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Life Policy Rescinded Due to Insured

Life Policy Rescinded Due to Insured's Failure to Disclose Mitral Valve Prolapse

ERISA and Life Insurance News
(April 19, 2011)

Milam v. Metropolitan Life Ins. Co.,
No. 1:09-cv-00111-WLS (N.D. Ga. Mar. 17, 2011)

Crosby applied to MetLife for life insurance in 2005. In her application, Crosby failed to disclose a diagnosis of mitral valve prolapse and treatment for related symptoms, in response to the question whether "within the past 10 years [she had] received treatment, attention, or advice from any physician … or been told by any physician … that he/she had …any … disease or disorder of the heart or circulatory system."

MetLife relied on Crosby’s answers to the application questions, and issued a life insurance policy in the "select preferred" premium rate classification.

In 2007, during the policy’s two-year contestable period, Crosby died in a motorcycle accident. Her beneficiaries submitted claims to recover benefits under the policy. MetLife obtained Crosby’s medical records, which revealed a long history of mitral valve prolapse, related symptoms, and medical treatment.

Under MetLife’s underwriting guidelines in effect in 2005, had Crosby’s mitral valve prolapse been disclosed, she would not have qualified for coverage in the "select preferred" premium rate classification. Rather, she would have been offered coverage in the "standard" rate classification, resulting in a higher premium.

MetLife denied the beneficiaries’ claims for benefits on the grounds that (1) the policy was subject to rescission and void ab initio due to material misrepresentations in the application, and (2) if Crosby’s true medical history been disclosed, the policy would not have been issued in the "select preferred" premium rate classification.

The beneficiaries sued MetLife to recover death benefits under the policy, plus a penalty and attorney’s fees under O.C.G.A. § 33-4-6, for MetLife’s alleged "bad faith" denial of insurance benefits.

MetLife asserted a counterclaim, seeking rescission of the policy on any or all of the grounds enumerated in O.C.G.A. § 33-24-7(b), and a declaration that the policy was void ab initio and of no effect.

During discovery, counsel for the beneficiaries took the deposition of MetLife’s associate chief underwriter, who testified that if Crosby’s mitral valve prolapse and related medical history had been disclosed in her application, the policy would have been issued in the "standard" rate classification. This testimony was corroborated by MetLife’s underwriting guidelines, which provided that to qualify for the "select preferred" rate classification, the applicant was required to have "no history" of cardiovascular problems.

The court granted summary judgment to MetLife, declaring that the policy was properly rescinded. The court emphasized that the testimony of MetLife’s underwriter was uncontradicted, and the underwriting guidelines clearly supported MetLife’s position.

The beneficiaries opposed MetLife’s motion in large part based on an affidavit from an expert cardiologist, who was identified for the first time at the summary judgment stage. Based on Crosby’s medical records, the cardiologist questioned whether she had been properly diagnosed with mitral valve prolapse.

The court struck the affidavit, holding that the beneficiaries could not rely on an expert witness identified after discovery and in response to MetLife’s motion for summary judgment. The court further emphasized that whether Crosby was, in fact, properly diagnosed with mitral valve prolapse was irrelevant.

Crosby believed that she had mitral valve prolapse, and she sought medical treatment for it many times before submitting her application to MetLife. Her failure to disclose the condition in the application properly resulted in rescission of the policy.

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H. Sanders Carter
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