Mann v. New York Life Insurance
Docket: No. 02-17086; D.C. No. CV-00-01570-MHM
Court: Court of Appeals for the Ninth Circuit; December 7, 2003; Federal Appellate Court
Dianne M. Mann, as the bankruptcy trustee for Courtney Ann Wiggs, appeals a summary judgment favoring New York Life Insurance and Annuity Company. The appellate review of the district court's decision is conducted de novo. The court affirms the judgment, determining that New York Life validly rescinded the conditional temporary coverage agreement due to Courtney Wiggs' failure to disclose his recent drug abuse history on his insurance application. The conditional agreement required truthful answers, which Wiggs misrepresented in part II of his application. Despite multiple opportunities to correct his false statements, he continued to provide misleading information regarding his drug use and treatment. According to Ariz.Rev.Stat. 20-1109, statements in insurance applications are treated as representations rather than warranties, and misrepresentations can prevent recovery if they are fraudulent, material to the risk accepted by the insurer, and if the insurer would not have issued the policy had the true facts been known. Arizona courts confirm that this statute applies to temporary coverage agreements as well. The district court found all three statutory elements met: Wiggs' misrepresentations were fraudulent, as he had knowledge of his drug use and treatment, which he failed to disclose. His recent cocaine use and hospitalization further substantiated the falsity of his statements, affirming the district court's conclusion that the fraudulent element under Ariz.Rev.Stat. 20-1109 was satisfied. Misrepresentations in an insurance application were deemed material, as they could influence a reasonable insurer's risk assessment. Specifically, New York Life's underwriting guidelines disallow policies for individuals who used cocaine within two years prior to application. It was established that New York Life would not have issued any policy to Wiggs had he disclosed his cocaine use, satisfying the necessary criteria for rescission under Arizona law (Ariz.Rev.Stat. 20-1109). The court also affirmed that the "reasonable expectations doctrine" does not apply in this case. This doctrine allows for voiding boilerplate terms if they cannot be understood by a reasonable consumer. However, Wiggs was explicitly questioned about his drug history, and his failure to disclose relevant information—such as a recent drug overdose—signaled a clear and unambiguous requirement for honesty in the application process. Thus, the court concluded that Wiggs' fraudulent misrepresentation justified New York Life's rescission of the policy, and the district court's summary judgment was appropriate. The ruling is affirmed and not intended for publication.