Frank v. Certain Underwriters At Lloyds London Syndicate 4141, 2:10-cv-00381

Plaintiff David Frank obtained international health insurance through Underwriters in 2008, with coverage primarily for Mexico.
Frank disclosed prior knee surgery, a history of a lumbar disc problem, high blood pressure, and denied arthritis on the application; riders were added excluding knee and other conditions.
Underwriters initiated a rescission review after receiving records suggesting undisclosed conditions; no records were attached to the rescission letter.
In 2009, Frank underwent right knee surgery, and a second surgery followed; Underwriters later canceled the policy in August 2009 for misstatements allegedly inconsistent with the application.
Padgett, a compliance manager, relied on records from North Phoenix Orthopedic and John C. Lincoln Health Network to justify rescission but did not attach all records to the letter.
Frank sued in 2010; the court granted in part summary judgment, limiting relief to denial of coverage for right knee surgeries and rejecting bad faith and punitive damages claims.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether the statutory test governs rescission	Frank argues delivery occurred outside Arizona; statutory test may not apply.	Underwriters contend statutory test applies if delivery in state; otherwise common law governs.	Insufficient record on delivery; both tests yield similar results; the court analyzes under both.
Whether misrepresentations concerning right knee were material	Arthritis and right knee facts were not misrepresented with intent to deceive.	Right knee condition misrepresented; material to risk accepted.	Summary judgment for right knee misrepresentation as material under statutory test; genuine issues remain for arthritis and arrhythmia.
Whether Underwriters would have denied or limited coverage had true facts been known	Underwriters would have issued or priced policy differently; ambiguous.	Underwriters would have added riders; policy would be denied entirely only if true facts showed broader risk.	Materiality shown for right knee; good faith denial supports rescission under statutory test; not all facts conclusively resolved.
Whether bad faith and punitive damages claims survive	If denial of coverage was improper, bad faith and punitive damages may attach.	No contract breach found; bad faith/punitive damages require breach.	Bad faith and punitive damages fail; court grants summary judgment on these grounds.

Smith v. Republic Nat’l Life Ins. Co., 107 Ariz. 112 (Ariz. 1971) (actual vs. legal fraud distinctions in insurance applications)
Valley Farms, Ltd. v. Transcontinental Ins. Co., 206 Ariz. 349 (Ct. App. 2003) (materiality in insurance misrepresentation analysis)
Golden Rule Ins. Co. v. Montgomery, 435 F. Supp. 2d 980 (D. Ariz. 2006) (symptoms vs. conditions—subjective nature of medical facts)
Stewart v. Mutual of Omaha Ins. Co., 169 Ariz. 99 (Ct. App. 1991) (nature of symptoms and medical conditions in insurance applications)
CenTrust Mortgage Corp. v. PMI Mortgage Ins. Co., 166 Ariz. 50 (Ct. App. 1990) (common law rescission framework for misrepresentations)
Acacia Mutual Life Ass’n v. Berry, 54 Ariz. 208 (1939) (delivery concept and policy effectiveness)
Continental Cas. Co. v. Mulligan, 10 Ariz. App. 491 (Ct. App. 1969) (early insurance misrepresentation principles)