United States District Court, D. South Dakota, Central Division
OPINION AND ORDER GRANTING PLAINTIFF'S MOTION FOR
ROBERTO A. LANGE UNITED STATES DISTRICT JUDGE
Midland National Life Insurance Company (Midland) filed this
suit against Defendants Lisa J. Morrison and Shawn Cudmore
Kremer seeking rescission of a life insurance policy issued
to Glen D. Cudmore, and a declaratory judgment that it has no
obligation under the policy other than the refund of premiums
paid, plus interest. DOc. 1. Morrison is named as the
beneficiary to the life insurance policy, and Kremer is the
personal representative of Cudmore's estate. Doc. 1 at
1-2. Midland seeks to rescind the policy based on information
about Cudmore's health that it learned during a two year
contestability period following the policy's issuance.
Doc. 1 at 5-8. Morrison timely filed an answer to the
complaint, but when Kremer did not, Midland filed a motion
for entry of default against Kremer. Docs. 8, 16. Midland
then moved for summary judgment, as well as default judgment
against Kremer. Doc. 22. For the reasons explained below,
this Court grants Midland's motion for summary judgment
and default judgment.
the last years of his life, Cudmore primarily received
treatment from Dr. Margaret Upell and nurse practitioner
Kathleen Zambo at the Upell Medical Clinic in Eagle Butte,
South Dakota, visiting the office on an almost monthly
basis. Doc. 34 at ¶ 6; Doc. 27 at ¶ 18;
Doc. 32 at ¶I8. On August 13, 2012, Cudmore visited
Avera St. Mary's Hospital in Pierre on the recommendation
of nurse practitioner Zambo because of an "elevated
PSA." Doc. 27-4 at 4. Dr. Joseph Wyatt reviewed a
prostate-specific antigen (PSA) test done at Eagle Butte on
August 2, 2012 that showed a level of 4.2. Doc. 27-4 at 4.
Dr. Wyatt noted that a previous test done in February of 2012
showed a level of 2.9, and that prior records show readings
"in between 2.5 and just above 4 throughout that
time." Doc. 27-4 at 4. Dr. Wyatt concluded by noting
that because the PSA level "as a trend is not going up
or down, " it "is reasonable to observe it which is
what [Cudmore] wants to do." Doc. 27-4 at 7. Dr. Wyatt
recommended another PSA in one year. Doc. 27-4 at 7.
April 30, 2013, Cudmore returned to visit Dr. Wyatt in Pierre
at the request of nurse practitioner Zambo because of a
recent test showing a PSA level of 5.45. Doc. 27-4 at 12. Dr.
Wyatt "lean[ed] the patient strongly towards what I
would favor of doing a biopsy at this point." Doc. 27-4
at 15. Cudmore did not want a biopsy done at the time, and
Dr. Wyatt ordered a follow-up PSA test for six, months later.
13, 2013, Cudmore returned to Pierre to have Dr. Wyatt
perform a prostate biopsy. Doc. 27-4 at 19. On May 20, 2013,
Cudmore met with Dr. Wyatt, who recorded in his medical
record that the biopsy results revealed two of the samples
having "atypical small acinar proliferation suspicious
for but not diagnostic of malignancy." Doc. 27-4 at 23.
At that meeting, Dr. Wyatt discussed with Cudmore a
"followup PSA in six months time and if persistently
elevated, we will repeat a biopsy at that point." Doc.
27-4 at 24.
October 28, 2013, Cudmore again traveled to Pierre to meet
with Dr. Wyatt because of an elevated PSA level found in a
test done on October 8, 2013. See Doc. 27-4 at 25. At this
meeting, Dr. Wyatt noted that "PSA remains mildly
elevated; however, overall trend is decreasing. In light of
this further observation for another six months with PSA at
that time is recommended." Doc. 27-4 at 27.
November 21, 2013, Cudmore applied for life insurance with
Midland and signed Part I of Midland's General Purpose
Life Insurance Application. Doc. 27 at ¶ 8; Doc. 32 at
¶ 8. The application included a variety of questions
about Cudmore's health. See Doc. 27-1. Question
34(i) of the application asked whether the applicant has
"been diagnosed by a licensed medical professional,
treated or advised to get treatment from a licensed medical
professional, hospitalized, or presently taking
prescriptions) or medication(s) for . . . "Disorder of
the kidney, bladder or urinary system, abnormal PSA
[prostate-specific antigen], abnormal PAP smear without
subsequent normal PAP smear or protein or blood in the
urine." Doc. 27 at ¶¶ 10-11; Doc. 32 at
¶¶ 10-11. In the corresponding checkmark box on
Cudmore's application, "No" was marked. Doc. 27
at ¶ 11; Doc. 32 at ¶ 11. Question 35(c) asked
whether the applicant has "[i]n the past 12 months been
advised by a licensed medical professional to have a checkup,
EKG, X-ray, blood or urine test or any other diagnostic
test." Doc. 27 at ¶ 12; Doc. 32 at ¶ 12.
"No" was checked for this question. Doc. 27 at
¶ 12; Doc. 32 at ¶ 12. For questions 34-37, any
"Yes" answers must be supplemented with the date,
diagnosis, treatment, results, and information of attending
physician and hospital. Doc. 27-1 at 33. No additional
information was provided in that section of Cudmore's
Part I application. Doc. 27 at ¶ 13; Doc. 32 at ¶
13. Part I of the application contained the certification
before the signature block that "It is declared that
statements and answers in this application, including
statements by the Proposed Insured(s) in any medical
questionnaire or supplement that become part of this
application, are complete and true to the best knowledge and
belief of the undersigned." Doc. 27-1 at 34. Morrison
maintains that Cudmore did not fill in the answers to Part I
himself, but does not dispute that Cudmore signed the bottom
of Part I of the application. Doc. 32 at ¶ 10; Doc. 27-1
of the application process, Cudmore had a paramedical
examination and completed Part II of the application on
December 11, 2013. Doc. 27 at ¶ 16; Doc. 32 at ¶
16. Again, Morrison maintains that Cudmore did not fill in
the answers to Part II himself, but does not dispute that
Cudmore signed the bottom of Part II of the application. See
Doc. 32 at ¶ 17. Question 2 of Part II asked about
several diseases or disorders, and in conjunction with two
"Yes" answers, nurse practitioner Zambo and Dr.
Upell, both of Eagle Butte, SD, were disclosed as
"Attending Physician[s]." Doc. 27-1 at 36; Doc. 27
at ¶ 17; Doc. 32 at ¶ 17. Question 2(i) of Part II
specifically asked whether, in the past ten years, Cudmore
had "ever had or been diagnosed by a licensed medical
professional, treated or advised to get treatment from a
licensed medical professional, hospitalized, or presently
taking prescriptions) or medications(s) for . . . [d]isorder
of the kidney, bladder or urinary system, abnormal PSA,
abnormal PAP smear without subsequent normal PAP smear or
protein or blood in the urine." Doc. 27-1 at 36. The
"No" box was checked for this question. Doc. 27 at
¶ 19; Doc. 32 at ¶ 19. Question 6 of Part II stated
that "[i]f not listed above, please provide full name,
address and phone numbers of licensed medical professionals)
consulted in the past five years, include date and findings
of last visit and test performed and treatment
received." Doc. 27-1 at 36. This space was left blank.
Doc. 27 at ¶ 20; Doc. 32 at ¶ 20. Throughout the
application, other aspects of Cudmore's other medical
history, including a 1979 accident resulting in disability
payments, were disclosed. See Doc. 27-1 at 36-37. The
application contained an affirmative oath that: "The
above statements and answers are true and complete to the
best of my knowledge and belief. I agree that such statements
and answers shall be part of the application and are made to
induce the Midland National Life Insurance Company to issue
the policy or certificate applied for." Doc. 27-1 at 36.
Cudmore signed Part II of the application. Doc. 27-1 at 38;
Doc. 27 at ¶ 17; Doc. 32 at ¶ 17.
the application's submission, Midland assessed the
mortality risk for Cudmore through its underwriting process.
See Doc. 27 at ¶ 24; Doc. 32 at ¶ 24. This process
determines the type of policy Midland is willing to offer,
the appropriate death benefit, the premium rate, • and
the ultimate issuance of the policy. Doc. 27 at ¶ 24;
Doc. 32 at ¶ 24. On January 10, 2014, Midland issued a
life insurance policy to Cudmore, of which he accepted
delivery on January 15, 2014, as Policy No. 1503084386. Doc.
27 at ¶¶ 27, 30; Doc. 32 at ¶¶ 27, 30.
The policy has a face amount of $ 100, 000, with Morrison
designated as the sole primary beneficiary of the policy.
Doc. 27 at ¶¶ 28-29; Doc. 32 at ¶¶ 28-29.
April 28, 2014, Cudmore met with Dr. Wyatt in Pierre because
of an elevated PSA level, which was lower than at the time of
the prior biopsy, but still "not back to a normal
level." Doc. 27-4 at 28. Dr. Wyatt noted that the follow
up was for "both history of elevated PSA and also
abnormal biopsy." Doc. 27-4 at 28. While Dr. Wyatt
thought a second biopsy was "the optimal plan, "
Cudmore wanted to "pursue ongoing followup, " and a
PSA test was recommended every six months. Doc. 27-4 at 31.
October 1, 2014, Cudmore returned to Pierre because of a PSA
level "elevated to 6.5." Doc. 27-4 at 32. Dr. Wyatt
"quite bluntly recommended that he have a repeat biopsy
at this point, " but Cudmore elected to have only a
follow-up PSA exam in six months. Doc. 27-4 at 32.
6, 2015, Cudmore met with Dr. Wyatt in Pierre to follow up
concerning his elevated PSA level. Doc. 27-4 at 38. Dr. Wyatt
noted in his care chart that Cudmore expressed at this
meeting "that even if it is higher he is going to refuse
biopsy." Doc. 27-4 at 39. Later, Melissa Simons, an R.N.
at Avera St. Mary's Hospital in Pierre called Cudmore to
tell him the PSA level had "decreased to 6.39."
Doc. 27-4 at 41. Simons noted that he declined a prostate
biopsy, but will return for another PSA check in six months.
Doc. 27-4 at 41.
August 16, 2015, Cudmore died in an ATV accident, and on
September 10, 2015, Morrison submitted the appropriate
paperwork to claim the death benefit proceeds. Doc. 27 at
¶¶ 33-34; Doc. 27-2 at 2; Doc. 32 at ¶¶
33-34. The policy contains an incontestability provision:
"We cannot contest this policy after it has been in
force during the Insured's lifetime for 2 years from the
Policy Date or, if reinstated, for two years from the date of
reinstatement." Doc. 27 at ¶ 32; Doc. 32 at ¶
32. Following Morrison's, claim, Midland conducted a
routine contestability investigation, as Cudmore's death
occurred within two years from the policy's effective
date. Doc. 27 at ¶ 36; Doc. 32 at ¶ 36. During the
course of this investigation, Midland obtained medical
records relating to Cudmore involving his elevated PSA levels
and the subsequent biopsy to determine whether the elevated
PSA levels were related to prostate cancer. Doc. 27 at
¶¶ 38, 41; Doc. 32 at ¶¶ 38, 41.
January 11, 2016, Midland sent letters to both Morrison and
Kremer stating that because "Cudmore did not disclose
his complete medical history ... the Company did not have a
proper opportunity to evaluate him.as an insurance risk,
" and had he disclosed his full history, Midland
"would not have offered him life insurance coverage
under the Policy, and would not have issued the Policy."
Doc. 27-1 at 41-46. Midland alleged that Cudmore
"materially misrepresented his medical history"
during the application, and "[a]s such, we are
exercising our right to rescind the Policy, deeming it null
and void. The extent of our liability is limited to the
return of all premiums paid into the Policy, plus
interest." Doc. 27-1 at 41-46. Along with the letters,
Midland sent a copy of the complaint filed with this Court,
which seeks rescission of the life insurance policy
"based on Mr. Cudmore's misrepresentation and
omission of material facts." Doc. 27-1 at 41-46.
complaint alleges that "[t]he false statements,
misrepresentations, omissions, incorrect statements made and
facts concealed and/or failed to be disclosed by Mr. Cudmore
in Parts I and II of the Application were fraudulent or
intentional misrepresentations of material fact." Doc 1
at ¶3l. Because of this, it asserts that it would have
declined Cudmore's application had it known the
"true facts." Doc. 1 at ¶ 33. Midland's
two count complaint seeks rescission of the policy and an
accompanying declaratory judgment. See Doc. 1. Following an
answer by Morrison, Doc. 8, and a clerk's entry of
default as to Kremer, Doc. 17, Midland moved for summary
judgment and default judgment under Rules 56 and 55(b) of the
Federal Rules of Civil Procedure, Doc. 22. Midland argues it
is entitled to summary judgment because there is no dispute
as to facts establishing that had it known Cudmore's
"true and complete health history, " it would not
have issued him a policy, and that "Cudmore's
material misrepresentations allow Midland National to rescind
the life insurance policy under SDCL § 58-11-44."
Doc. 22 at 2. Morrison opposes the entry of summary judgment,