Wohlman v. Paul Revere Life Ins. Co.

• Court: Court of Appeals for the Fifth Circuit
• Decided: November 13, 1992
• Docket: 92-4541
• Status: Unpublished

Opinion

UNITED STATES COURT OF APPEALS for the Fifth Circuit

_____________________________________

No. 92-4541 Summary Calendar

Marla Wohlman,

Plaintiff-Counter Defendant-Appellant,

VERSUS

Paul Revere Life Insurance Company,

Defendant-Counter Claimant-Appellee.

______________________________________________________

Appeal from the United States District Court for the Western District of Louisiana (90 CV 721) ______________________________________________________ (November 23, 1992)

Before JOLLY, DUHÉ, BARKSDALE, Circuit Judges.

PER CURIAM:1

Appellant, Dr. Marla Wohlman, appeals the district court's

judgment in favor of Paul Revere Insurance Company, Appellee,

holding that Wohlman's disability income insurance policy with the

Appellee was void ab initio as a result of misrepresentations made

in her application for the policy. Additionally, the court

rendered judgment against Wohlman requiring her to reimburse Paul

1 Local Rule 47.5 provides: "The publication of opinions that have no precedential value and merely decide particular cases on the basis of well-settled principles of law imposes needless expense on the public and burdens on the legal profession." Pursuant to that Rule, the Court has determined that this opinion should not be published. Revere $11,233.24 it had paid her in benefits, and costs. We find

no error and affirm.

Background

The following facts were found by the district court. In

April 1987, Dr. Wohlman applied for disability income insurance

with Paul Revere. At the time she was married to Dr. W. Zeichner,

who had previously purchased a disability income policy from Paul

Revere and encouraged Dr. Wohlman to do the same. In completing

the application, Dr. Wohlman was asked if she had ever used

"stimulants, hallucinogens, narcotics or any controlled substance

other than prescribed by a physician, or been counseled or treated

for excess use of alcohol or drugs?" Dr. Wohlman answered "no",

even though she had previously experimented with marijuana,

cocaine, and ecstacy. Dr. Wohlman, however, had never been

counseled or treated for the excess use of drugs or alcohol. She

claims that all prior drug use had ceased almost two years prior to

the date of the application.

The insurance agent did not explain to Dr. Wohlman that

previous drug use would result in rejection of her application.

Dr. Wohlman claims that she did not realize that her policy would

be rejected and answered "no" because she felt the question

violated her privacy. She felt that her prior experimental drug

use was of no significance with respect to her application for

disability income insurance.

2 Paul Revere bases much of its case on the testimony of Dr.

Zeichner, now divorced from Dr. Wohlman, and statements Dr. Wohlman

made to physicians two years after applying for the policy. Dr.

Zeichner testified that Dr. Wohlman told him of drug use prior to

their marriage and that he has personal knowledge of her smoking

marijuana and using cocaine, and purchasing and consuming an

illegal drug commonly referred to as "ecstacy." Dr. Zeichner

testified that his personal knowledge of Dr. Wohlman's drug use

predated her entry into medical school in 1980 and continued until

they moved to Shreveport, Louisiana, in 1985. Dr. Wohlman and Dr.

Zeichner were divorced in 1988.

Paul Revere also relies on medical records from drug

rehabilitation centers in which Dr. Wohlman was a patient after her

application for insurance. On February 26, 1989, Dr. Wohlman

became disabled as defined in the policy when she put her left

forearm through a window in her home while hallucinating under the

influence of alcohol and other drugs. The Shreveport police

arrested her for possession of cocaine and transported her to the

LSU Medical Center where she was treated for her injury. While

receiving treatment, Dr. Wohlman told the treating physician that

she had not used any cocaine that day and that her previous use had

been approximately a week earlier. As a result of the police

charges, Dr. Wohlman was suspended from the LSU residency program

and her license to practice medicine was suspended.

In order to be reinstated into the LSU surgical residency

program and regain her medical license, Dr. Wohlman was required to

3 enter an in-patient drug abuse treatment program, submit to

urinalysis drug screening and undergo psychiatric treatment. She

admitted herself into the Jackson Recovery Center in Mississippi in

March 1989. She told the physician there that she had abused

cocaine approximately 10 times between the ages of 17 and 30, and

had abused marijuana and hashish infrequently. She also admitted

to once using ecstacy and to periodically using Halcion to help her

sleep. She indicated on a drug questionnaire that her last use of

cocaine was on February 26, 1989.2 Doctors at that facility

diagnosed chemical dependency, however, Dr. Wohlman discharged

herself without completing the treatment program.

In April 1989, Dr. Wohlman met with a Paul Revere field

representative concerning her disability. She told the

representative that she had tried marijuana once in high school and

cocaine once in college, but was too busy working to do drugs and

alcohol.

In June 1989, she was evaluated by Dr. A. Singdahlsen, a

psychiatrist in Shreveport. In September 1989, Dr. Wohlman was

admitted to Timberlawn Psychiatric Hospital in Dallas for referral

to Timberlawn's health professionals program for evaluation of

possible substance abuse disorder. Once again, Dr. Wohlman

described her past drug use differently to both of these

professionals.

2 February 26 was the date of her accident in which she denied using cocaine to the treating physician.

4 Dr. Singdahlsen treated Wohlman through May 1990, when Dr.

Wohlman informed Dr. Singdahlsen that she was doing well and had no

depression. At Dr. Wohlman's request, Dr. Singdahlsen certified to

the Louisiana Board of Medical Examiners on October 12, 1989, that

Wohlman was competent to practice medicine and surgery.

On December 14, 1989, Paul Revere reviewed Timberlawn

Psychiatric Hospital medical records and determined that, had Paul

Revere known at the time of the application of Dr. Wohlman's prior

cocaine use, Paul Revere would not have issued a disability income

insurance policy to her. In December, Paul Revere notified Dr.

Wohlman that her policy was being rescinded and tendered her a

refund of $1,117.66 for previously paid premiums. At that time,

Paul Revere had paid a total of $11,233.34 in disability benefits.

Discussion

Dr. Wohlman admits that she lied in applying for her policy

when answering the question concerning prior drug use. Paul Revere

contends that this false statement is sufficient to bar recovery

under the policy.

Because plaintiff's intent to deceive and understanding of the

materiality of her misrepresentation to Paul Revere are both fact

findings, Fed R. Civ. P. 52(a) determines that the clear error

standard of review applies. "[E]specially where, as here, the

factual determination is made by resolving conflicts in the

evidence, requiring that essential credibility determinations be

made, this Court will defer to the trier of fact." Fontenot v.

Global Marine, Inc., 703 F.2d 867, 872 (5th Cir. 1983). Finally,

5 "[t]he burden of showing that the findings are clearly erroneous

. . . is on the party attacking them." Seaton v. Sills, 403 F.2d

710, 711 (5th Cir. 1968); see also Terrell v. Geldstein Co., Inc.,

468 F.2d 910, 911 (5th Cir. 1972).

Under La. Rev. Stat. 22:619, an insurance company cannot avoid

liability under the policy solely as a result of a false statement

given by the insured in an application for insurance.

The statute requires not only that the insurance company prove

that the statement was false, but also that the false statement was

made with the intent to deceive and that such statement materially

affected the acceptance of the risk by the insurer or the hazard

assumed. Coleman v. Occidental Life Insurance Co. of N. C., 418

So.2d 645, 646 (La. 1982); Clark v. Golden Rule Ins. Co., 887 F.2d

1276, 1281 (5th Cir. 1989). The burden of proof rests with the

insurer. Coleman, 418 So.2d at 646.

"Intent to deceive may involve either knowledge of the falsity

of the statement and its materiality to the risk or circumstances

in which an insured must have known the statement to be material to

the risk." Parfait v. Minnesota Mutual Life Ins. Co., 311 So.2d

558, 560 (La. App. 4th Cir. 1975), writ ref'd. 313 So.2d 847

(1975); see also Cousin v. Page, 372 So.2d 1231, 1233 (La. 1979).

Absent direct proof, the insurance company may prove that the

insured had the actual intent to deceive by showing that there were

facts and circumstances surrounding the application process

"indicating the insured's knowledge of the falsity of the

representations made in the application and his recognition of the

6 materiality of his misrepresentations or from circumstances which

create a reasonable assumption that the insured recognized the

materiality." Cousin, 372 So.2d at 1233; see also Ned v. Magnolia

Life Ins., 590 So.2d 733, 735 (La. App. 3d Cir. 1991).

The test of materiality involves considering whether knowledge

of the facts would have influenced the insurer in determining

whether to assume the risk or in fixing the applicable premium.

Fagen v. National Home Life Assurance Co., 473 So.2d 918, 920 (La.

App. 4th Cir. 1985); Jones v. United Savings Life Ins. Co., 486

So.2d 1110, 1113 (La. App. 2d Cir. 1986). If the information given

by the applicant is false, but the insurance company would have

issued the policy anyway, then it is not material. Jamshidi v.

Shelter Mutual Ins. Co., 471 So.2d 1141, 1143 (La. App. 3d Cir.

1985); Manzella v. Paul Revere Life Ins. Co., 872 F.2d 96 (5th Cir.

1989).

Dr. Wohlman argues that she did not realize the materiality of

the false statements she made nor did she have the actual intent to

deceive Paul Revere. We disagree. We find that there was ample

evidence to support the conclusions of the trial court.

Dr. Wohlman's preapplication drug use alone would have

materially affected Paul Revere's decision to write the policy.

Paul Revere presented evidence, unrefuted by Wohlman, that had it

known of her preapplication drug use it would not have issued the

policy. Dr. Wohlman understood that each question asked in the

application was material to Paul Revere. She knew when she filled

out the application that she could explain any negative answer

7 given to a question, but she chose not to do so. Dr. Wohlman also

admitted that, unless she told the Paul Revere representative about

her prior drug use, nothing on the application would alert Paul

Revere to her previous drug use. We find no error in the trial

courts holding that Dr. Wohlman's prior cocaine use would have

materially effected Paul Revere's decision to issue the policy.

Dr. Wohlman's intent to deceive is amply supported by her

recognition of the materiality of her misrepresentation regarding

her pre-application drug use. She understood that Paul Revere

wanted to know if her drug use was material or significant enough

to affect her insurability, but she chose to deny Paul Revere this

opportunity. Additionally, the trial court, in assessing the

credibility of Dr. Wohlman's testimony, did not believe that her

prior drug use was as limited as she claimed. The factual

determinations made by resolving conflicts in the evidence required

that essential credibility determinations be made, therefore this

Court must defer to the conclusions of the trial court. Fontenot,

703 F.2d at 872. We believe that the circumstances created a

reasonable assumption that the insured recognized the materiality

of her misrepresentations.

For the foregoing reasons, the judgment of the district court

is

AFFIRMED.