Summary
The United States District Court for the Western District of Kentucky granted Hartford Life and Accident Insurance Company’s motion for judgment on the administrative record and denied Jillian M. Florentino’s motion. The court held that Hartford validly rescinded supplemental life-insurance coverage under ERISA after determining that the decedent materially misrepresented his opioid-abuse history on a Personal Health Application. The court concluded that the rescission was valid under federal common law and the policy terms under either de novo or arbitrary-and-capricious review.
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Practice areas
Questions Presented
- Whether Hartford's denial and rescission of supplemental life-insurance coverage was valid under ERISA and federal common law.
- Whether the court was required to review Hartford's benefits decision de novo or under the arbitrary-and-capricious standard.
- Whether federal common law required Hartford to prove that the decedent intended to deceive before rescinding coverage.
- Whether the policy's signature and copy requirements in its incontestability clause applied to Hartford's rescission within two years of the coverage's effective date.
- Whether remitting insurance premiums was a condition precedent to rescission.
- Whether Plaintiff's motion to strike the Parker Declaration required exclusion of the declaration when the court could resolve the motions without considering it.
Holdings
- An insurer may rescind ERISA life-insurance coverage when the insured made a material misrepresentation in the insurance application that justifiably induced issuance of the coverage. The decedent's inaccurate denial of opioid use and diagnosis or treatment for drug abuse was material, and Hartford's rescission was valid.
- Federal common law does not require an insurer to prove the insured's intent to deceive when rescission is based on a material misrepresentation.
- The signature and copy requirements in the policy's incontestability clause did not prevent Hartford from using the personal health application to rescind coverage within two years of its effective date.
- Remitting or offering to remit premiums was not a condition precedent to Hartford's rescission of the supplemental life-insurance coverage.
- The motion to strike the Parker Declaration was moot because the court could resolve the cross-motions without considering the declaration.
Key quotations
“an insurer is entitled to avoid an insurance policy if the insurer proves that the insured made a fraudulent or material misrepresentation in his insurance application that justifiably induced the issuance of the policy.” (Section II(B))
“Even according no deference to the claims administrator’s decision to rescind, Defendant’s rescission is valid regardless of whether Decedent intended to deceive in making his misrepresentation.” (Section II(B)(1))
“Taken together, the Court is not persuaded that premium rescission is a prerequisite to rescission under federal common law.” (Section II(B)(3))
Factual background
Michael Florentino elected $440,000 in supplemental life-insurance coverage through his employer's ERISA benefit plan, including $240,000 in coverage requiring evidence of insurability. On his personal health application, he answered no to a question asking whether he had used controlled substances or been diagnosed or treated for drug or alcohol abuse within the preceding five years. After Florentino died from fentanyl and acetyl-fentanyl intoxication less than two months after coverage was approved, Hartford obtained medical records documenting opioid dependence and rescinded the supplemental coverage after determining that it would not have approved the additional insurance had it known the medical history.
Procedural history
Hartford denied Plaintiff's claim for supplemental life-insurance benefits and rescinded the supplemental coverage after determining that the decedent materially misrepresented his opioid-abuse history on a personal health application. Plaintiff administratively appealed, Hartford upheld its decision, and Plaintiff filed suit under ERISA. The court granted Hartford's motion for judgment on the administrative record, denied Plaintiff's motion and alternative remand request, and denied the motion to strike as moot.