     Case: 10-31016     Document: 00511616202         Page: 1     Date Filed: 09/28/2011




            IN THE UNITED STATES COURT OF APPEALS
                     FOR THE FIFTH CIRCUIT  United States Court of Appeals
                                                     Fifth Circuit

                                                                            FILED
                                                                        September 28, 2011

                                       No. 10-31016                        Lyle W. Cayce
                                                                                Clerk

ANGELA LEE WARREN FOSTER, Individually and as Trustee of the
ELEANOR F. WARREN FAMILY TRUST, SHONDA FAYE WARREN
LABORDE, WINDY WARREN DARBY, and GEORGE W. WARREN, JR.

                                                  Plaintiffs-Appellees/Cross-
                                                  Appellants
v.

UNITED OF OMAHA LIFE INSURANCE COMPANY

                                                  Defendant-Appellant/Cross-
                                                  Appellee



                   Appeal from the United States District Court
                      for the Western District of Louisiana
                            USDC No. 6:08-CV-01170


Before WIENER, CLEMENT, and ELROD, Circuit Judges.
PER CURIAM:*
        Before her death, Eleanor Warren, through a trust created in her name,
applied for a life insurance policy from United of Omaha Life Insurance
Company (“United”) but omitted mention of her lung condition, heart condition,
and recent visits to three physicians. After Warren’s death, United rescinded


        *
         Pursuant to 5TH CIR. R. 47.5, the court has determined that this opinion should not
be published and is not precedent except under the limited circumstances set forth in 5TH CIR.
R. 47.5.4.
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the policy because of these omissions. Plaintiffs-Appellees, Warren’s children
(“Plaintiffs”), sued United under the policy.      The district court held that
Plaintiffs were entitled to recover under the policy because, among other
reasons, Warren had no intent to deceive United. We affirm the district court’s
ruling that Plaintiffs are entitled to recover under the policy, its award of legal
interest, and its ruling that Plaintiffs are not entitled to statutory penalties.


                        I. FACTS & PROCEEDINGS
      In 2001, Eleanor Warren, the Plaintiffs’ mother, created a trust (“the
Trust”) for the benefit of her children. Since 2003, one of Warren’s daughters,
Angela Lee Warren Foster, has served as Trustee. Until 2005, the Trust owned
a life insurance policy issued by Northwestern Mutual providing insurance
benefits in the amount of $1 million to be paid to the Trust following Warren’s
death.
      In 2005, the Smith Insurance Agency (“Smith Agency”) suggested to
Warren that the Trust would be able to save money on insurance premiums by
seeking a different insurer. The Trust first submitted an application for a
replacement policy to Banner Life Insurance (“Banner”). On this application,
Warren indicated that she had two treating physicians, Drs. Crackower and
Steuben.   She did not indicate on the application that she had received
treatment for heart disease, chest pain, or lung ailments. Banner offered to
issue a $1 million term policy, but for a higher than standard rate premium
because of Warren’s abnormal EKG and blood test results.
      Through the Smith Agency, the Trust then submitted a life insurance
application to United. Brandon Smith and Jessica Breaux, employees of the
Smith Agency, reproduced the information from the Banner application onto the
United application. Warren was not interviewed or physically examined for this
application, but Smith asserts that he reviewed the application with Warren

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over the telephone. United requested a report on Warren from the MIB Group,
a non-profit organization of life insurance companies that collects information
on behalf of its members. The MIB report included a code indicating that
Warren suffered from chronic obstructive pulmonary disease (“COPD”) as
reported in 2001. United also requested the medical records of Dr. Crackower,
Warren’s family physician, for the period between June and October 2005. After
this investigation, the Smith Agency sent Warren and Foster the signature
pages, but not the medical history section, of the United application, and Warren
and Foster signed those pages.
      Two weeks after she signed the application, Warren sought treatment
from a new physician, Dr. Malek, for shortness of breath and wheezing on
exertion. After ordering tests, Dr. Malek prescribed several drugs, an inhaler,
oxygen, and a vaccine. Warren then saw Dr. Malek’s partner, Dr. Fei, who
prescribed further treatment for the same condition. Meanwhile, at Smith’s
suggestion, Warren agreed to seek a $2 million rather than a $1 million policy.
Some time after United had approved Warren for a $2 million policy, Dr. Malek
referred her to a third new doctor, Dr. Mounir, who concluded that Warren was
at a high risk for cardiovascular disease.
      The day after her appointment with Dr. Mounir, Warren met Smith for
lunch to accept delivery of the United policy. Warren gave Smith a check for the
first premium and signed the delivery receipt, which states that it constitutes
an addendum to the policy. Foster never signed the addendum, although there
was a space for the signature of the trustee. The addendum states that Warren
had “no change in health” and had “not consulted a health care provider or been
hospitalized” since the date of application. The addendum also contains the
following statement:
      I/We understand that United of Omaha Life Insurance Company is
      relying upon the information set forth in this Addendum and has


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       made execution and delivery of this Addendum a condition of
       delivery of this Policy. Incorrect or misleading information provided
       herein may void this Policy from its effective date.

       Warren died from lung cancer on June 1, 2007. When processing the
Trust’s claim on the policy, United opened an investigation and learned of
Warren’s visits to Drs. Malek, Fei, and Mounir. Based on this information,
United rescinded the policy and refunded the premiums paid.
       The following June, Plaintiffs filed suit against United seeking full
payment of the $2 million life insurance policy as well as penalties based on the
allegation that United denied the claim without just cause. After a trial on the
briefs, the district court concluded that Plaintiffs were entitled to recover the
insurance proceeds but not statutory penalties. United filed a notice of appeal.
Shortly thereafter, Plaintiffs cross-appealed the portion of the judgment
dismissing their claim for statutory penalties.


                              II. STANDARD OF REVIEW
       When a judgment from a bench trial is appealed, we review questions of
law de novo.1 The findings of fact from a bench trial are reviewed for clear error,
regardless whether they are based on oral testimony or documentary evidence.2
Nevertheless:
       When, as is the case here, the evidence relied upon by the district
       court in making its findings consists solely of documents in the
       record, the burden of establishing clear error is not so great as
       where the court engaged in the judging of witness credibility or in
       some other way was in a superior vantage point for finding facts.3


       1
           French v. Allstate Indem. Co., 637 F.3d 571, 577 (5th Cir. 2011).
       2
           FED. R. CIV. P. 52(a)(6); Hall v. Nat’l Gypsum Co., 105 F.3d 225, 228 (5th Cir. 1997).
       3
         Hall, 105 F.3d at 228; see also Volkswagen of Am., Inc. v. Jahre, 472 F.2d 557, 558-59
(5th Cir. 1973).

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This is because, as we have noted, “we view precisely the same evidence as did
the trial judge, from the same vantage point, neither tribunal being aided by
those advantages in assessing witness credibility that flow from observing
demeanor, reactions, and manner of testifying.”4


                                        III. ANALYSIS
A.      Insurance Proceeds
        The district court held that United waived its right to rescind Warren’s life
insurance policy for misrepresentations in her original application by failing to
conduct an adequate investigation in light of that which it knew about Warren’s
health. The district court also concluded that those misrepresentations cannot
be charged to Warren in any event because the application was completed by
Smith. These conclusions are not presently at issue, as United conceded at oral
argument that it could not rescind the policy based on misrepresentations in
Warren’s original application.
        Rather, United contends that the addendum to the insurance policy
contains misrepresentations that entitle it to rescind the policy. To deny
coverage for misrepresentations in a life insurance application, United must
establish that (1) Warren’s statements were false, (2) her misrepresentations
were made with an actual intent to deceive, and (3) her false statements
materially affected its acceptance of risk.5 In determining whether an applicant
intended to deceive the insurer, a court must examine whether “attending




        4
            Cooper v. Dep’t of Navy of U.S., 594 F.2d 484, 486 (5th Cir. 1979).
       5
        La. Rev. Stat. § 22:860; Johnson v. Occidental Life Ins. Co. of Ca., 368 So. 2d 1032,
1036 (La. 1979) (holding that each of these elements must be met in order to rescind policy,
notwithstanding the apparently disjunctive language of the statute); Swain ex rel. Estate of
Swain v. Life Ins. Co. of La., 537 So. 2d 1297, 1299 (La. Ct. App. 1989) (same).

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circumstances” indicate that the insured had knowledge of the falsity and
materiality of the misrepresentations.6
       The district court found that, even if the statements in the addendum to
the effect that Warren had “no change in health” and had “not consulted a health
care provider or been hospitalized” since signing the original application were
inaccurate and material, United failed to establish that Warren made these
statements with intent to deceive. Whether an insured intended to deceive an
insurer is a factual finding that we review for clear error.7 The district court
based its conclusion that Warren did not intend to deceive United on the
following discrete facts. First, Warren had suffered from the same ailments for
at least five years, and Drs. Mounir and Malek testified that Warren underwent
no change in health between the submission of the application and the delivery
of the policy. Second, the court found Smith to be not entirely credible because
of multiple inaccuracies and equivocations in his deposition testimony. This,
reasoned the district court, gave it cause to question whether Smith thoroughly
reviewed the addendum with Warren during the delivery, which took place over
lunch in a public restaurant.            Third, Warren previously had in place an
incontestable life insurance policy with Northwestern Mutual, and she switched
policies only at Smith’s suggestion. Fourth, when asked specific questions about
her medical history in a telephone interview, Warren answered truthfully. The
district court did not commit clear error in finding that, for these reasons, United
failed to show that Warren intended to deceive it when she signed the
addendum.8


       6
         Johnson, 368 So. 2d at 1036 (quoting Watson v. Life Ins. Co. of La., 335 So. 2d 518, 521
(La. Ct. App. 1976)) .
       7
           Wohlman v. Paul Revere Life Ins. Co., 980 F.2d 283, 285 (5th Cir. 1992).
       8
        See Swain, 537 So. 2d at 1300 (insufficient evidence that insured had intent to deceive
because, among other reasons, “he was not asked to nor did he read the application before

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       United also asserts that the addendum made Warren’s truthful disclosure
of her medical history a condition precedent to coverage under the policy. Under
Louisiana law, a suspensive condition, or condition precedent, is “a fact upon
which the rights and duties of the parties depend.”9 Louisiana courts “do not
construe stipulations in a contract as suspensive conditions unless the express
contract language compels such construction.”10
       Here, the addendum states that “execution and delivery of this Addendum”
is “a condition of delivery of this Policy.” The parties do not dispute that Warren
executed the addendum and that the addendum was delivered to United.11 The
addendum further states: “Incorrect or misleading information provided herein
may void this Policy from its effective date.” (emphasis added). This permissive
language does not expressly compel the construction that complete disclosure is
a condition precedent to coverage. Further, the circumstances under which a
misrepresentation enables an insurer to rescind a policy are set out in Louisiana
law, as discussed supra.12 Because the district court did not commit clear error
in finding that Warren had no intent to deceive United when she signed the
addendum, Plaintiffs are entitled to recover under the policy.13


signing it”); see also State Farm Mut. Auto. Ins. Co. v. Bridges, 36 So. 3d 1142, 1148 (La. Ct.
App. 2010) (insured did not intend to deceive insurer “when he was unaware of what was in
the form”).
       9
            LA. CIV. CODE. art. 1767 cmt. (f).
       10
            Tilley v. Lowery, 511 So. 2d 1245, 1247 (La. Ct. App. 1987).
       11
         We need not address Plaintiffs’ argument that the addendum did not go into effect
because Angela Lee Warren Foster, the Trustee, never signed it. We also note that neither
party argues that the policy as a whole did not go into effect because Foster never signed the
addendum.
       12
        See La. Rev. Stat. § 22:860(A) (limiting the kinds of misrepresentations that “shall
be deemed material or defeat or void the contract or prevent it attaching”) (emphasis added).
       13
        United’s reliance upon Holmes v. Jefferson Pilot Financial Insurance Co., 907 So. 2d
185 (La. Ct. App. 2005), is misplaced. In Holmes, the potential insured completed an

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B.      Interest
        United seeks a reduction in the legal interest, totaling $60,000, that
accrued during the time this matter was under advisement by the district court.
United appeals to “basic fundamental principles of fairness and equity,” but
there is no authority to support United’s position.14 Thus, we affirm the district
court’s award of legal interest in this matter.


C.      Penalty
        Plaintiffs have asserted an additional claim for penalties under former
Louisiana Revised Statute § 22:656.15 Under that statute:
        All death claims arising under policies of insurance issued or
        delivered within this state shall be settled by the insurer within
        sixty days after the date of receipt of due proof of death, and if the
        insurer fails to do so without just cause, the amount due shall bear
        interest at the rate of eight percent per annum from date of receipt
        of due proof of death by the insurer until paid.
Louisiana courts have held that “[a]n insurer’s refusal to pay can be found to be
not ‘without just cause’ even though its defense is not subsequently upheld in




application for a life insurance policy and signed a conditional receipt that required him to
undergo a medical examination, among other requirements, before the policy could go into
effect. Id. at 186-87. Holmes died before he could undergo the medical examination. The
court held that because Holmes had not fulfilled all of the conditions specified in the receipt
at the time of his death, the insurer had not accepted the application and there was no
coverage. Id. at 190. In the present case, by contrast, United accepted Warren’s application,
including the addendum. Whether United can nonetheless rescind the policy because of
misrepresentations in the addendum is determined by referring to Louisiana law, as discussed
supra.
       14
          See Trans-Global Alloy Ltd. v. First Nat’l Bank of Jefferson Parish, 583 So. 2d 443,
457-58 (La. 1991) (under the civil law, prejudgment interest is required in order to make a
plaintiff whole).
        15
             Now renumbered La. Rev. Stat. § 22:1811 by Acts 2008, No. 415 § 1, eff. Jan. 1, 2009.

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court”16 and that a penalty should not be imposed if the insurer was justified in
believing that it had found sufficient reasons to deny the claim.17
       United’s investigation revealed substantial omissions by Warren as to the
state of her health and her visits to additional physicians. Even though its
defenses have not ultimately prevailed, United was not without just cause in
withholding payment under the policy, so we affirm the district court’s decision
not to impose penalties.


                                   IV. CONCLUSION
       The district court did not commit clear error in finding that Warren had
no intent to deceive United when she signed the addendum to the life insurance
policy. We therefore affirm the district court’s ruling that Plaintiffs are entitled
to recover from United under the policy. We also affirm the district court’s
award of legal interest. Additionally, we affirm the district court’s ruling that
Plaintiffs are not entitled to recover statutory penalties from United.
       AFFIRMED.




       16
          Bertrand v. Protective Life Ins. Co., 419 So. 2d 1254, 1260 (La. Ct. App. 1982) (citing
Ducote v. Life Ins. Co. of La., 245 So. 2d 531 (La. Ct. App. 1971); see also Hendricks v. Conn.
Gen. Life Ins. Co., 244 So. 2d 249 (La. Ct. App. 1971)).
       17
         Bertrand, 419 So. 2d at 1259; cf. Swain, 537 So. 2d at 1304 (penalties were justified
when an investigation “would have revealed to the defendant that its defenses were spurious”).

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