# U ni te d S ta te s Co ur t of A pp ea ls
For the Eig hth Circu it

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No. 1 3- 32 55

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PHL Varia bl e In su ran ce Co m pa ny

ll ll ll ll ll ll ll ll ll ll l Pla in ti

ff - App el le e

v.

20 08 Ch ris ta Jo se ph Irre vo cab le Trus t, by an d th ro ug h it s tr ust ee , BN C N atio na l Ban k

ll ll ll ll ll ll ll ll ll ll l Defe nd

an t

Mi da s Li fe Se tt le m en ts LLC

ll ll ll ll ll ll ll ll ll ll l In te rv en or Defe nd an t - App el la nt

__ __ __ __ __ __ App eal fro m

Uni te d S ta te s Di st ric t Co ur t fo r th e Dis tri ct of M in ne so ta - Mi nn eap ol is

__ __ __ __ __ __

Su bm it te d: Octo be r 8, 2 01 4 Fil ed : Ap ril 9, 2 01 5

__ __ __ __ __ __

Befo re LOKEN, COLLO TON, and SHEPHERD, Circ ui t J ud ge s.

__ __ __ __ __ __ SHEPHERD, Cir cu it Ju dg e.PHL Vari ab le In su ran ce Co m pa ny br ou gh t th is act io n to res ci nd a $1 0 m il li on li fe-i ns ur an ce po li cy aft er it di sc ov ered th e po li cy ap pl ic at io n gr os sl y m is rep res en te d

th e in su red ’s fin an ces

. Fo ll owi ng a be nc h tri al

, th e di st ric t co ur t gr an te d res ci ss io n. 1

Mi da s Li fe Se tt le m en ts LLC no w app eal s. We affir m

.

I.

Alt ho ug h th is was no t a si m pl e cas e be lo w—p ro ceed in gs be fo re th e di st ric t

co ur t sp an ne d th ree y ears , r e q u i red ov er two -h un dr ed -fi fty do ck et en tri es , an d

in cl ud ed a si x- da y be nc h tri al —t he di st ric t co ur t d e v e l op ed th e reco rd well

. W e be gi n with th e rel ev an t fact s, as fou nd by the di st ric t cou rt, whic h are not co nt es te d

he re. The in su red was a ret ire d se am st res s na m ed Ch ris ta Jo se ph

. Jo se p h w a s of

m od es t m ean s. Her an nu al ho us eh ol d in co m e ne ve r ex ceed ed $4 0,0 00 an d he r m os t

va lu ab le pr op ert y was a co nd om in iu m wor th $1 69 ,99 0, wh i c h ha d go ne in to
fo recl os ur e. Jo se ph was bo rn in Hait i. Alt ho ug h sh e ha d li ve d i n t he Uni te d Stat es fo r so m e y ears , sh e d id no t s pe ak Eng li sh well

.

A m an na m ed Jo ha nn Jo hn Je an in di rect ly r e f erre d Jo se ph to th e in su ran ce

ag en cy Div ers e Fi na nc ia l. Jo se ph di d no t kn ow Je an , an d th ey ha d ne ve r m et

. Je an refe rred ret ire es to Div ers e fo r a fee. In Apr il 20 08

, Div ers e su bm it te d an ap pl ic at io n fo r a $1 0 m il li on li fe-i ns ur an ce p o l i c y on Jo se ph ’s li fe to PHL. The ap pl ic at io n fal se ly st at ed Jo s e p h’s ne t wor th was $1 1,9 06 ,00 0 an d he r ot he r in co m e was $4 97 ,00 0. The ap pl ic at io n li st ed th e 20 08 Ch ris ta Jo se ph Irre vo cab le Tr u s t as th e

pr op os ed be ne fic ia ry

. In earl y Ju ne 20 08

, Jo se ph si gn ed an ag reem en t est ab li sh in g th e 20 08 Ch ris ta Jo se ph Irre vo ca b l e Trus t (th e “ Trus t” ). The Trus t’s in te nd ed

pu rp os e was to own li fe in su ran ce po li ci es pu rch as ed on Jo se ph ’s li fe an d to co m pl y wit h t h e t e r ms of a rel at ed fin an ci ng ag reem en t. Jo se ph de si gn at ed he r da ug ht er,

The Hon or ab le Pat ric k J. Sch il tz
, Uni te d St at es Dis tri ct Ju dg e fo r th e Dis tri ct 1
of Mi nn es ot a.

-2

-Hele n Ram sa y , as th e be ne fic ia ry

. Sh e ap po in te d BNC Nati on al Ban k as th e tru st ee

an d Je an as th e tru st pr ot ect or

. Je an se rv ed as tru st pr ot ect or at th e be he st of Dor on
Am ir, who was a pr in ci pa l or ag en t o f Div ers e. Afte r Jo se ph est ab li sh ed th e Trus t,

Je an , as tru st pr ot ect or , di rect ed BNC to ap pl y fo r an d pu r c h a s e a $1 0 m il li on li fein su ran ce po li cy fro m PHL. In Ju ne 20 08

, PHL rece iv ed an ap pl ic at io n fo r in su ran ce th at was es se nt ia ll y a co py of th e Apr il ap pl ic at io n. The Ju ne ap pl ic at io n al so fal se ly

st at ed Jo se ph ’s ne t wor th was $1 1,9 06 ,00 0 an d he r ot he r i n c o me w a s $4 97 ,00 0.

Jo se ph an d B NC bo th si gn ed th e Ju ne ap pl ic at io n.

The fal se fin an ci al in fo rm at io n was in se r t e d i n t o th e ap pl ic at io n as pa rt of a la rg er sc he m e to de frau d PHL. Div ers e—a nd in pa rti cu la r on e of it s pr in ci pa ls

, Ro y Dek el —was “ gr ou nd zero ” fo r th is frau d:

Dek el

. . . arra ng ed to ha ve Jo se ph si gn a bl an k ap pl ic at io n, aft er whi ch he cau se d fla gr an t l y fal se in fo rm at io n ab ou t Jo se ph ’s ne t wor th an d in co m e to be in se rt ed in to th e ap pl ic at io n.

. . . Dek el li ke ly wo rk ed in

co nju nc ti on wit h Ami r , who al so pl ay ed so m e ro le in pr oc ur in g th e Po li cy an d who as ke d Je an to se rv e as th e tru st pr ot ect or

. . . . Dek el an d Am ir act ed wit h frau du le nt in t e n t fo r th e pu rp os e of in du ci ng PHL to is su e a hi gh -v al ue li fe-i ns ur an c e p o l ic y th at wou ld ge ne rat e a la rg e

co m m is si on for

Div ers e.

PHL Vari ab le In s. Co

. v. 20 08 Ch ris ta Jo se ph Irre vo cab le Trus t, 97 0 F. Su pp

. 2d 93 2,

93 8 (D. Mi nn . 20 13 ). F ur th er, “ [i]n hi s cap aci ty as tru st pr ot ect or , J ean kn owi ng ly

pa rti ci pa te d in th is frau du le nt sc he m e an d kn ew th at Div ers e su bm it te d wil lfu ll y fal se

an d in te nt io na ll y m is le ad in g fin an ci al in fo rm at io n to PHL in or de r to ob ta in a hi gh

va lu e li fe-i ns ur an ce po li cy on th e li fe of Jo se ph .” Id

. Howev er, “ Jo se p h d i d n o t

pe rs on al ly kn ow of th e m is rep res en ta ti on s on th e in su ran ce ap pl ic at io ns

. . . . It is

li ke ly th at sh e si gn ed at le as t so m e do cu m en ts —i nc lu di ng th e Po li cy ap pl ic at io n— in

bl an k.” Id

. a t 9 3 7

. It is al so un li ke ly Jo se ph “ un de rs to od m uc h m or e th an th at a

po li cy in so m e am ou nt ha d b een tak en ou t o n h er l ife .” Id

.

-3

-PHL is su ed a $1 0 mi ll io n li fe-i ns ur an ce po li cy on Jo se ph ’s li fe in Ju ly 20 08

(th e “ Po li cy ”). The Trus t was na m ed as be ne fic ia ry

. Alt ho u g h “ PHL’ s fin an ci al

un de rwri ti ng of th e [Po li cy ] le ft a lo t t o b e d es ire d,” PHL “ di d n ot de li be rat el y tu rn a b li nd ey e” to th e ap pl ic at io n’s p ro bl em s. Id . at 9 40 . “ Mo reo ve r, an y un de rwri te r

at th e ti m e wou ld ha ve ha d tro ub le gr as pi ng th e m ag ni tu de an d au da ci ty of th e frau d

th at was b e i n g p e r

p e tra te d ag ai ns t PHL.” Id

. The Trus t fin an ced th e Po li cy 2

pr em iu m s th r o u gh a lo an fro m PFG Pri va te Fi na nc in g, LLC. Afte r PFG Pri va te

or ig in at ed th e lo an , it as si gn ed it s in te res t to PFG Loa ns Fu nd in g, LLC. Rep ay m en t

on th e lo an was du e Ju ly 23

, 20 10

. In May 20 10

, Je an si gn ed a le tt er di rect in g BNC

to su rren de r th e Po li cy to PFG Loa ns in fu ll sa ti sf act io n of t h e Trus t’s fin an ci al

ob li ga ti on s. Jo se ph an d BNC al so si gn ed th is le tt er. In Aug us t 20 10

, BNC en te red

an ag reem en t to tra ns fer th e Po l i c y f r o m th e Trus t to PFG Loa ns

. PFG Loa ns la te r

so ld th e Po li cy

to Est at e Pl an ni ng LLC, whic h t he n s ol d t he Po li cy to Mi da s. 3

PHL br ou gh t th is act io n ag ai ns t th e Trus t in Ju ly 20 10

, wit hi n th e Po li cy ’s two

y ear co nt es ta bi li ty pe rio d, se ek in g to res ci nd th e Po li cy fo r frau d i n t he Po li cy

The frau d wen t well be y on d fals ifyin g Jo se ph ’s fin an ci al in fo rm at io n on th e 2
Po li cy ap pl ic at io n. Fo r ex am pl e, m os t li ke ly ei th er Dek el o r A mir frau du le nt ly

pr oc ur ed au th or iz at io n fo r Dek el ’s wife

, Sh ay na Gol db ur g, to be co m e an au th or iz ed
PHL ag en t. Eit he r Dek el or Am ir al so fo rg ed Gol db ur g’s si gn at ur e on th e Apr il an d Ju ne ap pl ic at io ns , fal se ly li st in g he r as th e li cen se d pr od uc er. And ei th er Dek el or Am ir fo rg ed ot he r do cu m en ts pu rp or te dl y su bm it te d by Gol db ur g to PHL in su pp or t of th e Po li cy ap pl ic at io n. Thi s is no t to m en ti on PHL rece iv ed “ fal se ta x ret ur ns [fo r Jo se ph ] su pp os ed ly p rep ared by a CPA who was a real CPA b ut who , it tu rn ed ou t, ha d n ev er ev en he ard of J os ep h.” PHL Variab le Ins . Co., 9 70 F. Sup p. 2 d a t 9 40

.

W hi le PHL di sp ut ed th e va li di ty of th es e tra ns fers in th e di st ric t co ur t, it do es 3

no t rai se th ei r va li di ty as an is su e on ap pe al

. W e th eref or e as su m e th e tra ns fers were

va li d.

-4

-ap pl ic at io n. The Trus t di d no t ap pe ar in th e act io n, an d Est at e Pl an ni ng in te rv en ed 4

as a de fen da nt

. The di st ric t co ur t la te r su bs ti tu te d Mi da s as in te rv e n o r

- d e f e nd an t
aft er it acq ui red th e Po li cy

. Afte r Jo se ph di ed fro m can cer in Sep te m be r 20 11

, Mi da s fil ed a co un te rcl ai m fo r th e Po li cy pr oc eed s. Fo ll owi ng a b e n ch tri al

, th e di st ric t

c o u r t gr an te d res ci ss io n an d he ld th at PHL c ou ld ke ep th e Po li cy pr em iu m

. M i d a s

no w rai se s two arg um en ts on ap pe al : (1 ) th at PHL can no t res ci nd th e Po li cy be cau se it s own ag en t co m

pl et ed th e Po li cy ap pl ic at io n an d Jo se ph was un aware of th e

m is rep res en ta ti on s; an d (2 ) th at PHL is es to pp ed fro m res ci nd in g th e Po li cy be cau se it ha d re as on to kn ow o f th e m is rep res en ta ti on s.

II.

Fo ll owi ng a be nc h t r i a l

, we rev ie w th e di st ric t co ur t’s le ga l co nc lu si on s de

no vo an d it s fact ua l fin di ng s fo r cl ear erro r. Urb an Hot el Dev

. Co

. v. Pres id en t Dev

. Grp ., L.C., 53 5 F.3 d 87 4, 87 9 (8 th Ci r. 20 08 ). “ As a di ve rs it y cas e, we m us t ap pl y Mi nn es ot a la w.” In te gr it y Fl oo rco ve rin g, In c. v. Bro an -Nu to ne , LLC, 52 1 F.3 d 91 4,

91 7 (8 th Ci r. 20 08 ). “ If th e Mi nn es ot a Su pr em e Co ur t ha s no t sp ok en on a pa rti cu la r is su e , we m

us t at te m pt to pr ed ic t ho w th e Mi nn es ot a Su pr em e Co ur t wou ld de ci de

an is su e an d ‘m ay co ns id er rel ev an t st at e pr eced en t, an al og ou s de ci si on s, co ns id ered

PHL al so cl ai m ed th e Po li cy w a s vo id fo r la ck of an in su rab le in te res t an d 4
la te r arg ue d Mi da s di d no t own th e Po li cy an d th us la ck ed s t an di ng

. W e no te we

rece nt ly de ci de d an ot he r cas e whe re PHL cl ai m ed a po l i c y w a s v o i d fo r la ck of an in su rab le in te res t. See PHL Vari ab le In s. C o

. v. Ban k of Utah

, No. 14 -1 21 0, 20 15 W L 10 86 24 6, at *4 (8 th Ci r. Mar ch 13

, 20 15 ) (p red ic ti ng th at Mi nn es ot a Su pr em e Co ur t wou ld fin d th at
, un de r Mi nn es ot a c o mm on la w, “ a po li cy pu rch as ed by an in su red on hi s own li fe wo ul d [n ot ] be vo id ab in it io at th e in st an ce of the in su rer” ) (in te rn al qu ot at io n m ark s om it te d)

. Here, t h e d i s t ric t co ur t de cl in ed to de te rm in e whe th er th e Po li cy was vo id fo r la ck of an in su rab le in te res t an d fo u n d Mi da s po ss es se d st an di ng

. The se is su es ha ve no t be en rai se d on ap pe al

, an d we ne ed no t ad dr es s t he m

.
-5

-di ct a . . . and an y ot he r rel ia bl e da ta .’ ” Id . ( al te rat io n i n o rig in al ) (q uo ti ng Kov ari k

v. Am . Fam il y

Ins . Grp., 1 08 F.3d 96 2, 9 64 (8t h C ir. 1 99 7) ).

W e fir st ad dr es s Mi da s’s arg um en t th at PHL can no t res ci nd th e Po li cy be cau se
Jo se ph was un aware of th e m is rep res en ta ti on s PHL’ s own ag en t m ad e in th e Po li cy

ap pl ic at io n. The pa rti es ag ree th at Mi nn es ot a co m m on la w c o n t r o l s ou r res ol ut io n of th is is su e be cau se , a s t h e d i st ric t co ur t pu t it , t hi s cas e “ fal l[s ] be twee n st at ut or y

crac ks .” PHL Va ria bl e In s. Co ., 9 70 F. Su pp . 2 d a t 9 4 1 ; se e Mi nn . S ta t. § 60 A.08

,

su bd

. 9 (ex cep ti ng li fe in su ran ce fro m se ct io n ad dr es si ng in su ran ce ap p l i can t’s

m i sr ep res en ta ti on s) ; Mi nn

. St at

. § 61 A.11 (co ve rin g li fe-i ns ur an ce po li cy

m is st at em en ts rel at in g on ly to “ ag e, ph y si cal co nd it io n, an d fam il y hi st or y ”). Und er Mi nn es ot a co m

m on la w, in su rers ge ne ral ly m ay res ci nd a po li cy if th ey d i s c o ve r

m at eri al m is rep res en ta ti on s in th e po li cy a p p l i c at io n. See Peri ne v. Gran d Lod ge
A.O.U.W

., 53 N.W

. 36 7, 36 8 (Mi nn

. 18 92 ) (“ In so far as th e an swe rs gi ve n [in an in su ran ce ap pl ic at io n] we re m at eri al

, . . . th ey m us t ha ve be en su bs ta nt ia ll y tru e, in

su bs ta nt ia l acco rd an ce wit h th e fact s st at ed

, or th e po li cy wou ld ha ve be en av oi de d,

ev en th ou gh an y m is st at em en t

. . . was m ad e ho ne st ly, an d no t frau du le nt ly.”); se e al so Sch m it t v . U.S. Fid . & Gua r. Co ., 21 0 N.W. 84 6, 8 49 (Mi nn . 19 26 ) (“ W e h av e he ld th at , if a m is rep res en ta ti on is m at eri al , no in te nt to de cei ve ne ed be sh own .”). 5

Mi da s d o e s n o t ap pe al th e di st ric t co ur t’s de te rm in at io n th at th e fin an ci al

m is rep res en ta ti on s in t h e Po li cy ap pl ic at io n were m at eri al

. Bu t it co nt en ds PHL

can no t av ai l it se lf of th e ge ne ral ru le pe rm it ti ng res ci ss io n be cau se PHL’ s own ag en t,
Div ers e, was res po ns ib le fo r t h e m is rep res en ta ti on s. Eve n as su m in g Div ers e was
PHL’ s ag en t, a p oi nt PHL con te st s, we d is ag ree.

Mi da s ha s dr awn ou r at te nt io n to Lars on v. Nor th wes te rn Mu tu al Life 5
In su ran ce Co

., 85 5 N.W .2d 29 3 (Mi nn

. 20 14 ), whe re th e Mi nn es ot a Su pr em e Co ur t

rece nt ly he ld “ th at ev id en ce of th e in su red ’s su bjec ti ve in te nt is req ui red whe n an in su rer seek s to res ci nd a po li cy un de r Mi nn

. St at

. § 61 A.11 .” Id

. at 29 9. Lars on is in ap po si te be cau se Mi nn . Sta t. § 61 A.11 do es no t co nt ro l h ere.

-6

-Mi da s rel ie s o n P o m eren ke v. Farm ers Life In su ran ce Co

., 36 N.W .2d 70 3

(Mi nn

. 19 49 ), whe re th e Mi nn es ot a Su pr em e Co ur t e x p la in ed th at in cert ai n ci rc um sta nc es in su rers are pr oh ib it ed fro m res ci nd in g po li ci es on th e ba si s of m at er ia l

m is rep res en ta ti on s:

W he re an ap pl ic at io n fo r in su ran ce is m ad e ou t by an in su ran ce ag en t in th e co ur se of hi s ag en cy an d th e in su red tru th fu ll y gi ve s th e ag en t th e

co rrec t an sw e r s , b u t th e ag en t reco rd s th e an swe rs in th e ap pl ic at io n in co rrec tl y wit ho ut th e fau lt

, kn owl ed ge , or co ll us io n of th e in su red

, an d th e in su red si gn s th e ap pl ic at io n wit ho ut fir st ha vi ng read it —al th ou gh he ha d th e op po rtu ni ty to do so —i n rel ia nc e up on th e go od fai th of th e ag en t, th e in su ran ce co m

pa ny is no t rel ie ve d fro m li ab il it y on th e po li cy , an d th e act of th e ag en t in reco rd in g in co rrec t an swe rs is de em ed th e act of th e in su rer a nd no t t ha t o f th e in su red

.

Id

. at 70 6. Thi s pr op os it io n is well -es ta bl is he d in Mi nn es ot a la w, an d in fact pr eda te s Po m eren ke

. See, e.g ., Kan se l v. Mi nn

. Farm ers ’ Mu t. Fi re In s. Ass ’n, 16 N.W

. 43 0, 4 30 (Mi nn . 18 83 ). For co nv en ie nc e, we refe r to it as t he “ Po m eren ke rul e.”

Afte r care fu l rev ie w, we pr ed ic t th e Mi nn es ot a Su pr em e Co ur t wou ld no t ap pl y th e Po m eren ke ru le to th is cas e. The Po m eren ke ru le req ui res th e in su red to pr ov id e

tru th fu l an swe rs to th e ag en t. See Zim m erm an v. Ban ke rs ’ Cas

. Co

., 16 5 N.W

. 27 1,

27 2 (Mi nn . 1 91 7) (s tre ss in g th at Po m eren ke ru le ap pl ie s “ [i]f, at th e ti m e of gi vi ng th e ap pl ic at io n in qu es ti on , th e [in su red ] m ad e to th e ag en t a f u l l, fai r, an d tru th fu l

st at em en ts of fact s” ). Tha t is no t wha t ha pp en ed h e r e

. Rat he r, Dek el arra ng ed fo r
Jos ep h to si gn a bl an k po li cy ap pl ic at io n, fal si fie d Jo se ph ’s fin an ci al in fo rm at ion, an d

di d so as pa rt of a la rg er sc he m e to de frau d PHL. Mi da s do es no t arg ue an y fact s on

ap pe al th at wou ld su pp or t a cl ai m th at Jo se ph pr ov id ed tru th fu l ans wers

. And aft er in de pe nd en tl y rev ie win g th e reco rd

, we fin d no ne

. Cf. Dah lk e v. Met ro

. Life In s. Co

., 15 N.W .2d 52 4, 52 5 (M in n. 1 94 4) (pl aci ng bu rd en on de fen da nt to pro ve de fen se );

Gud e v. Exc h. Fi re In s. Co

. of N.Y., 54 N.W

. 11 17

, 11 17 (Mi nn

. 18 93 ) (h ol di ng th at

-7

-pl ai nt iff

-in su red s se ek in g to be ne fit fro m Po m eren ke ru le bo re bu rd en of p ro vi ng

ag en cy ).

The pu rp os e of th e Po m eren ke ru le is to pr ot ect an in su red w h o “re li e[s ] in

go od fai th on th e ag en t’s co m pl et in g th e ap pl ic at io n co rrec tl y .” Ser Yan g v. W .-S.
Life Ass ur an ce Co

., 71 3 F.3 d 42 9, 43 3 (8 th Ci r. 20 13 ). It wou ld no t se rv e t ha t

pu rp os e to ap pl y th e Po m eren ke ru le he re be cau se an in su red who s i g n s a b l a nk

ap pl ic at io n wit ho ut pro vi di ng th e ag en t tru th fu l an swe rs can no t tru st in th e ag en t’s

fai th fu l tra ns cri pt io n. See Sm it h v. Ben efi t Ass ’n of Ry

. Em ps ., 24 4 N.W

. 81 7, 81 8 (Mi nn

. 19 32 ) (s ta ti ng th at th e Po m eren ke ru le ap pl ie s whe re th e in su red “ is wit ho ut
kn owl ed ge th at th e an swe rs are in co rrec tl y writ te n an d i s no t at fa ul t in no t
kn ow in g ”) (e m

ph as is ad de d)

.

Mi da s cit es no cas es , an d we fin d no ne , whe re the Mi nn es ot a Su pr em e Co ur t

ap pl ie d th e Po m eren ke ru le whe re th e in su red si gn ed a bl an k po li cy ap pl ic at io n wit ho ut pr ov id in g tru th fu l an s w e r s

. To th e co nt rary, in th e on e cas e we di d fin d

ad dr es si ng an ap pl ic at io n “ si gn ed in bl an k,” th e M i n ne so ta Su pr em e Co ur t

em ph as iz ed th at th e Po m eren ke ru le ap pl ie d on ly be cau se th e jury co ul d ha ve fo un d

“ whe n th e ap pl ic at io ns were ta ke n, [th e in su red ] st at ed fact s to [th e ag en t] whi ch he

fai le d to m en ti on in th e an swe rs he fil le d in

, al th ou gh [th e in su red ] ha d req ue st ed hi m

to do so .” Sch m it t, 2 10 N.W . at 8 48

.

Mi da s ne v e r t h e l es s in si st s two cas es , Hafn er v. Pru de nt ia l In su ran ce Co

. of

Am eri ca, 24 7 N.W

. 57 6 (Mi nn

. 19 33 ), an d Ser Yan g, sh ow th at th e Po m eren ke ru le

ap pl ie s ev en whe re th e in su red fai ls to pr ov id e an y tru th fu l an s w e r s

. We di sa gr ee. Hafn er is in ap po si te be cau se it was de ci de d un de r a st at ut e pe rm it ti ng res ci ss io n on ly

whe re th e in su red m ad e “ wil fu ll y fal se or in te nt io na ll y m is le ad in g” st at em en ts

. 24 7

N.W

. at 57 8 (in te rn al qu ot at io n m ark s om it te d)

. A n d th e ci ta ti on to Ser Yan g is

un pe rs ua si ve

. In th at cas e we he ld th e Po m eren ke ru le co ul d ap pl y whe re te st im on y

su gg es te d th e ag en t fai le d to as k th e in su red on e qu es ti on ab ou t he r m ed ic al hi st or y

.

-8

-See Ser Y an g, 71 3 F.3d at 43 2- 33

. Yet bec au se th e in su red pr ov id ed an swe rs to al l

th e ot he r qu es t i o n s t h e ag en t as ke d, we he ld “ a reas on ab le jury co ul d fin d th at [th e in su red ] rel ie d in go od fai th on th e ag en t’s co m pl et in g th e ap pl ic at io n co rrec tl y .” Id

. at 43 3. Ser Yan g th us sh ows an ag en t’s fai lu re to as k on e qu es ti on do es no t de feat

th e in su red ’s go od -fai th rel ia nc e on th e ag en t’s a ccu rat el y reco rd in g th e in su red ’s

an swe rs to th e qu es ti on s th e ag en t di d as k. It do es no t su gg es t in su red s ne ed pr ov id e

no an swe rs at a ll

.

Mi da s fu rth e r a r g u es th e Po m eren ke ru le sh ou ld ap pl y in th is cas e be cau se

un de r Mi nn es ot a la w “ th e ris k of lo ss is pr op erl y pl aced w i t h i n s ur an ce co m pa ni es fo r an y erro rs an d m is rep res en ta ti on s by th e in su ran ce ag en ts .” A p p el la nt Br. 24 (em ph as is ad de d)

. W e be li ev e Mi d a s ov ers ta te s Mi nn es ot a la w. Mi da s rel ie s on
Kan se l, y et Kan se l ne ve r m ad e as br oa d a st at em en t as Mi d a s makes he re. The

qu es ti on th ere was whe th er in su rers co ul d es cap e th e Po m eren ke ru le by st ip ul at in g in th ei r po li ci es th at al l st at em en ts in th e ap pl ic at io n wou ld be ch arg ed to th e in su red

. Kan se l, 16 N.W

. at 43 0- 31

. In ho ld in g th e st ip ul at io ns in su ffi ci en t, th e Mi nn es ot a
Su pr em e Co ur t no te d th at in su ran ce ag en ts “ m us t be de em ed th e ag en ts of th e in su rers an d no t of th e in su red in al l th at th ey do in pr ep ari ng th e ap pl ic at io ns .” Id

. at 43 0. Bu t Kan se l ne ve r he ld th at in su rers wou ld be ar res po ns ib i li ty fo r al l th ei r

ag en ts ’ m is de ed s. In st ead

, it st at ed th at in su rers wou ld be he ld r es po ns ib le fo r

m is rep res en t a t io ns in po li cy ap pl ic at io ns whe re th e ci rcu m st an ces de sc rib ed in

Po m eren ke ap pl ie d; th os e ci rcu m st an ces , of co ur se , do no t in vo lv e an in su red si gn in g

a bl an k ap pl ic at io n wit ho ut pr ov id in g tru th fu l an swe rs

. See Kan se l, 16 N.W

. at 43 0 (“ [W] he re an ag en t to pr oc ur e an d fo rward ap pl ic at io ns for in su ran ce, ei th er by h is

di rect io n or di rect act
, m ak es ou t an ap pl ic at io n in co rrec tl y , no tw it hs ta nd in g al l th e fa ct s ar e co rr ect ly st at ed to hi m by th e ap pl ic an t , th e erro r is ch arg eab le to th e in su rer

. . . .”) (em

ph as is ad de d) ; se e al so Sh au gh ne ss y v. N.Y. Life In s. Co

., 20 3 N.W

. 60 0,

60 2 (Mi nn

. 1 9 2 5) (s ta ti ng th at Kan se l req ui red th e in su red to “ co rrec tl y st at e[] th e fact s to th e i n s u rer’s ag en t,” an d fin di ng Kan se l in ap pl ic ab le in pa rt be cau se “ [n ]o

ev id en ce was in tro du ced sh owi ng th at th e fac ts were co rrec tl y st at ed ”).

-9

-Mor eo ve r, an other Mi nn es ot a Su pr em e Co ur t cas e di rect ly co nt rad ic ts Mi das’ s

as se rti on th at th e Mi nn es ot a Su pr em e Co ur t ho ld s in su rers li ab le fo r al l th ei r ag en ts ’

m is de ed s. In Brat l e y v. Bro th erh oo d of Am eri can Yeo m en , 19 8 N.W

. 12 8 (Mi nn

. 19 24 ), th e Mi nn es ot a Su pr em e Co ur t he ld th at an in su rer m ay res ci nd a po li cy whe re th e in su ran ce ag en t an d th e in su red bo th kn ow of th e m at eri al m is rep res en ta ti on s. Id

. at 13 1- 32

. The Mi nn es ot a Su pr em e Co ur t reas on ed in Brat le y it co ul d no t “ ho ld th at
th e in su rer is bo un d by st at em en ts co nt ai ne d in an ap pl ic a t i o n w h en no t on ly th e

ag en t, bu t th e [in su red ], kn ows th ey are un tru e

. . . . To do so wou ld pu t th e [in su rer]

co m pl et el y at th e m ercy of di sh on es t an d un sc ru pu lo us ag en ts .” Id

. at 13 2. W e fin d

th e fact s at ha nd m or e cl os el y res em bl e Brat le y th an Po m eren ke

. W e do no t be li ev e the Mi nn es ot a Su pr em e Co ur t wou ld ho ld PHL res po ns ib le fo r th e m isre pr es en ta tio ns whe re Jo se ph si gn ed a bl an k ap pl ic at io n wit ho ut pr ov id in g tru th fu l an swe r s t o Div ers e

. Cf. Ced ar Rap id s Nat’l Ban k v. Mo tt le , 1 32 N.W . 9 11 , 9 12 (Mi nn . 1 91 1) (“ [W] he re on e of two in no cen t pa rti es m us t su ffer th e lo ss , th e on e who se ne gl ig en ce

co nt rib ut ed to cau se th e lo ss m us t st an d it .”). As th is cas e well m ak es cl ear, “ [t]o do

so wou ld pu t [PHL] co m

pl et el y at th e m ercy of di sh on es t an d un sc ru pu lo us ag en ts .”

Brat le y , 19 8 N.W. at 13 2.

It fo ll ows th at PHL m ay res ci nd th e Po li cy ba se d on th e ap pl ic at io n’s m at eri al

m is rep res en ta ti on s of Jo se ph ’s fin an ces

. To th e ex te nt th e di st ric t co ur t to ok it s

an al y si s fu rth er— co nc lu di ng th at Je an ’s kn owl ed ge of th e m is rep res en ta ti on s co ul d

be at tri bu te d to Jo se ph or th e Trus t be cau se Je an was an ag en t of ei th er Jo se ph or th e
Trus t— we fi nd th is di sc us si on un ne ces sa ry to th e res ol ut io n o f th e cas e.

III.

W e ne xt ad dr es s Mid as ’s arg um en t th at PHL is es to pp ed fro m res ci nd in g th e
Po li cy be cau se it ha d reas on to kn ow of th e m is rep res en ta ti on s in t he ap pl ic at io n. Mi da s cl ai m s two Mi nn es ot a Co ur t of App eal s cas es , Dom ke v

. Farm ers &

Mec ha ni cs Sav in g s B a n k, 36 3 N.W .2d 89 8 (Mi nn

. Ct

. App

. 19 85 ), an d Alwes v.

-1 0-Hart fo rd Life & Acci de nt In su ran ce Co

., 3 7 2 N.W .2d 37 6 (Mi nn

. Ct

. App

. 19 85 ),

“ st an d fo r th e pr op os it io n th at an in su rer ha s a du ty to reas on ab ly in ve st ig at e th e fact s

st at ed in a po li cy ap pl ic at io n.” App e l l a n t B r

. 44

. Si m pl y pu t, th es e cas es do no t

st an d fo r so br oa d a pr op os it io n. Cf. Grin ne ll Mu t. Rei ns ur an ce Co

. v. DeCam p,
19 94 W L 19 37 63

, at *2 (Mi nn

. Ct

. App

. May 9, 19 94 ) (u np ub li sh ed ) (“ In Alwes an d

Dom ke

, waiv er ap pl ie d be cau se th e in su red s in di cat ed sp eci fic ph y si cal im pa irments

whi ch th e in su rers ig no red an d gr an te d co ve rag e, bu t la te r de ni ed cl ai m s ba se d on th e

pr e-ex is ti ng im

pa irments .”). Nor are th ey on po in t he re, be cau se ne it he r in vo lv ed a

m at eri al m is rep res en ta ti on

. See Dom ke

, 36 3 N.W .2d at 90 0 (fi nd in g th at tri al co ur t
di d no t cl earl y err in de te rm in in g in s u r e d ’s st at em en t was no t a m at eri al

m is rep res en ta ti on ); Alwes

, 37 2 N.W .2d at 37 8 (n ot in g th at in su red di sc lo se d he was

on di sa bi li ty). The di st ric t co ur t co rrec tl y st at ed “ Alwes ha s no th in g to do wit h th is

cas e.” PHL Vari ab le Ins . Co., 9 70 F. Sup p. 2 d a t 9 44

.

W e fu rth er no te Mi da s cl ai m s, in it s op en in g br ie f, th at th e du ty to in ve st ig at e ari se s fro m Domk e a n d A l w es

. App el la nt Br. 44 -4 7. The re, it arg ue s Mi nn es ot a

su it ab il it y la w “ un de rs co re[s ]” th e di st ric t co ur t’s al le ge d m is read in g o f Alwes

. 6 App el la nt Br. 48

. In it s rep ly br ie f, Mi da s arg ue s Mi nn es ot a su it ab il it y la w pr ov id es

an “ in de pe nd en t gr ou nd [] fo r im po si ng up on in su ran ce co m pa ni es a du ty to in qu ire .” App el la nt Rep ly Br. 24 (ci ti ng , fo r th e fir st ti m e, Mi nn

. St at

. § 72 A.20

, su bd

. 34 (req ui rin g in su rer “ ei th er di rect ly or th ro ug h it s ag en t” to “ ha ve reas on ab le gr ou nd s fo r be li ev in g th at th e reco m m en da ti on is su it ab le fo r th e cu st om er”) ). W e de cl in e to
ad dr es s whe th er Mi nn es ot a su it ab il it y la w im po se s an in de pe nd en t du ty of i n q u i r y

o n in su rers be cau se Mi da s fir st rai se d th is arg um en t in it s rep ly b rie f. See Bar h a m

v. Rel ia nc e St d. Life In s. Co

., 44 1 F.3 d 58 1, 58 4 (8 th Ci r. 20 06 ). W e ob se rv e Mi da s

Mi da s cit es Mi nn

. St at

. § 60 K.46

, su bd

. 4, whi ch pr ov id es , in pa rt, th at “ [i]n 6

reco m m en di ng th e pu rch as e of an y li fe

. . . in su ran ce to a cu st om er, a pr od uc er m us t ha ve reas on ab le gr ou nd s fo r be li ev in g th at th e reco m m en da ti on is su it ab le fo r th e

cu st om er an d m

us t m ak e rea so na bl e in qu iri es to de te rm in e su it ab il it y .”

-1 1-ci te s no cas e whe re a co ur t has us ed Mi nn es ot a su it ab il it y la w to pr ev en t an ins ur er

fro m res ci nd in g a po li cy

.

Bec au se Mi nn es ot a la w do es no t im po se a du ty on PHL to reas on ab ly

in ve st ig at e th e fin an ci al in fo rm at io n co nt ai ne d in th e Po li cy ap pl ic at io n, PHL can no t
b e e qu it ab ly es to pp ed fro m res ci nd in g th e Po li cy

. See Alwes

, 37 2 N.W .2d a t 3 7 9 (rec it in g e le m en ts of e qu it ab le est op pe l).

IV.

Fo r th e fo reg oi ng r e a s o n s , we affi rm th e di st ric t co ur t’s jud gm en t. W e de ny
PHL’ s m ot io n to st rik e po rti on s of Mi da s’s rep ly br ie f or , in th e al te rn at iv e, fo r le av e

to fil e a s ur -rep ly brie f.

__ __ __ __ __ __ __ __ __ __ __ __ __ __ __

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