Court Opinion

ID: 3158951
Source: CourtListenerOpinion
Date Created: 2015-12-01 17:00:56.733602+00
Date Added: 2024-06-11T12:00:28.907577
License: Public Domain

United States Court of Appeals
                            For the Eighth Circuit
                        ___________________________

                                No. 14-3098
                        ___________________________

              The Northwestern Mutual Life Insurance Company

                        lllllllllllllllllllll Plaintiff - Appellee

                                           v.

                                 Douglas G. Weiher

                     lllllllllllllllllllll Defendant - Appellant
                                     ____________

                   Appeal from United States District Court
                  for the District of Minnesota - Minneapolis
                                 ____________

                             Submitted: June 10, 2015
                             Filed: December 1, 2015
                                  ____________

Before LOKEN, BYE, and KELLY, Circuit Judges.
                           ____________

KELLY, Circuit Judge.

       Douglas Weiher appeals the district court’s grant of summary judgment
allowing Northwestern Mutual Life Insurance Company (Northwestern) to rescind
a disability insurance policy. Because we conclude Northwestern was not entitled
to summary judgment, we reverse and remand.1

    1
     We have jurisdiction under 28 U.S.C. § 1291.
                                 I. Background

      Weiher lived in Minnesota and practiced dentistry in Wisconsin. In 2009, he
owned two disability insurance policies: a Unum group disability policy, and a
Great-West Life and Annuity Company (Great-West) policy. On May 4, 2010,
Weiher applied to Northwestern for additional disability insurance coverage. In his
application, Weiher specifically agreed that the Northwestern policy would replace
his Great-West policy and that he would terminate the Great-West policy within 90
days of the date of the application. The application warned that any policy issued
could be rescinded if the Great-West policy was not cancelled.

      Northwestern offered Weiher a disability insurance policy with a monthly
benefit of $8,400. On July 20, 2010, before receiving the policy, Weiher signed an
Amendment to Application, which supplemented and amended the May 4, 2010,
application, and agreed to terminate the Great-West policy by its next premium due
date. The Amendment to Application also warned of Northwestern’s rights to
rescind the policy if the Great-West policy was not canceled. Weiher did not cancel
the Great-West policy.

       In 2012, Weiher began to suffer from neurological and autoimmune
symptoms and could no longer practice dentistry safely. He submitted claims for
disability benefits to Great-West and Unum. Great-West and Unum investigated his
claim, ultimately determined he was totally disabled from his profession, and paid
his claims.

       Weiher also made a claim to Northwestern, who quickly discovered he had
not terminated his Great-West policy. Northwestern then reviewed whether it would
have issued the policy to Weiher if it had known he would not cancel the Great-West
policy. Northwestern determined it would not have issued the policy because, in its
view, doing so increased the risk that Weiher would be over-insured and would

                                        -2-
 therefore have more incentive to make a claim under the policy. Northwestern
 notified Weiher that it was rescinding the policy.

        Northwestern filed an action in the United States District Court for the District
 of Minnesota claiming Weiher’s promise to cancel the Great-West policy was a
 misrepresentation that entitled it to rescind the policy. Weiher counter-claimed for
 breach of contract. Both parties moved for summary judgment. Construing
 Weiher’s promise to cancel the Great-West policy as a warranty, the district court
 applied Wisconsin law.2 The district court found that Northwestern was entitled to
 rescind the policy under Wisconsin Statutes § 631.11(3)3 because Weiher’s failure
 to terminate the Great-West policy increased the risk to Northwestern. The district
 court entered judgment in favor of Northwestern. Weiher appeals.

                                     II. Discussion

       Our review of a district court’s decision on cross-motions for summary
 judgment is de novo. Netherlands Ins. Co. v. Main St. Ingredients, LLC, 745 F.3d
 909, 912 (8th Cir. 2014). Summary judgment is appropriate “if the movant shows

      2
       Although Northwestern initially disputed that Wisconsin law applied, it has
abandoned that position on appeal. See Freitas v. Wells Fargo Home Mortg., Inc., 703
F.3d 436, 438 n.3 (8th Cir. 2013).
      3
       Section 631.11(3) provides:

      Effect of Failure of Condition or Breach of Promissory Warranty.
      No failure of a condition prior to a loss and no breach of a promissory
      warranty constitutes grounds for rescission of, or affects an insurer’s
      obligations under, an insurance policy unless it exists at the time of the
      loss and either increases the risk at the time of the loss or contributes to
      the loss. This subsection does not apply to failure to tender payment of
      premium.

                                           -3-
that there is no genuine dispute as to any material fact and the movant is entitled to
judgment as a matter of law.” Id. (quoting Fed. R. Civ. P. 56(a)).

      The parties agree on appeal that Wisconsin law applies. Accordingly, we
apply substantive Wisconsin law in this diversity action. Netherlands Ins., 745 F.3d
at 912–13. “We review the district court’s application of [Wisconsin law] de novo
without deference.” Gersham v. Am. Cas. Co. of Reading, PA, 251 F.3d 1159, 1161
(8th Cir. 2001) (internal quotation marks omitted).

       Under Wisconsin law, the interpretation of an insurance contract and the
interpretation of a statute are both questions of law reviewed de novo. Fox v.
Catholic Knights Ins. Soc., 665 N.W.2d 181, 186–87 (Wis. 2003). “We must predict
how the Supreme Court of [Wisconsin] would rule, and we follow decisions of the
intermediate state court when they are the best evidence of [Wisconsin] law.”
Netherlands Ins. Co., 745 F.3d at 913 (internal quotation marks omitted).

       Under Wisconsin law, insurance contracts are “governed by the same rules
that govern contract interpretation in general.” Wis. Label Corp. v. Northbrook
Prop. & Cas. Ins. Co., 607 N.W.2d 276, 282 (Wis. 2000). As with other contracts,
Wisconsin courts seek to “determine and give effect to the intent of the contracting
parties.” Am. Family Mut. Ins. Co. v. Am. Girl, Inc., 673 N.W.2d 65, 73 (Wis.
2004). Where the language of the insurance contract is unambiguous, Wisconsin
courts apply the contract’s literal meaning. Wis. Label Corp., 607 N.W.2d at 282.
Although insurance policies are construed as they would be understood by a
reasonable insured, Wisconsin courts “do not interpret insurance policies to provide
coverage for risks that the insurer did not contemplate or underwrite and for which
it has not received a premium.” Am. Girl, 673 N.W.2d at 73.

                                         -4-
        Wisconsin state law limits the circumstances under which an insurer may
 rescind an insurance policy. See Wis. Stat. § 631.11.4 The district court in this case
 applied § 631.11(3), which pertains to failures of condition and breaches of
 promissory warranties after an effective policy is in place. Neither party argues on
 appeal that the district court erred in construing Weiher’s promise to cancel the
 Great-West policy as a promissory warranty governed by § 631.11(3). Further,
 neither party disputes that Weiher’s failure to cancel the Great-West policy occurred
 after an effective policy was in place.

        A promissory warranty is “[a] warranty that facts will continue to be as stated
 throughout the policy period, such that a failure of the warranty provides the insurer
 with a defense to a claim under the policy.—Also termed continuing warranty.”
 Fox, 665 N.W.2d at 190 (emphasis omitted) (quoting Black’s Law Dictionary).
 “Promissory warranties are those that require that something shall or shall not be
 done after the policy takes effect.” Id. at 189 (emphasis omitted) (quoting comment
 to Wisconsin Civil Jury Instruction 3105); accord 6 Couch on Ins. § 81:14 (“A
 promissory warranty is one by which the insured stipulates that something shall be
 done or omitted after the policy takes effect and during its continuance and has the
 effect of a condition subsequent.”). Under the facts and procedural posture of this
 case, we cannot say the district court erred in construing Weiher’s promise to cancel
 the Northwestern policy as a promissory warranty that was subject to the restrictions
 of § 631.11(3).

        Weiher concedes that he failed to cancel his Great-West policy and this failure
 existed at the time of loss. He contends, however, the district court erred in not
 requiring Northwestern to meet its burden to show that his failure to cancel the
 Great-West policy “increased [Northwestern’s] risk at the time of the loss.” See

      4
       A rescission based on a misrepresentation or breach of affirmative warranty is
governed by § 631.11(1)(b), and a rescission based on a failure of condition or breach
of promissory warranty is governed by § 631.11(3).

                                          -5-
Wis. Stat. § 631.11(3). “The burden of proof on an insurance company seeking to
rescind an insurance contract is . . . clear and convincing evidence as to each element
of the statute.” Pum v. Wis. Physicians Serv. Ins. Corp., 727 N.W.2d 346, 353 (Wis.
Ct. App. 2006).

        As an initial matter, the parties dispute what risk Northwestern insured against
in its policy. Weiher asserts that the risk was that he “might become disabled and
be unable to work in his occupation.” He argues Northwestern has not shown that
the failure to cancel the Great-West policy increased the risk that he would become
disabled and unable to work. Northwestern concedes it has not shown that the
existence of additional insurance actually increased the risk that Weiher would suffer
a medical condition that would give rise to a disability. Instead, Northwestern
contends the risk it insured against was that Weiher would seek and obtain disability
benefits. Part of that, Northwestern agrees, was the risk that Weiher would suffer
a medical condition that rendered him physically or mentally disabled. Another part,
however, was the risk that he would make and perpetuate a disability claim.
Northwestern argues that an over-insured individual is more likely to make and
perpetuate a claim, thereby increasing its risk.

       It is not necessary to resolve the parties’ dispute concerning whether risk, as
that term is used in § 631.11(3), includes over-insurance.5 Even assuming
Northwestern’s risk included the risk of over-insurance, Northwestern failed to show
it was undisputed that Weiher was over-insured at the time of the loss. See Wis.
Stat, § 631.11(3). As support for its argument, Northwestern first relies on its
Financial Underwriting Standards (Underwriting Standards). For example,
Northwestern points to Section 626.1.1 of its Underwriting Standards, which
provides:

     5
      The statute does not define risk.

                                          -6-
      Financial underwriting is the evaluation of the financial aspects of an
      application to avoid over-insurance. The company is concerned about
      over-insurance because experience has shown that it leads to an
      increase in the number of claims and an increase in the length of
      claims. Specifically, when applying financial underwriting standards,
      an underwriter will evaluate four key variables: earned income,
      unearned income, net worth, and bankruptcy.

Northwestern further relies on its underwriting standard on Issue and Participation,
which provides:

      Northwestern Mutual Disability Insurance coverage is designed to
      replace a portion of the financial loss that occurs if an Insured becomes
      disabled and cannot work. An important aspect of disability
      underwriting is determining the appropriate portion of the financial loss
      to insure. It is desirable that the Insured have enough coverage to
      continue to provide necessities in the event of disability. It is
      undesirable to allow so much coverage that the Insured is better off,
      financially, after disability than before disability. Such a situation
      makes it tempting to even highly motivated people to continue
      receiving benefits rather than return to work. This is costly to the rest
      of our policy owners, and also impedes the recovery of the insured. In
      short, over insurance is not a healthy situation for any of our policy
      owners. To minimize the risk of over insurance, Northwestern Mutual
      limits the amount of coverage in which we will participate on any one
      life. Total coverage on any one life (including all outside coverage)
      will not normally be allowed to exceed Northwestern Mutual’s
      published limits.

      This evidence may support Northwestern’s contention that it would not have
issued the policy to Weiher had it known Weiher would not cancel the Great-West
policy. But the question is not whether Northwestern would (or would not) have
issued the policy had it known what it knows now. The question is whether, after
the policy went into effect, the failure to cancel the policy increased the risk at the
time of the loss, i.e., when Weiher became disabled and made a claim for benefits

                                         -7-
 in 2012.6 Furthermore, § 631.11(3) speaks to a particular policy, and an insurer’s
 ability to rescind that particular policy, not to general risks taken into consideration
 by underwriters as a whole in deciding whether to issue certain types of policies as
 described in these Underwriting Standards. See Wis. Stat. § 631.11(3) (“no breach
 of a promissory warranty constitutes grounds for rescission of . . . an insurance
 policy unless it exists at the time of the loss and either increases the risk at the time
 of the loss or contributes to the loss.” (emphasis added)). General underwriting
 principles provide a helpful backdrop to explain the nature of a particular risk, but
 they do not conclusively answer the specific question at issue here.

      Next, Northwestern presented the testimony of its Standards Compliance
 Consultant, Don Seebach. Seebach’s statements likewise do not address whether
 Weiher was over-insured in 2012, thus resulting in an increased risk to
 Northwestern. In an affidavit, Seebach averred that Northwestern

          specifically relied on Dr. Weiher’s representation that he would
          terminate his [Great-West] disability policy. His failure to do so
          increased the risk to Northwestern Mutual. Northwestern Mutual
          would not have issued a Disability Income Policy . . . had it known that
          Dr. Weiher would not terminate his [Great-West] Disability Policy.

 Again, this testimony may be sufficient to show that Weiher’s agreement to cancel
 the Great-West policy was material to Northwestern’s decision to issue the policy.
 But rescission pursuant to § 631.11(3) does not turn on a finding of materiality. Cf.
 Wis. Stat. § 631.11(1)(b). And Seebach’s simple and unsupported statement that
 Weiher’s failure to cancel “increased the risk” is insufficient to meet Northwestern’s
 burden on rescission as to this particular policy. See Pum, 727 N.W.2d at 353.

      6
        We respectfully disagree with the dissent’s characterization of how we
construe the phrase “increases the risk at the time of the loss.” In fact, we see little,
if any, difference between the dissent’s view and our view of “the question” at issue.
(Dissenting Opinion, infra, slip op. at 17.)

                                            -8-
       Northwestern also relies on Seebach’s deposition testimony that Weiher’s
failure to cancel the Great-West policy increased the risk “from an underwriting
standpoint,” because “he had more coverage in force than we would allow.” That
increased the risk, according to Seebach, because the amount the person receives in
disability benefits “would be possibly higher than what they could earn while in
their occupation.” However, when specifically asked whether he knew if that was
the case with Weiher, Seebach conceded he did not know and was “just talking
generalities.” Seebach also admitted that he was not aware of any other way that
Weiher’s failure to cancel the Great-West policy might have increased
Northwestern’s risk.

        Northwestern’s evidence is insufficient to show that it is entitled to summary
judgment because the evidence does not address the specific insurance policy at
issue in this case. Even if a general aversion to “over-insurance,” as described in the
Underwriting Standards and testified to by Seebach, is sufficient to prove that
Weiher’s breach of his promise to cancel the Great-West policy “increase[d] the
risk” to Northwestern, it does not address whether his breach “increase[d] the risk
at the time of the loss.” Weiher, on the other hand, offered evidence showing that,
based on his income in 2012, he was not over-insured at the time of the loss. And
even Northwestern’s Disability Benefits Team Lead Consultant, Tricia Hoesly,
testified that the policy did not prevent Weiher from cancelling the Great-West
policy but then signing up for another disability policy from a different insurance
company—which also would have provided him with additional disability coverage.
Accordingly, based on the record before us, we conclude Northwestern was not
entitled to summary judgment under § 631.11(3).

      Northwestern alternatively asserts it is allowed to rescind the insurance
contract pursuant to § 631.11(1)(b) because the failure to cancel the Great-West
policy also can be construed as a “misrepresentation or breach of affirmative
warranty” which under some circumstances can be proper grounds for rescission of

                                         -9-
 an insurance contract. See Wis. Stat. § 631.11(1)(b). Even if so construed, there
 appears to remain a factual dispute concerning whether Weiher “knew or should
 have known that the representation was false” or “was made with intent to deceive”
 Id. Weiher claims he mistakenly failed to cancel the policy; Northwestern alleges
 otherwise. Such factual disputes are usually questions for the jury. Pum, 727
 N.W.2d at 352. In any event, the district court did not address this alternative
 ground, and we decline to do so for the first time on appeal. See Loftness
 Specialized Farm Equip., Inc. v. Twiestmeyer, 742 F.3d 845, 851 (8th Cir. 2014)
 (“When it would be beneficial for the district court to consider an alternative
 argument in the first instance, we may remand the matter to the district court.”).
 The district court may consider on remand Northwestern’s alternative ground for
 summary judgment. 7

                                  III. Conclusion

      Accordingly, we reverse the decision of the district court to grant
 Northwestern summary judgment and remand for further proceedings.

 LOKEN, Circuit Judge, dissenting.

         I respectfully dissent. Based upon the Wisconsin Supreme Court’s controlling
 decision in Fox v. Catholic Knights Ins. Soc’y, 665 N.W.2d 181 (Wis. 2003), I
 conclude the majority has misinterpreted Wis. Stat. § 631.11(3), a statute that does
 not even apply to the issue whether Northwestern Mutual Life Insurance Company
 is entitled to rescind the disability insurance policy it issued to Douglas Weiher.

      7
       We likewise decline to consider Weiher’s argument that he is entitled to
summary judgment on his breach of contract counterclaim. Because the district court
concluded Northwestern had properly rescinded the policy, it denied Weiher’s motion
for summary judgment. We believe “it would be beneficial for the district court to
consider this issue in the first instance.” Id.
                                         I.

       In mid-2009, with his income from the practice of dentistry increasing,
Weiher advised his independent insurance agent that he would like to increase the
monthly disability benefits that would be provided by his two existing policies. One
policy, with UNUM, would pay $5,000 per month if Weiher became totally
disabled. The other, a Great-West Life policy sponsored by the American Dental
Association, would pay $6,000 per month. The agent began negotiating with
Northwestern, and Weiher eventually submitted to Northwestern tax returns and
other information disclosing current annual earned income of $271,500 and the two
existing disability policies. Northwestern advised that it was willing to issue a new
policy offering disability benefits of $8,400 per month provided Weiher terminated
the Great-West policy. Though Weiher preferred to retain the Great-West policy
because he wanted total monthly benefits of $15,000, he signed an Amendment To
Application stating:

      I agree to terminate the insurance listed below by the next premium due
      date. I understand Northwestern Mutual Life is relying on this
      agreement and would not have issued a policy without this agreement.
      If the coverage listed below is not terminated by the next premium due
      date, or is terminated and later reinstated, any policy issued as a result
      of this application may be rescinded and the premiums returned.

The Amendment listed a Great-West policy in the amount of $3,500 with a next
premium due date of July 11, 2010. The Amendment was false when signed because
the Great-West policy benefit was in fact $6,000 and the July 11 premium had
already been paid. Weiher continued paying premiums on the Great-West policy
and submitted a claim for disability benefits in 2012, which Great-West paid. Thus,
while Weiher may not have defrauded Northwestern, he knowingly breached a
contractual obligation that was a condition precedent to Northwestern issuing its
policy.

                                        -11-
                                         II.

       It is undisputed that Northwestern’s unwillingness to issue Weiher a policy
providing a monthly disability benefit of $8,400 unless he terminated the Great-West
policy was based upon financial underwriting standards that included coverage
limits based on a percentage of earned income designed to avoid the risk of
overinsurance. “Overinsurance” is an imprecise term with different meanings. In
this context, as the Wisconsin Court of Appeals has noted:

      “overinsurance” refers to a situation where multiple coverages exist to
      a degree where the insured is tempted to trigger the insured event and
      thereby obtain the substantial coverage proceeds. An “overinsurance”
      clause prohibiting such excess coverage serves public policy by
      reducing the temptation of such fraud. See Struebing v. American Ins.
      Co., 197 Wis. 487, 493-94, 222 N.W. 831, 834 (1929).

Becker v. State Farm Mut. Auto. Ins. Co., 512 N.W.2d 191, 193 (Wis. App. 1993).
This type of overinsurance is a well-recognized risk to disability insurers:

      People who know that their full income will continue after they stop
      working may take more risks in their daily lives and will not try as hard
      to return to work after injury or illness; some insureds will fake the
      existence of a disability or exaggerate its severity. The closer the
      disability benefit to 100% of earned income, the greater the moral
      hazard.

Hall v. Life Ins. Co. of N. Am., 317 F.3d 773, 775 (7th Cir. 2003).

      In Langlois v. Wis. Nat’l Life Ins. Co., 119 N.W.2d 400, 403 (Wis. 1963), the
Wisconsin Supreme Court held that, if the insured misrepresented in a disability
insurance policy application that his annual income was $8,500, when in fact it was
less than $3,000, the misrepresentation “materially affected the [insurer’s]

                                        -12-
acceptance of this risk,” which would defeat recovery under the policy even absent
an intent to deceive the insurer. At that time, the applicable statute, § 209.06(1),
provided that no representation or warranty “shall be deemed material or defeat or
avoid the policy . . . unless the matter misrepresented or made a warranty increased
the risk or contributed to the loss.”

       In 1975, as “part of a broad revision to the insurance laws,” the Wisconsin
Legislature enacted Wis. Stat. § 631.11 “to replace section 209.06 of the previous
statutes and broaden it to expressly bring failures of condition within the statute.”
Fox, 665 N.W.2d at 191. Two provisions of the current § 631.11 are relevant here:

             (1)(b) Misrepresentation or breach of affirmative warranty. No
      misrepresentation, and no breach of an affirmative warranty, that is
      made . . . in the negotiation for or procurement of an insurance contract
      constitutes grounds for rescission of, or affects the insurer’s obligations
      under, the policy unless, if a misrepresentation, the person knew or
      should have known that the representation was false, and unless any of
      the following applies:
             1. The insurer relies on the misrepresentation or affirmative
      warranty and the misrepresentation or affirmative warranty is either
      material or made with intent to deceive.
             2. The fact misrepresented or falsely warranted contributes to the
      loss.

            (3) Effect of failure of condition or breach of promissory
      warranty. No failure of a condition prior to a loss and no breach of a
      promissory warranty constitutes grounds for rescission of, or affects an
      insurer’s obligation under, an insurance policy unless it exists at the
      time of the loss and either increases the risk at the time of the loss or
      contributes to the loss.

                                         -13-
                                         III.

      In Fox, the insured applied for a life insurance policy and paid the initial
premium. The application stated that coverage would not begin until a blood test
was completed. The insured was killed in an auto accident before completing the
blood test. The Wisconsin Court of Appeals held that § 631.11(3) trumped this
condition precedent, and therefore the policy provided coverage because the insurer
“could not prove that the failure to complete the blood draw and medical studies
contributed to or increased the risk of loss.” 665 N.W.2d at 186.

       The Wisconsin Supreme Court unanimously reversed. First, examining the
text of § 631.11(3), the Court concluded that it applies only to conditions subsequent
and to promissory or continuing warranties, not to conditions precedent that “relate
to the attachment of risk and precede the existence of the policy . . . . Insurers
cannot show, under § 631.11(3), that the failure of such a condition [precedent]
increased the risk at the time of the loss or contributed to the loss because risk has
not yet attached.” Id. at 188. Next, the Court thoroughly examined the legislative
history of § 631.11, finding that its purpose was both to protect policyholders from
“harsh common law doctrines” and to protect “the ability of insurance companies
to get the information they need to underwrite policies.” Id. at 192. One purpose
of the statute was to protect insurers against “violations of conditions that would
preclude acceptance of the risk.” Id., quoting Act of June 21, 1975, ch. 375, § 41,
1975 Wis. Sess. Laws 1150, 1169. “Were we to rule that interim insurance is
automatically provided upon payment of a first premium,” this purpose would be
frustrated, the Court explained, because “potential insureds would have no incentive
to fulfill requirements such as medical examinations which assist insurers with
underwriting.” Id.

       After concluding that § 631.11(3) did not apply, the Court turned to whether
the required blood test was a condition precedent to coverage:

                                        -14-
      Whether a condition is a condition precedent to coverage depends on
      the language of the contract itself. If the proposed insured does not
      then get an examination required for coverage, there is no contract for
      insurance.

Id. at 192. Based on the contract in Fox, the Court concluded that “the conditional
insurance agreement makes absolutely clear that coverage is not effective until the
required medical examination has taken place.” Id. at 193. “As a result, we must
conclude that there was no insurance policy in effect at the time Patrick Fox died and
that, therefore, Wis. Stat. § 631.11(3) does not apply.” Id. at 194.

       In my view, the decision in Fox applies equally to this case. The negotiations
between Weiher and Northwestern, and in particular the above-quoted Amendment
To Application, make clear, in the words of Fox, “that coverage is not effective until
the required [termination of the Great-West policy] has taken place.” Like the
insured’s promise to get a blood test in Fox, Weiher’s promise to terminate the
Great-West policy was a condition precedent, but it did not preclude the parties from
putting the policy in place on a conditional basis. If viewed as a warranty, the
promise was “that facts are as stated at the beginning of the policy period,” not a
promise “that facts will continue to be as stated throughout the policy period.” Id.
at 190 (emphasis in original, quoting Black’s Law Dictionary). Note that the Court
in Fox, having concluded that § 631.11(3) did not apply, did not turn to
§ 631.11(1)(b) to determine whether there was a misrepresentation or breach of
affirmative warranty that affected the insurer’s obligation. Rather, the Court held
that there was no coverage because the conditional policy never came into existence.
In effect, the Court ruled that § 631.11 simply does not apply to a condition
precedent to the existence of a policy. At minimum, Fox established that breach of
a condition precedent that defines insurability meets the reliance and materiality
requirements of § 631.11(1)(b).

                                        -15-
                                           IV.

      For these reasons, the decision in Fox conclusively establishes that the district
court properly granted summary judgment to Northwestern because Wis. Stat. §
631.11(3), the statute on which Weiher relied in opposing summary judgment, does
not apply on the undisputed facts of this case.

       In addition, if § 631.11(3) did apply in this case, I agree with the district court
that the interpretation of that statute urged by Weiher, and now adopted by the
majority, is “unpersuasive” because it depends upon a definition of “risk” that is
“unreasonably narrow and unsupported.” As the analysis in Fox makes clear, the
“risk” referred to in § 631.11(3) includes both the risk of loss being insured and the
financial risk to the insurer of providing coverage for the insured risk. The latter risk
includes, as a matter of Wisconsin public policy, the “moral hazard” of
overinsurance that creates a risk that the insured will be tempted to trigger the
insured event and thereby obtain the substantial coverage proceeds. See Manzella
v. Paul Revere Life Ins. Co., 872 F.2d 96, 99 (5th Cir. 1989) (disability insured’s
failure to disclose another policy “did not increase the risk that he would become
disabled” but did “affect the acceptance of the risk” because “an overinsured person
has a strong inducement not to return to work”). Weiher’s promise to cancel the
Great-West policy “materially affected [Northwestern’s] acceptance of this risk.”
Langlois, 119 N.W.2d at 403. His breach of that material promise increased the risk
by enlarging his monthly disability benefit beyond what Northwestern’s financial
underwriting standards allowed. That increased risk existed from the moment he
submitted the false Amendment stating he would terminate the Great-West policy
at the due date of a premium that had already been paid, until he filed claims for
disability benefits with both Northwestern and Great-West in 2012.

       The majority construes the phrase “increases the risk at the time of the loss”
in § 631.11(3) as requiring proof that Northwestern would not have issued the policy

                                          -16-
based on Weiher’s greater income when he filed the claim for disability benefits in
2012. The district court properly concluded, consistent with the analysis of
conditions precedent in Fox, “This change in [Weiher’s] income is irrelevant. [He]
created a binding contract in 2010, and even if his income increased, his disability
benefits were nevertheless closer to his earned income than they otherwise should
have been under the Policy.” Thus, even if § 631.11(3) applies, the question is not
whether Northwestern would have issued the same policy to Weiher in 2012 with
the Great-West policy still in effect but whether Weiher’s failure to cancel the Great-
West policy increased Northwestern’s risk in 2012.

       In 2012, Weiher had many proper ways to seek an increase of his disability
benefits based on his greater income -- he could terminate the Great-West policy and
apply to Northwestern for increased benefits under the policy here at issue or a
second policy; or he could keep the Great-West policy, terminate the Northwestern
policy, and apply to Great West, Northwestern, or another insurer for increased
disability benefits based upon his earned income in 2012. Instead, he chose to
continue breaching his contractual commitment to Northwestern, thereby failing to
satisfy a condition precedent to coverage that, under Fox, prevented that coverage
from coming into existence. Fortunately, the majority opinion does not preclude the
district court from correctly applying Wisconsin law as established in Fox on
remand. Rather than impose additional work on the district court, I would affirm its
correct grant of summary judgment rejecting Weiher’s claim for disability benefits.
                       ______________________________

                                         -17-