IN THE UNITED STATES DISTRICT COURT

FOR THE SOUTHERN DISTRICT OF ALABAMA

SOUTHERN DIVISION

FEDERAL LIFE INSURANCE :

COMPANY (MUTUAL),

:

Plaintiff,

:

vs. CA 05-0657-CB-C

:

LINDA M. RUFFIN,

:

Defendant.

REPORT AND RECOMMENDATION

This action was initially referred to the undersigned as a potential

consent action pursuant to the practices and Rules of this Court. After plaintiff

filed its motion for default judgment and default judgment was entered, an

evidentiary hearing on the motion for default judgment was held on December

19, 2005. At the conclusion of that hearing, it was determined that the case

should be reassigned to a United States district judge for final judgment and

that the undersigned would enter a report and recommendation as to the

information that has been developed in this case pursuant to 28 U.S.C. §

636(b)(1)(B).

FINDINGS OF FACT

1. Federal Life Insurance Company (Mutual) (“Federal Life”) is the

plaintiff in this action and has filed a complaint seeking a declaratory judgment

pursuant to 28 U.S.C. § 2201 (Doc. 1). 

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2. Plaintiff is an insurance company incorporated in the State of

Illinois and has its principal place of business in Illinois. The deceased

insured, Leo Ruffin, during the relevant time periods in this action, was

residing in Mobile County, Alabama, and died on July 16, 2005.

3. Defendant, Linda M. Ruffin, is the sole beneficiary of the life

insurance policy issued by Federal Life and is the decedent’s wife.

4. R. “Wing” Nestle, an insurance broker, arranged a meeting with

Mr. and Mrs. Ruffin on July 13, 2004. Prior to that meeting, Mr. Nestle had

never met Mr. or Mrs. Ruffin.

5. On July 13, 2004, Mr. Ruffin completed and signed an

application for life insurance with Federal Life (Policy Number 0727963, Doc.

1, Exhibit A). The policy had a face value of $132,000.00.

6. One of the questions on the application completed by Mr. Ruffin

asked if he had used tobacco products including cigarettes within the prior

twelve months, to which his response was “No.” Contrary to this response on

the application, the evidence shows that Mr. Ruffin was a heavy smoker of

cigarettes for nearly forty years, including the twelve-month period prior to

completing and signing his application.

7. Prior to Mr. Ruffin’s death, Federal Life had no knowledge of

his heavy cigarette use or his misrepresentation as to his heavy use of tobacco

on the application.

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8. The life insurance policy at issue was delivered to Mr. Ruffin

with an effective date of July 15, 2004. Mrs. Ruffin filed a claim for death

benefits on July 18, 2005. Along with her claim for benefits, Mrs. Ruffin

submitted a death certificate to Federal Life.

9. Until a review of the death certificate indicated the cause of

death was related to heavy use of tobacco, Federal Life had no reason to

investigate and discover that Mr. Ruffin had been a heavy smoker for nearly

forty years including the twelve-month period prior to signing the application

for insurance.

CONCLUSIONS OF LAW

1. This Court has diversity jurisdiction pursuant to 28 U.S.C. §

1332, in that the amount in controversy exceeds $75,000.00, exclusive of

interest and costs, and complete diversity of the parties exists.

2. Venue is proper, according to 28 U.S.C. § 1391, in this District

and this Division, because Mrs. Ruffin, the sole defendant, is a resident of

Mobile County, Alabama, a County within the Southern Division of the

Southern District of Alabama; a substantial portion of the events giving rise to

the claim occurred in this District and this Division; and the defendant is

subject to personal jurisdiction in this District and Division. The law to be

applied in this case is that of the State of Alabama, since Mr. Ruffin was an

Alabama resident, the application was filled out and signed in Alabama, the

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agents listed in the insurance agreement are in Alabama and the claim for

benefits was made in Alabama.

3. Ala.Code § 27-14-7(a) (1975), as amended, applies to all

contracts of insurance in the State of Alabama. That Statute reads:

(a) All statements and descriptions in any

application for an insurance policy or annuity

contract, or in negotiations therefor, by, or on

behalf of, the insured or annuitant shall be

deemed to be representations and not warranties.

Misrepresentations, omissions, concealment of

facts and incorrect statements shall not prevent a

recovery under the policy or contract, unless

either:

(1) Fraudulent;

(2) Material either to the

acceptance of the risk or to the

hazzard assumed by the insured; or

(3) The insurer in good faith would

either not have issued the policy or

contract, or would not have issued

a policy or contract at a premium

rate as applied for, or would not

have issued a policy or contact in as

large an amount or would not have

provided coverage with respect to

the hazard resulting in the loss if

the true facts had been made known

to the insurer as required by the

application for the policy or

contract or otherwise.

(Id).

4. Relying on Mr. Ruffin’s responses to the questions on the

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application, Federal Life issued a twenty-year renewable and convertible term

life insurance policy with a face value of $132,000.00. The policy was issued

under the “Non-Tobacco” risk.

5. Mr. Ruffin’s heavy use of cigarettes increased the risk to the

insurer.

6. Mr. Ruffin’s misrepresentation regarding his tobacco use was a

direct and proximate cause of Federal Life issuing him the lower-risk policy

at the lower premium rate.

7. Mr. Ruffin’s misrepresentation concerned a material fact that

Federal Life detrimentally relied upon to issue a policy at a lower premium

than it otherwise would have issued, or issued under different conditions (such

as a different premium or different death benefits).

8. Under these circumstances, Ala.Code §§ 27-14-7(a)(1), (a)(2)

and (a)(3) enabled Federal Life to rescind the insurance policy.

CONCLUSION

It is therefore recommended that (1) final judgment, after default, be

entered in this case on behalf of plaintiff, Federal Life; (2) that Federal Life be

given the authority to rescind the policy under the laws of the State of

Alabama and, (3) that the insurance premiums paid into the Court by Federal

Life be distributed to the estate of Leo Ruffin.

The attached sheet contains important information regarding objections

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to this report and recommendation.

DONE this 20th day of December, 2005.

s/WILLIAM E. CASSADY 

UNITED STATES MAGISTRATE JUDGE

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MAGISTRATE JUDGE'S EXPLANATION OF PROCEDURAL RIGHTS 

AND RESPONSIBILITIES FOLLOWING RECOMMENDATION, AND 

FINDINGS CONCERNING NEED FOR TRANSCRIPT

l. Objection. Any party who objects to this recommendation, or anything in it,

must, within ten days of the date of service of this document, file specific written

objections with the Clerk of this Court. Failure to do so will bar a de novo

determination by the district judge of anything in the recommendation and will bar

an attack, on appeal, of the factual findings of the Magistrate Judge. See 28 U.S.C.

§ 636(b)(1)(C); Lewis v. Smith, 855 F.2d 736, 738 (11th Cir. 1988); Nettles v.

Wainwright, 677 F.2d 404 (5th Cir. Unit B, 1982)(en banc). The procedure for

challenging the findings and recommendations of the Magistrate Judge is set out in

more detail in SD ALA LR 72.4 (June 1, 1997), which provides that:

A party may object to a recommendation entered by a magistrate

judge in a dispositive matter, that is, a matter excepted by 28 U.S.C.

§ 636(b)(1)(A), by filing a “Statement of Objection to Magistrate

Judge’s Recommendation” within ten days after being served with a

copy of the recommendation, unless a different time is established by

order. The statement of objection shall specify those portions of the

recommendation to which objection is made and the basis for the

objection. The objecting party shall submit to the district judge, at

the time of filing the objection, a brief setting forth the party’s

arguments that the magistrate judge’s recommendation should be

reviewed de novo and a different disposition made. It is insufficient

to submit only a copy of the original brief submitted to the magistrate

judge, although a copy of the original brief may be submitted or

referred to and incorporated into the brief in support of the objection.

Failure to submit a brief in support of the objection may be deemed

an abandonment of the objection. 

A magistrate judge's recommendation cannot be appealed to a Court of

Appeals; only the district judge's order or judgment can be appealed.

2. Transcript (applicable Where Proceedings Tape Recorded). Pursuant to 28

U.S.C. § 1915 and FED.R.CIV.P. 72(b), the Magistrate Judge finds that the tapes and

original records in this case are adequate for purposes of review. Any party planning

to object to this recommendation, but unable to pay the fee for a transcript, is advised

that a judicial determination that transcription is necessary is required before the

United States will pay the cost of the transcript.

 s/WILLIAM E. CASSADY 

UNITED STATES MAGISTRATE JUDGE

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