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American General Life Insurance Co. v. Underwood

United States District Court, E.D. Tennessee, Knoxville Division

January 9, 2015

AMERICAN GENERAL LIFE INSURANCE COMPANY, Plaintiff,
v.
BRENDA K. UNDERWOOD, Defendant

Page 945

For American General Life Insurance Company, Plaintiff, Counter Defendant, ThirdParty Plaintiff: Van Austin Shaver, LEAD ATTORNEY, L Eric Ebbert, Baker, Donelson, Bearman, Caldwell & Berkowitz, PC (Knox), Knoxville, TN; S Russell Headrick, Lathrop & Gage, LC, Kansas City, MO.

For Brenda K Underwood, Defendant, Counter Claimant: S Russell Headrick, Lathrop & Gage, LC, Kansas City, MO; Mike G Nassios, Nassios & McLaughlin, PLLC, Knoxville, TN.

For Steve Ruth, ThirdParty Defendant: David C Hollow, LEAD ATTORNEY, Hollow & Hollow, LLC, Knoxville, TN.

Page 946

MEMORANDUM OPINION

Leon Jordan, United States District Judge.

This civil action is before the court for consideration of " Plaintiff/Counter-Defendant/Third-Party Plaintiff American General Life Insurance Company's Motion for Summary Judgment" [doc. 38]. Defendant/Third-Party Plaintiff Brenda Underwood (" Underwood" ) has filed a response [docs. 44, 45], and American General Life Insurance Company (" American General" ) has submitted a reply [doc. 50]. Oral argument is unnecessary, and the motion is ripe for the court's determination.

American General has filed suit to rescind a life insurance policy pursuant to Tennessee Code Annotated § 56-7-103 or in the alternative for a declaratory judgment that insurance coverage under the policy never became effective. Underwood has filed a counterclaim for breach of contract or in the alternative for a declaratory judgment finding that insurance coverage was in existence at the time of the death of Underwood's husband, David Underwood (" Decedent" ). American General seeks summary judgment on its claims against Underwood along with a denial and dismissal of Underwood's counterclaim.[1] For the reasons that follow, American General's motion for summary judgment will be granted on all grounds, including the dismissal of Underwood's counterclaim.

I.

Background

On September 8, 2008, Decedent executed Part A of an application for a term life insurance policy with American General. Decedent executed Part B of the application on September 24, 2008. Parts A and B are considered the " Application." The policy is a twenty-year term policy with a death benefit of $300,000, with Underwood as the primary beneficiary. The policy has a two-year contestability period.

The application for the policy at issue contains the following language:

I, the Proposed Insured signing below, agree that I have read the statements contained in this application and any attachments or they have been read to me. They are true and complete to the best of my knowledge and belief. I understand that this application: (1) will consist of Part A, Part B, and if applicable, related attachments including supplement(s) and addendum(s); and (2) shall be the basis for any policy and any rider(s) issued. I understand that any misrepresentation contained in this application and relied on by the Company

Page 947

may be used to reduce or deny a claim or void the policy if: (1) such misrepresentation materially affects the acceptance of the risk; and (2) the policy is within its contestable period.
Except as may be provided in any Limited Temporary Life Insurance Agreement, I understand and agree that even if I paid a premium no insurance will be in effect under this application or under any new policy or any rider(s) issued by the Company unless or until all three of the following conditions are met: (1) the policy has been delivered and accepted; and (2) the full first modal premium for the issued policy has been paid; and (3) there has been no change in the health of the Proposed Insured(s) that would change the answers to any questions in the application before items (1) and (2) in this paragraph have occurred. I understand and agree that if all three conditions above are not met (1) no insurance will begin in effect; and (2) the Company's liability will be limited to a refund of any premiums paid, regardless of whether loss occurs before premiums are refunded.
I understand and agree that no agent is authorized to: accept risks or pass upon insurability; make or modify contracts; or waive any of the Company's rights or requirements.

Part B of the application contains the following questions and answers provided by Decedent:

5. Personal Health History . . .
B. Is the Proposed Insured currently taking any medication, treatment or therapy or under medical observation?
(If yes, provide details such as: date of first diagnosis; name, address, and phone number of doctor; tests performed; test results; medications or recommended treatment).
[Decedent answered " yes" and provided " Methotrexate -- see above" and " Mobic for arthritis" ] . . .
F. Other than previously stated, in the past 10 years, has the Proposed Insured:
1) been hospitalized, consulted a health care provider or had any illness, injury or surgery?
(If yes, provide details such as: date of first diagnosis; name, address, and phone number of doctor; tests performed; test results; medications or recommended treatment).
[Decedent answered " yes" and provided " Mercer (sic) staph infection -- operation to correct 3 yrs ago. Dr. Schuman, 2001 Laurel Ave., Knoxville, TN 37916, (865) ...

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