Opinion ID: 777328
Heading Depth: 1
Heading Rank: 2

Heading: Questions Regarding Drug Use in Decedent's Insurance Application

Text: 11 Under Pennsylvania law, a life insurance policy is void ab initio where the applicant's representations are: 1) false; 2) made fraudulently or otherwise made in bad faith; and 3) material to the risk assumed. Matinchek v. John Alden Life Ins. Co., 93 F.3d 96, 102 (3d Cir.1996) (citations omitted). Appellants argue that, under a summary judgment standard, questions of fact exist with respect to each element.
12 The District Court concluded that [i]t is clear from the evidence that decedent answered question six falsely in at least two respects: (1) there is substantial evidence that decedent failed to disclose his continued use of illegal controlled substances beyond 1990; and (2) decedent failed to disclose significant addiction treatment by Dr. Forest, including prescriptions for Antabuse and Prozac. 6 13 Question 6(a) asks whether the proposed insured has used narcotics and other drugs within the last ten years; question 6(b) asks whether the proposed insured has received medical counseling or medical treatment regarding the use of alcohol or drugs. The application stated that Decedent's answers are true and complete to the best of my knowledge and belief. The answers were expressly made part of the application, and the application required the answers to be complete. In his answer to question six, Decedent described his drug and alcohol use and treatment as follows: late 80s-1990 — occasional use of cocaine — in patient treatment at Institute of Penna for 28 days no problems since. 14 Appellants argue that the no problems since response does not necessarily mean no drug use. Instead, Appellants argue, the response means that Jamison may have used cocaine since, but not to an extent that it was a problem requiring treatment. Even under a summary judgment standard, Appellants' argument fails. Uncontradicted documentary evidence (records of Ann Rosen Spector, Ph.D., and Jean Forrest, M.D.), and their uncontradicted deposition testimony unequivocally prove that Decedent continued to habitually use cocaine, received treatment and counseling for drugs and alcohol, and received prescriptions of Antabuse and Prozac for his alcoholism in the relevant time period. Thus, Decedent's answers to Questions 6(a) and 6(b) on Part 2 of the Application were patently false. There is likewise no question that Decedent knew his answers were false. At the time of the Application, he was still using cocaine and undergoing treatment with Ann Rosen Spector, Ph.D. for alcohol and drug use.
15 The District Court concluded that statements made in Decedent's insurance application, based on Decedent's false representations as to his drug abuse and counseling, were made in bad faith. The District Court correctly noted that courts applying Pennsylvania law have routinely held that misrepresentations regarding alcohol abuse are deemed to be made in bad faith as a matter of law and extended this holding to include misrepresentations regarding drug use. See, e.g., Van Riper v. The Equitable Life Assurance Soc'y of the United States, 561 F.Supp. 26, aff'd without opinion, 707 F.2d 1397 (3d Cir. 1983); 6 Couch on Insurance § 88:20 (3d ed. & Supp.2000). We agree that to equate alcohol abuse to drug abuse is both reasonable and logical. 16 Appellants argue that most cases supporting the inference of bad faith result from an untruthful no answer to a yes or no question. Here, Appellants allege, that Jamison's answers were truthful, and argue that it is a question of fact as to whether the incomplete answers can be deemed bad faith. It is not, however, a question of fact, because we have specifically held that [f]raud is presumed ... from knowledge of the falsity. Coolspring Stone Supply, Inc. v. Am. States Life Ins. Co., 10 F.3d 144, 148 (3d Cir.1993); Evans v. Penn Mut. Life Ins. Co., 322 Pa. 547, 186 A. 133, 138 (1936) (inference of fraud is irresistible when, for example, unreported illness or disability of the insured was so serious and so recent that he could not have forgotten it); Grimes v. Prudential Ins. Co., 401 Pa.Super. 245, 585 A.2d 29, 31 (1991). Given that the drug use and treatment/counseling for drug and alcohol use were substantial, and proximate in time (even ongoing) when Decedent completed his application, Appellants' so-called ambiguity argument is frivolous, and we affirm the District Court's conclusion of bad faith.
17 A misrepresented fact is material if being disclosed to the insurer it would have caused it to refuse the risk altogether or to demand a higher premium. New York Life v. Johnson, 923 F.2d 279, 281 (3d Cir.1991) (citing McCaffrey v. Knights & Ladies of Columbia, 213 Pa. 609, 63 A. 189 (1906)); see also Piccinini v. Teachers Protective Mut. Life Insurance Co., 316 Pa.Super. 519, 463 A.2d 1017, 1024 n. 2 (1983) (citations omitted). `Every fact is material which increases the risk, or which, if disclosed, would have a fair reason for demanding a higher premium.' New York Life, 923 F.2d at 282 (citing Hartman v. Keystone Ins. Co., 21 Pa. 466, 477 (1853)). Courts have repeatedly held that false answers relating to the insured's treatment for alcoholism and alcohol use are material as a matter of law. Van Riper, 561 F.Supp. at 31; 6 Couch on Ins. § 88:6 (3d ed.1996) (listing cases). 18 Appellants argue that there is still a question of fact as to the extent of the influence Jamison's misrepresentation had on the underwriting decision to provide Jamison with life insurance. Appellants argue that the insurers knew of Jamison's past drug and alcohol problem and took the possibility of Jamison's relapse into its calculation of the risks of providing him with insurance. Thus, Appellants argue, Jamison was a calculated risk and the formula of calculation ( e.g., how the equation would have changed if the insurance company knew of Jamison's true history) is a question of fact, which trumps the District Court's materiality conclusion as a matter of law. 19 Appellants' argument fails. The evidence and level of misrepresentation are undisputed by other evidence of record, and they clearly support the District Court's conclusion that knowledge of the true nature of decedent's drug and alcohol use would have caused Equitable to decline the risk or require higher premiums.