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Nature of Suit Code: 110
Nature of Suit: Insurance
Cause of Action: 

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PUBLISH 

· FILED 

VaUecl States Coart of Appeals 

Tenth Circuit 

UNITED STATES COURT OF APPEALS JUL 3 11995 

TENTH CIRCUIT 

RHEA DAWN JONES, 

Plaintiff-Counter-DefendantAppellant, 

v. 

NEW YORK LIFE & ANNUITY 

CORPORATION, a Delaware 

corporation, 

Defendant-Counter-ClaimantAppellee. 

PATRICK FISHER c:~r~; 

No. 94-4059 

Appeal from the United States District Court 

For the District of Utah, Central Division 

(D.C. No. 89-CV-212-J) 

R. Paul Van Dam of Anderson & Watkins, PC, Salt Lake City, 

Utah, for Appellant. 

Casey K. McGarvey of Van Cott, Bagley, Cornwall & McCarthy 

(Stephen Marshall with him on the brief), Salt Lake City, 

Utah, for Appellee. 

Before ANDERSON, Circuit Judge, McWILLIAMS, Senior Circuit 

Judge, and BROWN, Senior District Judge.* 

McWILLIAMS, Senior Circuit Judge. 

* The Honorable Wesley E. Brown, Senior 

District of Kansas, sitting by designation. 

District Judge, 

Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 1 
Rhea Dawn Jones, the beneficiary under a policy of life 

insurance issued her deceased husband, Kelly Jones, by New 

York Life & Annuity Corporation (New York Life), brought suit 

in the United States District Court for the District of Utah, 

Central Division, against New York Life to recover under the 

terms of the policy. Jurisdiction was based on diversity. 

28 U.S.C. § 1332(a) (1). New York Life denied liability under 

the policy based on misrepresentations in the application for 

the insurance conce~ning Kelly Jones' health and asserted a 

counterclaim seeking rescission of the policy. 

After a four-day trial to the court, the district court 

entered judgment in favor of Jones and against New York Life 

in the amount of $164,300, $100,000 thereof representing the 

face amount of the policy, and the remaining $64,300 representing prejudgment interest. 

The principal issue at trial was whether Rhea Jones was 

bound by the several undisputed misrepresentations1 in the 

application for insurance. Jones' position on this matter 

was that, although there were misrepresentations in the application, her husband, Kelly Jones, had, in fact, given 

correct verbal answers to the agent of New York Life, Richard 

1 In a pretrial order it was stipulated, inter alia, that 

Kelly Jones had, within two years prior to his signing the 

application for insurance, been treated for elevated blood 

pressure, and from his birth had a genetic blood condition 

known as Christmas Disease, and, within five years prior to 

his signing the application, had been counseled because of 

dependency on narcotic analgesic pain medication, and had 

been diagnosed as suffering from depressive neurosis accompanied by some organic impairment and residual effect of 

substance abuse, none of which was set forth in answers to 

questions contained in the application for insurance. 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 2 
Doerr, concerning his blood pressure and his "blood condition," and that the latter had incorrectly recorded Kelly 

Jones' answers to questions propounded to him by agent Doerr. 

As concerns Kelly Jones' dependency on narcotic pain medications, Rhea Jones' position was that agent Doerr never asked 

Kelly Jones about that particular matter. In this regard, 

the district court agreed with Rhea Jones and found that 

Kelly Jones had made no misrepresentations to agent Doerr, 

that the misrepresentations in the application were solely 

attributable to Doerr and that his acts could not be attributed to Kelly Jones so as to bar his wife, Rhea Jones, 

from recovery on the policy issued by New York Life. 

On appeal we reversed and remanded for further proceedings. See Jones v. New York Life, 985 F.2d 503 (lOth Cir. 

1993) . (No petition for rehearing was filed.) The gist of 

our opinion was that under Theros v. Metropolitan Life Insurance Co., 407 P.2d 685 (Utah 1965), Kelly Jones and his wife, 

Rhea Dawn Jones, the beneficiary under the policy of insurance issued Kelly Jones by New York Life, were bound by the 

misrepresentations contained in the application. In this 

connection, we noted that on August 8, 1984, Kelly Jones, 

Rhea Jones and Doerr had all signed the application, which 

was completed in the Jones' residence, and that immediately 

above their signatures appeared the following: 

THOSE PERSONS WHO SIGN BELOW AGREE THAT: 

1. All of the statements which are part of 

the application are correctly recorded, and 

are complete and true to the best of the 

knowledge and belief of those persons who made 

them. 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 3 
2. No agent or medical examiner has any right 

to accept risks, make or change contracts, or 

give up any of NYLIC's [New York Life Insurance Company] or NYLIAC's [New York Life Insurance and Annuity Corporation] rights or 

requirements. 

However, even though we concluded that Rhea Jones was 

bound by the misrepresentations in the application, we remanded the case with direction that the district court consider, and determine, whether Rhea Jones could still recover 

under the provisions of Utah Code Ann. § 31-19-8(1), repealed 

in 1986, which provided that misrepresentations in an application for insurance would not prevent recovery on the 

policy unless the misrepresentations were (1) fraudulent, or 

(2) material either to the acceptance of the risk or to the 

hazard assumed by the insurer, or (3) the insurer would not 

have issued the policy if the true facts had been made known 

to the insurer either by the application for the policy or 

otherwise. 

On remand, New York Life filed a motion for entry of 

judgment in its favor based on its belief that the evidence 

presented at the earlier trial showed that each of the three 

statutory grounds for precluding recovery on the policy as 

set forth in Utah Code Ann. § 31-19-8(1) had been met, "any 

one of which would be sufficient to justify rescission under 

Utah Code § 31-19-8(1), repealed 1986." Jones filed a response to New York Life's motion in which Jones asked that 

judgment be entered in her favor. Hence, both parties apparently were willing to have the district court resolve the 

remaining issues on the record as previously made. 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 4 
After hearing, the district court granted New York 

Life's motion and later entered judgment rescinding the 

policy here involved and dismissing the action "in its entirety with prejudice and on its merits," and in line therewith also dismissed Rhea Jones' claim for punitive damages. 

In so doing, the district court found that the misrepresentations in the application were material to the risk assumed 

by New York Life and that, if it had known the true facts, it 

would not have issued the policy, and further that New York 

Life was not equitably estopped from relying on the representations in the application. 

As indicated, there was more than one misrepresentation2 

in the application, and the district court in its judgment 

made special note of the fact that Kelly Jones had never in 

any way disclosed to New York Life or its agent that he "had 

been counseled, treated and hospitalized because of dependency on narcotic analgesic medication" and that "New York 

2 There were at least three misrepresentations in Jones' 

application for insurance. In addition to the misrepresentation regarding Kelly Jones' dependence on narcotic analgesic medication, they were the representations that Kelly 

Jones had not been treated within the last two years for elevated blood pressure and the representation that Kelly Jones 

had not been treated within the last two years for a blood 

disorder. It is undisputed that on the date that the application was signed, both Rhea and Kelly Jones knew that 

Kelly Jones suffered from high blood pressure and had an incurable blood condition known as Christmas Disease, and in 

1983, had been counseled, treated and hospitalized due to his 

dependency on narcotic analgesic pain medication. Moreover, 

evidence adduced at trial showed that Kelly Jones had a long 

history of alcohol and drug abuse, including the use of 

marijuana, cocaine, "speed," and pain medications, and as a 

result had suffered from schizophrenia, depressive neurosis 

and organic impairments. 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 5 
Life is not estopped from relying on the misrepresentations 

in Mr. Jones' application for life insurance that he had not 

been so counseled, treated or hospitalized to avoid liability 

on the insurance policy." 

Jones now appeals the judgment thus entered. Her position on appeal is, necessarily, that on the record as made 

the district court, as a matter of law, was compelled to deny 

New York Life's motion and to grant her request for judgment 

in her favor. That is not our view of the matter. 

Our present task, of course, is to simply review the 

judgment of the district court entered on remand. Although 

the district court, in its Supplemental Findings of Fact, 

Amended Conclusions of Law and Amended Judgment, recognized 

that there were "misrepresentations" in the application, it 

identified only one, the misrepresentation in the application 

that Kelly Jones had not been counseled, treated or hospitalized because of dependency on narcotic analgesic pain 

medications.3 The district court held that, under all the 

facts and circumstances, such representation was material to 

the risk assumed, that New York Life was not estopped from 

relying thereon, and that accordingly, New York Life was entitled to rescission, and the further holding that Rhea Jones 

was not entitled to recover under the policy. Our study on 

the matter indicates that the record supports such a finding 

and conclusion, and on that basis, we affirm. 

3 The district court in its order made no mention of "elevated blood pressure" or "blood condition." 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 6 
On appeal, Rhea Jones concedes that under T.heros, even 

though Kelly Jones may have given agent Doerr correct answers 

to questions contained in the application, which answers Doerr incorrectly recorded in the application, she is nonetheless bound by those misrepresentations by his act of signing 

the application, where, as here, immediately above his signature was the statement that by his signature the signatory 

agreed that all statements in the application had been "correctly recorded." 

Counsel would escape the rule of Theros, however, on the 

ground that New York Life did not rely on any misrepresentation in the application and, on the contrary, either knew, or 

should have known, of Kelly Jones medical and health problems, and either conducted, or should have conducted, its own 

investigation of Kelly Jones' condition. In such circumstances, Jones argues here that New York Life is estopped 

from seeking rescission and, consequently, is estopped from 

denying liability under the policy, citing Hardy v. Prudential Ins. Co. of America, 763 P.2d 761 (Utah 1988) and Major 

Oil Co. v. Equitable Life Assurance Soc'y, 457 F.2d 596 (lOth 

Cir. 1972) .4 

Both cases cited by Appellant stand for the proposition 

that an insurance company cannot escape liability on a policy 

4 In her complaint Rhea Jones alleged, inter alia, that if 

there were misrepresentations in the application, New York 

Life was "estopped from claiming ignorance of such " 

In its amended answer New York Life alleged, inter alia, that 

Rhea Jones was "estopped from asserting [her] claim," 

because of Kelly Jones' misrepresentations relating to his 

"health history." 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 7 
if it is established that there should have been no actual 

reliance on the applicant's misrepresentations, concealment, 

or omission. See Hardy, 763 P.2d at 770; Major Oil, 457 at 

602 (citations omitted). Appellant's reliance on this rule, 

however, is misplaced. In the instant case, although New 

York Life had information from a previous application for 

life insurance by Kelly Jones regarding the possibility of 

hemophilia, there is nothing in the record to indicate that 

New York Life should have known of Jones' dependence on narcotic analgesic pain medications. 

On the question of estoppel, the district court specifically held that New York Life was not estopped from relying on the misrepresentation in Mr. Jones' application for 

life insurance that he had not been so counseled, treated, or 

hospitalized because of dependency on narcotic analgesic 

medication.S Such was a fact issue, and contrary to Jones' 

suggestion, the district court was not compelled, as a matter 

of law, to find that New York Life was estopped from relying 

on that particular misrepresentation. We reject any suggestion that before issuing the policy New York Life knew or 

should have known that Kelly Jones had been treated for his 

addiction to pain medications. The record reveals that the 

only evidence received by New York Life was an attending 

5 At the conclusion of the hearing, upon remand, on New 

York Life's Motion for Entry of Judgment, the district judge 

stated that "it appears to me as well as I remember the 

record and look at the record that the company issued the 

policy in reliance upon the application." 

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Appellate Case: 94-4059 Document: 01019279203 Date Filed: 07/31/1995 Page: 8 
physician's statement submitted by Kelly Jones' doctor indicating that Jones was hospitalized for stomach and back pain 

and listing the medications prescribed to Jones. There was 

nothing in the physician's statement to suggest that Kelly 

Jones was hospitalized or treated for his addiction. Consequently, New York Life did not possess the information 

necessary to put it on notice of the possible falsity in 

Kelly Jones' application and to make a further inquiry into 

Kelly Jones' drug problems, sufficient to invoke the above 

stated rule. 

Counsel also argue that the misrepresentation relating 

to alcohol or drug problems was not material to the risk assumed by New York Life. The district court found that such 

misrepresentation was material and in our view the record 

amply supports such finding. There was testimony that the 

misrepresentation relating to Kelly Jones' drug problem was 

"material," which would seem to us rather obvious. 

Judgment affirmed. 

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