JANUARY 2010 BAD FAITH CASES POLICY HELD TO BE VOID AB INITIO DUE TO APPLICANT’S MISREPRESENTATIONS (Middle District)
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.)