1986 WL 15099, at *5 (N.D. Ill. Dec. 23, 1986) (explaining that there must be "reasonable notice of falsity").
Based on the facts of this case, the court finds that New England Mutual did not have a duty to conduct a further investigation into Penoyer's answers. It is true that Dr. Lewis' records gave New England Mutual notice that Penoyer had answered question 2(d) of the paramedical portion of the exam incorrectly because Dr. Lewis' records indicate that Penoyer had had an indication of chest pains prior to June 26, 1985. However, the undisputed evidence submitted by New England Mutual is that all of the tests performed on Penoyer while he had been seeing Dr. Lewis were within normal limits, with the exception of mildly elevated blood pressure. (Sullivan Aff. P 14). All of these tests were performed subsequent to the June 26, 1985 initial visit. It is also undisputed that (1) nothing in Dr. Lewis' records indicated that Penoyer had a history of aortic disease and (2) nothing in Dr. Lewis' records indicated that the policy should be rated at a higher rate or declined. Further, there is no evidence that Penoyer gave ambiguous or implausible answers, see Boyles v. Freeman, 21 Ill. App. 3d 535, 315 N.E.2d 899, 902 (Ill. App. Ct. 1974), or that New England Mutual had in its possession direct evidence of prior inconsistent answers, see Government Employees Ins. Co. v. Govan, 451 A.2d 884, 886 (D.C. 1982). Similarly, there is no evidence that New England Mutual had reasonable notice that Penoyer's omissions were made in bad faith in an attempt to cover up a serious medical condition. Thus, New England Mutual was not required to conduct a further investigation into Penoyer's application.
Further, question 2(d) is not the critical question in this case. The critical questions are questions 45 ("Have you ever been treated or diagnosed as having ... High blood pressure; stroke, or disease of heart, blood or circulatory system?), 46 ("Other than above, have you within the past 5 years: had a checkup or consultation; been a patient in a medical facility; or been advised to have any diagnostic test, hospitalization or surgery?"), and 4(a), (b), and (d) ("Other than the above have you within the past 5 years: Had any mental or physical disorder? Had a checkup consultation, illness, injury or surgery? ... Had an electrocardiogram, x-ray or other diagnostic test?"). There is nothing in Dr. Lewis' records which gave New England Mutual reasonable notice that Penoyer answered question 45, 46, 4(a), 4(b), or 4(d) falsely. Thus, New England Mutual was entitled to rely on Penoyer's answers to these questions and was not required to conduct an independent investigation into these answers. See Gibler, 1987 U.S. Dist. LEXIS 9012, 1987 WL 17817, at *2.
In sum, the only reasonable inferences from the record are that Penoyer made false statements on his application and that New England Mutual relied on those false statements when it issued the policy. There is no evidence from which an inference reasonably could be drawn that New England Mutual knew about Penoyer's medical condition or that New England Mutual was required to conduct a further investigation into Penoyer's application. Thus, Penoyer's failure to disclose the many facts related to his history of aortic disease constituted misrepresentations within the meaning of section 154 of the Illinois Insurance Code.
New England Mutual must also show that the only reasonable inference from the record is that Penoyer's misrepresentations either were made with an intent to deceive or were material to the risk assumed. A misrepresentation is material if "reasonably careful and intelligent persons would regard the facts as stated to substantially increase the chances of the event insured against, so as to cause a rejection of the application." Small v. Prudential Life Ins. Co., 246 Ill. App. 3d 893, 617 N.E.2d 80, 83, 186 Ill. Dec. 841 (Ill. App. Ct. 1993); Garde, 498 N.E.2d at 308; Methodist Med. Ctr., 38 F.3d at 320. A material misrepresentation will avoid the contract even though made through mistake or good faith. Campbell, 155 N.E.2d at 11; Cohen, 529 N.E.2d at 1067; Garde, 498 N.E.2d at 308. Thus, if the misrepresentation is material to the risk assumed, it did not have to be made with an intent to deceive in order for the policy to be avoided. Campbell, 155 N.E.2d at 11; Ratcliffe v. International Surplus Lines Ins. Co., 194 Ill. App. 3d 18, 550 N.E.2d 1052, 1057, 141 Ill. Dec. 6 (Ill. App. Ct. 1990); Home Ins. Co. v. Dunn, 963 F.2d 1023, 1026 (7th Cir. 1992). The fact that the insured does not die from the misrepresented ailment does not affect the materiality of a misrepresentation. Campbell, 155 N.E.2d at 11; Weinstein, 60 N.E.2d at 210; Garde, 498 N.E.2d at 308; Hatch, 409 N.E.2d at 543.
Materiality can be established by the testimony of the insurer's underwriter or employees. Small, 617 N.E.2d at 83; Cohen, 529 N.E.2d at 1067; Garde, 498 N.E.2d at 308; Allender v. Guardian Life Ins. Co., 592 F. Supp. 541, 543 (N.D. Ill. 1984). The materiality of a misrepresentation is a question of fact; however, summary judgment is appropriate where the misrepresentation is of such a nature that no one would dispute its materiality. Northern Life Ins. Co., 601 N.E.2d at 779; Cohen, 529 N.E.2d at 1067; Garde, 498 N.E.2d at 308; Commercial Life Ins. Co. v. Lone Star Life Ins. Co., 727 F. Supp. 467, 470 (N.D. Ill. 1989); Methodist Med. Ctr., 38 F.3d at 320.
In this case, New England Mutual submitted the affidavit of Dr. Sullivan. See infra Part II.C.1.b (discussing Dr. Sullivan's credentials). In his affidavit, Dr. Sullivan testified that "Penoyer's history of an aortic aneurysm, aortic insufficiency, aortic stenosis, aortic regurgitation, and aortic dilatation ... substantially increased the chances of his death and was material to the risk assumed by New England in insuring his life." This testimony was based on Dr. Sullivan's medical training and his twenty-four years of experience in life insurance underwriting. Dr. Sullivan also testified that if the omitted medical history had been disclosed, New England Mutual would not have issued the policy. This testimony was based on Dr. Sullivan's position as Second Vice President and Medical Director and his familiarity with New England Mutual's underwriting practices and underwriting manual. (Sullivan Aff. P 15.)
Defendants have offered no evidence to counter Dr. Sullivan's testimony. In fact, defendants have not even argued that there is a genuine issue of fact as to whether the misrepresentations were material. Thus, even when viewing the record in the light most favorable to defendants, the court finds that the only reasonable inference from the record is that Penoyer's misrepresentations were material to the risk assumed by New England Mutual.
See Small, 617 N.E.2d at 83 (finding the misrepresentation was material where the insurer offered testimony from its underwriter to that effect and the insured failed to counter that testimony); Cohen, 529 N.E.2d at 1067 (same).
Defendants argue that New England Mutual is estopped from relying on the misrepresentations because New England Mutual knew about Penoyer's medical condition prior to issuing the policy. In Illinois, the general rule is that an insurer who knows the truth about an insurance applicant's medical condition before issuing the policy is estopped from avoiding the policy on the basis that the insured made material misrepresentations about that condition in the application. See Moone v. Commercial Cas. Ins. Co., 350 Ill. App. 328, 112 N.E.2d 626 (Ill. App. Ct. 1953); Nogulich v. Metropolitan Life Ins. Co., 317 Ill. App. 411, 46 N.E.2d 396 (Ill. App. Ct. 1943); Smith v. Metropolitan Life Ins. Co., 550 F. Supp. 896 (N.D. Ill. 1982). Defendants argue that New England Mutual knew about Penoyer's condition through (1) its agent Carbon and (2) the records of Dr. Lewis.
These are the same arguments that defendants made in support of defendants' argument that New England Mutual could not have relied on Penoyer's misrepresentations. As before, the court finds it is not reasonable to infer that New England Mutual knew about Penoyer's history of aortic disease before issuing the policy. First, because Penoyer acted in bad faith, the court will not impute whatever knowledge Carbon had to New England Mutual. Second, the uncontroverted evidence is that Dr. Lewis' records "gave no indication that Fred H. Penoyer had a history of an aortic aneurysm or any other disease of disorder of the aorta." (Sullivan Aff. P 14.) Thus, New England Mutual is not estopped from relying on the misrepresentations about Penoyer's history of aortic disease to avoid the policy.
In sum, the record establishes that Fred Penoyer made material misrepresentations in his application for a life insurance policy from New England Mutual Life Insurance Company. New England Mutual is not estopped from relying on those misrepresentations to avoid the policy. Thus, pursuant to section 154 of the Illinois Insurance Code, 215 ILCS § 5/154, New England Mutual is entitled to rescind the Ordinary Life Insurance Policy Number 8821001, which was issued to Fred Penoyer.
Accordingly, the court grants plaintiff New England Mutual Life Insurance Company's motion for summary judgment. The court grants judgment in favor of plaintiff New England Mutual Life Insurance Company on its claim for rescission. Ordinary Life Insurance Policy Number 8821001 is rescinded, and plaintiff has no obligations or liability thereunder except to refund the premiums paid. Because the court has entered judgment on plaintiff's claim for rescission, plaintiff's claim for declaratory judgment is rendered moot. Final judgment is entered in this case in favor of plaintiff New England Mutual Life Insurance Company and against defendants Bank of Illinois in DuPage, Leslie F. Penoyer, Kathryn G. Penoyer, Fred L.B. Penoyer, Lynette J. Penoyer, and Alana Smaldone.
Date: FEB 20 1998
James H. Alesia
United States District Judge
JUDGMENT IN A CIVIL CASE
Decision by Court. This action came to hearing before the Court. The issues have been heard and a decision has been rendered.
IT IS ORDERED AND ADJUDGED that plaintiff's motion for summary judgment is granted. The court (1) enters judgment for plaintiff on its claim for rescission and (2) orders plaintiff's Ordinary Life Policy Number 8821001 is rescinded and plaintiff has not liability or obligation thereunder, except to refund the premiums already paid. Because the court entered judgment on plaintiff's claim for rescission, plaintiff's request for a declaratory judgment is rendered moot. Final judgment is entered for plaintiff New England Mutual Life Insurance Company and against defendants Bank of Illinois in DuPage, Leslie F. Penoyer, Kathryn G. Penoyer, Fred L.B. Penoyer, Lynette J. Penoyer, and Alana Smaldone.