Court Opinion

ID: 2641080
Source: CourtListenerOpinion
Date Created: 2013-11-05 01:03:00.21686+00
Date Added: 2024-06-11T12:18:08.178266
License: Public Domain

FILED
                           NOT FOR PUBLICATION                                NOV 04 2013

                                                                          MOLLY C. DWYER, CLERK
                    UNITED STATES COURT OF APPEALS                          U.S. COURT OF APPEALS

                            FOR THE NINTH CIRCUIT

MARSHALL SALKIN, an individual and               No. 12-55089
ELLEN SALKIN, an individual,
                                                 D.C. No. 5:10-cv-01322-VAP-OP
              Plaintiffs - Appellants,

  v.                                             MEMORANDUM*

USAA LIFE INSURANCE COMPANY,

              Defendant - Appellee.

                   Appeal from the United States District Court
                       for the Central District of California
                   Virginia A. Phillips, District Judge, Presiding

                      Argued and Submitted October 10, 2013
                               Pasadena, California

Before: REINHARDT and CHRISTEN, Circuit Judges, and SEDWICK, District
Judge.**

       Appellants seek review of the district court’s order granting United Services

Automobile Association Life Insurance Company’s (“USAA”) motion for

        *
             This disposition is not appropriate for publication and is not precedent
except as provided by 9th Cir. R. 36-3.
       **
             The Honorable John W. Sedwick, District Judge for the U.S. District
Court for the District of Alaska, sitting by designation.
summary judgment. We have jurisdiction pursuant to 28 U.S.C. § 1291. We

review an order granting summary judgment de novo, viewing the evidence in the

light most favorable to the non-moving party to determine whether any genuine

issues of material fact remain. Coszalter v. City of Salem, 320 F.3d 968, 973 (9th

Cir. 2003). We affirm.1

      Under California law, an insurer can “‘rescind a policy when the insured has

misrepresented or concealed material information in connection with obtaining

insurance.’” Nieto v. Blue Shield of Cal. Life & Health Ins. Co., 181 Cal. App. 4th
60, 75–77 (Cal. Ct. App. 2010) (quoting TIG Ins. Co. of Mich. v. Homestore, Inc.,

137 Cal. App. 4th 749, 755–56 (Cal. Ct. App. 2006)). The California Insurance

Code provides that “[c]oncealment, whether intentional or unintentional, entitles

the injured party to rescind insurance.” Cal. Ins. Code § 331. It creates a

“statutory framework that imposes ‘heavy burdens of disclosure’ ‘upon both

parties to a contract of insurance, and any material misrepresentation or the failure,

whether intentional or unintentional, to provide requested information permits

rescission of the policy by the injured party.’” Mitchell v. United Nat’l Ins. Co.,

127 Cal. App. 4th 457, 468 (Cal. Ct. App. 2005) (internal citations omitted).

      1
            In reaching this conclusion, we rely only on evidence the district court
ruled admissible. We address appellants’ motion to strike in an order filed
concurrently with this disposition.

                                          2
“Materiality,” in turn, “is to be determined not by the event, but solely by the

probable and reasonable influence of the facts upon the party to whom the

communication is due, in forming his estimate of the disadvantages of the

proposed contract, or in making his inquiries.” Cal. Ins. Code § 334.

      USAA argues that Dr. Salkin made misrepresentations in his 2008

application by stating that he had never consulted with a health care provider

regarding a mental disorder, had not undergone diagnostic tests within the last five

years other than an EKG, and had no medical records. USAA further argues that

these misrepresentations were material, and that USAA would not have issued the

policy in the first place, based on its underwriting guidelines, if Dr. Salkin had

answered its questions accurately. Appellants argue that Dr. Salkin did not

actually “conceal” any information on his application, citing Thompson v.

Occidental Life Ins. Co., 9 Cal. 3d 904 (Cal. 1973).

      We agree with the district court that there are no genuine issues of material

fact regarding the material misrepresentations Dr. Salkin made in his application

for insurance. Therefore, USAA was within its contractual rights to rescind the

policy. Appellants’ broad reading of Thompson is inconsistent with the California

Insurance Code and other relevant case law. Under the Code, even an

unintentional misrepresentation can be the basis for rescission. Cal. Ins. Code §

                                           3
331. Moreover, where an insurance applicant is asked specific questions as to his

medical history — as happened here — “the failure to refer to temporary or minor

indispositions” will not be excused as immaterial. San Francisco Lathing Co. v.

Penn Mut. Life Ins. Co., 144 Cal. App. 2d 181, 186 (Cal. Ct. App. 1956). During

his application interview, Dr. Salkin was asked specific questions about his mental

health, diagnostic tests that he had undergone, and whether he had any medical

records. He responded with misrepresentations that USAA considered to be

material. Moreover, given that he was a physician himself, there is no concern

about Dr. Salkin’s ability to comprehend questions containing basic medical

terminology, let alone those questions that require no particular expertise to

understand.

      Because appellants’ breach of contract claim fails, their claim for breach of

the covenant of good faith and fair dealing also fails. See San Diego Housing

Comm’n v. Indus. Indem. Co., 68 Cal. App. 4th 526, 544 (Cal. Ct. App. 1998)

(“Where a breach of contract cannot be shown, there is no basis for finding a

breach of the covenant.”). Similarly, because appellants did not oppose USAA’s

summary judgment motion on their claim for relief from rescission under

California Civil Code § 1692, this claim also fails. ER 25. There is no dispute that

USAA refunded all premiums paid on the policy at the time of rescission.

                                          4
      Appellants also contend that USAA should not have underwritten Dr.

Salkin’s policy without further investigation. They argue that an insurance

company like USAA “should not be allowed to cherry-pick only the undisclosed

medical abnormalities it considers material in order to rescind a life insurance

policy, while having ignored other disclosed material medical abnormalities that it

required and that were in its underwriting file before it issued the Policy.” In

essence, appellants argue that USAA was negligent in underwriting Dr. Salkin’s

policy in the first place. But their claims in this litigation sound in contract, not

tort, so their suggestion that USAA acted negligently does not raise a genuine issue

of material fact.

      Appellants also argue that USAA was precluded from rescinding its policy

based on a prohibition against “postclaims underwriting.” This claim fails

because, in California, postclaims underwriting is a defined statutory phrase

applicable only to health and disability insurance policies. See Cal. Ins. Code §

10384 (“No insurer issuing or providing any policy of disability insurance

covering hospital, medical, or surgical expenses shall engage in the practice of

postclaims underwriting.”) The court declines appellants’ invitation to expand

California law based on public policy considerations.

                                           5
      Finally, because the district court rejected appellants’ other claims, their

prayer for punitive damages was properly denied as moot.

      AFFIRMED.

                                          6
                                                                             FILED
                                                                             NOV 04 2013
Salkin v. USAA, 12-55089                                                  MOLLY C. DWYER, CLERK
REINHARDT, Circuit Judge, Concurring.                                      U.S. COURT OF APPEALS

      My question is whether Dr. Salkin’s failures to disclose were material.

USAA offered testimony from an underwriter that they were. Appellants failed to

offer evidence to the contrary. Accordingly, no genuine issue of fact existed for a

fact finder to resolve, and summary judgment for USAA was appropriate.