Opinion
C.A. No. 02C-10-042 JTV.
Submitted: June 7, 2004.
Decided: December 30, 2004.
Upon Consideration of Defendant's Motion For Summary Judgment. Granted.
Nicholas H. Rodriguez, Esq., Schmittinger Rodriguez, Dover, Delaware. Attorney for Plaintiff.
Kathleen M. Miller, Esq., Smith, Katzenstein Furlow, Wilmington, Delaware. Attorney for Defendant.
OPINION
Before the Court is a motion for summary judgment filed by the defendant, American Bankers Life Assurance Company of Florida (?American Bankers").
I. FACTS
The plaintiff, Harriet M. Desmond, filed her complaint individually and as personal representative of the estate of Dale G. Helmick, Sr.
On February 7, 2000, the plaintiff and Mr. Helmick financed the purchase of a home with a mortgage from Conseco Finance Company.
A few months later, on May 31, 2000, they took out a second mortgage on the property with Citifinancial, Inc. In connection with the second mortgage, they applied for and obtained a decreasing term life insurance policy from American Health Life Insurance Company (?American Health") so that funds would be available to pay off that mortgage in the event of the death of either one of them. The American Health policy was approved and went into effect five days after they filed their application, without any communication between the plaintiff, Mr. Helmick and American Health, beyond the filing of the application. The monthly premiums were automatically added to their Citifinancial monthly mortgage payment.
Ms. Desmond and Mr. Helmick then decided to obtain a similar life insurance policy for the Conseco mortgage. They contacted local area insurance companies to obtain quotes for such insurance. On the advice of Conseco, they also contacted the defendant, which provided them with premium quotes and an application. They decided to obtain insurance from the defendant.
In response to medical history questions on the application, Mr. Helmick gave a "yes" answer to a question asking whether he had had any medical advice or treatment in the last three years. He also gave a "yes" answer to a question asking whether he had ever had, or ever been treated for, certain diseases. The application indicated in print below these questions that the applicant should provide certain additional information concerning any "yes" answers, including explanatory information and the name and address of any involved physician.
On September 19, 2000 Ms. Desmond and Mr. Helmick mailed the defendant their application for $100,000 of life insurance. They did not include any of the additional information which the form requested concerning Mr. Helmick's "yes" answers. No premium was included with the application and none was required. The premium was to be added to their monthly mortgage payment to Conseco.
Based upon their previous experience with American Health, Ms. Desmond and Mr. Helmick did not expect to receive any confirmation of their insurance coverage or to receive any actual policy. The only notification they expected was the addition of the insurance premium to their mortgage payment.
Unfortunately, Mr. Helmick died less than a month later, on October 17, 2000.
Shortly after Mr. Helmick's death, Ms. Desmond received a letter from the defendant, postmarked October 16, 2000, which returned their application and requested that they fill in highlighted information. The only highlighted information requested was their loan application number. No mention was made of additional information concerning Mr. Helmick's medical conditions.
After Mr. Helmick died, the plaintiff applied for and received the proceeds of the American Health policy which she and Mr. Helmick had obtained in connection with their Citifinancial mortgage. Notably, however, Mr. Helmick had given "no" answers to medical history questions on the American Health application which were essentially the same as the ones he gave "yes" answers for on the American Bankers application.
The plaintiff subsequently submitted to the defendant a formal proof of claim for $100,000 of life insurance proceeds due to Mr. Helmick's death. The defendant responded with a letter dated January 5, 2001 stating that "coverage would not have been issued" because of Mr. Helmick's "yes" answers to the above-mentioned questions and the lack of explanatory information for those answers.
No premium was paid or collected on the policy.
The defendant has submitted an affidavit of an American Bankers representative which states that the defendant's underwriting department would not have processed the plaintiff's application until the additional information necessitated by Mr. Helmick's "yes" answers was obtained, and that because of the nature of Mr Helmick's medical conditions, coverage would have been denied when that information was provided.
After a subsequent exchange of correspondence between plaintiff's counsel and the defendant, the plaintiff commenced this action.
II. STANDARD OF REVIEW
Summary judgment should be rendered if the record shows that there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. The facts must be viewed in the light most favorable to the nonmoving party. Summary judgment may not be granted if the record indicates that a material fact is in dispute, or if it seems desirable to inquire more thoroughly into the facts in order to clarify the application of the law to the circumstances. However, when the facts permit a reasonable person to draw but one inference, the question becomes one for decision as a matter of law.
Superior Court Civil Rule 56(c).
Guy v. Judicial Nominating Comm'n, 659 A.2d 777, 780 (Del.Super.Ct. 1995); Figgs v. Bellevue Holding Co., 652 A.2d 1084, 1087 (Del.Super.Ct. 1994).
Ebersole v. Lowengrub, 180 A.2d 467, 470 (Del. 1962).
Wooten v. Kiger, 226 A.2d 238 (Del. 1967).
III. CONTENTIONS OF THE PARTIES
In support of its motion, the defendant contends that at the time of Mr. Helmick' s death, the insurance policy applied for had not been issued and no coverage existed.The plaintiff responds with two arguments. The first is that an insurance contract may be created by estoppel. In order for a contract to be established by estoppel, she contends, three things must be shown: (1) that she and Mr. Helmick lacked knowledge of the truth and lacked the means to obtain the true facts; (2) that they relied upon the conduct of the defendant; and (3) that they suffered a prejudicial change in position. She contends that those elements are present in this case because there was unreasonable delay on the defendant's part in returning their application; that the unreasonable delay left the plaintiff and Mr. Helmick unaware that they were not yet insured until after Mr. Helmick died; that they reasonably believed, based upon their prior experience with American Health and their expectations of the defendant, that the policy had been approved; that in reliance upon the lack of a response from the defendant, they did not seek insurance elsewhere; and that the plaintiff is prejudiced because she now finds herself without insurance and may lose her home.
The plaintiff's second argument is that an insurance company should be estopped from denying coverage for a claim simply because it arose during the "gap period," that is, the period between the submission of the application and its ultimate approval. She argues factually that Mr. Helmick's application for insurance would have been approved had he not died during the "gap period," since the only thing the letter in the October 16 envelope requested was the loan number. The defendant should be estopped, she argues, from taking advantage of the chance occurrence that Mr. Helmick died during the "gap period."
In response, the defendant argues that plaintiff seeks to create coverage where none exists. It contends that equitable estoppel is not appropriate because: (1) the plaintiff was aware from the application itself that the application was not complete without the additional information concerning Mr. Helmick's medical condition; (2) there was no action on the part of the defendant on which plaintiff relied and any reliance on the part of the plaintiff is not justified and; (3) plaintiff's prejudice is not attributable to defendant's conduct or lack thereof. The defendant also contends, and the plaintiff agrees, that no Delaware court has ever applied the doctrine of estoppel to create an insurance contract. It contends that the majority rule is that mere delay, however great, in processing an insurance application cannot give rise to an insurance contract by estoppel, even where a premium has been paid.
As to the plaintiff's second argument, the defendant contends that coverage would have been denied based on Mr. Helmick's medical condition.
In response to these points, the plaintiff contends that many other jurisdictions have held that an insurance company may be estopped from denying coverage where the elements of an estoppel are present, including cases where a premium has not been paid. She contends that this Court should adopt the reasoning and rationale of courts which have found insurance coverage through the doctrine of equitable estoppel. She contends that an insurer must be prevented from benefitting from its own negligence in failing to act upon an application within a reasonable period of time.
American Life Insurance Co. of Alabama v. Hutcheson, 109 F.2d 424 (6th Cir. 1940); Coffey v. Polimeni, 188 F.2d 539 (9th Cir. 1951); National Bank of Commerce v. Royal Exchange Assurance of Am., 455 F.2d 892 (6th Cir. 1972); Ranes v. Paul Revere Life Ins. Co., 32 F.3d 1393 (9th Cir. 1994); Royal MacCabees Life Ins. Co. v. Peterson, 139 F.3d 568 (7th Cir. 1998); Bass, 605 So.2d 908 (Fla.App. 1992); Moore v. Palmetto State Life Ins. Co., 73 S.E.2d 688, 692-93 (SC 1952); Rech v. Prudential Ins. Co. of America, 184 A.2d 777 (NJ 1936).
The defendant contends, however, that the cases relied upon by the plaintiff are a minority rule, and that even the minority rule does not apply where no premium has been paid.
IV. DISCUSSION
Ms. Desmond contends that if Mr. Helmick had not died when he did, the defendant would have issued insurance on his life. As support for her contention, she points to the fact that when the application was returned to them in the October 16 envelope, the only additional information requested was the loan number. Since the evidence must be viewed in the light most favorable to the plaintiff and all factual inferences must be resolved in her favor, I will accept as fact, for purposes of this motion, that she is correct and that the defendant would have issued insurance for Mr. Helmick once the loan number was provided, despite the affidavit of the American Bankers' representative that the underwriting department would not have approved Mr. Helmick's application.
The doctrine of equitable estoppel may be invoked "when a party by his conduct intentionally or unintentionally leads another, in reliance upon that conduct, to change position to his detriment." To establish equitable estoppel, a party must show that he "lacked knowledge and the means of knowledge of the truth of the facts in question, that he relied on the conduct of the party against whom estoppel is claimed, and that he suffered a prejudicial change of position in consequence thereof." Estoppel may not rest on mere inference, it must be proven by clear and convincing evidence. Estoppel has a tortious quality and is maintainable only where conduct of one party has induced another to change his position for the worse in which case the law rests the consequences upon him. Under Delaware law, "as a general rule, the doctrine of estoppel and waiver may not be invoked to make a new contract, or to change radically the terms of the policy to cover additional subject matter."
Waggoner v. Laster, 581 A.2d 1127 (Del. 1990) (quoting Wilson v. American Ins. Co., 209 A.2d 902, 903-904 (Del. 1965)).
Dragon Run Farms, Inc. v. New Castle County, 2000 WL 33113804 at *9 (Del.Super.) (quoting Wilson v. American Ins. Co., 209 A.2d 902, 904 (Del. 1965)).
Id. at *9.
Collins v. Sussex Trust Co., 1989 WL 70901 (Del.Super.).
New Castle County v. National Union Fire Insurance, 1997 U.S. Dist. LEXIS 21086, at *28 (citing Brandywine Shoppe, Inc. v. State Farm Fire and Cas. Co., 307 A.2d 806, 809 (Del.Super. 1973)); see also Container Corp. of Amer. v. Bituminous Cas. Co., 252 A.2d 117, 120-21 (Del.Super.Ct. 1969); see also Mutual Benefit L. Ins. Co. of Newark, N.J. v. Bailey, 190 A.2d 757 (Del. 1963).
In this case, I conclude that under any of the theories advanced by the plaintiff, the elements of an estoppel cannot be established as a matter of law. The application which Ms. Desmond and Mr. Helmick signed and submitted stated as follows with respect to its effective date: "[t]he effective date is the date shown on the reverse side if all these conditions are met: 1) the certificate is delivered and accepted; 2) the first premium is paid in full and 3) no substantial change from the answers given in the application has occurred prior to the occurrence of (1) and (2)." Thus, even if the defendant would, in fact, have provided coverage for Mr. Helmick once the loan number was provided, Ms. Desmond and Mr. Helmick were on notice that they were not covered until they paid their first premium with their mortgage payment. It is undisputed that no premium was paid. Whether or not Ms. Desmond and Mr. Helmick actually read the provision just mentioned is immaterial. It plainly appeared on the application above their signatures. In addition, the plaintiff cannot establish that she and Mr. Helmick relied upon the defendant's failure to return their application more quickly than it did. The record contains no evidence that Mr. Helmick could have obtained life insurance elsewhere prior to his death. It would appear that the claim paid by American Health was based upon an application containing false answers concerning Mr. Helmick's death. While I have taken as fact, for purposes of this motion, that American Bankers would have granted coverage after the loan number was provided, it does not follow, without evidence, that any other insurance company would have done so. In order to show detrimental reliance the plaintiff must be able to establish that Mr. Helmick could have obtained insurance from another company had he not simply waited for approval from the defendant. There is no evidence in the record to support such a finding.
For these reasons, the defendant's motion is granted.