Opinion ID: 77633
Heading Depth: 3
Heading Rank: 1

Heading: The Wendell Mullins Policies Issued by VFL

Text: 62 Wendell Mullins, a resident of Arkansas, applied for two $1 million policies through insurer VFL on November 17, 1997. Mullins executed the applications at a VFL broker's office in Waterville, Ohio. In response to a query on VFL's insurance application as to whether he had ever been diagnosed or treated for AIDS in the past ten years, Mullins checked the answer choice labeled no. 13 Apparently, he had tested positive for HIV in 1994. Mullins submitted to a blood test on February 10, 1998 at VFL's request and passed, showing no signs of HIV infection. VFL contended that Mullins likely enlisted the aid of an impostor who took the blood test in his place, but the insurer was unable to provide further details of how this worked. 63 After Mullins passed the blood test, VFL issued two $1 million life insurance policies to him on March 23, 1998. The policies contained identical incontestability clauses, which read: 64 [Valley Forge] cannot contest this policy, except for non-payment of premiums, after it has been in force during the Insured's lifetime for 2 years from the Policy Date or if reinstated the date of reinstatement. 65 Two years later, Mullins asked to have the policies amended in order to exercise an option for a Guaranteed Insurance Rider (GIR) that VFL had offered under an earlier policy. The GIR on the earlier policy gave Mullins the right to purchase additional insurance up to two times the initial face amount of the policy, without having to answer additional medical questions, present evidence of insurability or attest to current employment. Mullins executed the amendment to the policies in Charleston, West Virginia on March 15, 2000. VFL alleged that the amendment to the policies is fake, and that MBC submitted a doctored version of Mullins' original application and other false correspondence in support of the amendment. 66 MBC viaticated both of the Mullins policies within a few months of their amendment, in May and June 2000. By this point in time, the policies had been in force for at least two years and the contestability period had expired. Mullins died of AIDS-related complications on September 24, 2003. VSI submitted claims on both his policies on January 27, 2004. VFL did not allege fraud in connection with the Mullins policies until August 31, 2004, however, when the insurers filed their original ancillary complaint. VFL amended the complaint on March 15, 2005, to allege additional claims in connection with the Mullins' policies such as aiding and abetting fraud, civil conspiracy, and RICO claims. Thus, VFL did not seek to challenge the policies until long after the incontestability bar took effect. 67 To determine whether the incontestability clauses absolutely bar VFL from asserting fraud-based claims at this point, we must look to the law of the state where Mullins executed the contracts. The receiver contends that Mullins filed the last document required to complete the contract in West Virginia because that is where he signed the amendment to the policies. The insurers argue that the purported final amendment is a fake, and that Ohio law applies because that it where Mullins signed his original applications for insurance. 68 Regardless of whether we apply West Virginia law or the law of Ohio, the result is the same. Neither state will bar enforcement of an incontestability clause on the grounds of fraudulent procurement once the two-year contestability period has lapsed. See e.g., Morris v. Mo. State Life Ins. Co., 114 W.Va. 278, 281, 171 S.E. 740, 741 (1933) (fraud in the procurement of the policy cannot be made a defense subsequent to the date fixed by the policy when it shall be deemed incontestable); see also Poffenbarger v. N.Y. Life Ins. Co., 277 F.Supp. 726, 729 (D.W.Va.1967) (affirming Morris). 69 An Ohio statute plainly dictates that any life insurance policy that is issued by a company organized under the laws of the state or delivered to an insured within the state must contain a provision that: [it] shall be incontestable after it has been in force during the lifetime of the insured for a period of not more than two years from its date, except for nonpayment of premiums. Ohio Rev.Code Ann. § 3915.05(C) (1998). The statute does not provide for any exceptions on account of fraud. Although the insurers argue that Ohio case law recognizes an exception where the insured lacked an insurable interest at the time he applied for the policy, 14 they do not state why that exception should apply. The insurable interest doctrine holds that a person who procures a life insurance policy on the life of another person must have an insurable interest in the continuation of that other person's life. See Couch on Insurance § 41:17 (3d ed.1997). Failure to disclose an HIV infection may affect an insured's premium rates, but that does not mean he would lack an insurable interest, as the term is understood in the law. 70 Thus, we affirm the district court's decision to dismiss VFL's request to declare the Mullins policies void ab initio and its common law fraud and civil conspiracy claims (counts V, III, and IV, respectively). Although the court did not specifically find that these claims were barred under the policies' incontestability clauses, we do find this to be the case. And, as we noted previously, we may affirm the district court's decision to dismiss on any grounds that finds support in the record. See, e.g., W.W. Grainger, 257 F.3d at 1256.