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IN THE UNITED STATES DISTRICT COURT FOR THE DISTRICT OF MARYLAND THE LAURA CAMPBELL TRUST, Plaintiff : : : v. : : JOHN HANCOCK LIFE INSURANCE : COMPANY (U.S.A.), : Defendant : ...o0o...

CIVIL NO. AMD 05-885

MEMORANDUM OPINION In this lawsuit, the Laura Campbell Trust1 (the "Trust") seeks to recover the proceeds of a $750,000 life insurance policy. Defendant John Hancock Life Insurance Company ("the company") issued the policy on Dec. 26, 2002, to the insured, Dr. Joella Campbell.2 After Dr. Campbell died, however, the company denied the claim, rescinded the policy and returned all premiums that had been paid. Consequently, the Trust filed this case for breach of contract in the Circuit Court for Baltimore County, from which defendant timely removed the case to this court. Discovery having concluded, defendant now moves for summary judgment. The company has put forth the following arguments for denying the claim: (1) Dr. Campbell made a material misrepresentation in the insurance application and in doing so concealed the fact that she had been hospitalized with a serious medical condition; and (2) the policy never became effective because Dr. Campbell never fulfilled the condition precedent that there be

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The trust was created by Dr. Joella Campbell for her disabled daughter, Laura.

The complaint was filed against Manufacturer's Life Insurance Company, which changed its name to John Hancock Life Insurance Company on Jan. 1, 2005.

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no deterioration in her health between the date of the application and the delivery of the policy. The Trust refutes these assertions and argues that the insurer is precluded from denying coverage by the doctrine of equitable estoppel. No hearing is needed; the motion shall be granted for the reasons stated below. I. Dr. Campbell started looking into life insurance policies in Summer 2002, when she was 73 years old, so she could provide for her disabled daughter, Laura. She initiated the process through Keith Burgess, an appointed agent of the company's predecessor, Manufacturer's Life Insurance Company. As part of that process, Burgess arranged for Dr. Campbell to get a medical examination on July 18, 2002. She also agreed to make her medical records available to the company. The examination and records review indicated that Dr. Campbell had myriad health problems, including gastroesophageal reflux disease, a benign goiter, arthritis of the hips, high cholesterol, cancer (which apparently had been treated with some success) and an abnormally high heart rate. Dr. Campbell filled out an application on Oct. 2, 2002. While the October 2002 application was being considered by the underwriter, Dr. Campbell decided that it was in her best interest not to be the owner of the proposed policy. Instead, she and her attorney, Gary Aiken, Esq., established a trust with Aiken serving as the trustee and the Laura Campbell Trust as the beneficiary. Consequently, Dr. Campbell had to submit a new application. The new application was dated November 21, 2002, and was signed by Dr. Campbell

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with the agent, Burgess, as the witness. Of particular note here, Question 22 asked when the applicant last visited her regular doctor and the reason for the visit. Dr. Campbell answered that she had not seen her doctor in six months, when she went for a check-up. In reality, however, Dr. Campbell had been to see her doctor on November 19, 2002, as a follow-up to her October hospitalization for congestive heart failure, unresolved pneumonia and hypothyroidism. Nevertheless, the policy was issued on December 26, 2002, and the company delivered it to Dr. Campbell the next day. Dr. Campbell died on March 21, 2004, of lung cancer with metastasis. A claim was filed with the company in June 2004. The company conducted a routine review. When it discovered that Dr. Campbell had falsely answered Question 22, the company denied the claim, rescinded the policy, and returned the premium payments (totaling $52,380). II. Pursuant to Rule 56(c) of the Federal Rules of Civil Procedure, summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247 (1986). A fact is material for purposes of summary judgment, if, when applied to the substantive law, it affects the outcome of the litigation. Id. at 248. Summary judgment is also appropriate when a party "fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322

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(1986); Karim v. Staples, Inc., 210 F. Supp. 2d 737, 740 (D.Md. 2002). III. A. The insurer argues that Dr. Campbell made a material misrepresentation when she stated in Question 22 of the insurance application that she had not visited her doctor in the prior six months. In fact, Dr. Campbell had visited her doctor two days prior to the date on the application as a follow-up to her then-undisclosed hospitalization. The parties agree that Virginia law applies in this case. Under Virginia law, an insurer seeking to void a policy because of a misrepresentation, must prove "(1) that the statement or omission on the application was untrue; and (2) that the insurance company's reliance on the false statement or omission was material to the company's decision to undertake the risk and issue the policy." Montgomery Mutual Insurance Company v. Riddle, 587 S.E.2d 513, 515 (Va. 2003); see VA. CODE ANN.

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Maryland Law