Colorado Springs veteran sues USAA for denying husband’s $1 million life insurance policy

[adjusterjack]

I am not convinced this particular death claim was denied for good cause

The court granted USAA's Motion for Summary Judgment on October 26, 2018, meaning that the court ruled that the denial of the claim was for good cause.

https://www.courtlistener.com/recap/gov.uscourts.cod.172234/gov.uscourts.cod.172234.100.0.pdf

Read the decision. It explains how summary judgment works and what is required for an MSJ to be successful. The court then analyzed both sides and came to a conclusion in favor of USAA.

The medical issues are revealed in the court's decision. The insured had two sleep studies. The first resulted in a diagnosis of Obstructive Sleep Apnea. He treated the condition with a CPAP device. The second study was a follow up on the use and adjustment of the CPAP device. The insured had two further consultations with doctors regarding the condition.

The decision goes on to discuss the application. The article posted earlier referred to only one question. There were others (as I suspected) regarding medical history.

The application inquired whether the insured: "[had] ever consulted with a health care provider for: asthma, emphysema, pneumonia or other respiratory system disorder?" (Doc. # 74-13 at 35);

"within the past five years: had an electrocardiogram, X-ray or any other diagnostic test or procedure that was not previously disclosed?" (Id.) (emphasis added); or

"consulted a health care provider for any reason not previously disclosed?" (Id.)

Even if one argues that the insured did not understand that apnea was a respiratory system disorder, there were two other questions designed to elicit a positive response about his apnea. He said no to all three questions.

And there is this:

The application question regarding respiratory disorders features a hyperlinked definition of the term "other respiratory system disorder." (Doc. # 74-5 at 1.) If selected by an applicant, the definition explicitly characterizes "sleep apnea" as a respiratory disorder. (Id.) The explanatory link is conspicuously located immediately below the "other respiratory system disorder" question and it is highlighted with a dotted blue line for emphasis.

The decision continues with analyses of the other elements of the case. I discussed the medical issues because that's what this thread was all about. The remaining technical issues can be read by anyone at the case link I provided.

You might not like the results of the decision (the widow doesn't get paid) but the blame goes to the insured who failed to disclose his condition when asked, not to the insurance company.

Vaguely worded questions should weaken the claim denial on appeal

You can see by the text of the decision that the questions were NOT vaguely worded.

Bob, your last post is also addressed by the sections of the decision that I cited. You didn't go far enough in the online application.

 

[walthamny]

The insurance company can go beyond 2 years in the case of contract fraud. Basically they can invalidate any contract if the contract was illegal when it was signed. But the burden is pretty high. Here are some cases that I know. The insured dies overseas. The family here never notifies Social Security. You apply for life insurance, use someone who looks like him for the exam. After 2 years passes, file a death claim. Insurance company will deny claim if they figure out what happened. If the medical exam was done on a different person than the insured, the insurance company can void the contract beyond the 2 years. Obviously, the burden of proof is pretty high. Another case, I know is that they broke into the Doctors office and modified the medical records and applied for life insurance. Again courts agreed that 2 years statue of limitations does not apply. This apparently happens more often than we think, if someone is terminal and is told that they have 5 years left, it is really tempting to pull it off.

 

[LGilmore]

"The insured had two sleep studies. The first resulted in a diagnosis of Obstructive Sleep Apnea. "

BINGO! Chart notes. Two studies, he may not have acted on the results, but the results came up Sleep Apena. I can understand why the carrier prevailed

 

[VolAgent]

Definitely not true in an underwriter's eyes.

I've had declines based on medical notes that were not a true diagnosis. Or provisional declines until the doctor actually states for the record if a certain ailment is indeed a chronic condition or not.

That is why many apps use the wording "consulted with physician" instead of or in addition to "diagnosed with".

Please remember, underwriting is not claims. Underwriting doesn't need much of a reason to decline. Even a vague or provisional diagnosis is enough. Even just uncertainty in the chart is enough to decline. But to contest, the company needs something concrete that contradicts the app, at least if they plan to win any lawsuit.

 

[VolAgent]

Also, I've seen many policies that include a fraud clause, giving the company the right to rescind a policy for fraud after 2 years. Now, fraud is a whole lot different than a misrepresentation, even in civil court. I admit I don't generally search for court cases, but I have yet to hear of one. It may happen, but I suspect it is pretty rare.

Finally, states have different rules when it comes to misrepresentation. While I don't feel like doing the research, there are states that require the cause of death be relevant to the misrepresentation. So to borrow an earlier example, if an applicant failed to disclose they had lung cancer and later dies as a passenger in a car accident, the company cannot rescind the policy. The misrepresentation had no impact upon the ultimate cause of death. Based upon the quote earlier, it appears Colorado does not require such a connection. Merely that the misrepresentation be material to the risk assumed.

 

[Robert Barney]

The medical issues are revealed in the court's decision. The insured had two sleep studies. The first resulted in a diagnosis of Obstructive Sleep Apnea. He treated the condition with a CPAP device. The second study was a follow up on the use and adjustment of the CPAP device. The insured had two further consultations with doctors regarding the condition.

The decision goes on to discuss the application. The article posted earlier referred to only one question. There were others (as I suspected) regarding medical history.

Even if one argues that the insured did not understand that apnea was a respiratory system disorder, there were two other questions designed to elicit a positive response about his apnea. He said no to all three questions.

I want to thank adjusterjack for his further examination of the case. It appears that the insured was well aware that he had a sleep apnea condition, and when specifically asked about it, answered that he did not. Based upon this, the company was well withing its rights to decline paying the benefit.

I am baffled about how a $1 million policy was issued without the company requesting an APS. Clearly, had they done so, the doctor's records would have turned up the omission, whoever's fault it was.

I think the further discussion about "fraud" after the 2 year contestability period is worthwhile to continue. I think this case could have easily fallen into a "fraud" definition, and could have permitted a company, in some jurisdictions, to deny a claim after 2 years. I would like to hear more on that subject.

 

[VolAgent]

I love this quote from the footnotes on page 5 of the decision.

Plaintiff also contends that “the question of whether [Defendant] actually knew or had reason to know about Decedent’s sleep apnea, is immaterial.

Does that fly in courts, or was the plaintiff's attorney asleep during class when this was covered in contract law? Misrepresentation all hinges upon knowing or reasonably should have known.

 

[adjusterjack]

I love this quote from the footnotes on page 5 of the decision.

Plaintiff also contends that “the question of whether [Defendant] actually knew or had reason to know about Decedent’s sleep apnea, is immaterial.

Does that fly in courts, or was the plaintiff's attorney asleep during class when this was covered in contract law? Misrepresentation all hinges upon knowing or reasonably should have known.

Not sure what your point is and you've taken part of the footnote out of context. The full text of the footnote is:

The Court notes that Plaintiff argues that "Plaintiff need not discuss the materiality of the answer to issue to policy [sic] or [Defendant’s] knowledge." (Doc. # 82 at 13.) Plaintiff also contends that "the question of whether [Defendant] actually knew or had reason to know about Decedent’s sleep apnea, is immaterial." (Id.) However, Plaintiff’s arguments are clearly
inapposite with the applicable standard set forth in Hollinger and are, therefore, erroneous. Hollinger, 560 P.2d at 827.

The footnote refers to the 5 elements that USAA had to prove:

(1) the applicant made a false statement of fact or concealed a fact in his application for insurance; (2) the applicant knowingly made the false statement or knowingly concealed the fact; (3) the false statement of fact or the concealed fact materially affected either the acceptance of the risk or the hazard assumed by the insurer; (4) the insurer was ignorant of the false statement of fact or concealment of fact and is not chargeable with knowledge of the fact; (5) the insurer relied, to its detriment, on the false statement of fact or concealment of fact in issuing the policy.

Now that you have those quoted sections, please explain the point you were trying to make with your comment.

 

[VolAgent]

Not sure what your point is and you've taken part of the footnote out of context. The full text of the footnote is:



The footnote refers to the 5 elements that USAA had to prove:



Now that you have those quoted sections, please explain the point you were trying to make with your comment.

I get myself mixed up with Defendant and Decendent. Somehow I got to thinking the statement was saying whether or not the insured knew he had sleep apnea was immaterial.

That said, I do stand by my question as to if the attorney slept through law school. The Judge does call out the Plaintiff's attorney for basically failing to state a claim under the CCPA or effectively respond to the motion.

As Defendant notes, “Plaintiff’s complaint simply parrots back the language of the [CCPA], coupled with a bare assertion that [Defendant] engaged in the 19 enumerated ‘prohibited and/or deceptive trade practices.’” (Doc. # 74 at 19.) Moreover, Plaintiff’s response to the instant motion does not provide any facts regarding the challenged practices.

From pages 18/19 of the decision, 19/20 of the PDF.

 

[adjusterjack]

I want to thank adjusterjack for his further examination of the case.

You're welcome.

I think the further discussion about "fraud" after the 2 year contestability period is worthwhile to continue. I think this case could have easily fallen into a "fraud" definition, and could have permitted a company, in some jurisdictions, to deny a claim after 2 years. I would like to hear more on that subject.

You've gotten me curious but this thread has gotten rather lengthy with the analysis of the USAA case so I have opened a new thread on the fraud issue so we can give it our full attention there rather than mixing it in here.

All who would like to participate in that discussion see:

https://insurance-forums.com/community/threads/fraud-and-the-contestability-clause.95940/