he would have received by answering truthfully.  Because his life insurance policy was procured by means of knowing falsehood, Asamoah’s policy was void ab initio.  Without a valid policy, Bonsu’s claims for breach of contract and insurance bad faith necessarily fail, and [the insurer] is entitled  to summary judgment.”

Date of Decision:  January 4, 2010

Bonsu v. Jackson Nat'l Life Ins. Co., Civil Action No. 1:05-CV-2444, United States District Court for the Middle District of Pennsylvania, 2010 U.S. Dist. LEXIS 89 (M.D. Pa January 4, 2010) (Conner, J.)