Document ID: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-caed-2_06-cv-02048/USCOURTS-caed-2_06-cv-02048-0/pdf.json

Parties Involved:
American General Life Insurance Company
Cross Defendant
Rebeca Green
Cross Claimant

Document Text:

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1

UNITED STATES DISTRICT COURT

EASTERN DISTRICT OF CALIFORNIA

AMERICAN GENERAL LIFE No. 2:06-CV-02048-MCE-KJM

INSURANCE COMPANY,

Plaintiff and

Cross-Defendant,

v. MEMORANDUM AND ORDER

REBECA GREEN,

Defendant and 

Cross-Plaintiff.

----oo0oo----

Plaintiff and Cross-Defendant, American General Life

Insurance Company (“AG”) initiated the current action against

Defendant and Cross-Plaintiff, Rebeca Green (“Ms. Green”), the

beneficiary of a life insurance policy (“the Policy”) AG issued

to Ms. Green’s husband. AG requests Declaratory Relief that, due

to material misrepresentations the insured allegedly made on the

insurance application (“the Application”), the Policy is void ab

initio, the policy is properly subject to rescission, and

Ms. Green is not entitled to the Policy’s death benefit. 

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 Because oral argument will not be of material assistance, 1

the Court orders this matter submitted on the briefing. E.D.

Cal. Local Rule 78-230(h).

 Unless otherwise stated, these facts are taken from AG’s 2

Statement of Undisputed Facts and Ms. Green’s Responses thereto

(“UF”). Both parties raised various evidentiary objections. To

the extent evidence is not relied on here, those objections are

moot. As is necessary, the Court will address the parties’

specific objections to evidence it relied upon in this Order. 

2

Ms. Green filed Cross-Claims against AG for Breach of Contract,

Breach of the Implied Covenant of Good Faith and Fair Dealing,

and Fraud. Presently before the Court is AG’s February 27, 2008,

Motion for Summary Judgment on its Declaratory Relief claim and

each of Ms. Green’s Cross-claims.1

BACKGROUND2

In April of 2004, Edward Green (“Mr. Green”) applied to AG

for life insurance, a process which required him, inter alia, to

execute Parts A and B of the Application. At the center of the

current dispute are three specific questions: 

Question No. 17(F) on Part A asked, “Have any proposed

insureds ever been convicted of, or pled guilty or no

contest to a felony, or do they have any charges

pending against them?” 

Question No. 7(D)(1) on Part B asked, “Has any proposed

insured ever: 1) sought or received advice, counseling

or treatment by a medical professional for the use of

alcohol or drugs, including prescription drugs?” 

Question 7(D)(2) on Part B asked, “Has any proposed

insured ever: 2)used cocaine, marijuana, heroin,

controlled substances or any other drug, except as

legally prescribed by a physician?” 

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3

Mr. Green answered, “No,” to each of these questions. AG relied

on these answers when it approved Mr. Green’s Application and

when it issued the Policy. AG contends that each of these

answers was material to AG when it underwrote and issued the

Policy. 

Additionally, at the time of execution, the Application

contained the following clause: 

I have read the above statements or they have been read

to me. They are true and complete to the best of my

knowledge and belief. I understand that this

application: (1) will consist of Part A, Part B, and if

applicable, related forms; and (2) shall be the basis

for any policy issued. I understand that any

misrepresentation contained in this application and

relied on by the Company may be used to reduce or deny

a claim or void the policy if: (1) it is within its

contestable period; and (2) such misrepresentation

materially affects the acceptance of the risk. 

On May 2, 2004, AG issued the $250,000 Policy to Mr. Green. 

The Policy contained an “Incontestability Provision” which

stated, “Except for nonpayment of premiums, we will not contest

this policy after it has been in force during the lifetime of the

insured for two years from the date of issue.” 

Mr. Green passed away on August 1, 2005, while the Policy

was still contestable. Ms. Green, the primary beneficiary of the

Policy, subsequently submitted a claim to AG for the Policy’s

death benefit. 

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 The Court notes that AG did not object to Mr. Green’s 3

answer to 17(F) until a later date. However, this is not

material to the Court’s decision. The Court is also aware that

Ms. Green denies these answers were misrepresentations, but it is

undisputed that AG so found. 

4

After receiving Ms. Green’s claim, AG conducted a

contestable claim investigation. As part of that investigation,

a life insurance underwriter conducted an underwriting review. 

Based on information obtained during the claim investigation and

underwriting review, AG determined that Mr. Green’s negative

answers to Questions 7(D)(1) and 7(D)(2) on Part B were material

misrepresentations. Pursuant to its findings, AG made the 3

decision to rescind the Policy. 

On February 14, 2006, AG wrote a letter to Ms. Green

advising her that, due to Mr. Green’s alleged material

misrepresentations, it was rescinding the Policy. In this

letter, AG offered to refund past premiums paid to Ms. Green. 

Decl. of Diana Fields (“Fields Decl.), ¶ 17 (Feb. 20, 2008). AG

did later return the premiums, but Ms. Green did not cash the

check and instead returned it to AG through an attorney. Id.

Pertinent to AG’s decision to rescind the Policy were

notations in several of Mr. Green’s medical records that are now

before the Court. The medical records of Dr. Debra Clyde, dated

September 23, 2004, confirm that Mr. Green told Dr. Clyde he had

smoked marijuana until approximately five months prior when he

had moved from Southern California to Alturas. Declaration of

Charan M. Higbee (“Higbee Decl.”), Exh. J, p. 4 (Feb. 27, 2008).

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 Though Ms. Green styles her document as a Statement of 4

“Disputed” Facts, the evidence relied upon here consists of a

medical record she put before the Court and is not itself

disputed. 

5

A “Little Company of Mary Hospital Anesthesia Pre-Operative

Assessment and Consent” form also indicates that Mr. Green was

currently smoking marijuana as of March 31, 1997. Def. and

Cross-Pl.’s Separate Statement of Disputed Facts (“DF”), Exh. 3.4

Additionally, according to Dr. Jack Futterman’s February 18,

2005, “Modoc County Health Services Adult Mental Health

Assessment” form, Mr. Green had smoked marijuana two times per

week up until the year prior and had used methamphetamine

briefly. Higbee Decl., Exh. N, p. AGL0228. Also according to

that form, Mr. Green felt he had abused hydrocodone, codeine, and

Xanax in the past. Id. Finally, Dr. Slutzger’s March 31, 1997,

“Short Form History and Physical” record indicates that Mr. Green

previously took codeine, which he had obtained on the street. 

Higbee Decl., Exh. D p. 000133. 

Ms. Green subsequently confirmed, in a written statement she

made to AG during the contestable claim investigation, that

Mr. Green had smoked marijuana until 2004. Fields Decl., ¶ 7,

Exh. C, 2:14. However, Ms. Green also claims that Mr. Green used

marijuana for pain management and that a doctor had told him it

was okay. Higbee Decl., Exh. A, 39:1-41:6. Nevertheless,

Ms. Green has no personal knowledge that Mr. Green ever had a

physician’s recommendation or approval and has not submitted, to

AG or to this Court, any independent proof to support her

assertion. Id., 41:7-11. 

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6

Finally, Ms. Green is unaware of any misrepresentations made

to Mr. Green relating to sale of the Policy and has stated that

AG made no misrepresentations to her regarding its sale.

STANDARD

The Federal Rules of Civil Procedure provide for summary

judgment when “the pleadings, depositions, answers to

interrogatories, and admissions on file, together with

affidavits, if any, show that there is no genuine issue as to any

material fact and that the moving party is entitled to a judgment

as a matter of law.” Fed. R. Civ. P. 56(c). One of the

principal purposes of Rule 56 is to dispose of factually

unsupported claims or defenses. Celotex Corp. v. Catrett, 477

U.S. 317, 325 (1986).

Rule 56 also allows a court to grant summary adjudication on

part of a claim or defense. See Fed. R. Civ. P. 56(a) (“A party

claiming relief may move...for summary judgment on all or part of

the claim.”); see also Allstate Ins. Co. v. Madan, 889 F. Supp.

374, 378-79 (C.D. Cal. 1995); France Stone Co., Inc. v. Charter

Twp. of Monroe, 790 F. Supp. 707, 710 (E.D. Mich. 1992).

The standard that applies to a motion for summary

adjudication is the same as that which applies to a motion for

summary judgment. See Fed. R. Civ. P. 56(a), 56(c); Mora v.

ChemTronics, 16 F. Supp. 2d. 1192, 1200 (S.D. Cal. 1998).

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7

Under summary judgment practice, the moving party

always bears the initial responsibility of informing

the district court of the basis for its motion, and

identifying those portions of ‘the pleadings,

depositions, answers to interrogatories, and admissions

on file together with the affidavits, if any,’ which it

believes demonstrate the absence of a genuine issue of

material fact.

Celotex at 323(quoting Rule 56(c)).

If the moving party meets its initial responsibility, the

burden then shifts to the opposing party to establish that a

genuine issue as to any material fact actually does exist. 

Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574,

585-87 (1986); First Nat’l Bank v. Cities Serv. Co., 391 U.S.

253, 288-89 (1968).

In attempting to establish the existence of this factual

dispute, the opposing party must tender evidence of specific

facts in the form of affidavits, and/or admissible discovery

material, in support of its contention that the dispute exists. 

Fed. R. Civ. P. 56(e). The opposing party must demonstrate that

the fact in contention is material, i.e., a fact that might

affect the outcome of the suit under the governing law, and that

the dispute is genuine, i.e., the evidence is such that a

reasonable jury could return a verdict for the nonmoving party. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 251-52

(1986); Owens v. Local No. 169, Assoc. of W. Pulp and Paper

Workers, 971 F.2d 347, 355 (9th Cir. 1987). 

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8

Stated another way, “before the evidence is left to the jury,

there is a preliminary question for the judge, not whether there

is literally no evidence, but whether there is any upon which a

jury could properly proceed to find a verdict for the party

producing it, upon whom the onus of proof is imposed.” Anderson,

477 U.S. at 251 (quoting Improvement Co. v. Munson, 81 U.S. (14

Wall.) 442, 448 (1872)). As the Supreme Court explained, “[w]hen

the moving party has carried its burden under Rule 56(c), its

opponent must do more that simply show that there is some

metaphysical doubt as to the material facts .... Where the record

taken as a whole could not lead a rational trier of fact to find

for the nonmoving party, there is no ‘genuine issue for trial.’” 

Matsushita, 475 U.S. at 586-87.

In resolving a summary judgment motion, the evidence of the

opposing party is to be believed, and all reasonable inferences

that may be drawn from the facts placed before the court must be

drawn in favor of the opposing party. Anderson, 477 U.S. at 255. 

Nevertheless, inferences are not drawn out of the air, and it is

the opposing party’s obligation to produce a factual predicate

from which the inference may be drawn. Richards v. Nielsen

Freight Lines, 602 F. Supp. 1224, 1244-45 (E.D. Cal. 1985),

aff’d, 810 F.2d 898 (9th Cir. 1987). 

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 Since the Court has rendered judgment in AG’s favor, AG’s 5

Motion to Strike portions of Ms. Green’s Opposition is moot. 

9

ANALYSIS

AG argues that Mr. Green made material misrepresentations on

the Application that render the Policy void ab initio. Since

this Court agrees based on Mr. Green’s answer to 7(D)(2) on Part

B, Ms. Green’s Cross-claims for Breach of Contract and Breach of

the Implied Covenant of Good Faith and Fair Dealing, which are

dependent on the existence of a valid Policy, are moot. 

Additionally, there is nothing in the record to indicate that AG

should be estopped from rescinding the Policy. Finally, there is

also no evidence sufficient to support Ms. Green’s Cross-claim

for Fraud. Hence, AG’s Motion for Summary Judgment is granted.5

A. Mr. Green’s Negative Answer to 7(D)(2) on Part B of the

Application Justifies AG’s Rescission of the Policy.

“[An insurance company] has the unquestioned right to select

those whom it will insure and to rely upon him who would be

insured for such information as it desires as a basis for its

determination to the end that a wise discrimination may be

exercised in selecting its risks.” Robinson v. Occidental Life

Ins. Co. of Cal., 131 Cal. App. 2d 581, 586 (2d Dist. 1955). 

“Each party to a contract of insurance shall communicate to the

other, in good faith, all facts within his knowledge which are or

which he believes to be material to the contract...and which the

other has [no]...means of ascertaining.” Cal. Ins. Code § 332;

see also Robinson, 131 Cal. App. 2d at 585. 

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10

“Three factors are reviewed in determining whether an insurance

company has the right to rescind a policy, which are: 1) that the

applicant made a misrepresentation; 2) that the misrepresentation

was material; and 3) that the applicant knew that he made a

material misrepresentation.” Casey by Casey v. Old Line Life

Ins. Co. of Am., 996 F. Supp. 939, 944 (N.D. Cal. 1998) (citing

Trinh v. Metro. Life Ins. Co., 894 F. Supp. 1368, 1372 (N.D. Cal.

1995)). 

1. Mr. Green’s Answer to 7(D)(2) was a Misrepresentation.

As a threshold matter, since the medical records are of

utmost importance in this case, the Court will address Ms.

Green’s objections to the use of some of those records as

unauthenticated. She is correct that “[d]ocuments which have not

had a proper foundation laid to authenticate them cannot support

[or defend against] a motion for summary judgment.” Burch v.

Regents of Univ. of Cal., 433 F. Supp. 2d 1110, 1120 (E.D. Cal.

2006) (quoting Can. v. Blain’s Helicopters, Inc., 831 F.2d 920,

925 (9th Cir. 1987)). Moreover, “[a] writing is not

authenticated simply by attaching it to an affidavit ... The

foundation is laid for receiving a document in evidence by the

testimony of a witness with personal knowledge of the facts who

attests to the identity and due execution of the document and,

where appropriate, its delivery.” U.S. v. Dibble, 429 F.2d 598,

602 (9th Cir. 1970). 

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11

AG argues that it properly authenticated the relevant

medical records via declarations indicating that those records

were produced during discovery. See Reply 2:1-8. Indeed, the

only evidence to support authentication of the medical records of

Dr. Harvey and West Hills Hospital is the Declaration of Charan

M. Higbee, AG’s attorney, stating that his office subpoenaed

those records during the course of this litigation. See Higbee

Decl., ¶¶ 6, 12. His declaration is not sufficient. See Orr v.

Bank of Am., NT & SA, 285 F.3d 764, 774 (9th Cir. 2002) (attorney

affidavit stating that an exhibit was a “true and correct copy”

did not authenticate the transcript of the deposition because the

attorney lacked personal knowledge). 

Moreover, the case law on which AG relies does not support

AG’s proposition. See Parker v. FId. Sec. Life Ins. Co., 2007 WL

2688811 (E.D. Cal. Sept. 12, 2007). In that case, the disputed

records were produced during discovery by the opposing party. 

Id. at *2 n.4; See also Orr at 777 n.20. In this case, the

records were subpoenaed directly from the doctor’s office or

medical facility.

The purpose of the authentication requirement is to ensure

that the evidence submitted is what the proponent claims. Fed.

R. Evid. 901(a). While this purpose is served if the opposing

party supplies a record during discovery, it is not necessarily

served when a third party, such as a doctor or hospital, is the

source. In order for the current records to be admissible, AG

needed to properly authenticate the documents as it did other

records. 

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 See Hoston v. J.R. Watkins Co., 300 F.2d 869, 870 (9th 6

Cir. 1962) (concluding that summary judgment was proper based on

deposition testimony). 

12

Hence, the records of Dr. Harvey and West Hills Hospital are

inadmissible, and the Court did not rely upon those records to

reach its decision. 

Ms. Green also objects to the medical records of Dr.

Futterman and Modoc County Health Services. However, AG

authenticated these records through the appropriate deposition

testimony as required by Federal Rule of Evidence 901. See 6

23:6-28:12. Additionally, these records are admissible pursuant

to Rule 803(4) as exceptions to the hearsay rule. 

AG has provided sufficient evidence to prove that Mr. Green

smoked marjiuana and took other drugs without a prescription

prior to filling out the Application. According to Dr.

Futterman’s records, Mr. Green smoked marijuana approximately

twice a week. Higbee Decl., Exh. N, AGL0228. Additionally, he

used methanphetamine and obtained codeine “on the street” as

well. Id. Finally, Mr. Green stated that he felt he had abused

hydrocodone, codeine, and Xanax in the past. Id. Other medical

records confirm that Mr. Green smoked marijuana, and Ms. Green

testified to the same. Higbee Decl., Exh. J, p. 4; DF, Exh. 3. 

In her Opposition, Ms. Green makes several arguments to try

to overcome the ample evidence supporting a finding of

Mr. Green’s past drug use. First, Ms. Green argues that the word

“use” is ambiguous and that Mr. Green could have been answering

truthfully if he had merely “tried” marijuana in the past. 

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 Cal. Health and Safety Code § 11362.5. The Act creates an 7

affirmative defense to criminal prosecution if a criminal

defendant can prove he or she used the marijuana pursuant to a

doctor’s recommendation or approval. People v. Fisher, 96 Cal.

(continued...)

13

Though the record does not support the proposition that Mr. Green

merely “tried” various drugs, Ms. Green is correct that “[i]t is

a well-settled rule that all ambiguities must be interpreted

against the insurer. However, courts ‘will not engage in

strained or tortured interpretation of the terms of an insurance

contract in order to fabricate an ambiguity where none exists.’” 

Casey, 996 F. Supp. at 945-946. This Court finds the language

of 7(D)(2) to be unambiguous and will not strain or torture the

language to find otherwise. 

Next, Ms. Green argues that Mr. Green smoked marijuana

pursuant to a recommendation from a physician, rendering his

answer to 7(D)(2) a true and correct response. However,

Ms. Green has provided no admissible evidence to support such a

claim. Ms. Green’s only support for this assertion are her own

statements that Mr. Green told her that a doctor had told him it

was okay to smoke marijuana for pain. Ms. Green’s statements do

not create a triable issue of fact because she has submitted no

evidence showing that she has any personal knowledge of any

recommendation or approval.

Nevertheless, Ms. Green further claims that since the record

is lacking admissible evidence that Mr. Green smoked marijuana

prior to 1997, he must have legally smoked it pursuant to a

doctor’s recommendation because California’s Compassionate Use

Act (“the Act”) went into effect in 1996. 

7

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(...continued) 7

App. 4th 1147, 1151-1152 (3d Dist. 2002). “The word

‘recommendation,’ as used in the Compassionate Use Act, suggests

the physician has raised the issue of marijuana use and presented

it to the patient as a treatment that would benefit the patient's

health by providing relief from an illness. The word ‘approval,’

on the other hand, suggests the patient has raised the issue of

marijuana use, and the physician has expressed a favorable

opinion of marijuana use as a treatment for the patient. Thus, a

physician could approve of a patient's suggested use of marijuana

without ever recommending its use.” People v. Jones, 112 Cal.

App. 4th 341, 347 (3d Dist. 2003) (emphasis in original). 

14

The fallacy of this logic is obvious since it completely ignores

the fact that the Act still required a doctor’s recommendation or

approval, proof of which is completely lacking in the current

record. The existence of a California law exempting marijuana

users from prosecution under some circumstances does not itself

prove that Mr. Green acted pursuant to that statute when he used

the drug. Notably, Ms. Green appears to be determined to prove

that Mr. Green’s marijuana use was “legal,” but that is not the

relevant issue. Rather, the issue is whether Mr. Green had a

recommendation. Since there is ample evidence that Mr. Green

smoked marijuana in the past, the only excuse for his failing to

answer 7(D)(2) in the affirmative would be proof of a

prescription from a physician. There is absolutely no evidence

in the record to support that proposition. 

Additionally, Mr. Green’s medical records indicate that he

used both methamphetamine and codeine, the latter of which he

obtained “on the street.” Ms. Green does not, and could not in

good faith, allege that Mr. Green used methamphetamine pursuant

to any prescription or recommendation. 

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Furthermore, since Mr. Green obtained codeine “on the street,” it

is reasonable to infer that he was not taking the medication

pursuant to a prescription. Therefore, based on the current

record showing that Mr. Green smoked marijuana, and used

methamphetamine and codeine without prescriptions, Mr. Green

should have answered 7(D)(2) in the affirmative. 

Finally, Ms. Green argues that AG has the burden to disprove

all plausible explanations for any alleged misrepresentations. 

See Thompson v. Occidental Life Ins. Co. of Cal., 9 Cal.3d 904,

919 (1973) (“[T]he burden was on [the insured] to negate to the

satisfaction of the trier of fact the various plausible

explanations for the incomplete answers on [the insured’s]

application.”). Her argument ignores the fact that the Federal

Rules of Civil Procedure require Ms. Green to first raise such

plausible explanations and supply proof to support those

explanations. AG is not required to raise all plausible

explanations for the misrepresentations and to subsequently prove

those explanations wrong. AG’s burden is to “negate” those

explanations, but it can only negate what Ms. Green has first

adequately supported. Id. at 919. Any contrary conclusion would

undermine the very principles governing summary judgment. 

Nevertheless, Ms. Green goes on to argue that AG bears the

burden of proving that Mr. Green did not have a prescription to

use marijuana pursuant to the Act. To the contrary, since the

Act provides individuals with an affirmative defense to criminal

prosecution, the burden is on Ms. Green to raise the defense in

this context and to prove that Mr. Green did have a physician’s

recommendation or approval. 

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16

Indeed, it is unclear how AG would prove that Mr. Green did not

have a prescription, other than, as it did here, to show that

Ms. Green has no evidence of a recommendation. Since Ms. Green

has provided no evidence showing that Mr. Green used any of the

relevant drugs pursuant to a prescription, her argument must

fail. Therefore, this Court finds that Mr. Green’s answer to

7(D)(2) was a misrepresentation. 

The crux of the parties’ current dispute is whether

Mr. Green actually made any misrepresentations on the

Application. Because this Court finds that Mr. Green’s negative

answer to 7(D)(2) on Part B asking if he “had ever used cocaine,

marijuana, heroin, controlled substances or any other drug,

except as legally prescribed by a physician” was a

misrepresentation, the Court need not address any other alleged

misstatements.

2. Mr. Green’s Answer to 7(D)(2) was Material to AG. 

“Materiality is determined by the probable and reasonable

effect that truthful disclosure would have had on the insurer in

determining the advantages of the proposed contract.” Trinh v.

Metro. Life Ins. Co., 894 F. Supp. 1368, 1372 (N.D. Cal. 1995). 

This is a subjective determination. See Burns v. The Prudential

Ins. Co. of Am., 201 Cal. App. 2d 868, 871 (2d Dist. 1962). Ms.

Green does not contest that Mr. Green’s answer to question

7(D)(2) was material to AG. UF No. 13. 

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Therefore, since the materiality determination is subjective, and

since Ms. Green admitted the misrepresentation was material to

AG, no further inquiry is required. The Court finds that

Mr. Green’s misrepresentation in response to 7(D)(2) was material

to AG. 

3. Mr. Green Had Knowledge That He Made A Material

Misrepresentation When He Answered 7(D)(2). 

“[I]f the applicant for insurance had no present knowledge

of the facts sought, or failed to appreciate the significance of

information related to him, his incorrect or incomplete responses

would not constitute grounds for rescission.” Thompson, 9 Cal.

3d at 916 (1973). “[F]ailure of an applicant to disclose a

physical condition of which he is ignorant will not affect the

policy and a layman might reasonably be excused if, in disclosing

information, he failed to understand the meaning of certain

medical terms and for that reason omitted some fact in his

medical history.” Cohen v. Penn Mutual Life Ins. Co., 48 Cal. 2d

720, 726 (1957). 

Contrary to those cases, Mr. Green’s misrepresentation does

not concern incomprehensible medical conditions of which he can

claim ignorance. Rather, Mr. Green was asked specific questions

regarding his history of drug use. It is clear that Mr. Green

was aware he had used marijuana, methamphetamine, and codeine. 

In fact, he self-reported such use to his physicians, which is

indicative of his knowledge. 

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See San Francisco Lathing Co., Inc. v. Penn Mut. Life Ins. Co.,

144 Cal. App. 2d 181, 187 (1st Dist. 1956) (“It [was] idle for

appellant to argue that there [was] no evidence to support the

finding that the insured knew [the] facts since the evidence

[was] clear that it was he who reported them to his physician.”). 

Therefore, Mr. Green had the requisite knowledge and AG was

justified in rescinding the Policy. 

B. AG Is Not Estopped From Rescinding The Policy.

Ms. Green argues that, even if Mr. Green made a material

misrepresentation on the Policy, AG should be estopped from

rescinding because it failed to timely investigate and conducted

an inadequate investigation. However, Ms. Green points to no

cases that support either proposition. 

1. AG Is Not Estopped From Rescinding The Policy Based On

The Alleged Untimeliness Of Its Investigation. 

At least one court has stated, even if in dicta, “It was not

incumbent upon [the insurer] to investigate [the insured’s]

statements made to the examiner. It was [the insured’s] duty to

divulge fully all he knew. No authority is cited and none will

be found holding that an insured or his beneficiaries may escape

the consequences of his deception by placing upon the insurer the

burden of investigating his verified statements.” Robinson, 131

Cal. App. 2d at 585. 

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Ms. Green is similarly unable to cite to any authority for

the proposition that AG was required to investigate sooner. The

cases on which she primarily relies involved investigations

initiated after the expiration of the contestability period. See

United FId. Life Ins. Co. v. Emert, 49 Cal. App. 4th 941 (4th

Dist. 1996); Amex Life Assurance Co. v. Super. Ct. of Los Angeles

County, 14 Cal. 4th 1231, 1243 (1997). However, unlike those

cases, when Mr. Green died, his Policy was still contestable. 

While policy reasons abound for prohibiting an insurance company

from waiting until the policy is incontestible prior to

investigating, those considerations are not applicable here. 

Moreover, the case law actually seems to indicate that it is

standard procedure to conduct a contestability investigation if

the insured dies during the period in which a policy is still

contestable. See Freeman, 253 F.3d at 535 (“[The insurer]

acknowledged the claim but informed [the claimant] that because

the death occurred within the two-year contestable period, it

would seek information regarding [the insured’s] health history

prior to her application.”); see also Casey, 996 F. Supp. at 943

(“[The insurer] conducted a contestable investigation, pursuant

to the two year contestable provision.”). Therefore, AG is not

estopped from rescinding the Policy based on the timing of its

investigation. 

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2. AG Is Not Estopped From Rescinding The Policy Based On

The Alleged Inadequacy Of Its Investigation.

Ms. Green also argues that AG failed to conduct an adequate

investigation because, in conducting its inquiry, it relied only

on Mr. Green’s medical records rather than contacting his medical

providers directly. However, this argument is logical only in

the context of Ms. Green’s Cross-claim for Breach of the Implied

Covenant of Good Faith and Fair Dealing, a claim which was

rendered moot by the Court’s finding that Mr. Green materially

misrepresented his past drug use on the Application. Indeed,

Ms. Green’s own authority raises this issue in the context of the

courts’ Bad Faith discussions, not as grounds for estoppel. See

McLaughlin v. Conn. Gen. Life Ins. Co., 565 F. Supp. 434, 453

(N.D. Cal. 1983), disapproved of on other grounds by Waller v.

Truck Ins. Exchange, Inc., 11 Cal. 4th 1 (1995); Eagan v. Mut.

of Omaha, 24 Cal.3d 809, 814, 817 (1979). Nevertheless,

assuming, arguendo, that an inadequate investigation is grounds

to estop an insurance company from rescinding a policy,

Ms. Green’s claim still cannot stand. 

First, Ms. Green cites to no relevant case law, nor has this

Court found any, supporting the proposition that, in order to

conduct an investigation in good faith, an insurer confronted

with evidence of an insured’s past drug use must contact the

insured’s doctors, rather than relying solely on his medical

records, to rescind a policy. To the contrary, the relevant case

law indicates that insurance companies can properly rely on

medical records to deny a claim. 

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See Freeman v. Allstate Life Ins. Co., 253 F.3d 533, 535 (9th

Cir. 2001) (insurance company rescinded policy based on

information gleaned from medical records and not provided on the

application); See also Casey, 996 F. Supp. at 942 (insurance

company relied on medical records to justify rescission of

policy). 

Additionally, contrary to the authority provided by

Ms. Green, and contrary to her own argument in opposition of this

Motion, any further investigation would have been futile. AG

would not have uncovered additional facts that would have

required it to honor the Policy. Indeed, Ms. Green is unable,

even now, to put forth such facts that she claims AG should have

labored to expose. Hence, Ms. Green’s assertion that AG is

estopped from rescinding the Policy, either because it failed to

timely investigate or because its actual investigation was

legally inadequate, must necessarily be rejected. 

C. Ms. Green’s Fraud Claim Is Unsupported By Any Evidence.

In order to “prevail on a claim for fraud, a plaintiff must

show: (1) misrepresentations; (2) knowledge of falsity;

(3) intent to defraud; (4) justifiable reliance; and

(5) resulting damage.” Minn. Mut. Life Ins. Co. v. Ensley, 174

F.3d 977, 982 (9th Cir. 1999). There is no evidence that AG made

false statements to either Mr. or Ms. Green, and the record is

utterly lacking in evidence sufficient to support any of the

elements of this claim. Hence, AG’s Motion for Summary Judgment

is granted. 

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CONCLUSION

Since the Court determined that Mr. Green’s answer to

7(D)(2) was a material misrepresentation, the Policy is void ab

initio. Therefore, AG’s request for declaratory relief is

granted. Ms. Green’s Breach of Contract and Breach of Implied

Covenant of Good Faith and Fair Dealing are dependent upon the

existence of the Policy and therefore must fail. Additionally,

Ms. Green has supplied no evidence to support her claim against

AG for fraud, so that claim fails as well. Finally, Ms. Green

has no remaining cause of action on which she can base a claim

for punitive damages. 

Hence, AG’s Motion for Summary Judgment is GRANTED. AG’s

request for an order declaring and adjudging that AG Policy

No. YM001651575 is null and void ab initio and rescinded is

GRANTED. Ms. Green is not entitled to the death benefit under

the Policy and is entitled only to a refund of premiums paid for

the Policy plus accrued interest, which is to be calculated

pursuant to California Civil Code § 3289. AG is ordered to issue

such amount to Ms. Green within thirty (30) days of the date of

this Order. The Clerk of the Court is directed to enter judgment

in favor of Plaintiff and Cross-Defendant and close the file.

IT IS SO ORDERED.

Dated: May 16, 2008

_____________________________

MORRISON C. ENGLAND, JR.

UNITED STATES DISTRICT JUDGE

 

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