898 F.3d 825
8th Cir.2018Background
- In May 2003, insured May Yang applied to Farmers New World Life for a life policy limited to applicants under 60; her application listed birthdate July 11, 1943 and included Laotian birth documentation.
- Farmers issued the policy, which contained an incontestability clause (policy not contestable after two years except for nonpayment) and a misstatement clause (if insured’s age or sex misstated, amount payable is what premiums would have purchased at correct age/sex).
- In 2014 Mary Yang (beneficiary) submitted a Laotian death certificate showing a 1943 birth year and claimed the $150,000 death benefit; Farmers discovered SSA records reflecting a May 27, 1933 birthdate and refused the benefit, refunding premiums under the misstatement clause.
- Mary sued, arguing either Yang had a 1943 birth year or, regardless, Farmers was barred by the incontestability clause from invoking the misstatement-of-age clause to eliminate benefits.
- District court granted summary judgment for Mary, holding the incontestability clause barred Farmers from applying the misstatement clause when the age adjustment would eliminate benefits.
- Eighth Circuit: policy interpretation is a question of law; affirmed that the record is disputed on actual birth year (precluding summary judgment for Farmers), but reversed district court’s legal ruling that incontestability precluded applying the misstatement clause to eliminate benefits; remanded for further proceedings.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether incontestability clause bars insurer from invoking misstatement-of-age clause when age adjustment would reduce benefits to zero | Incontestability forbids challenges to validity; applying misstatement clause to eliminate benefits is effectively a contest, so insurer must pay full benefit | Misstatement clause is a term of the policy governing amount payable; applying it enforces, not contests, the policy even if it results in zero benefits | Court held incontestability does not bar applying the unambiguous misstatement clause; it enforces policy terms rather than contests the policy |
| Whether the insurer is entitled to summary judgment that insured’s birth year is 1933 | Yang’s documents and beneficiary’s evidence support 1943 | Farmers points to consistent federal/state IDs and other insurance application showing 1933; argues admissions by insured | Court held factual dispute exists over birth year; summary judgment for Farmers on birth date denied |
| Whether Minn. Stat. §61A.11 (representations binding absent willful falsity and medical exam) precludes insurer from invoking misstatement clause | Mary argues the representation is valid and binding under §61A.11 so misstatement cannot be used | Farmers says it conducted a medical exam and that any ten-year discrepancy could be willful/intentional, so §61A.11 may not apply | Court found on record §61A.11 cannot be resolved as a matter of law; factual issues remain for trial/remand |
| Whether misstatement clause’s inclusion of sex (not required by statute) invalidates the clause | Mary argued the clause should be void because Minnesota statute requires only age adjustments | Farmers argued parties may contract and any conflict would be severed to conform to statute | Court rejected the argument; upheld clause and noted severability principles if a conflict existed |
Key Cases Cited
- Welspun Pipes, Inc. v. Liberty Mut. Fire Ins. Co., 891 F.3d 351 (8th Cir.) (standards for de novo review of summary judgment and contract interpretation)
- HIP, Inc. v. Hormel Foods Corp., 888 F.3d 334 (8th Cir.) (federal review principles on summary judgment)
- Linn v. Blue Cross & Blue Shield of Minnesota, 905 N.W.2d 497 (Minn. 2018) (contracts and insurance policies interpreted under general principles of contract law)
- Metropolitan Airports Comm’n v. Noble, 763 N.W.2d 639 (Minn. 2009) (must give effect to all contract provisions)
- Engineering & Construction Innovations, Inc. v. L.H. Bolduc Co., 825 N.W.2d 695 (Minn. 2013) (avoid constructions that entirely neutralize contract provisions)
- Storms, Inc. v. Mathy Construction Co., 883 N.W.2d 772 (Minn. 2016) (court may not rewrite or limit clear contractual language)
- Yang v. Western-Southern Life Assurance Co., 713 F.3d 429 (8th Cir.) (distinguishing contesting a policy from enforcing policy terms via adjustment)
- Amica Life Insurance Co. v. Barbor, 488 F. Supp. 2d 750 (N.D. Ill. 2007) (under Illinois law, court held an age adjustment that voids benefits may be treated as a contest; Eighth Circuit disagreed as a matter of Minnesota law)