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JAHN v. GREAT AMERICAN ASSURANCE COMPANY

April 6, 2004.

DEBORAH JAHN and SEVEN OAKS FARM, L.L.C., Plaintiffs,
v.
GREAT AMERICAN ASSURANCE COMPANY, Defendant



The opinion of the court was delivered by: SUZANNE CONLON, District Judge

MEMORANDUM OPINION AND ORDER

This dispute arises over a $125,000 insurance policy on Irish Shannon, a show horse euthanized following her third surgery for gastrointestinal impaction ("colic"). The horse's owners, Deborah Jahn and her Seven Oaks Farm (collectively "plaintiffs"), seek a declaratory judgment they are entitled to the insurance proceeds. The insurer, Great American Assurance Company ("Great American"), denies coverage on the grounds that plaintiffs failed to fully disclose Irish Shannon's significant history of colic problems, and for failure to comply with the notice and post mortem examination conditions of the policy. Cross-motions for summary judgment are before the court.

BACKGROUND

 I. Local Rule 56.1

  Local Rule 56.1 requires litigants to follow a detailed procedure in filing and responding to summary judgment motions. Both the moving and non-moving parties must submit statements of material facts, including "specific references to the affidavits, parts of the record, and other supporting materials relied upon." Local Rule 56.1(a)(3); Local Rule 56.1(b)(3)(B). Facts not properly supported by the record evidence must be disregarded. Brasic v. Heinemann's Inc., 121 F.3d 281, 284 (7th Cir. 1997). The parties' statements of facts and their respective responses are peppered with legal and factual arguments unsupported by record evidence. See Def. Facts ¶¶ 6, 19, 40, 42-49, 54-55, 58-59, 62-63, 66-67, 69-70, 71, 73-76, 81, 83-85, 88, 91, 95-96, 99; Pl. Facts ¶¶ 42; Def. Resp. Pl. Facts ¶¶ 9, 17, 20, 44-45, 52, 74, 76, 82, 84-86, 90, 95; Pl. Resp. Def. Facts ¶¶ 18-21, 24-25, 30, 33, 42, 45-47, 54, 59, 66-67, 70-71, 73-74, 78, 81, 83, 85, 87-88, 91, 96-97; Def. Resp. PL Add. Facts ¶¶ 2, 11, 13-15, 20, 22, 24. "The purpose of the 56.1 statement is to identify for the Court the evidence supporting a party's factual assertion in an organized manner; it is not intended as a forum for factual or legal argument." Malec v. Sanford, 191 F.R.D. 581, 585 (N.D. Ill. 2000). The court considers only the parties' factual statements to the extent they are properly supported by the record.

  Great American relies on unauthenticated veterinary records to support ¶¶ 9, 13, 31, 43, 48, 49, 53, 54, 58, 60, 61, 62, 65, 68, 72, 75, 90, 91. Woods v. City of Chicago, 234 F.3d 979, 988 (7th Cir. 2000)(evidence submitted at the summary judgment stage must be admissible at trial). Therefore, these paragraphs are disregarded to the extent that no other record evidence, such as deposition testimony, supports these factual assertions. In addition, plaintiffs improperly submit an unnumbered factual statement between their response to Great American's statement of facts and their own statement of additional facts. Pl.Resp. Def. Facts at p. 35. The court disregards plaintiffs' unnumbered statement because it fails to comply with the explicit language of Rule 56.1(b)(3)(B) and Great American appropriately did not respond.

 II. Facts

  The following facts are undisputed unless otherwise noted. Great American is an insurance company writing mortality and major medical policies for horses. Def. Facts at ¶ 2. Jahn has been in the horse business for approximately 20 years and has read and purchased equine mortality insurance policies. Def. Facts ¶¶ 4-5; Pl. Resp. Def. Facts ¶ 5. In 1996, Jahn purchased Irish Shannon, a registered American Saddlebred mare, for $150,000 through her horse trainer, Lisa Strickland. PL Facts ¶¶ 4, 6-7. In 1998, Jahn established Seven Oaks Farm for her horse business. PL Facts ¶ 3; Def. Facts ¶ 1.

  A. Insurance Policy Application History

  Irish Shannon was initially insured through the Plamp-Keen Insurance Agency ("Plamp-Keen") for $150,000 from 1996 until May 2000. Id. at ¶ 8. On November 13, 1998, Irish Shannon underwent surgery because of colic. Pl. Facts at ¶ 14. As a result, the insurer excluded "death as a direct or indirect result of colic" from Irish Shannon's insurance policy when it was renewed in May 1999. Def. Facts ¶ 10; Pl. Facts ¶ 15. Jahn was later told that the exclusion would be eliminated from the policy if Irish Shannon did not suffer from colic during the calendar year following the November 1998 surgery. Def. Facts ¶¶ 10, 12; Pl. Facts ¶ 16. However, on October 10, 1999, Irish Shannon underwent a second surgery for colic. Pl. Facts ¶ 17. Jahn decided not to renew Irish Shannon's insurance policy in May 2000 because the renewed policy would necessarily contain a colic exclusion. Pl. Facts ¶ 18; Def. Facts ¶ 14. Irish Shannon remained uninsured over the next several months. Def. Facts ¶ 14-15.

  After a discussion with Jahn in February 2001, Strickland contacted the Independent Equine Agency about insuring Irish Shannon. Pl. Facts ¶ 19; Def. Facts ¶ 15. In March 2001, Jahn completed and signed an insurance application. Def. Facts ¶ 17; Pl. Facts ¶ 25. The application included the following question: "Has animal ever been treated for accident, illness or lameness? If yes, give date and description of treatment." Def. Facts ¶ 18; Pl. Facts ¶ 27. In response, Jahn wrote "10/99 surgery for impaction." Def. Facts ¶ 18; Pl. Facts ¶ 28. Jahn signed and submitted the application to Independent Equine Agency. Def. Facts ¶¶ 17, 21. The following legend appeared on the application directly below the signature line:
I understand that the insurance being applied for, if accepted by the Company, will be based on the statements made in this application. If information is withheld or falsely stated, any insurance issued may be subject to rescission or modification as provided by the law of the state in which the application was accepted or policy issued,
Id at ¶ 20. For purposes of the application, Dr. Andrew Schmidt completed a veterinary certificate of examination. Def. Facts ¶ 22. The certificate included the following questions: "Any history or clinical evidence of surgery? If yes explain below. Any colic within last 12 months?" Id Schmidt responded "yes" to the first question and "not to my knowledge" to the second. Id Schmidt explained that Irish Shannon "has a history of gri [?] colic and has had colic surgery. I am unsure of when, and diagnosis. I sure [sic] you are aware of this fact." Id

  Independent Equine Agency uses several different insurance underwriters, including Great American. Def. Facts ¶ 16. The relationship between Great American and Independent Equine Agency is governed by contract. Pl. Facts ¶ 20; Def. Resp. Pl, Facts ¶ 20. Great American maintains unwritten underwriting policies with respect to equine mortality risks, including five colic guidelines that materially affect its underwriting decisions. Pl. Facts ¶¶ 35-37. These guidelines require a colic exclusion of approximately one year after a horse undergoes colic surgery without intestinal resection. Def. Facts ¶ 25. The guidelines strictly require a permanent colic exclusion if a horse has two or more surgical colics, regardless whether an intestinal re-section was performed. Def. Facts ¶ 25-26; Pl. Facts ¶ 38. Independent Equine Agency forwarded the application and veterinary certificate for Irish Shannon to Great American with a memorandum stating, "Please process a policy . . . at your earliest convenience. Completed application and vet certs attached. Please let me know if any problem regarding colic surgery on IRISH SHANNON 10/99." Def. Facts ¶ 24. Great American approved Irish Shannon's insurance policy with a colic exclusion; Independent Equine Agency requested reconsideration of the exclusion. Pl. Facts ¶ 40; Def. Facts ¶ 28. Kris Knight, the CEO of Independent Equine Agency, attested that the colic exclusion was questioned because the 1999 surgery — "the only surgery that we knew of — would not necessarily warrant a colic exclusion if no re-section were performed and Irish Shannon remained colic free for twelve months thereafter. Knight Dep. at 54-55; Def. Resp. Pl. Facts ¶ 42. In response, Great American directed an agent for Independent Equine Agency "to inquire about further episodes and surgeries." Pl. Facts at ¶ 43. As a follow-up, Great American then sent written instructions to Independent Equine Agency requesting that it determine whether Irish Shannon had any reoccurrences of colic after the 1999 surgery. Pl. Facts at ¶ 44, Independent Equine Agency did not inquire whether Irish Shannon had undergone additional surgeries based on the fact that only one surgery was disclosed on the application form. Def. Facts ¶ 29.

  Independent Equine Agency notified Great American that Irish Shannon had no reoccurrences after the October 1999 surgery. Def. Facts at ¶ 30. This information was based on conversations Independent Equine Agency's Chris Knight had with Jahn or Strickland. Def. Facts ¶ 21, 29. Contrary to Great American's version, Jahn maintains she did not speak with Knight regarding Irish Shannon's medical history. Pl. Resp. Def. Facts ¶ 29. Plaintiffs admit, however, that Strickland was asked whether Irish Shannon had a recurrence of colic after October 1999. Pl. Facts ¶ 50. Great American then issued an equine mortality and major medical insurance policy without a colic exclusion for Irish Shannon through Independent Equine Agency. Def. Facts ¶ 34; Pl. Facts ¶ 53. Jahn gave the policy to Art Herbstman, her husband's business manager. Def. Facts ¶ 35. The policy was renewed on identical terms in 2002. Pl. Facts ¶ 66. Herbstman was given the renewed policy. Def. Facts ¶ 38. In connection with the renewal, plaintiffs were only required to submit an updated veterinary certification of examination and information about Irish Shannon's use and value. Def. Facts ¶ 36. The certification, completed by Dr. Keith Merritt in February 2002, included the following questions and answers;

 
Any history or clinical evidence of surgery? If yes explain below, X Yes ___ No ___ NTMK Any colic within last 12 months? ___ Yes X_No ___ NTMK Colic surgery. Good prognosis & full recovery.
Def. Facts ¶ 37. Dr. ...

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