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NEW ENGLAND MUT. LIFE INS. CO. v. BANK OF ILLINOIS

February 20, 1998

NEW ENGLAND MUTUAL LIFE INSURANCE CO., Plaintiff,
v.
BANK OF ILLINOIS IN DuPAGE, et al., Defendants.



The opinion of the court was delivered by: ALESIA

 Before the court is plaintiff New England Mutual Life Insurance Company's motion for summary judgment. For the reasons that follow, the court grants plaintiff's motion.

 I. BACKGROUND1

 On January 22, 1994, Fred Penoyer ("Penoyer") met with insurance salesman Michael Carbon ("Carbon") in Lombard, Illinois. At that time, Penoyer and Carbon together filled out a two-part application for a life insurance policy from defendant New England Mutual Life Insurance Company ("New England Mutual").

 Part II of the application asked for certain medical information. Part II was filled out as follows: Carbon would read the question to Penoyer; Penoyer would respond either "yes" or "no"; and then Carbon would write down Penoyer's responses on the application. Question 45(b) of the application asked: "Have you ever been treated or diagnosed as having: ... High blood pressure; stroke; or disease of heart, blood or circulatory system?" Penoyer responded "no." Question 46 asked: "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?" Penoyer responded "no." Finally, question 47 asked Penoyer to "give details to each Yes answer to questions 42 through 46." Nothing was filled in on question 47.

 After completing the application with Carbon, Penoyer executed the application in Carbon's presence. The application contains the following declaration: "To the best of my knowledge and belief, the answers recorded are true and complete." Penoyer signed the application and dated it January 22, 1994.

 On February 8, 1994, Penoyer met with Dr. Julie Levering for the purpose of undergoing a physical examination. During the examination, the paramedical portion of the application was completed as follows: Dr. Levering would ask Penoyer the question; Penoyer would respond; and then Dr. Levering would write the responses on the application. Question 2(d) of the paramedical portion asked: "Have you ever been treated for or ever had any known indication of: ... Rheumatic fever or other severe infection; high blood pressure, heart murmur, chest pain, heat attack, varicose veins, phlebitis or other disorder of the heart or blood vessels?" Penoyer responded "no." Questions 4(a), (b), and (d) asked: "Other than 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?" Penoyer responded "yes" to all three of those questions.

 Dr. Levering asked Penoyer to explain any affirmative answers given in response to the questions asked, including any diagnoses, dates, duration, and names and addresses of all attending physicians and medical facilities. As to questions 4(a), (b), and (d), Penoyer explained that in 1992, he was treated at Thunderbird Hospital in Phoenix, Arizona for gallbladder removal; in 1993, he had a "chest x-ray" which was "negative; and in 1994, he underwent "lumbar series x-rays" which were "negative" and an "IVP" which was "negative." As to other affirmative answers, Penoyer identified Dr. Barry Lewis as his personal physician who treated him for possible pneumonia in 1991, pneumonia in 1993, possible kidney stones in 1994, and muscle spasms in 1994. Penoyer also disclosed that he had been treated in 1960 for a bruise to the kidney that resulted from a football injury.

 After completing the paramedical portion of the application, Penoyer reviewed that portion of the application. The document contained the following declaration: "I declare that my answers to the foregoing questions are true and complete and are correctly recorded to the best of my knowledge and belief." Penoyer signed directly below this declaration.

 After receiving the application and payment of a premium, (Pl.'s Ex. 1 (Joint Stipulation of Uncontested Facts) (hereinafter "J. Stip.") P 41), New England Mutual prepared and issued its Ordinary Life Policy, Number 8821001 ("the policy"), designating Penoyer as the insured, in the face amount of $ 750,000 with an additional protection amount of $ 250,000. The policy contains a provision which states that the policy is issued "in reliance on the statements made in the Application for the insurance." (Pl.'s Ex. 7 at 4.) The date of issue of the policy was July 28, 1994.

 Penoyer died on January 4, 1996, which was within the two-year period of contestability. Because Penoyer died within the two-year contestability period, New England Mutual conducted an investigation into the actual health of Penoyer prior to the dates on which he applied for the policy. The investigation uncovered the following medical history which was not disclosed by Penoyer on the application to New England Mutual for the policy:

 
1. In June and July of 1989, Dr. G. Martin Mullen examined Penoyer at the Loyola Medical Center Outpatient Clinic for multiple complaints, including a complaint of chest pain and exhaustion. Based on Penoyer's description of the chest pain, Dr. Mullen diagnosed Penoyer as having "atypical chest pain." Penoyer told Dr. Mullen that he had this "'atypical chest pain' for 'more than five years.'"
 
Dr. Mullen then performed a physical examination on Penoyer, which revealed "mildly elevated" blood pressure readings which "could be a significant risk factor for cardiovascular complications." Dr. Mullen also performed a cardiac examination, which revealed an "irregular rhythm, a slightly accentuated second heart sound and the presence of an abnormal cardiac murmur suggestive of aortic valve leakage."
 
Pursuant to Dr. Mullen's orders, Penoyer underwent a number of diagnostic tests, including a chest x-ray, a Doppler echocardiogram, and a two-dimensional echocardiogram. The chest x-ray revealed an elongated and prominent aorta, which confirmed Dr. Mullen's diagnosis of aortic regurgitation murmur. The Doppler and two-dimensional echocardiograms confirmed that Penoyer had aortic valve disease.
 
On July 7, 1989, Penoyer again saw Dr. Mullen. At that time, Dr. Mullen discussed his diagnosis of aortic valve disease with Penoyer. Dr. Mullen recommended that Penoyer return to see him in three months to monitor the aortic valve regurgitation murmur and its effect on his left ventricle and aorta. (Pl.'s 12(M) Statement P 39; Pl.'s Ex. 10 at C6; J. Stip. P 16.)
 
3. On March 25, 1992, Penoyer went to see Dr. Moran for a second opinion concerning some pains and the cardiac catheterization that was done on March 17, 1992. (Pl.'s 12(M) Statement P 40; J. Stip. P 18.) Penoyer provided Dr. Moran with a personal and medical history, which included the fact that he (1) was an x-ray technician; (2) had a history of cardiomegaly for over twenty-five years; and (3) had undergone a number of diagnostic tests in Sun City, Arizona, which included an echocardiogram and a cardiac catheritization. Penoyer also told Dr. Moran that (1) "he had 'aortic regurgitation, trivial coronary artery disease,' and a 'dilated aorta all the way down'" and (2) he was "scared shitless."
 
At that time, Dr. Moran physically examined Penoyer. The exam revealed an abnormally elevated systolic blood pressure and a murmur of aortic insufficiency. Penoyer then underwent a chest x-ray, which revealed the dilated aorta.
 
4. On June 3, 1992, Penoyer underwent an echocardiogram at Midwest Heart Specialists which revealed a calcified aortic valve, an aneurysmal dilatation of the proximal ascending aorta, and left ventricular enlargement. On that day, he also underwent a Doppler echocardiogram at Midwest Heart Specialists, which revealed a mild mitral regurgitation, mild aortic stenosis, and a mild to moderate aortic insufficiency.
 
5. On July 15, 1992, Penoyer returned to see Dr. Moran. Penoyer complained of right-sided numbness and some right leg weakness.
 
6. On September 22, 1992, Penoyer underwent a follow up echocardiogram. (Pl.'s 12(M) Statement P 47; J. Stip. P 25.) The echocardiogram measured Penoyer's aortic aneurysm at 6 to 7 centimeters, which is a significant aneurysm. (Pl.'s 12(M) Statement P 47; J. Stip. PP 25-26.)
 
7. In 1993, Penoyer continued to see Dr. Moran for further monitoring of his aneurysm, blood pressure, and related cardiovascular problems. In 1993, Penoyer underwent two more follow-up echocardiograms at Midwest Heart Specialists. The first, performed on March 30, 1993, revealed a dilated aortic root, abnormal aortic valve, and aortic regurgitation. The second follow-up echocardiogram, performed on December 6, 1993, showed no significant change from the echocardiogram performed on March 30, 1993.
 
8. Penoyer saw Dr. Moran five times during 1992 and at least three times during 1993. (Pl.'s Ex. 9 at 48.)
 
9. Penoyer was taking Altace (an anti-hypertension medication) throughout the entire time that he was under Dr. Moran's care.

 It is undisputed that Penoyer did not disclose on his application for the policy any of the facts contained in the above paragraphs one through nine. Further, it is undisputed that Penoyer did not disclose the names of either Dr. Moran or Dr. Mullen on the application in any way.

 On July 8, 1996, New England Mutual filed a two-count complaint against defendants Leslie F. Penoyer, Kathryn G. Penoyer, Fred L.B. Penoyer, Lynette J. Penoyer, and Alana Smaldone, who are the named beneficiaries of the policy, and defendant Bank of Illinois in DuPage, which has an assignment interest in the policy. Count I is an action for a declaratory judgment pursuant to 28 U.S.C. § 2201, seeking a declaration from this court that New England Mutual has no obligations or liability under the policy, other than to refund the premiums paid. Count II is for rescission of the policy. The court has subject matter jurisdiction over ...


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