Appeal from the United States District Court for the District of Hawaii. D.C. No. CV-91-00501-HMF. Harold M. Fong, Chief District Judge, Presiding.
Before: Jerome Farris, Robert R. Beezer, and Pamela Ann Rymer, Circuit Judges. Opinion by Judge Rymer.
Sherry Gasaway appeals the district court's summary judgment in favor of Northwestern Mutual Life Insurance Co. (NML) on its counterclaim for rescission of Gasaway's disability insurance policy based on material misrepresentations in her application. See Gasaway v. Northwestern Mut. Life Ins. Co., 820 F. Supp. 1241 (D. Haw. 1993). This court has jurisdiction, 28 U.S.C. § 1291, and we affirm.
Gasaway was an agent for NML who first applied for an NML life insurance policy in April 1989. NML underwriters obtained copies of Gasaway's medical records from her personal physician (Dr. Dierdorff) which indicated that Gasaway had complained of chronic fatigue syndrome since April 1988 and that Sinequan was prescribed to alleviate depression associated with that illness. She also had a medical examination as part of the application process. In July 1989, Gasaway applied for a second NML life insurance policy; that application had no new medical information.
In December 1989, Gasaway applied for an NML disability insurance policy. She underwent another medical exam and filled out another questionnaire in which she answered "no" to all questions relating to prior disabilities, conditions, or treatments, except that she acknowledged her prior physical exam and tests in April 1989. NML also obtained medical records from Gasaway's gynecologist which revealed chronic gynecological problems for which a diuretic, Dyazide, was prescribed. After the standard audit and underwriting process was completed, NML issued a disability policy.
Sometime between February and April 1990, Gasaway became disabled and stopped working. She was later diagnosed with fibrositis, a condition of diffuse muscle aches and pains and associated fatigue often secondary to a sleep disorder, and classified as totally disabled.
In July 1990, she filed a claim for disability benefits. Because the claim was filed and the disability occurred shortly after her coverage began, NML conducted an investigation which revealed that Gasaway failed to state that she made numerous visits to other doctors for serious health problems, such as myalgia (muscle pain) and hypokalemia (deficiency of potassium in blood), generalized anxiety disorder, and depression. Gasaway was still taking Dyazide and Sinequan, and in excess of her prescribed dosages, even though her application stated that she was not taking any medication; Dr. Dierdorff's records indicated that he instructed the pharmacist to discontinue dispensing Dyazide to Gasaway. Gasaway's abuse of these prescriptions also caused the Honolulu prosecutor's office and the Hawaii State Department of Health, Investigation and Narcotics Control Section to investigate her. NML also learned that Gasaway had been treated for depression in 1983 or 1984 for which she received disability benefits and sought psychotherapy in 1988, though this was not included in her applications.
As a result, NML denied her benefits. Gasaway filed suit, and NML brought a counterclaim for rescission based on Gasaway's misrepresentations. In support of its summary judgment motion, NML submitted affidavits from Patricia Westphal which stated that, had Gasaway disclosed this information to NML, NML would have rejected her application. The district court granted NML's motion for summary judgment, concluding that Gasaway made misrepresentations which were material to the risk NML assumed. 820 F. Supp. at 1246, 1248.
In order to rescind Gasaway's policy, NML is required to show that her statements were misrepresentations and that they either were made with intent to deceive or materially affected acceptance of the risk or the hazard assumed by NML.*fn1 Gasaway does not argue that her representations on the disability application were not false. Rather, she argues that her misrepresentations were not material because NML already had, or could obtain, the information Gasaway omitted from other sources, and because there was no causal link between the misrepresentations and her ultimate disability.
Gasaway first urges us to adopt Hawaii's "remedial" policy of viewing insurance policies as adhesion contracts which are construed in favor of insureds. See AVEMCO Ins. Co. v. Chung, 388 F. Supp. 142 (D. Haw. 1975). The policy is not germane, however, as the issue here involves a statute, not an insurance policy drafted by the insurer.*fn2
Gasaway's argument that NML had at least constructive knowledge of many of the risks at issue fails because regardless of the information from prior applications, NML was never told about excessive use of prescription drugs, her history of treatment for mental and muscle disorders, including myalgia and hypokalemia, her psychiatric treatment prior to 1985, and her previous disability ...