Principal Nat'l Life Ins. Co. v. Coassin
884 F.3d 130
2d Cir.2018Background
- Applicant Lawrence Coassin applied (Apr 2012) for a $10,000,000 life policy; application and amendment contained statements that answers were true and that misrepresentations could lead to rescission.
- Coassin amended the application to say his vertigo had resolved and checked “No” on a supplemental form about post-application medical visits, though he had seen an ENT who ordered further tests and appointments.
- Post-application testing (ABR, VNG) showed abnormalities and ENT recommended MRI and neurologic evaluation; a neurologist (Coassin’s brother‑in‑law) reviewed MRI by phone and advised benign positional vertigo and no further referral; later MRIs showed a brain tumor and Coassin died within two years of application.
- Insurer Principal discovered the misrepresentations during a contestability review, concluded it would have denied coverage under its guidelines, and sued for rescission and declaratory relief; district court found misrepresentations but held they were immaterial because Principal’s underwriting guidelines would still have produced coverage.
- The Second Circuit affirmed: it held the district court applied controlling Connecticut-law standards (Pinette and Great American Ins. Co.), and that the district court’s factual findings (that Principal would have issued the policy under its guidelines) were not clearly erroneous.
Issues
| Issue | Plaintiff's Argument (Principal) | Defendant's Argument (Coassin / Beneficiary) | Held |
|---|---|---|---|
| Whether Coassin knowingly misrepresented post‑application medical care | Coassin knowingly lied about ongoing visits and resolution of vertigo | Misstatements were false but contextualized by later benign diagnosis | Court: Misrepresentations proved as matter of law (district court found them) |
| Whether misrepresentations were material under Connecticut law | Material; would have influenced issuance and Principal’s guidelines would lead to denial | Presumption of materiality rebutted because Principal’s underwriting would still have issued policy | Held: Not material — insurer failed to show it would have declined coverage under its guidelines |
| Whether insurer’s underwriting guidelines required non‑related, written, or in‑person doctor documentation | Guidelines effectively require a definitive diagnosis and no ongoing referrals; not limited to non‑related physicians or written/in‑person reports | Insurer: diagnosis by brother‑in‑law, by phone, and without exam undermines credibility so guidelines not met | Held: District court reasonably credited testimony and documents; no clear error in finding guidelines satisfied |
| Standard of review and controlling precedent | District court should apply Connecticut law as interpreted by Second Circuit’s prior decisions | District court applied Pinette and Great American; beneficiary urged reliance on same precedents | Held: Second Circuit precedent controls; district court applied correct law and its factual findings are not clearly erroneous |
Key Cases Cited
- Pinette v. Assurance Co. of America, 52 F.3d 407 (2d Cir. 1995) (misrepresentation presumptively material when application specifically requests the information)
- FDIC v. Great Am. Ins. Co., 607 F.3d 288 (2d Cir. 2010) (applies Pinette’s presumption of materiality for answers to specific application questions)
- Davis Scofield Co. v. Agric. Ins. Co., 145 A. 38 (Conn. 1929) (defines materiality as increasing risk or affecting issuance/premium)
- State Bank & Trust Co. v. Conn. Gen. Life Ins. Co., 145 A. 565 (Conn. 1929) (treats matters subject to special inquiry as presumptively material)
- Middlesex Mut. Assur. Co. v. Walsh, 218 Conn. 681 (Conn. 1991) (reciting State Bank & Trust Co. standard on material misrepresentations)