Insurer overturns decision in favor of widow; allows AutoOwners to contest life insurance payout
Debra Langley's husband, Eric, experienced a number of health issues prior to his death in November of 2007. He had been followed for a heart murmur for many years and Cincinnati had quoted him a very high premium for a $250,000.00 policy, resulting in his rejection of the coverage. In the midst of other medical investigations, he purchased a $50,000.00 policy with AutoOwners. Shortly afterwards, he was diagnosed with cancer and died within months. Although Langley had never been warned of, or diagnosed with, cancer, AutoOwners refused to pay on the coverage. It argued that he had provided false answers to its questionaire regarding medical conditions. The trial judge rejected AutoOwners' defenses and it appealed.On appeal, the Court carefully explained the legal standard applied by Michigan Courts to insurance policy representations. It noted that since 1907, Michigan had statutorily rejected any "misrepresentation" claims on two-year old policies and required proof that even innocent misrepresentations were not made "in good faith."
Auto Owners argued that this policy applied only to questions soliciting health "opinions" and that there was at least a question of fact with regard to whether Eric knew that he had been diagnosed with heart disease or that he had failed to seek a recommended test. With regard to the latter questionaire inquiry, the Court of Appeals agreed with the trial judge that Eric had followed through on all recommended tests and that the language of the questionaire did not apply where the tests had been performed, but a diagnosis not achieved.
Nevertheless, it sent the case back to the trial court to assess testimony from Langley's family doctor. She supported Auto Owners' claim by testifying that she had explained to Eric that she heard a "new murmur" months before he applied for insurance. The doctor said that she had told Eric that this was a new problem and claimed that her office had informed Eric's wife, by phone, that Eric had arterial stenosis, a heart disease.
The Appellate Court panel concluded that this testimony created a question of fact with regard to whether Eric knew, when he applied for insurance, that he had been diagnosed with a heart or artery disease that interfered with his heart's "ordinary functions." If the jury concludes that he mistakenly believed, in good faith, that the new diagnosis was not a serious disorder and was similar to his lifetime murmur, his policy could not be voided. If he made a false claim that he should have recognized to be false, AutoOwners is within its rights to void the policy.