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PHL Variable Insurance Co. v. Fulbright McNeill

January 22, 2007

PHL VARIABLE INSURANCE COMPANY PLAINTIFF
v.
FULBRIGHT MCNEILL, INC. DEFENDANT



The opinion of the court was delivered by: James M. Moody United States District Judge

ORDER

Pending are cross motions for summary judgment. (Docket #'s 4 and 13). Following a thorough review of the pleadings, exhibits and after hearing argument of counsel in a hearing held December 14, 2006, the Court finds that the motion of Plaintiff, docket # 13, should be and hereby is granted. Defendant's motion for summary judgment, docket # 4, is denied.

Facts

This action is a dispute over a life insurance policy. Defendant Fulbright McNeill, Inc. ("FMI") initially filed this case in Pulaski County Circuit Court. Following the completion of discovery, FMI non-suited the case and Plaintiff PHL Variable Insurance Company ("PHL") filed this declaratory judgment action seeking rescission and cancellation of the policy.

On February 28, 2003, Keith McNeill ("McNeill") completed and signed an application to PHL for a $3,000,000.00 life insurance policy. The beneficiary of the policy was to be FMI, a rubber product manufacturing company in Wynne, Arkansas in which McNeill owned a 50% interest. On March 17, 2003, McNeill underwent a paramedic examination and completed and signed part II of the PHL life insurance policy application. At that time, McNeill was reportedly in good health and had no problems with his heart.

On April 2, 2003, McNeill voluntarily submitted to a cardioscan/coronary artery calcification study with gated ct ("Coronary Test") which was administered in the Methodist Healthcare North Hospital, Memphis, Tennessee. The Coronary Test revealed McNeill's total coronary artery calcium score to be 431, placing him at a 90% likelihood of having a heart attack and at "high risk" of cardiovascular disease.

Plaintiff contends that on April 2 or 3, 2003, Dr. Tom S. Fowler, radiologist, Memphis, Tennessee, dictated a report of the McNeill Coronary Test and within a few days personally contacted McNeill to inform him of the results. On April 7, 2003, the Methodist Healthcare North Hospital sent a letter report to McNeill.

PHL used and relied upon the information and answers to the questions in the application and application part II to issue and print the McNeill policy. On or shortly after June 15, 2003, PHL printed and issued the McNeill policy with an Issue Date of June 15, 2003. On July 11, 2003, the McNeill policy was delivered to McNeill. McNeill signed a policy acceptance form at that time. McNeill did not disclose to PHL the Coronary Test or results at any time.

On January 28, 2004, McNeill died from a heart attack.

FMI made a claim to PHL for payment of the death benefits of $3,000,000 under the McNeill policy. PHL refused to pay the death benefit claim on the ground that McNeill had made a misrepresentation in the application for the insurance. PHL contends that the application contained a misstatement because the Coronary Test was never revealed to PHL. PHL contends that McNeill had a duty to notify PHL of the change in his condition during the period of time between the application and the issuance of the policy. Additionally, PHL contends that McNeill affirmed that the statements made in his initial application remained true when he signed the policy acceptance form on July 11, 2003.

FMI argues that the terms of the policy preclude PHL from relying upon any misrepresentation in the policy acceptance form and McNeill had no duty to notify PHL of his medical condition following his initial application.

Standard for Summary Judgment

Summary judgment is appropriate only when there is no genuine issue of material fact, so that the dispute may be decided solely on legal grounds. Holloway v. Lockhart, 813 F.2d 874 (8th Cir. 1987); Fed. R. Civ. P. 56. The Supreme Court has established guidelines to assist trial courts in determining whether this standard has been met:

The inquiry is the threshold inquiry of determining whether there is a need for trial -- whether, in other words, there are genuine factual issues that properly can be resolved only by a finder of fact because ...


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