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Gary v. USAA Life Insurance Co.

United States District Court, D. Maryland, Southern Division

January 17, 2017

ROBERT GARY, Plaintiff,



         When the Plaintiff, Colonel Robert Gary, made a claim for benefits under a life insurance policy (the “Policy”) that Defendant USAA Life Insurance Co. (“USAA Life”) had issued to his wife Angela Maddox-Gary less than two years earlier, USAA Life denied his claim because Ms. Maddox-Gary had made a misrepresentation in the medical questionnaire interview (“Medical Questionnaire”) that was part of the application process for the Policy. Gary filed suit against USAA Life to recover benefits under the Policy. USAA Life moved for summary judgment, insisting that Ms. Maddox-Gary's misrepresentation was material and therefore provided a basis for USAA Life to rescind the Policy. Def.'s Mot., ECF No. 29; Def.'s Mem. 5, ECF No. 29-1. Gary filed a cross-motion for summary judgment, ECF No. 32, admitting that Ms. Maddox-Gary made the misrepresentation but arguing that, “[u]nder the applicable statutes, USAA Life is precluded from declaring Ms. Maddox-Gary's policy void because of failure to disclose an Echocardiogram.” Pl.'s Opp'n & Mem. 4, ECF No. 32-2.[1] He also contends that the Medical Questionnaire is not part of the application but rather inadmissible hearsay that could not alter the written application, id. at 5, 8, and that the misrepresentation was not material, id. at 14. Additionally, Gary argues that the Court should exclude testimony from one of USAA Life's principal underwriters, Tammy Koenig. Id. at 16. Gary has not established grounds for excluding the evidence, and the Medical Questionnaire is a part of the application. Moreover, Ms. Maddox-Gary's misrepresentation, which was material, indeed provides a basis for rescission. Accordingly, I will grant USAA Life's motion and deny Gary's.

         Standard of Review

         Summary judgment is proper when the moving party demonstrates, through “particular parts of materials in the record, including depositions, documents, electronically stored information, affidavits or declarations, stipulations . . ., admissions, interrogatory answers, or other materials, ” that “there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law.” Fed.R.Civ.P. 56(a), (c)(1)(A); see Baldwin v. City of Greensboro, 714 F.3d 828, 833 (4th Cir. 2013). If the party seeking summary judgment demonstrates that there is no evidence to support the nonmoving party's case, the burden shifts to the nonmoving party to identify evidence that shows that a genuine dispute exists as to material facts. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 585-87 & n.10 (1986). The existence of only a “scintilla of evidence” is not enough to defeat a motion for summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251-52 (1986). Instead, the evidentiary materials submitted must show facts from which the finder of fact reasonably could find for the party opposing summary judgment. Id.

         Preliminary Matters

         On a motion for summary judgment, “[a] party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.” Fed.R.Civ.P. 56(c)(2). To establish that the decedent made a misrepresentation and that the misrepresentation was material, USAA Life relies in part on the Medical Questionnaire, as well as Koenig's affidavit and deposition testimony. Gary challenges the insurer's ability to present the facts it introduces through these documents as admissible evidence.

         Admissibility of Medical Questionnaire

         Gary notes that Ms. Maddox-Gary completed the Medical Questionnaire, Jt. Rec. 28-31, in a telephone interview that “an unidentified third party” conducted, for which her answers were not recorded verbatim, and which she did not see in written form before the Policy issued. Pl.'s Opp'n & Mem. 6-8. Gary argues that, although it is “authentic as part of USAA Life's business records . . ., there is incurable hearsay within the document that render[s] the entire document inadmissible.” Id. at 5. He insists that “the truthfulness of the information within the document cannot be presumed absent authentication by the interviewer or the opportunity by Ms. Maddox-Gary to review and adopt the written answers.” Id.; see Pl.'s Reply 6 (arguing that under Fed.R.Evid. 803(6), the Medical Questionnaire “qualifies as inadmissible hearsay as it lacks trustworthiness”).

         Yet, as USAA Life correctly asserts, Ms. Maddox-Gary's statements “are not hearsay because USAA does not offer her statements to establish the truth of her assertion that she did not have diagnostic procedures, but rather . . . to establish that the statement was made.” Cover Page to Jt. Ex. 1, ECF No. 36, at 4. In essence, USAA contends that the document is offered not to prove the truth of the assertions it contains, but rather to show what USAA did in response to having received and relied on those statements (i.e., it issued the policy at the lower premium rate than it would have required had it known the actual facts). A hearsay statement is one made outside of the current court proceeding and that “a party offers in evidence to prove the truth of the matter asserted in the statement.” Fed.R.Evid. 801(c)(2). This case focuses on Ms. Maddox-Gary's misrepresentation in the Medical Questionnaire; if what she said were true, or if USAA Life believed that it was true, then USAA Life would not have rescinded the Policy based on her statement, and this case would not be before me. And, because the statement was not true, but USAA mistakenly thought that it was when it issued the policy, it is, so to speak, offered for its non-truth-the antithesis of hearsay. Thus, the misrepresentation is not offered for its truth and simply cannot be hearsay, and is not inadmissible on that ground. See id.

         The only other contents of the Medical Questionnaire on which USAA Life relies, see Def.'s Mem. 2, are the text of Question 8.a, as it appeared in the Medical Questionnaire and in the transcript of Ms. Maddox-Gary's interview, which also is not offered for its truth, and Ms. Maddox-Gary's response that she had her finger x-rayed, which is not disputed. Therefore, insofar as USAA Life relies on the contents of the Medical Questionnaire, Gary's objection that it is inadmissible hearsay is overruled for purposes of this summary judgment analysis. See Fed. R. Evid. 801(c)(2).

         Admissibility of Koenig's Statements

         Gary argues that “[t]he nature of Ms. Koenig's testimony as well as the skill required to conduct her investigation clearly demonstrate that she should have been disclosed as an expert under Red. R. Civ. P. 26(a)(2)(B), ” and because USAA Life did not disclose her as an expert witness, her opinion testimony on whether the decedent made a material misrepresentation is inadmissible. Pl.'s Opp'n & Mem. 16. According to Gary, Koenig testified at her deposition that “she was not involved [in] nor did she have personal knowledge of the application []or the underwriting process of the life insurance policy at issue, ” and that “her involvement in this matter was solely to render an opinion on the final issue in this matter.” Id. at 17.

         USAA Life responds that Koenig is not an expert witness and that her “testimony is not ‘opinion' testimony.” Def.'s Reply & Opp'n 13. In its view, Koenig testified that she input results from Ms. Maddox-Gary's undisclosed echocardiogram into a calculator that “then determined the future risk demonstrated by those measurements.” Id. at 13-14. USAA Life insists that Koenig did not exercise her judgment in the process. Id. Alternatively, USAA Life argues that, if her testimony were opinion testimony, it would be admissible lay opinion testimony under Fed.R.Evid. 701. Id. at 14. Defendant asserts that “[t]he testimony USAA intends to elicit from Ms. Koenig is based on her personal knowledge of the circumstances surrounding USAA's decision to rescind the life insurance policy at issue in this case . . . .” Id. at 15.

         In Gary's view, “while simply plugging in numbers to a calculator may not require any skill, this was just a small step in the much larger process which le[]d Ms. Koenig to her conclusion, a process which clearly requires the ability of an expert.” Pl.'s Reply 4. He contends that Koenig “was able to read through Ms. Maddox-Gary's medical records and ‘interpreted' Dr. Shakoor's notes to determine that an echocardiogram had been scheduled.” Id.

         Koenig testified that she “offered an opinion” with regard to the decedent's Policy “[a]t the time of contestable claim review, ” after USAA Life had issued the Policy. Koenig Dep. 5:17-24, Jt. Rec. 80. She stated that, after “review[ing] the information obtained during the contestable claim review, ” it was her opinion “[t]hat there was misrepresentation and that the policy would not have been issued at the risk class it was issued.” Id. at 7:21-8:4, Jt. Rec. 80; see Id. at 17:17-20, Jt. Rec. 83. She testified that Ms. Maddox-Gary's failure to disclose her echocardiogram was “material because it changes her policy rating.” Id. at 37:7-13, Jt. Rec. 88. She acknowledged that she used her “knowledge and experience as an underwriter in making this determination.” Id. at 8:5-15, Jt. Rec. 80. According to Koenig, she was testifying from her personal memory as well as her contemporaneous notes. Id. at 21:13-23, Jt. Rec. 84.

         Similarly, in her affidavit, Koenig explained how she “conduct[ed] the contestability review of the claim made on the policy of life insurance issued to Angela Maddox-Gary, ” including reviewing medical records and entering data into a calculator “[t]o determine whether the results of [an] echocardiogram had any significance for underwriting purposes.” Koenig Aff. ¶¶ 2-9, Jt. Rec. 100-01. She stated:

Had USAA Life known of the echocardiogram results at the time that it was originally underwriting the policy, Ms. Maddox-Gary would not have been offered the policy at the preferred rate. Rather, the rate would have been 100 - 150% of the rate that she paid, based upon the Swiss Re Left Ventricular Mass. Calculator.

Id. ¶ 10.

         Federal Rule of Evidence 701 provides that a lay witness may provide testimony that is “rationally based on the witness's perception, ” “helpful to clearly understanding the witness's testimony or to determining a fact in issue, ” and “not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.” In United States v. Roe, 606 F.3d 180 (4th Cir. 2010), the Fourth Circuit reiterated its observation of the blurred line between Rule 701 and Rule 702 testimony from United States v. Perkins, 470 F.3d 150, 155-56 (4th Cir. 2006):

We have previously recognized that the distinction between lay and expert testimony “is a fine one” and “not easy to draw.” In describing this tension, we have observed:
While we have noted that a critical distinction between Rule 701 and Rule 702 testimony is that an expert witness must possess some specialized knowledge or skill or education that is not in possession of the jurors, we also have acknowledged that the subject matter of Rule 702 testimony need not be arcane or even especially difficult to comprehend. The interpretive waters are muddier still: while lay opinion testimony must be based on personal knowledge, expert opinions may also be based on first hand observation and experience.

Roe, 606 F.3d at 185-86 (quoting Perkins, 470 F.3d at 155-56 (internal quotation marks omitted)). In Perkins, the Fourth Circuit observed that the addition of subsection (c) “did not work a sea change to the rule, ” but rather “‘serves more to prohibit the inappropriate admission of expert opinion under Rule 701 than to change the substantive requirements of the admissibility of lay opinion.'” Id. at 155 & n.8 (quoting United States v. Garcia, 291 F.3d 127, 139 n.8 (2d Cir. 2002)).

         In Roe, 606 F.3d 180, in appealing his conviction, Roe argued that the district court should not have allowed the Government's witness Sergeant Russell, who had not been designated or qualified as an expert, “to testify about the authority possessed by the holders of a Maryland private detective and security guard certification and a handgun permit” because, in Roe's view, “Sergeant Russell's testimony constituted ‘expert' testimony.” Id. at 185. The Fourth Circuit disagreed with Roe, concluding that “the district court did not err in admitting [Sergeant Russell's testimony] as lay testimony.” Id. It reasoned:

Sergeant Russell was in charge of the unit that issues handgun carry permits, as well as security guard and private detective certifications in Maryland. He was qualified to testify as to the requirements for getting such permits and certifications and to state what possessing those permits permitted an individual to do based on his personal knowledge acquired in that capacity. Such knowledge was not “specialized knowledge” in the Rule 702 sense, and does not constitute expert testimony. Instead, it falls under Rule 701's description of lay testimony, being “rationally based on the perception of the witness” and helpful to the jury's “determination of a fact in issue.”

Id. at 185-86 (quoting Perkins, 470 F.3d at 155-56 (internal quotation marks omitted)).

         MCI Telecommunications Corp. v. Wanzer, 897 F.2d 703, 706 (4th Cir. 1990), [2] also provides guidance. There, the defendant offered Lillian Harrison, the accountant for a corporation with which the defendant worked, as a lay witness to testify about the corporation's profits. The Fourth Circuit concluded that the district court erred in ruling that Harrison's testimony “constituted expert testimony” and that, because she was not designated as an expert, her testimony was inadmissible. The appellate court reasoned:

In ruling Harrison's testimony inadmissible, the district court failed “to distinguish between opinion testimony which may be introduced by lay witnesses and that which requires experts.” “The modern trend favors the admission of opinion testimony, provided that it is well founded on personal knowledge [as distinguished from hypothetical facts] and susceptible to specific cross-examination. A lay witness in a federal court proceeding is permitted under ...

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