### IN THE UNI TED STAT ES COURT OFAPPEALS FOR THE FIF TH CIRCU IT

No. 10-31016

ANGELA LEE WARREN FOSTER, Individually and as Trustee of the ELEANOR F. WARREN FAMILY TRUST, SHONDA FAYE WARREN LABORDE, WINDY WARREN DARBY, and GEORGE W. WARREN, JR.Plaintiffs-Appellees/CrossAppellants
v. UNITED OF OMAHA LIFE INSURANCE COMPANYDefendant-Appellant/CrossAppellee

Appeal from the United States District Court for the Western District of Louisiana USDC No. 6:08-CV-01170

Before WIENER, CLEMENT, and ELROD, Circuit Judges. PER CURIAM: * Before her death, Eleanor Warren, through a trust created in her name, applied for a life insurance policy from United of Omaha Life Insurance Company (“United”) but omitted mention of her lung condition, heart condition, and recent visits to three phy sicians. After Warren’s death, United rescinded U n i te d S ta te s C o u rt o f A p p ea l s

F i ft h C i rc u i t 

### F I L E D Sep tem ber 2 8, 2 011 Lyle W . Cayce Clerk

Pursua nt to 5 T H C IR

. R. 47.5 , the cour t has d ete rm inedt hat this op inion s houldnot * be publ ish ed and is not pr ece dent excep t unde r the lim ite d cir cum st ance s se t for th in 5 T H C IR

. R. 47.5 .4. Case: 10-31016 Document: 00511616202 Page: 1 Date Filed: 09/28/2011No. 10-31016

the policy because of these omissions. Plaintiffs-Appellees, W a r r e n ’s children (“Plaintiffs”), sue d U n i t e d under the policy. The district court held that Plaintiffs were entitled to recover under the policy because, among other
reasons, Warren had no intent to deceive United. We affirm the district court’s ruling that Plaintiffs are entitled to recover under the policy, its award of legal interest, and its ruling that Plaintiffs are not entitled to statutory penalties.

I. FACTS & PROCEEDINGS In 2001, Eleanor Warren, the Plaintiffs’ mother, created a trust (“the Trust”) for the benefit of her children. Since 2003, one of Warren’s daughters, Angela Lee Warren Foster, has served as Trustee. Until 2005, the Trust owned

a life insurance policy issued by Northwestern Mutual providing insurance benefits in the amount of $1 million to be paid to the Trust following Warren’s death. In 20 0 5 , t he Smith Insurance Agency (“Smith Agency”) suggested to Warren that the Trust would be able to save money on insurance premiums by seeking a diff

e rent insurer. The Trust first submitted an application for a replacement policy to Banner Life Insurance (“Banner”). On this application, Warren indicated that she had two treating physicians, Drs. Crac k o w e r a nd Steuben. She did not indicate o n the application that she had received treatment for heart disease, chest pa i n , o r l u ng ailments. Banner offered to issue a $1 million term policy, but for a higher than standard r a t e p r e m i u m because of Warren’s abnormal EKG and blood test results. Through the Sm i t h A gency, the Trust then submitted a life insurance application to United. Brandon Smith and Jessica B r e a u x , employees of the Smith Agency, reproduced the information from the Banner application onto the United application. Warren was not interviewed or physically examined for this application, but Smith as s erts that he reviewed the application with Warren

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over the telephone. United requested a report on Warren from the MIB Group,

a non-profit organ i z a t i o n of life insurance companies that collects information

on behalf of its members. The MIB report included a code indicating that Warren suffered f

rom chronic obstructive pulmonary disease (“COPD”) as reported in 2001. United also requested the medical records of Dr. Crackower, Warren’s family physician, for the period between June and October 2005. After this i nv estigation, the Smith Agency sent Warren and Foster the signature pages, but not the medical history section, of the United application, and Warren and Foster signed those pages. Two weeks after she signed the application, Warren s o ught treatment from a new physician, D r . M a l e k, for shortness of breath and wheezing on exertion. After ordering tests, Dr. Malek prescribed several drugs, an inhaler,

o x y g e n , a n d a vaccine. Warren then saw Dr. Malek’s partner, Dr. Fei, w h o prescribed furth e r treatment for the same condition. Meanwhile, at Smith’s suggestion, Warren agreed to seek a $2 million rather than a $1 million policy. Some time after United had approved Warren for a $2 million policy, Dr. Malek referred her to a third new doctor, Dr. Mounir, who concluded that Warren was at a high risk for cardiovascular disease. The day after her appointment with Dr. Mounir, Warre n met Smith for lunch to accept delivery of the United policy. Warren gave Smith a check for the first premium and signed the delivery receipt, which states t h a t it constitutes

an addendum to the policy. Foster never signed the addendum, although there

was a space for the signature of the trustee. The addendum states that Warren had “no change in health” and had “not consulted a health care provider or been hospitalized” since the date of applicatio n . T he addendum also contains the following statement: I/We understand that United of Omaha Life Insurance Company is relying upon the information set forth in thi s A ddendum and has

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made execution and delivery of th i s Addendum a condition of deliv e ry of this Policy. Incorrect or misleading information provided herein may void this Policy from its effective date.
Warren died from lung cancer on June 1, 2007. When processi n g the Trust’s claim on the policy, United o p e n e d an investigation and learned of Warren’s visits to Drs. Malek, Fei, and Mounir. Based o n t h i s information, United rescinded the policy and refunded the premiums paid. The following June, Plaintiffs filed suit against United seekin g f u ll payment of the $2 million life insurance policy as well as penalties based on the allegation that United denied the claim without just cause. After a trial on the briefs, the district court concluded t h a t Plaintiffs were entitled to recover the insurance proceeds but not statutory penalties. United filed a notice of appeal. Shortl y t hereafter, Plaintiffs cross-appealed the portion of the judgment dismissing their claim for statutory penalties.

II. STANDARD OF REVIEW When a judgment from a bench trial is appealed, we review questions of law de novo. The findings of fact from a bench trial are reviewed for clear error,

1 regardless whether they are based on oral testimony or documentary evidence. 2 Nevertheless: When, as is the case here, the evidence r e l i e d upon by the district court in making its findings consists solely of document s i n the record, the burden of establishing c l e ar error is not so great as where the court engaged in the judging of witness credib i l ity or in some other way was in a superior vantage point for finding facts. 3

Frenc h v

. Al ls tate Indem

. Co. , 637 F.3d571 , 577 (5t h Cir

. 2011)

. 1
F E D

. R. C IV

. P. 52(a)( 6); Ha ll v. Na t’l Gyps um Co. , 105 F.3d225, 228 (5t h Cir. 1997)

. 2
Ha ll , 105 F.3d at 228; see also Vo lks wa gen of Am ., Inc. v. Jahr e , 472 F.2d 557, 558- 59 3 (5t h Cir

. 1973)

. 4 Case: 10-31016 Document: 00511616202 Page: 4 Date Filed: 09/28/2011No. 10-31016

This is because, as we have noted, “we view precisely the same evidence as did the trial judge, from the same vantage point, neither tr ib u n a l being aided by those advan t ages in assessing witness credibility that flow from observing demeanor, reactions, and manner of testifying.” 4

III. ANALYSIS A. Insurance Proceeds The district court held that United waived its right to rescind Warren’s life insurance policy for misrepresentations in her original application by failing to conduct an adequate investigation in light of that which it knew about Warren’s health. The district court also concluded that those misrepresentations cannot be charged to Warren in any event because the applic a t i o n was completed by Smith. These conclusions are not presently at issue, as United conceded at oral argument that it could not rescind the poli c y b a s ed on misrepresentations in Warren’s original application. Rathe r , U n i t ed contends that the addendum to the insurance policy

c o ntains misrepresentations that entitle it to rescind the policy. To de n y coverage for misrepresentations in a life insurance appli c a t i o n , United must establish that (1) Warren’s statemen t s w e re false, (2) her misrepresentations

were made with an actual intent to d e c e iv e, and (3) her false statements materially affected its acceptance of risk. In determining whether an applicant 5 intended to deceive the insurer, a court must examine whether “ a t t e n d i ng

Coop er v. D ep ’t of Na vy of U. S. , 594 F.2d484 , 486 (5t h Cir

. 1979)

. 4
La. Rev. Sta t

. § 2 2 : 8 6 0 ; Johns on v. Oc ci dental Lif e Ins. Co. of Ca. , 368 So. 2d 1032, 5 1036 (La. 197 9) (ho ldi ng t hat each of thes e elem ents mus t be me t in ord er to res cind pol icy, notw iths tand ing the app aren tly disjunct ive language of the st atut e); Swa in ex rel

. Estate of Swa in v. LifeIns. Co. of La

. , 537 So. 2d129 7, 1299 (La. Ct

. App

. 1989) ( sam e).

5 Case: 10-31016 Document: 00511616202 Page: 5 Date Filed: 09/28/2011No. 10-31016

circumstance s ” indicate that the insured had knowledge of the falsity and materiality of the misrepresentations. 6 The district court found that, even if the statements in the addendum to the effect that Warren had “no change in health” and had “not consulted a health

care provider or been hospitalized” since sign i n g the original application were i n a c c urate and material, United failed to establish that Warren made thes e statements with intent to deceive. Whether an insured intended to deceive an insurer i s a f

actual finding that we review for clear error. The district court 7 b a sed its conclusion that Warren did not intend to deceive United o n t h e following discrete facts. First, Warren had suffered from the same ailments for at least five years, and Drs. Mounir and Malek testified that Warren underwent

no change in health between the submission of the application and the delivery of the policy. Second, the court found Smith to be not entirely credible because of multiple inaccur a c i es and equivocations in his deposition testimony. This, reasoned the district court, gave it cause to question whether Smith thoroughly reviewed the addendum with Warren during the delivery, which took place over lunch in a public re s t a u r a n t

. Third, Warren previously had in place an incontestable life insurance policy with Northwestern Mutual, and she switched policies only at Smith’s suggestion. Fourth, when asked specific questions about her medical history in a telephone interview, Warren answered truthfully. The district court did not commit clear error in finding that, for these reasons, United failed t o s h o w that Warren intended to deceive it when she signed the addendum. 8

Johns on , 368 So. 2d at 1036 (quo ting Wats on v. Lif e Ins. Co. of La. , 335 So. 2d 518, 521 6 (La. Ct

. App

. 1976) )

. Wohl ma n v . PaulRe ve re Lif e Ins. Co. , 980 F.2d283 , 285 (5t h Cir

. 1992)

. 7
See Swa in , 537 So. 2d at 1300 (ins uff icie nt evide nce that ins ured had inte nt to dec eive 8 beca use , amo ng othe r reas ons , “ h e w a s n o t ask ed to nor did he read the app lica tio n bef ore 6 Case: 10-31016 Document: 00511616202 Page: 6 Date Filed: 09/28/2011No. 10-31016

United also asserts that the addendum made Warren’s truthful disclosure of her medical history a condition precedent to coverage under the policy. Under L ouisiana law, a suspensive condition, or condition precedent, is “a fact u p o n which the rights and duties of the p a r t i e s depend.” Louisiana courts “do not 9 construe stipulations in a contract as suspensive conditions unless the express contract language compels such construction.” 1 0 H e r e , the addendum states that “executi o n a n d d e liv e ry o f thi s Ad d e n du m” is “a condition of delivery of this Policy.” The parties do not dispute that Warren executed the addendum and that the addendum was delivered to United. The 1 1 addendum further states: “Incorrect or misleading information provided herein may void this Policy from its effective date.” (emphasis added). This permissive language does not expressly compel the construction that complete disclosure is

a c o ndition precedent to coverage. Further, the circumstances under which a misrepresentation enables an insurer to rescind a policy are set out in Louisiana law, as discussed supra . Because the district court did not commit clear error 1 2 in finding th at Warren had no intent to deceive United when she signed the addendum, Plaintiffs are entitled to recover under the policy. 1 3

signi ng it”) ; seea ls o Sta te Fa rm M ut. Auto. Ins. Co. v. Br idge s , 36 S o. 3d 1142, 114 8 ( La. Ct. App

. 2010) (ins uredd id not inte nd to dec eive ins urer“wh en he was unawar e of w hat wa s in the for m” ).

LA

. C IV

. C ODE

. art

. 1767 cm t. (f)

. 9
Ti lley v. Low ery , 511 So. 2d124 5, 1247 (La. Ct

. App

. 1987)

. 1 0
We ne ed not add res s Plaint iffs’ argum ent that the add endu m didno t go i nto eff ect 1 1 beca use Angela Lee Warr en Fos ter , the Trus tee , never signe d it. We als o n o t e t h a t n eit her par ty argues that the policy as a wh ole did not go into eff ect beca use Fos ter never signed the add endu m.

See La. Rev. Sta t. § 2 2:86 0(A) (lim itin g t he ki nds of m isr epr es enta tio ns that“ sha ll 1 2 be dee me d mat eria l or def eat or void the cont rac t or prev ent it attac hing ”) (em phas is added).
Unit ed’ s reli ance upon Ho lm es v. Jef fe rso n Pilot Fina nci al Insura nce Co. , 907 So. 2d 1 3 185 (La. Ct. App

. 2005) , is mi sp lace d. In Ho lm es , the pot enti al ins u r ed com ple ted an 7 Case: 10-31016 Document: 00511616202 Page: 7 Date Filed: 09/28/2011No. 10-31016

B. Interest United seeks a reduction in the legal interest, tot a l i n g $60,000, that accrued during the time this matter was under advisement by the district court. United a p p e a l s to “basic fundamental principles of fairness and equity,” but there is no authority to support United’s position. Thus, we affirm the district 1 4 court’s award of legal interest in this matter.

C. Penalty Plaintiffs have asserted an additiona l c laim for penalties under former Louisiana Revised Statute § 22:656. Under that statute: 1 5 All death claims arising under policies of insurance issued or d e l ivered within this state shall be settled by the insurer wit h i n sixty days after the date of receipt of due proof of death, and if the insurer fails to do so without just cause, the amount due shall bear interest at the rate of eight percent per annum from date of receipt of due proof of death by the insurer until paid. Louisiana courts have held that “[a]n insurer’s refusal to pay can be found to be not ‘w i t h o u t just cause’ even though its defense is not subsequently upheld in

app lica tio n for a lif

e ins uranc e pol icy and signe d a con d i t i o n a l rec eip t that requ ired him to unde rgo a me dic al exam inati on, amo ng othe r requ irem ents , bef ore the pol icy coul d go i nto eff ect

. Id. at 186- 87. Ho lm es die d bef ore he coul d unde rgo the me dic al exam inat ion. The cour t heldthat beca use H olm es hadno t fulf illedal l o f the cond itio ns s pec ifi ed in therecei pt at the tim e of his dea th, the ins urer had n o t acc ept ed the app lica tio n and ther e wa s no cover age. Id. at 190. In the pr es ent cas e, by cont ras t, Unit ed acc ept ed Warr en’s app lica tio n, inclu ding the add endu m. Whet her Unit ed can nonet he l e s s r e s c ind the pol icy beca use of mi sr epr es enta tio ns in the add endu m is det erm ined by ref err ing to Louis iana law , as dis cus se d sup ra . See Tr ans -G lob alAlloy Ltd. v. First Na t’l Bankof Jef fe rso n Pa ri sh , 583 So. 2d443 , 1 4 457- 58 (La. 1 9 9 1 ) ( unde r the civil law , pr ejudgm ent inte res t is requ ired in ord er to mak e a plai ntif f wh ole)

. Now renum bere d La. Rev. Sta t. § 22:1 811 by Acts 2008, No. 415 § 1, eff

. Jan. 1, 2009. 1 5 8 Case: 10-31016 Document: 00511616202 Page: 8 Date Filed: 09/28/2011No. 10-31016

court” and that a penalty should not be imposed if the insurer was justified in

1 6 believing that it had found sufficient reasons to deny the claim. 1 7 United’s investigation revealed substantial omissions by Warren as to the state of her health and her visits to additional physician s . E ven though its defenses have not ultimately prevailed, United w a s not without just cause in withholding payment under the policy, so we affirm the district court’s decision not to impose penalties.

IV. CONCLUSION The district court did not commit clear error in finding that Warren had

no intent to deceive United when she signed the addendum to the life insurance policy. We therefore affirm the district court’s ruling that Plaintiffs are entitled to recover from United under t h e policy. We also affirm the district court’s award of legal interest. Additionally, we affirm the district court’s ruling that Plaintiffs are not entitled to recover statutory penalties from United. AFFIRMED.

Bertrand v. Protec tiv e Lif e Ins. Co. , 419 So. 2d 1254, 1260 (La. Ct. App

. 1982) (c itin g 1 6 Du cote v. LifeIns. Co. of La. , 245 So. 2d 531 (La. Ct. App

. 1971) ; seea ls o H endr ic ks v. Con n. Ge n. Lif e Ins. Co. , 244 So. 2d249 ( La. Ct. Ap p. 197 1))

. Bertrand , 419 So. 2d at 1259; cf

. Swa in , 537 So. 2d at 1304 (p enalt ies we re just ifi ed 1 7 wh en an inves tigat ion “w ould have revealed to the def enda nt that its def

ens es we re sp urio us” ). 9 Case: 10-31016 Document: 00511616202 Page: 9 Date Filed: 09/28/2011