Title: GAIL L. HARPER V. FIDELITY AND GUARANTY LIFE INSURANCE COMPANY

State: wyoming

Issuer: Wyoming Supreme Court

Document:

GAIL L. HARPER V. FIDELITY AND GUARANTY LIFE INSURANCE COMPANY2010 WY 89Case Number: S-09-0119Decided: 06/29/2010NOTICE:  This opinion is subject to formal revision before publication in Pacific Reporter Third.  Readers are requested to notify the Clerk of the Supreme Court, Supreme Court Building, Cheyenne, Wyoming 82002, of any typographical or other formal errors so that correction may be made before final publication in the permanent volume.
 
 
APRIL 
TERM, A.D. 2010

 
 
GAIL 
L. HARPER,Appellant(Plaintiff),v.FIDELITY AND 
GUARANTY LIFE INSURANCE 
COMPANY,Appellee(Defendant).

 
 
Appeal 
from the District Court of Natrona County

The 
Honorable Scott W. Skavdahl, Judge

 
 

Representing 
Appellant:

Stephen 
R. Winship of Winship & Winship, P.C., Casper, Wyoming

 
 

Representing 
Appellee:

Julie 
Nye Tiedeken of McKellar, Tiedeken & Scoggins, LLC, Cheyenne, 
Wyoming

 
 
Before 
VOIGT, C.J., and GOLDEN, HILL, KITE, and BURKE, 
JJ.

 
 

HILL, 
Justice.

 
 
[¶1]      Joseph Harper, 
the husband of Appellant Gail Harper, bought a life insurance policy and died 
within two months of doing so. Fidelity and Guaranty Life Insurance Company 
refused to pay the claim because they insisted that Mr. Harper 
"misrepresented/omitted" the state of his health in the claim application.  Mrs. Harper filed suit, the district 
court granted summary judgment in favor of Fidelity, and this appeal 
followed.

 
 
ISSUES

 
 
[¶2]      Harper lists the 
issues as follows:

 
 

1.    
Is 
the determination of what is a "material" omission or misstatement in a life 
insurance application an issue of fact to be determined by the 
jury?

2.    
Were 
there genuine issues of material fact as to whether there were any material 
misrepresentations or omissions in [Mr. Harper's] life insurance 
application?

3.    
When 
[Mr. Harper's] insurance application disclosed the actual health conditions that 
were later determined to be the cause of his death, was it error to grant 
summary judgment based on allegations of his material omissions or 
misrepresentations as to other health conditions.

4.    
Whether 
in granting [Fidelity's] Motion for Summary Judgment, did the District Court 
accord to [Gail] the benefit of all reasonable inferences that could be fairly 
drawn from the record?

5.    
When 
[Fidelity] had notice of material medical information that differed from the 
information in [Joseph's] life insurance application, was it a genuine issue of 
material fact as to whether [Fidelity] could reasonably rely solely on the life 
insurance application information in issuing the life insurance policy to [Mr. 
Harper]?

6.    
Whether 
the application's reference to the records of  [Mr. Harper's] treating physician and the 
authorization provided to [Fidelity] to gather [Mr. Harper's] medical records 
created a disputed factual issue as to whether [Fidelity] needed to review more 
than [Mr. Harper's] life insurance application as part of the underwriting 
decision?

7.    
Did 
[Fidelity] engage in "post-claim" underwriting?

8.    
Where 
the life insurance contract provisions at issue have been made ambiguous by the 
life insurance application's uncertainties, was summary judgment 
appropriate?

 
 
Fidelity 
recites the issues this way:

 
 

1.    
Did 
the District Court properly conclude that there was no genuine issue of material 
fact on whether [Fidelity] properly rescinded [Mr. Harper's] policy of insurance 
pursuant to W.S. § 26-15-109?

2.    
Did 
the trial court properly conclude that [Fidelity], under the facts of this case, 
did not have a duty to investigate [Mr. Harper's] medical 
condition?

3.    
Did 
the trial court properly grant Summary Judgment on [Mrs. Harper's] claim that 
[Fidelity] was estopped to deny coverage under the policy?

4.    
Did 
the trial court properly grant Summary Judgment on [Mrs. Harper's] claim of the 
breach of good faith and fair dealing?

5.    
Did 
the trial court properly grant Summary Judgment on [Mrs. Harper's] claim that 
she should recover the benefits of the policy under the reasonable expectations 
doctrine?

 
 
FACTS

 
 
[¶3]      Joseph Harper 
(Mr. Harper) applied for a $63,000.00 life insurance policy with Fidelity & 
Guaranty Life Insurance Company (Fidelity) on February 10, 2006, and named his 
wife Gail (Mrs. Harper) as the beneficiary.

 
 
[¶4]      Fidelity's 
application for insurance required that Mr. Harper answer questions about his 
health and health history.  He 
indicated that he was born on January 19, 1955, that he was 5'11" tall, and that 
he weighed 275 pounds.  He 
represented on his application that he had never sought or received treatment, 
advice, or counseling for the use of alcohol.  He listed that he was diagnosed with 
both high blood pressure and high cholesterol in 1997, and the application noted 
that he was currently taking medication for both conditions.  He responded "no" to whether he had been 
treated for or diagnosed with "[a]ny circulatory disease, stroke, TIA, aneurysm, 
or any other disorder of the veins or arteries," "[h]epatitis, gastritis, 
colitis, or any disease or disorder of the liver, stomach, pancreas, or 
intestines."  Mr. Harper reported 
that he had surgery on his knee in "1995 or 1996," and that he had "[b]lood 
tests and an electrocardiogram for complaint of migraine & headaches  
complete recovery from symptoms in 1996."

 
 
[¶5]      After Mr. Harper 
signed and submitted the application to Fidelity for approval or denial, Lisa 
Jones, a senior underwriter for Mid-America Agency Services (MAAS)1, reviewed the application.  The type of life insurance applied for 
by Mr. Harper was a "simplified underwritten product," where the underwriter 
reviews and relies upon only the information and medical history provided by the 
application plus a single report from the Medical Information Bureau 
(MIB).

 
 
[¶6]      Overall, the 
information contained in the MIB was consistent with Mr. Harper's application 
information, but two pieces of information from the MIB were of note to Ms. 
Jones.  First, based upon the MIB 
information existing for Mr. Harper, Fidelity knew that he had applied for 
another insurance product, the type and results of which were unknown.   Second, Ms. Jones noted a weight 
discrepancy  the MIB recorded Mr. Harper's weight to be 305 pounds within sixty 
days prior to January 9, 2006; Mr. Harper's February application represented his 
weight to be 275 pounds.  Under 
Fidelity's underwriting guidelines, an individual the height of Mr. Harper 
(5'11") must be less than 301 pounds for an application to be accepted.  Ms. Jones concluded that given the time 
between the date of the application and the date of her review, she assumed Mr. 
Harper had lost enough weight (four pounds) to fit within the guidelines, so she 
gave him the benefit of the doubt and "let it go."

 
 
[¶7]      Ms. Jones made 
several other observations about Mr. Harper's application that she ultimately 
let go as well.  She noted that Mr. 
Harper had been treated for depression in 1996 but had a "complete recovery;" 
thus she was not concerned about his depression being severe, which would have 
resulted in denial of the application.  
Also, she observed his diagnosis for high blood pressure and high 
cholesterol, but considered both to be under control based on the fact that he 
was taking medication for both conditions.  
Based on all of Mr. Harper's answers, Ms. Jones recommended his 
application for life insurance be approved.

 
 
[¶8]      On March 1, 2006, 
Fidelity issued a life insurance policy to Mr. Harper.  On April 20, 2006, Mr. Harper died from 
sudden cardiac arrest, hypertensive cardiovascular disease, and 
hypertriglyceridemia, just 50 days after the policy was 
issued.

 
 
[¶9]      In light of Mr. 
Harper's death, Fidelity conducted an investigation within the insurance 
company's "two-year contestability period," during which Mr. Harper's medical 
records were reviewed.  Fidelity 
identified various medical conditions of Mr. Harper's that had not been 
disclosed on his application for life insurance but that, in Fidelity's 
estimation, were material to the issuance of the policy.  First, Mr. Harper had been treated for a 
"probable transient ischemic attack (TIA)" in May of 2000.  On his application, however, he denied 
ever being treated for a TIA.  Also, 
Mr. Harper's medical records reflected a history of alcohol abuse, including 
advice from his physician to quit drinking because his liver tests were abnormal 
 he denied any such condition on his insurance application.  In March of 2000, Mr. Harper was also 
hospitalized for heart fluttering and chest pains, which he did not 
disclose.  Mr. Harper's weight 
discrepancies also came up.  
Although he listed himself at 275 pounds on his application, and although 
his MIB report listed him to be 306 pounds, Mr. Harper's certificate of death 
recorded Mr. Harper as morbidly obese at 350 pounds.

 
 
[¶10]   Mrs. Harper submitted a claim for 
benefits, but her claim was denied by Fidelity based on Wyo. Stat. Ann. 
§ 26-15-124.  Along with its 
denial, Fidelity refunded the premiums paid on the policy to Mrs. Harper, who 
nevertheless filed suit in district court, asserting four claims for relief: 
breach of contract, reasonable expectations, equitable and/or promissory 
estoppel, and breach of the implied covenant of good faith and fair 
dealing.  She also sought an award 
of punitive damages, attorney's fees, and costs.  The district court granted Fidelity's 
motion for summary judgment, and this appeal followed.

 
 
STANDARD 
OF REVIEW

 
 
[¶11]   
We recently reiterated our standard of review for summary judgment 
motions in Singer v. New Tech, 2010 WY 31, ¶ 8, 227 P.3d 305, 
308-09 (Wyo. 2010):

 
 
We 
evaluate the propriety of a summary judgment by employing the same standards and 
using the same materials as the district court. Cook v. Shoshone First 
Bank, 2006 WY 13, ¶ 11, 126 P.3d 886, 889 (Wyo.2006). Thus, our review 
is plenary. Birt v. Wells Fargo Home Mortg., Inc., 2003 WY 102, ¶ 7, 
75 P.3d 640, 647 (Wyo.2003).

            

Wyo. 
R. Civ. P. 56 governs summary judgments. A summary judgment is appropriate when 
there are no genuine issues of material 
fact and the moving party is entitled to judgment as a matter of law. 
W.R.C.P. 56(c).  When reviewing a summary judgment, we 
consider the record in the perspective most favorable to the party opposing the 
motion and give that party the benefit of all favorable inferences which may be 
fairly drawn from the record. We review questions of law de novo without 
giving any deference to the district court's 
determinations.

 
 

Loredo 
v. Solvay Am., Inc., 2009 
WY 93, ¶ 10, 212 P.3d 614, 618 (Wyo. 2009), quoting Cathcart v. State 
Farm Mut. Auto. Ins. Co., 2005 WY 154, ¶ 11, 123 P.3d 579, 586 
(Wyo.2005), quoting Baker v. Ayres and Baker Pole and Post, Inc., 2005 WY 
97, ¶ 14, 117 P.3d 1234, 1239 (Wyo.2005).

 

 
A 
genuine issue of material fact 
exists when a disputed fact, if it were proven, would establish or refute an 
essential element of a cause of action or a defense that the parties have 
asserted." Christensen v. Carbon County, 2004 WY 135, ¶ 8, 100 P.3d 411, 413 (Wyo.2004) (quoting Metz Beverage Co. v. Wyoming Beverages, 
Inc., 2002 WY 21, ¶ 9, 39 P.3d 1051, 1055 (Wyo.2002)).  The party requesting a summary judgment 
bears the initial burden of establishing a prima facie case for summary 
judgment. If he carries his burden, the party who is opposing the motion for 
summary judgment must present specific facts to demonstrate that a genuine issue 
of material fact exists.' 
Id. We have explained the duties of the party opposing a motion for 
summary judgment as follows: 

 
 
After 
a movant has adequately supported the motion for summary judgment, the opposing 
party must come forward with competent evidence admissible at trial showing 
there are genuine issues of material 
fact. The opposing party must affirmatively set forth material, specific 
facts in opposition to a motion for summary judgment, and cannot rely only upon 
allegations and pleadings , and conclusory statements or mere opinions are 
insufficient to satisfy the opposing party's burden. 

 
 
The 
evidence opposing a prima facie case on a motion for summary judgment "must be 
competent and admissible, lest the rule permitting summary judgments be 
entirely eviscerated by plaintiffs proceeding to trial on the basis of mere 
conjecture or wishful speculation." Speculation, conjecture, the suggestion of a 
possibility, guesses, or even probability, are insufficient to establish an 
issue of material fact.  Cook, ¶ 12, 126 P.3d  at 890, 
quoting Jones v. Schabron, 2005 WY 65, ¶¶ 9-11, 113 P.3d 34, 37 
(Wyo.2005). 

 
 

Hatton 
v. Energy Elec. Co., 
2006 WY 151, ¶¶ 8-9, 148 P.3d 8, 12-13 (Wyo. 2006).

 
 

Loredo, 
¶ 10, 212 P.3d  at 618.

 
 
DISCUSSION

 
 
Issue 
I - Materiality

 
 
[¶12]   Mrs. Harper contests the district 
court's finding that there was no issue of material fact as to whether Fidelity 
properly rescinded Mr. Harper's insurance policy pursuant to Wyo. Stat. Ann. § 
26-15-109.  Mrs. Harper argues that 
a representation or omission in an insurance application is "material' if 
knowledge or ignorance of it would naturally influence the judgment of the 
insurer in making the contract, or in estimating the character of the risk or 
setting the premium."  Thus, argues 
Mrs. Harper, this is a question of fact for the jury to decide.  

 
 
[¶13]   Wyo. Stat. Ann. § 26-15-109 
(LexisNexis 2009) sets forth when a "misrepresentation, omission, concealment of 
facts or incorrect statement" will prevent recovery under a life insurance 
policy and states in relevant part:

 
 
(a)  Any 
statements and descriptions in any application for an insurance policy . . . by 
or in behalf of the insured . . . are representations . . . Misrepresentations, 
omissions, concealment of facts and incorrect statements do not prevent a 
recovery under the policy or contract unless either:

(i)            
Fraudulent; 
or

(ii)          
Material 
either to the acceptance of the risk, or to the hazard the insurer assumes; 
or

(iii)         
The 
insurer in good faith, if it knew the true facts as required by the application 
for the policy . . . would not have:

(A)  Issued 
the policy or contract;

(B)  Issued 
it at the same premium rate[,] 

 
 

[¶14]   One year before § 26-15-109 
was adopted, this Court considered a case similar to the instant 
one.  In All American Life & Casualty Co. v. 
Krenzelok, 409 P.2d 766 (Wyo. 1966), 
Mary Krenzelok, a foreign woman who could neither read nor write, applied 
for life insurance.  Her son 
actually completed the application and Krenzelok signed it.  The policy was issued, and Krenzelok 
died from a cerebral brain hemorrhage approximately one year after its 
issuance.  It was then discovered 
that Krenzelok had failed to disclose a hospitalization for arteriosclerotic 
heart disease and congestive heart failure.  This Court stated on 
appeal:

 
 
There 
are numerous cases which hold a concealment or failure to disclose periods of 
past hospitalization and medical treatment will invalidate a policy, regardless 
of whether applicant had a fraudulent intent to deceive.  A fraudulent intent 
on the part of the insured is not a requisite of concealment.  Consequently, concealment of facts 
material to the risk will avoid the policy even though the concealment was the 
result of inadvertence or mistake and was entirely without fraudulent intent. 

 
 

Id., 
409 P.2d  at 768.

 
 
[¶15]   More recently, the Wyoming Federal 
District Court interpreted § 26-15-109, and discussed Krenzelok.

 
 

Krenzelok, 
a case decided one year before the Wyoming legislature adopted § 26-15-109, and 
which influenced the drafting of that statute, therefore stands for the 
proposition that if the insurer can show that the 
concealment was "material" to the insurance risk at issue, then any concealment 
by the insured, even if made in good faith, will justify rescission of the 
coverage by the insurer. Other courts have reached the same conclusion in 
interpreting similar state statutes. Bageanis, 783 F. Supp.  at 1145 ("A good 
faith mistake does not excuse a material misrepresentation"); Massachusetts Mut. Life Ins. Co. v. 
Nicholson, 775 F. Supp. 954, 959 (N.D. Miss. 1991) ("If the misstatement is 
material, it can make no difference as to whether or not it was made in good 
faith") (citations omitted). Stated another way, proof of intent is not 
necessary to rescind under Krenzelok 
as long as the insurer can prove that the concealment was "material" to the 
insurance risk involved. While the rule enunciated in Krenzelok may be a considered a harsh 
one, it is nonetheless the prevailing law of Wyoming which this Court must 
follow and apply in this case.

 
 

White 
v. Continental Gen. Ins. Co., 831 F. Supp. 1545, 1553 (D. Wyo. 1993).

 
 
[¶16]   "Materiality" is determined by 
asking whether reasonably careful and intelligent persons would have regarded 
the omitted facts as substantially increasing the chances of the events insured 
against so as to cause a rejection of the application or different conditions, 
such as higher premiums.  White, 831 F. Supp.  at 1554.  The materiality of a misrepresentation 
may be established by the underwriter's testimony or testimony of the insurer's 
employees.  Bageanis v. Amercan Bankers Life Assurance 
Co., 783 F. Supp. 1141, 1145 (N.D. Ill, 1992).  Furthermore, a good faith mistake does 
not excuse a material misrepresentation.2  Id.  The fact that a potential insured does 
not die from the withheld ailment does not affect the materiality of the 
misrepresentation.  Hatch v. Woodmen Accident & Life 
Co., 409 N.E.2d 540, 543 (Ill. App. Ct. 2d Dist. 1980).  Finally, although materiality is usually 
a question of fact, summary judgment is appropriate where the misrepresentation 
"is of such a nature that there can be no dispute as to its materiality."  Commercial Life Ins. Co. v. Lone Star Life 
Ins. Co., 727 F. Supp. 467, 470 (N.D. Ill. 1989).

 
 
[¶17]   Mr. Harper's application contained 
omissions and misrepresentations.  
He did not accurately respond to several of the questions, including the 
question about his weight; the question regarding whether he had treatment 
for/was diagnosed with "hepatitis, gastritis, colitis, or any disease or 
disorder of the liver " (he underwent a biopsy and ultrasound of his liver and 
was treated for a liver disease/disorder); and the question regarding diagnosis 
or treatment of "stroke, TIA, aneurysm" (he had been treated for a TIA and he 
had been diagnosed as suffering from a stroke).  Under Fidelity's guidelines, and 
according to the underwriter, Mr. Harper's application would have been denied 
had this information been known.  
Dennis Gunderson, the chief underwriter in Mr. Harper's case, testified 
that the policy would not have been issued if the true facts had been 
presented.  Mrs. Harper's own 
witness, John Terry, testified that Mr. Harper's failure to disclose his history 
was material.

 
 
[¶18]   The omissions/misrepresentations on 
Mr. Harper's application were material.  
Mr. Harper did not disclose several health conditions on his 
application.  Whether or not he 
meant to omit them is not at issue.  
Had he included them, it is clear that Fidelity would not have issued the 
certificate of insurance.  The 
underwriter testified that if Mr. Harper had correctly stated that he had a 
liver function test with an abnormal result, or that he had a liver biopsy, or 
had he disclosed his hospitalizations for heart problems in March 2000, and/or 
the May 2000 treatment for a probable TIA, his application would have been 
rejected.  This is a case of even 
though there are material misrepresentations, which usually raises a question of 
fact, summary judgment was appropriate here because the misrepresentations are 
of such a nature that there is no dispute as to this materiality.  Thus, there being no genuine issues of 
material fact, Fidelity was entitled to summary judgment, and the district court 
is affirmed.

 
 

Issue 
II  Duty to Investigate

 
 
[¶19]   Mrs. Harper argues that Fidelity 
had a duty to further investigate Mr. Harper's answers on his insurance 
application, and that Fidelity should have obtained his medical records rather 
than rely on the application itself.  
Fidelity, however, disputes the assertion that it was under a duty to 
investigate the answers Mr. Harper gave in his application when the application 
was submitted, especially because Fidelity had no reason to assume that the 
answers were not truthful or accurate.  

 
 
[¶20]   An insurer is under no duty to 
investigate the truthfulness of an applicant's responses unless it has notice 
that those responses might not be truthful or accurate.  White, 831 F. Supp.  at 1545.  A majority of cases interpreting 
statutes similar to Wyoming's statute have held that an insurer does not have a 
duty to investigate, and is entitled to rely on the representations made by the 
applicant on his application.  See, 
for example, Twin City Bank v. Verex 
Assur. Inc., 733 F. Supp. 67, 71 (E.D. Ark. 1990) (interpreting Ark. Code 
Ann. § 23-79-107(a) (LexisNexis) which is verbatim to Wyoming's 
statute).

 
 
[¶21]   In White, 831 F. Supp.  at 1553, the Tenth 
Circuit weighed in on this very issue:

 
 
Although 
the Tenth Circuit has not spoken to this issue as of the date of this order, 
this Court is inclined to follow the rulings of the other appellate and trial 
courts that have considered this issue and have rejected this position, 
concluding that the insurer is entitled to rely on an insured's representations. 
 [Citations omitted.]  As the court 
in Bageanis said, the insured was the one who had the burden "to supply complete 
and accurate information to the insurer."  [Citations omitted.]  Therefore, the Court concludes that the 
insurer did not have a duty to investigate and thus was entitled to rely on 
White's representations.

 
 
[¶22]   Also, in a case similar to the 
instant one (and mentioned in White), 
the insured omitted several hospitalizations for psychological problems and a 
history of suicide attempts from her insurance application (but did disclose 
three other hospitalizations for mental issues).  Mutual Ben. Life Ins. Co. v. Morley, 722 F. Supp. 1048 (S.D.N.Y. 1989).  She 
argued that the insurance company engaged in "lax and sloppy underwriting" and 
had the underwriter been more thorough and ordered medical records, her prior 
hospitalizations and suicide attempts would have been discovered, precluding her 
from insurance coverage.  The court 
granted summary judgment to the insurance company, noting that the company was 
entitled to rely on the representations made by the applicant. 

 
 
[¶23]   Mrs. Harper insists that there were 
red flags that were ignored by Fidelity and, rather than investigate, the 
underwriter simply ignored the signs that warranted more study.  Specifically, Mrs. Harper points to the 
conflicting MIB information versus the application regarding Mr. Harper's 
weight.  The MIB listed his weight 
at 305 pounds, while his application stated his weight to be 275 pounds. 
Contrary to Mrs. Harper's assertions, however, the "red flags" in this case were 
adequately explained away by the underwriter:  Indeed, Mr. Harper indicated his weight 
was 275 pounds, whereas the MIB reported his weight to have been 305.  The underwriter testified that she 
looked at the different weight on the MIB report and assumed that Mr. Harper 
would have lost enough weight to fit into the guidelines which, for Mr. Harper, 
would have been 301 pounds.  In the 
simplified underwriting process that was used in Mr. Harper's case, the 
underwriter is to rely on the health questionnaire and the MIB, which is what 
happened in this instance.  
Furthermore, Mr. Harper represented in his application that "[t]he 
statements made in this application are complete, true, and correctly 
recorded."  Mr. Harper's knowledge 
in this instance was not limited to his "knowledge and belief," as in some 
cases.  There, where the insurance 
application contains "knowledge and belief" language, the insurer must show that 
the insured intentionally made the misstatement or omission to rescind the 
contract.  See Joseph v. Zurich Life Ins. Co. of America, 
159 Fed.Appx. 114, 116, fn.3, 2005 WL 3420258 (11th Cir. 2005).

 
 
[¶24]   Based upon the law, and Mr. 
Harper's own assertions, Fidelity was under no duty to investigate and was 
entitled to rely upon Mr. Harper's application.

 
 
Issue 
III  Promissory Estoppel

 
 
[¶25]   Mrs. Harper next argues that 
because Fidelity issued Mr. Harper a life insurance policy, he did not seek 
coverage from another company  thus, the equities of the case require that the 
contract be enforced under the doctrines of promissory and equitable 
estoppel.

 
 
[¶26]   The general theory of the doctrine 
of promissory estoppels is 
this:  "If an 
unambiguous promise is made in circumstances calculated to induce reliance, and 
it does so, the promisee if hurt as a result can recover damages."  B & W Glass v. Weather Shield 
Mfg., 829 P.2d 809, 813 (Wyo. 1992) (quoting Goldstick v. ICM Realty, 
788 F.2d 456, 462 (7th Cir. 1986)).  Thus, the elements of a promissory 
estoppel claim are:

 
 
(1) [T]he 
existence of a clear and definite promise which the promisor should reasonably 
expect to induce action by the promisee; (2) proof that the promisee acted to 
its detriment in reasonable reliance on the promise; and (3) a finding that 
injustice can be avoided only if the court enforces the 
promise.

 
 

City 
of Powell v. Busboom, 
2002 WY 58, ¶ 8, 44 P.3d 63, 66 (Wyo. 2002) (quoting Roussalis v. 
Wyoming Med. Ctr., Inc., 4 P.3d 209, 253 (Wyo. 2000)).  See also, Parkhurst v. Boykin, 
2004 WY 90, ¶ 21, 94 P.3d 450, 460 (Wyo. 2004).  "The party who is asserting promissory 
estoppel is assigned the burden of establishing all of the 
elements of the doctrine with a standard of strict proof." Roussalis, 4 P.3d  at 253, quoting B & W Glass, 829 P.2d  at 
819.

 
 
[¶27]   In addition to establishing the 
existence of a clear and definite promise, a plaintiff must also show "action or 
forbearance of a definite and substantial character" to satisfy the second 
element of the doctrine.  Birt v. Wells Fargo Home Mortg., Inc., 2003 WY 102, 
¶ 28, 75 P.3d 640, 653 (Wyo. 2003).  Furthermore, such action or forbearance 
must be the result of "reasonable reliance." Id. We have described reasonable 
reliance as follows:

 
 
In 
Provence [v. Hilltop Nat'l Bank, 780 P.2d 990 (Wyo. 
1989)], we explained that detriment in reasonable reliance 
is closely tied to the existence of a clear and definite agreement. A reasonable 
person does not rely to his or her detriment on an oral agreement unless it is 
sufficiently clear and definite as to induce him or her to act. Provence. 
 "There can be no estoppel 
as a matter of law when the asserted reliance is not justifiable or reasonable 
under the circumstances of the case considered as a whole."  Roth [v. First Security Bank of 
Rock Springs, Wyoming] 684 P.2d [93,] 97 [(Wyo. 1984)] (citing Matter of 
Simineo v. Kelling, 199 Colo. 225, 607 P.2d 1289 (1980)). The representation 
that induces the reliance also must be the immediate or proximate cause of the 
act in reliance. Roth. The knowledge and sophistication of the relying 
party is to be considered in determining reasonableness (Roth) and 
consistent with the Restatement (Second) of Contracts § 90, we also 
consider the reasonable foreseeability by the promisor that the promisee would 
rely on the statement or representation. [Inter-Mountain 
Threading,v.] Baker Hughes [Tubular Servs., 812 P.2d 555 (Wyo. 
1991)].

 
 

Id., 
¶ 28, 75 P.3d  at 653.

 
 
[¶28]   In response to Mrs. Harper's 
estoppel claims, Fidelity first points out that under Wyoming Legislative 
guidelines, Mr. Harper's death was well within the two-year contestable period 
under Wyo. Stat. Ann. § 26-16-204 (LexisNexis 2009).  Furthermore, Fidelity also argues that 
there is no evidence that Mr. Harper could have obtained other coverage.  When 
viewing the facts in the light most favorable to Mrs. 
Harper, there exists a genuine issue of material fact as to whether Fidelity's 
issuing the policy constituted a promise that would have reasonably induced 
reliance.

 
 
[¶29]   In addition to establishing that 
the promissor reasonably should have known that the promise would have induced 
reliance, Mrs. Harper must also show that Fidelity's promise actually induced 
action or forbearance to her husband's detriment. Although Mrs. Harper asserts 
that Mr. Harper "could have found another insurer" had Fidelity declined to 
issue the policy, Mrs. Harper offers no evidence that her husband could have or 
would have obtained life insurance from 
another company.  In fact, the record shows that Mr. 
Harper was actually denied coverage by other companies.

 
 
[¶30]   While the moving party bears the 
burden of showing that there are no material facts in dispute, the non-movant 
must offer more than "a mere scintilla of evidence in its favor, and cannot 
simply reassert factually unsupported allegations contained in its pleadings." 
 Anderson v. Liberty Lobby, 
Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986); 
Williams v. West Chester, 891 F.2d 458, 460 (3d Cir. 1989).  Here, Mr. Harper was clearly not the 
picture of health, and although he may have applied to another life 
insurance company, there is nothing in the record apart from his 
wife's assertions which suggests another life 
insurance company would have insured Mr. Harper.  "Summary judgment 
for a defendant is appropriate when the plaintiff fails to make a showing 
sufficient to establish the existence of an element essential to [her] case, and 
on which [she] will bear the burden of proof at trial.'"  Cleveland v. Policy Mgmt. Sys. 
Corp., 526 U.S. 795, 805, 119 S. Ct. 1597, 143 L. Ed. 2d 966 (1999) (quoting 
Celotex Corp. v. Catrett, 477 U.S. 317, 322, 91 L. Ed. 2d 265, 106 S. Ct. 2548 (1986)).  There is no basis to 
conclude that the equities in this instance require the insurance contract be 
enforced.

 
 
Issue 
IV- Good Faith and Fair Dealing

 
 
[¶31]   Mrs. Harper asserts that Fidelity 
breached the covenant of good faith and fair dealing by denying the benefits due 
under the policy without any reasonable or fairly debatable basis and by failing 
to fully and properly investigate.

 
 
[¶32]   In order to recover on a claim like 
the instant one, a plaintiff must show the absence of a reasonable basis for 
denying benefits of the policy, and the defendant's knowledge or reckless 
disregard of the lack of a reasonable basis for denying the claim.  Darlow v. Farmers Ins. Exch., 822 P.2d 820, 824 (Wyo. 1991).  The test to 
be applied in determining whether bad faith has occurred is as 
follows:

 
 
            
An objective standard is also used to determine whether an insurer has 
committed first-party bad faith. Kirkwood v. CUNA Mut. Ins. Soc., 937 P.2d 206, 211 (Wyo. 1997). The question is whether the validity of the denied 
claim is fairly debatable. First Wyoming Bank, N.A., Jackson Hole v. 
Continental Ins. Co., 860 P.2d 1094, 1101 (Wyo. 1993). The validity of a 
claim is fairly debatable if a reasonable insurer would have denied or delayed 
payment of benefits under the facts and circumstances. Ahrenholtz v. Time 
Ins. Co., 968 P.2d 946, 950 (Wyo. 1998). To establish a claim for 
first-party bad faith, a plaintiff must establish (1) the absence of any 
reasonable basis for denying the claim, and (2) the insurer's knowledge or 
reckless disregard of the lack of a reasonable basis for denying the 
claim.

 
 

Gainsco 
Ins. Co. v. Amoco Prod. Co., 2002 
WY 22, ¶ 14, 53 P.3d 1051, 1058 (Wyo. 2002).

 
 
[¶33]   Not only does Mrs. Harper iterate 
her argument that Fidelity had a duty to investigate, but she argues that 
Fidelity unreasonably denied her claim and suggests that post-claim underwriting 
took place in this case.  When 
"post-claim underwriting" occurs, an insurer simply fails to perform any actual 
underwriting until after a claim has been made.  Lewis v. Equity Nat'l Life Ins. Co., 637 So. 2d 183, 188-89 (Miss. 1994).  
See also Thomas C. Cady & Georgia Lee Gates, Article: Post Claim Underwriting, 102 W. Va. L. 
Rev. 809, 810 (2000) (concluding that post-claim underwriting is per se evidence 
of bad faith). Indeed, Mrs. Harper only suggests that this may have occurred in 
this case and does not altogether argue its existence.  Nevertheless, it is our opinion that 
there is no showing by Mrs. Harper on appeal of an absence of a reasonable basis 
to deny the claim.

 
 
[¶34]   After Fidelity received Mrs. 
Harper's claim for benefits, Fidelity followed its routine practice and ordered 
the medical records of the deceased.  
When it appeared that things were amiss, the records were sent to the 
chief underwriter who then gave his opinion that the misrepresentations (whether 
intentional or not) were material.  
The procedure followed is one which Mrs. Harper's expert testified is 
routine within the insurance industry.  
Under Wyoming law, a claim for breach of the implied covenant of good 
faith and fair dealing cannot exist where a party is simply exercising those 
rights that they are contractually entitled to exercise.  See Scherer Constr. LLC v. Hedquist Constr., 
Inc., 2001 WY 23, ¶ 19, 18 P.3d 645, 653-54 (Wyo. 2001).

 
 
[¶35]   Fidelity rescinded the policy of 
insurance because it determined, after obtaining an opinion from the chief 
underwriter, that there were material misrepresentations, omissions, and 
incorrect statements made on the insurance application which, if they had been 
known at the time, would have caused the application to have been rejected.    There is no question of 
material fact that § 26-15-109 allows rescission under those circumstances.  Accordingly, Fidelity was entitled to 
summary judgment on whether it breached the duty of good faith and fair 
dealing.

 
 
Issue 
V  Reasonable Expectations Doctrine

 
 
[¶36]   Finally, Mrs. Harper argues that 
because the parties' contract was ambiguous, she should be allowed to recover 
under the "reasonable expectations" doctrine.    In order to state a claim 
under the "reasonable expectations" doctrine, the plaintiff must show the 
subject contract is ambiguous as to the provision in dispute.  Ahrenholtz v. Time Ins. Co., 968 P.2d 946, 950 (Wyo. 1998).  The doctrine 
will not be applied where the insurance contract is plain and unambiguous.  W.N. McMurry Constr. Co. v. Community First 
Ins., Inc., 2007 WY 96, 
¶ 21, 160 P.3d 71, 78 (Wyo. 2007).

 
 
[¶37]   The doctrine of reasonable 
expectations is explained as follows in St. Paul Fire and Marine Ins. Co. v. Albany 
County Sch. Dist. No. 1, 763 P.2d 1255, 1262 (Wyo. 
1988):

 
 
The 
doctrine of reasonable expectations is essentially a rule of construction that 
acknowledges the usual disparity of bargaining power between an insurer and the 
fact that insurance contracts are generally contracts of adhesion. See 
Corgatelli v. Globe Life & Accident Insurance Company, 96 Idaho 616, 
533 P.2d 737 (1975), wherein the Idaho Supreme Court described the doctrine and 
applied it in a split decision, and Casey v. Highlands Insurance Company, 
100 Idaho 505, 600 P.2d 1387 (1979), in which that same court disavowed and 
refused to adopt the doctrine. Under the doctrine, "the court will uphold the 
insured's reasonable expectations as to the scope of coverage, provided that the 
expectations are objectively reasonable." 2 G. Couch, Cyclopedia of Insurance 
Law 2d § 15:16 at 172 (Rev. ed. 1984). Professor Keeton describes the operation 
of the doctrine in this fashion: 

 
 
The 
objectively reasonable expectations of applicants and intended beneficiaries 
regarding the terms of insurance contracts will be honored even 
though painstaking study of the policy provisions would have negated those 
expectations.

 
 
[¶38]   In regard to this issue, the 
district court was correct when it stated as follows:

 
 
Mr. 
Harper was advised in the application that the information would be relied upon 
in issuing the insurance.  The 
policy contained a contestability clause allowing challenge within the first two 
years of issuance.  By his 
signature, Mr. Harper verified the answers contained in the application were 
true and correct.  This [reasonable 
expectations] claim presumes that Mr. Harper can assume [Fidelity] will not rely 
upon his answers, which is contrary to the unambiguous language in the 
application.

 
 
As 
did the district court, this Court fails to see how any claim would exist under 
the doctrine of reasonable expectations.

 
 
CONCLUSION

 
 
[¶39]   There is no issue of material fact 
as to whether Fidelity properly rescinded Mr. Harper's insurance policy pursuant 
to § 26-15-109.  Mr. Harper's 
application contained omissions and misrepresentations, and summary judgment is 
appropriate where the misrepresentation "is of such a nature that there can be 
no dispute as to its materiality."  Such was the case in this instance.  Furthermore, an insurer is under no duty 
to investigate the truthfulness of an applicant's responses unless it has notice 
that those responses might not be truthful or accurate.  There is no basis to conclude that the 
equities in this instance require the insurance contract be enforced under the 
doctrine of promissory estoppel.  
Finally, the covenant of good faith and fair dealing was not breached, 
and no claim exists under the doctrine of reasonable expectations.  Affirmed.

 
 

FOOTNOTES

1Fidelity contracted with MAAS for its underwriting 
services.

 
 

2           
Mrs. Harper takes issue that her husband misrepresented his health on his 
application.  Rather, Mrs. Harper 
blames her husband's erroneous answers on his "lack of sufficient knowledge" as 
to the health conditions being inquired about, and Mr. Harper himself being a 
"poorly educated 51-year-old bricklayer being asked  medically technical 
questions at the end of his work day[.]"  
Without question, Mr. Harper's application for life insurance contained a 
number of misrepresentations. 

Mrs. 
Harper urges this Court to find that her husband's insurance 
application form contained no misrepresentation because, she 
argues, Mr. Harper did not "knowingly" misrepresent his health status.  Contrary to Mrs. Harper's argument, 
however, Wyoming law does not require a finding of a "knowing" 
misrepresentation.  A material 
misrepresentation will avoid coverage, even if it is made through mistake or in 
good faith.  All American Life & Casualty Co. v. 
Krenzelok, 409 P.2d 766 (Wyo. 
1966); Cohen v. Washington Nat'l Ins. Co., 529 N.E.2d 1065, 1067 (Ill. App. 
Ct. 1st Dist. 1988).  A material misrepresentation--i.e., one 
that affects either the acceptance of the risk or the hazard assumed by the 
insurer--will void an insurance contract regardless of whether the 
misrepresentation was made innocently or with intent to 
deceive.