                     United States Court of Appeals
                           FOR THE EIGHTH CIRCUIT
                                   ___________

                                   No. 02-3325
                                   ___________

Shirley R. Adzick,               *
                                 *
            Appellee,            *
                                 * Appeal from the United States
     v.                          * District Court for the District
                                 * of Minnesota.
UNUM Life Insurance Company      *
of America,                      *
                                 *
            Appellant.           *
                            ___________

                             Submitted: May 16, 2003

                                  Filed: December 16, 2003
                                   ___________

Before SMITH and HANSEN, Circuit Judges, and READE,1 District Judge.
                            ___________

SMITH, Circuit Judge.

       UNUM Life Insurance Company of America ("UNUM") appeals the district
court's denial of its motions for new trial and expanded findings of fact in Shirley
Adzick's action to recover long-term disability insurance benefits. The district court
denied the motions after concluding that UNUM's policy contained ambiguous
material terms and Adzick did not fraudulently report her income. We reverse.

      1
        The Honorable Linda R. Reade, United States District Judge for the Northern
District of Iowa, sitting by designation.
                                     II. Facts
      Adzick purchased a long-term disability insurance policy from UNUM in
February 1993 when she worked as a dentist for Pentagon Dental Group. UNUM's
application process required Adzick to answer a series of eligibility questions on the
application form. Adzick, the UNUM insurance agent, and Adzick's employer,
Michael Perpich, D.D.S., completed the form together. Adzick reviewed the
completed application for accuracy before she signed it.

       UNUM issued the policy, effective February 28, 1993, to Adzick. The policy
provided that "[e]xcept for fraudulent misstatements, we will not contest those
statements made by you in the application for a coverage provided under this policy
after that coverage has been in effect for two years during your lifetime."2

       Over four years later on March 10, 1997, Adzick filed a claim for long-term
disability benefits. Adzick claimed she became unable to work on January 23, 1997,
because she "had no confidence in [her] ability to perform" the duties associated with
her practice. Adzick's physician diagnosed Adzick primarily as having cocaine
dependency. After submitting her application, Adzick admitted herself for treatment
at a drug-treatment clinic.3

      2
       UNUM's insurance application provided that the completed application is
incorporated into the insurance contract between UNUM and its insured.
      3
        Prior to UNUM's receipt of the claim form, Adzick entered a one-week drug-
treatment Professional Assessment Program at Abbott Northwestern Hospital spurred
by a disciplinary referral to the Minnesota Board of Dentistry. Following completion
of the assessment program in February 1997, Adzick entered the Talbott-Marsh
Treatment Center in Georgia for chemical-dependency treatment. Beginning in June
1997, Adzick was treated by Sheila Specker, M.D. On September 9, 1997, Adzick
underwent a neuropsychological exam, administered by Deborah D. Roman, Psy.D.
During each of these periods, Adzick reported similar histories of cocaine usage over
approximately twenty years beginning in 1978, occurring on an intermittent basis
until approximately 1992 or 1993, when her usage increased to several times a week

                                         -2-
      During its investigation of Adzick's claim, UNUM requested copies of Adzick's
federal income tax returns. Adzick’s returns indicated that she made $17,125 in 1991
and $17,600 in 1992, but that she claimed a loss in 1993. In addition, Adzick's 1992
divorce decree indicated that she earned $1,000 per month as an employee of
Pentagon Dental Group.

       On June 16, 1997, UNUM rescinded the policy and denied Adzick's claim for
benefits. UNUM claimed that Adzick fraudulently misrepresented both her income
and cocaine use in the application. Adzick appealed this decision pursuant to the
plan's terms, but UNUM affirmed the denial. Adzick filed this lawsuit.

       The district court ruled in Adzick's favor after a bench trial in January 2000.
The district court found that the application term "regularly used"4 was ambiguous
and construed it against UNUM. The court also concluded that UNUM failed to
establish that Adzick "regularly used" cocaine during the five years preceding
submission of the application. Furthermore, the district court found that UNUM failed
to establish that Adzick fraudulently misrepresented her income. UNUM moved for
amended findings or, in the alternative, for a new trial on these issues and on the issue
that the application term "currently use" precluded coverage. The district court denied
these motions, and UNUM appealed.


and then to everyday.
      4
          The application contained the following question:

      Other than already mentioned in this Application, have you in the past
      five years:
                                        ***
      (c) regularly used, or do you currently use, cocaine . . . .

Adzick answered "no" to this inquiry. The application did not define the terms
"regularly" or "currently."

                                          -3-
       When considering whether to grant or deny a motion for new trial, a district
court must consider whether the verdict is against the weight of the evidence and if
allowing it to stand would result in a miscarriage of justice. In re Air Crash at Little
Rock, Arkansas, on June 1, 1999, 291 F.3d 503, 509 (8th Cir. 2002). A district court's
denial of a motion for new trial is reviewed for abuse of discretion. Id. at 508–09
(citing Van Steenburgh v. Rival Co., 171 F.3d 1155, 1160 (8th Cir. 1999)). "In
reviewing the district court's decision, we give great deference to its judgment,
because the district court has the benefit of hearing testimony and observing the
demeanor of witnesses throughout the trial." Bonner v. ISP Techs., Inc., 259 F.3d 924,
932 (8th Cir. 2001) (citing Sanford v. Crittenden Memorial Hospital, 141 F.3d 882,
884 (8th Cir. 1998)).

                                   III. Analysis5
       Minnesota courts recognize that Minnesota Statutes § 62A governs disability
insurance.6 See Kersten v. Minnesota Mut. Life Ins. Co., 608 N.W.2d 869, 873 (Minn.
2000) (noting that Minnesota Statutes § 62A regulates "various health and disability
policies"). Section 62A.06(3) provides:

      The falsity of any statement in the application for any policy covered by
      sections 62A.01 to 62A.09 hereof [accident and health insurance], may




      5
         UNUM raised two issues on appeal. Because we reverse the district court's
decision on the first issue regarding the ambiguity of the contract language and the
falsity of Adzick's answers thereto, we need not address UNUM's second point on
appeal regarding the falsity of Adzick's responses to the income questions.
      6
        Federal jurisdiction in this case is based on diversity. Thus, Minnesota's
substantive law applies. Larsen v. Mayo Medical Center, 218 F.3d 863, 866 (8th Cir.
2000).

                                          -4-
      not bar the right to recovery thereunder unless such false statement
      materially affected either the acceptance of the risk or the hazard
      assumed by the insurer.

Because Adzick's policy is more than two years old, UNUM must also prove fraud
in addition to materiality. Minn. Stat. § 62A.04(2); Independent Sch. Dist. No. 197
v. Accident and Casualty Ins., 525 N.W.2d 600, 606 (Minn. Ct. App. 1995);
Useldinger v. Old Republic Life Ins. Co., 377 N.W.2d 32, 35 (Minn. Ct. App. 1985).
Where the insured had full knowledge of the concealed facts, an inference that the
insured was willfully false or intentionally misleading arises as a matter of law. See
Ellis v. Great-West Life Assurance Co., 43 F.3d 382, 387 (8th Cir. 1994). "A willfully
false and intentionally misleading answer is one which is consciously made with a
premeditated design so as to falsify facts so as to lead the insurer to act when he
otherwise would not" and "[w]illfully false denotes knowingly concealed." Siemers
v. United Benefit Life Ins. Co., 75 N.W.2d 605, 608 (Minn. 1956).

      As noted, the application contained the following question:

      Other than already mentioned in this Application, have you in the past
      five years:
                                        ***
      (c) regularly used, or do you currently use, cocaine . . . .

Adzick answered "no" to this inquiry. The application did not define the terms
"regularly" or "currently." Adzick indicated at trial that she defined the word
"regularly" to mean "every day."

       Second, UNUM sought income information as reported on Adzick's federal
income tax returns. Adzick's written answer indicated that she earned $30,000 each
year in 1991 and 1992 after she began working at Pentagon Dental in 1990, and that
she anticipated earning $35,000 in 1993. At trial, Adzick testified that she did not

                                         -5-
know how much income she had earned at the time she provided the answers, but that
Perpich volunteered the information concerning her current and projected income.

                               1. Contract Ambiguity
      UNUM first argues that the terms "regularly used" and "currently use" are not
ambiguous. UNUM asserts that the evidence supports a finding that Adzick regularly
used cocaine within the five years prior to submitting the application and currently
used cocaine at the time she submitted the application. The district court determined
that both phrases were ambiguous and read them against the drafter, UNUM. We
disagree.

       We review a district court's interpretation of the contractual provisions of an
insurance policy de novo as a question of law. See Noran Neurological Clinic, P.A.
v. The Travelers Indem. Co., 229 F.3d 707, 709 (8th Cir. 2000) (applying Minnesota
law); Koch Eng'g Co. v. Gibralter Cas. Co., 78 F.3d 1291, 1294 (8th Cir. 1996). "In
interpreting insurance contracts, we must ascertain and give effect to the intentions
of the parties as reflected in the terms of the insuring contract." Jenoff, Inc. v. New
Hampshire Ins. Co., 558 N.W.2d 260, 262 (Minn. 1997); Minnesota Mining & Mfg.
Co. v. Travelers Indem. Co., 457 N.W.2d 175, 179 (Minn. 1990) (citing Dairyland
Ins. Co. v. Implement Dealers Ins. Co., 199 N.W.2d 806, 811 (1972)).

       If an ambiguity in the language of an insurance contract exists, then the court
is obliged to construe the ambiguity against the insurer, and in favor of the insured.
Noran Neurological Clinic, 229 F.3d at 708; American Commerce Ins. Brokers, Inc.
v. Minnesota Mut. Fire and Cas. Co., 551 N.W.2d 224, 227 (Minn. 1996). The
language of an insurance policy, however, is ambiguous only if it can reasonably be
given more than one meaning. American Commerce Ins. Brokers, Inc., 551 N.W.2d
at 227; General Mills, Inc. v. Gold Medal Ins. Co., 622 N.W.2d 147, 153 (Minn. App.
2001); Lhotka v. Illinois Farmers Ins. Co., 572 N.W.2d 772, 773 (Minn. App. 1998).
"However, a court has no right to read an ambiguity into the plain language of a

                                         -6-
policy in order to provide coverage." Farkas v. Hartford Accident & Indem. Co., 173
N.W.2d 21, 24 (1969) (citations omitted). In undertaking such an assessment, the
court must fastidiously guard against any invitation to "create ambiguities" where
there are none. Noran Neurological Clinic, 229 F.3d at 708. "Minnesota courts have
been quite clear that the initial existence of a contractual ambiguity does not
'ineluctably lead to the conclusion that the drafter is to lose.'" Piper Jaffray Cos. v.
National Union Fire Ins. Co., 967 F.Supp. 1148, 1154 (D. Minn. 1997) (quoting
Davis by Davis v. Outboard Marine Corp., 415 N.W.2d 719, 724 (Minn. App. 1987));
see also, Sphere Drake Insurance PLC v. Trisko, 24 F.Supp.2d 985, 991 (D. Minn.
1998).

       Because UNUM's insurance contract and application do not define "regularly
used" or "currently use," we must give these terms their plain, ordinary, or popular
meaning. Smith, 353 N.W.2d at 132. "Regular use," particularly in relation to drug
use, is defined as "a habitual or common practice." BLACK'S LAW DICTIONARY 1541
(7th ed. 1999). Webster's Dictionary defines "regular" as "orderly" and "methodical,"
and defines "regularly" as "in a regular manner," "on a regular basis," or "at regular
intervals." WEBSTER'S THIRD NEW INTERNATIONAL DICTIONARY 1913 (3d ed. 1993).
In addition, "current" is defined as "presently elapsing," "occurring in or existing at
the present time," or "most recent." Id. at 557. Given their plain meaning, these terms
are not ambiguous in the context of this case.

       Although Adzick testified that she believed that "regularly used" meant "daily
use," there is no support for that interpretation. Case law indicates that the courts have
generally determined that terms such as "regularly used" or "current" are
unambiguous in the context of an insurance policy. Minnesota courts have concluded
that the term "regular use" and others like it are unambiguous in the context of
automobile insurance policies. Le Doux v. Iowa Nat'l Mut. Ins., 262 N.W.2d 418
(Minn. 1978) (the term "furnished for regular use" was unambiguous in automobile
policy); Van Overbeke v. State Farm Mutual Automobile Ins. Co., 227 N.W.2d 807

                                           -7-
(Minn. 1975) (same); Boedigheimer v. Taylor, 178 N.W.2d 610 (Minn. 1970) (same);
Milbank Ins. Co. v. Johnson, 544 N.W.2d 56 (Minn. Ct. App. 1996) (same) (citing Le
Doux, Van Overbeke, and Boedigheimer). See also, Kern v. Liberty Mut. Ins. Co., 398
F.2d 958 (8th Cir. 1968) (interpreting Missouri law) (meaning of term "regular use"
in automobile policy depends upon the circumstances of each case). Other
jurisdictions, as well, have found the term "regular use" to be unambiguous in the
context of automobile policies. See, e.g., American Family Ins. Group v. Hemenway,
575 N.W.2d 143 (Neb. 1998). But see, Moss v. Mid-America Fire and Marine Ins.
Co., 647 P.2d 754 (Idaho 1982) (meaning of "regular use" is a question of fact at
summary-judgment stage of proceedings).

       More specifically, the term "regularly used, or is currently using" illegal drugs
has been found to be unambiguous in the context of a claim for life insurance
proceeds. Johnson v. Prudential Ins. Co. of America, 589 F.Supp. 30 (D.C. 1983),
aff'd without opinion, 744 F.2d 878 (D.C. Cir. 1984). In Johnson, the insurer denied
life-insurance benefits to the decedent-insured's spouse upon learning that the
decedent smoked marijuana at various times before and after applying for and
becoming insured under the life-insurance policy. In particular, the insurer denied the
request for benefits by claiming that the decedent falsely answered the material
question of whether he "regularly used, or is currently using . . ." various illegal drugs
including marijuana. The plaintiff sued, claiming in part that the terms "regularly use"
and "currently using" were ambiguous. The district court, however, determined that
the question was unambiguous and that the decedent understood the question.

       Johnson is clearly analogous to this case. Here, too, the insurance application
asks whether Adzick "regularly used, or is currently using . . ." cocaine or other
illegal drugs. Given the plain meaning of the terms, there could be no reasonable
confusion as to the meaning of the terms. Adzick's assertion that she believed that
"regularly used" meant "daily use" is unreasonable when viewed under the common
definition of the term. In addition, Adzick's assertion offers no explanation for her

                                           -8-
denial to the question regarding whether she "currently use[d]" illegal drugs when she
applied for coverage. Therefore, the district court erred in determining that this phrase
is ambiguous in this case.

                                  2. False Statement
       Because we find that the terms "regularly used" and "currently use" are
unambiguous in this case, we must next determine whether Adzick provided a false
answer to allow UNUM to avoid the contract.7 Rule 52(a) of the Federal Rules of
Civil Procedure mandates that in cases tried to the court, findings of fact shall not be
set aside unless clearly erroneous. Washington v. Simpson, 806 F.2d 192, 195 (8th
Cir. 1986). This standard of review does not permit us to substitute our own
impressions for those of the district court. Horner v. Mary Institute, 613 F.2d 706,
713 (8th Cir. 1980). When findings are based on determinations regarding the
credibility of witnesses, Rule 52 demands even greater deference to the trial court's
findings, and unless contradicted by extrinsic evidence or internally inconsistent, such
findings can virtually never be clear error. Anderson v. City of Bessemer City, N.C.,
470 U.S. 564 (1985); Wilson v. Lambert, 789 F.2d 656, 658 (8th Cir. 1986).

      The strongest evidence of the frequency of Adzick's cocaine use arises from
Adzick's medical records produced after she submitted her claim for benefits in 1997.
These records indicate that Adzick herself reported to numerous doctors, therapists,
the Minnesota Board of Dentistry, and her expert witness, Carl Malmquist, M.D., a
twenty-year history of cocaine use that became a problem sometime between 1991
and 1993, except during her pregnancies.8


      7
       At trial, the parties stipulated to the materiality of the drug-use and income
questions. As such, we need not address this issue here.
      8
       Three of Adzick's pregnancies resulted in successful deliveries on February
11, 1981; August 11, 1987; and August 10, 1995. Adzick also contended that she was
pregnant for a time in 1983, 1984, 1985, 1989, 1992, and 1993; however, those

                                          -9-
       Adzick's treatment records indicate that she reported that her cocaine use was
"continuous," except during her pregnancies, during the twenty years prior to
treatment. In June 1997, Adzick described her cocaine use to Dr. Specker as
"intermittent" until 1991 or 1992 when her usage "developed into a substantial
problem for her." In September 1997, Adzick told the neuropsychologist, Dr. Roman,
that her "use was occasional until 1991 or 1992 when she began using on a more
frequent basis, generally a couple of times per week." During the litigation, Adzick
told Dr. Malmquist that she used cocaine five to six times a year from 1985 through
1990, that her use increased over the next eighteen months, and finally that in 1992
her cocaine use increased further.

       Adzick, however, asserted that she did not regularly use cocaine until October
1995 and that her behavior between 1988 and 1993 provides no indication that she
was a chronic user. Adzick presented evidence from witnesses who claimed that they
did not witness any behavioral problems indicative of chronic cocaine use. However,
these witnesses included people who worked with Adzick and saw her only in her
office or other work settings. This is consistent with Adzick's statements to her
counselors that she did not use cocaine at work. Adzick was able to conceal her
cocaine use as evidenced by the fact that she admittedly began using cocaine nearly
every day beginning in October 1995, but was able to conceal this behavior until she
was reported to the Minnesota Board of Dentistry in December 1997.

       The district court discounted the numerous treatment records that included
Adzick's own statements regarding the history of her cocaine use and addiction. The
court apparently determined that the records were of little value because they were
created years after the period at issue. However, these records–created by doctors and
counselors reporting and recording Adzick's own statements–consistently point to a
history of "regular" use particularly beginning in 1991 and 1992 when she reported


pregnancies did not go to term.

                                        -10-
that she began using cocaine at least two times a week. In contrast, the decedent in
the Johnson case reportedly only smoked marijuana approximately once a month,
which the court determined was sufficient to qualify as "regular" or "current" use. In
addition, the district court credited the testimony of Adzick's various witnesses who
testified that she did not appear to be under the influence of cocaine during the period
in question. However, following the district court's reasoning, these recollections, too,
occurred years after the events in question, and would, pursuant to the district court's
analysis, render the testimony of little value.

       After reviewing the entire record, we find that the district court clearly erred
in determining that Adzick did not regularly use or was not currently using cocaine
during the relevant period. Adzick's negative response on the insurance application
constitutes a false answer to a material matter at issue in this case. As such, we find
that the district court abused its discretion in denying UNUM's motion for new trial
and clearly erred in denying UNUM's motion to amend the court's findings of fact.
We reverse.
                         ______________________________




                                          -11-
