United States District Court, D. New Mexico
MEMORANDUM OPINION AND ORDER
matter comes before the Court upon Plaintiff's Opposed
Motion for Summary Judgment (Motion for Summary Judgment),
filed November 20, 2017. (Doc. 57). Defendant Roger Saul
filed a response on December 6, 2017,  and Plaintiff
filed a reply on December 21, 2017. (Docs. 64 and 66). Having
considered the Motion for Summary Judgment and the
accompanying briefing, the Court grants the Motion for
Silva was hospitalized from July 20, 2013, through July 29,
2013, for medical conditions associated with alcoholism.
(Doc. 57-3) at ¶ 8. Mr. Silva was again hospitalized
from February 4, 2015, to February 5, 2015, for chest and leg
pain. (Doc. 57-2) at 2.
28, 2015, Mr. Silva applied for a $100, 000 life insurance
policy with Plaintiff. (Doc. 57-1). In his application, Mr.
Silva designated Defendant Rosanne Silva, his spouse, as the
sole beneficiary. Id. Mr. Silva also answered
“No” to the following question in the
application: “In the past 2 years, for any condition,
have you been admitted to or confined in a hospital, nursing
home, extended care or special treatment facility?”
Id. Mr. Silva, in signing the application,
acknowledged the following: “I represent that, to the
best of my knowledge and belief, the information on this
request is true and complete.” Id. He further
acknowledged that “[i]f material facts have been
misstated here, benefits may be denied if the insured's
death occurs within the first two years after the Insurance
accepted Mr. Silva's insurance application and issued Mr.
Silva a $100, 000 life insurance policy, certificate number
A8118559, with an Insurance Date of July 14, 2015. (Doc.
57-4) at 2. Relevant to this lawsuit, the policy has an
incontestability clause which states, in pertinent part:
Except for nonpayment of PREMIUMS, WE cannot contest the
validity of the insurance … after it has been in force
for two years during the INSURED's lifetime from …
the INSURANCE DATE…. To contest, WE will only rely
upon statements signed by the OWNER in applying for such
Id. at 4.
Silva then passed away on June 16, 2016, within the 2-year
contestability period. (Doc. 57-2) at 1. Mrs. Silva
subsequently submitted a claim to Plaintiff to collect on Mr.
Silva's life insurance policy. (Doc. 57-2) at 1.
According to Mr. Saul, in November 2016, he “agreed to
champion the widow Silva's cause by accepting an
assignment of $10, 000 … of the policy; with an
understanding that [he] would apply 100% of all net proceeds
from any award toward her rental arrears for her Elder
Care/Hospice.” (Doc. 57-8) at 2. On January 4, 2017, Mrs.
Silva assigned to Mr. Saul $10, 000 of the proceeds of the
life insurance policy in consideration for Mr. Saul's
application of “all net cash proceeds” toward her
“rental arrears” for “Elder
Care/Hospice.” (Doc. 57-6).
identical letters dated April 28, 2017, Bates Number 000021,
(Doc. 57-2), and May 11, 2017, Bates Number 000014, (Doc. 64)
at 7, Plaintiff informed Mrs. Silva of its decision to deny
her claim for the life insurance proceeds. Plaintiff
explained that Mr. Silva “did not disclose material
information concerning his medical history” when he
indicated on the insurance policy application that he had not
been hospitalized in the past 2 years although, in fact, he
had been hospitalized on July 20, 2013, and on February 4,
2015. (Doc. 57-2) at 2. Plaintiff stated that had it
“been aware of this medical information when processing
the insured's application [it] would have declined to
issue this coverage.” Id. Plaintiff then
concluded that “the appropriate resolution is to
rescind the Contract.” Id. To that end,
Plaintiff noted that it would send Mrs. Silva a check to
“refund … all the premiums paid, plus
interest.” Id. Plaintiff further explained
Your endorsing, cashing or depositing of this check will
constitute your agreement to rescission of the Contract. By
doing so, you agree that the Contract is of no force or
effect and irrevocably waive and release all claims you may
have under the Contract. The refund check is being sent to
you on the express condition that your acceptance of this
check is without reservation and in full and complete
satisfaction of any claims you may have under the Contract.
Id. Moreover, Plaintiff stated that “you may
contest our decision by bringing a legal action in
separately sent Mrs. Silva a check dated April 28, 2017, for
$1, 928.69. (Doc. 57-5). The check notes on it: “Refund
of premiums paid under contract A8118559. Coverage is hereby
rescinded.” Id. Mrs. Silva endorsed the back
of the check and cashed it. Id. Sometime later, Mr.
Saul wrote a check to Plaintiff for $1, 928.69. (Doc. 64) at 13.
There is no evidence that Plaintiff received Mr. Saul's
check let alone cashed it.
Boggs, a corporate vice president for Plaintiff, attested in
a declaration that Plaintiff will not issue a life insurance
policy to an applicant that “is receiving or has
recently received medical treatment for serious medical
conditions related to alcoholism….” (Doc. 57-3)
at ¶ 6. Mr. Boggs further attested that if Plaintiff had
known about Mr. Silva's hospitalization for alcoholism
related conditions, Plaintiff would not have issued a life
insurance policy to Mr. Silva. Id. at ¶ 9. Mr.
Boggs noted that “Mr. Silva's medical conditions
disqualified him from coverage completely and could not have
been dealt with through an increased premium.”
Id. at ¶ 10. In addition, Mr. Boggs attested
that Plaintiff “relied on Mr. Silva's
representation that he had not been hospitalized in the two
years prior to his application.” Id. at ¶
12. Consequently, Plaintiff “did not have any reason to
investigate Mr. Silva's medical history” prior to
issuing the life insurance policy. Id. at ¶ 11.
Relevant Procedural History
is suing Mr. Saul, Mrs. Silva, and the estate of Mr. Silva to
declaratory order that the Policy was effectively rescinded,
that the beneficiary has affirmatively waived all claims
under the Policy, that no proceeds are payable under the
Policy, and that no action may be brought under the Policy.
(Doc. 1) at ¶ 2. Plaintiff alleges that the life
insurance policy was rescinded because Mr. Silva “died
during the Policy's contestability period” and
Plaintiff's “investigation revealed that Mr. Silva
had made a material misrepresentation on his insurance
application….” Id. at ¶ 3.
Plaintiff further alleges that Mrs. Silva waived any claims
under the life insurance policy when Plaintiff advised Mrs.
in writing that the Policy was being rescinded, that [Mrs.]
Silva was advised in writing that she would receive a check
refunding the premiums paid, that [Mrs.] Silva was advised in
writing that cashing, depositing, or endorsing the check
would constitute acknowledgment of the rescission and waiver
of all claims under the Policy, and that she cashed or
deposited the check.
Id. at ¶ 4. Finally, Plaintiff alleges that Mr.
Saul has no claim against Plaintiff because his
interest, if any, is only in the proceeds of the Policy and
that rescission of the Policy extinguished any claim that Mr.
Saul otherwise may have had as the existence of a valid
Policy is a condition precedent of Mr. Saul's claims.
Id. at ¶ 5.
Mr. Saul's Counterclaims (Doc. 6) and Bifurcation
Saul answered Plaintiff's Complaint and raised
counterclaims based on Plaintiff's failure to pay the
$100, 000 claim and bad faith insurance practices. (Doc. 6)
at 8-9. In November 2017, the Court bifurcated this case so
that the Court could first address the issues raised in
Plaintiff's Complaint and then, if necessary, address the
counterclaims. (Doc. 58). The Court agreed with Plaintiff
that if a ...