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Harrell v. Northwestern Mutual Life Insurance Co.

United States District Court, W.D. Louisiana, Monroe Division

March 25, 2015



ROBERT G. JAMES, District Judge.

This is a dispute over a denial of disability benefits. Defendant Northwestern Mutual Life Insurance Company ("Northwestern") issued a disability benefits policy to Plaintiff Patrick Harrell ("Harrell") in 2009. Three years later, in July 2012, Northwestern denied Harrell's claim for disability benefits on grounds that he had made a material misrepresentation regarding his illegal drug use on the policy application.

Pending are Northwestern's Motion for Summary Judgment [Doc. No. 37] and its Motion to Strike. [Doc. No. 44]. For the following reasons, the Motion for Summary Judgment is GRANTED, and the Motion to Strike is DENIED AS MOOT.


Since the early 2000's, Harrell has acted as the chief executive officer of Premier Food Group, LLC ("Premier"), the company he founded. In May 2009, Harrell contacted James Whitaker ("Whitaker"), an independent contractor agent with Northwestern in Alabama, about the possibility of getting a disability policy through Premier for himself. Harrell told Whitaker that another insurer, New York Life, had previously denied his application for disability insurance because he had admitted on that application that he had used cocaine. Harrell testified that he was concerned that if he were honest about his drug use on the Northwestern application, as he was with New York Life, he would be turned down again. [Doc. No. 37, Exh. 4, Harrell Depo., p. 50-55, 67-68]. According to Harrell, Whitaker then instructed him "not to mention" his illegal drug use.

As part of the application process, Harrell was required to undergo a medical examination and respond to questions regarding his medical history. In this examination, on May 20, 2009, approximately two weeks before he signed and submitted his disability policy application, Harrell was asked whether he had used or tested positive for marijuana, cocaine, heroin, amphetamines, or hallucinogens in the past 10 years. Harrell responded "no" on the provided form. [Doc. No. 37, Exh. 1, Medical History Questionaire, p. 1].

During the subsequent underwriting process, it came to Northwestern's attention through the Medical Information Bureau that Harrell possibly had a history of illegal drug use. Northwestern's investigation revealed only that Harrell had disclosed drug use on a prior insurance application, but Northwestern was unable to obtain medical records indicating such. [Doc. No. 37, Exh. B., Deposition of Susan Schlueter ("Schleuter Depo."), pp. 12-13]. Consequently, in July 2009, Northwestern sent Harrell a questionnaire to confirm whether or not he had a history of drug abuse. Id. at 14. Harrell answered only that he had used prescription Adderall and Eskalith. [Doc. No. 37, Exh. 2, Drug Use Questionnaire, p. 1]. Because Harrell had not addressed whether he had used the illegal drugs referenced in the questionnaire, Northwestern sent Harrell a follow-up questionnaire in September 2009, asking whether he had used "marijuana or cocaine, or any narcotic drugs not prescribed by a physician." [Doc. No. 37, Exh. 3, Follow-Up Questionnaire, p. 1]. Harrell answered "NO" and signed the document. Id.

Based on Harrell's application and on his repeated denials of illegal drug use, Northwestern decided to issue Harrell a disability policy with a medical rating for his disclosed bipolar disorder. [Doc. No. 37, Exh. B., Schleuter Depo., p. 17]. However, as a condition of receiving the policy, Harrell was asked to sign a Personal Health and Status Declaration declaring that he had not taken any illegal drugs, unless noted in the form or previously disclosed. [Doc. No. 37, Exh. 4, Harrell Declaration, p. 1]. Harrell signed the form on December 7, 2009, without comment. Id.

On July 31, 2012, Harrell filed a claim for disability benefits based on his bipolar disorder. During Northwestern's investigation of the claim, Harrell's health care providers disclosed documentation indicating that Harrell had a history of substance abuse that predated the underwriting of the policy and that the drug use had continued up until the time of his claim for benefits. [Doc. No. 37, Exh. D, Schlueter Affidavit, ¶ 8]. After further investigation and review of Harrell's application, Northwestern determined it would not have issued the policy had it known of Harrell's drug use. Id. Accordingly, Northwestern denied Harrell's claim and then rescinded the policy based on material misrepresentations during the underwriting process. Id. at ¶ 9.

On June 20, 2013, Harrell filed a Petition in the Fourth Judicial District Court for the Parish of Ouachita, State of Louisiana, claiming Northwestern wrongfully denied his claim. [Doc. No. 1]. The matter was removed to this Court on August 6, 2013. [Doc. No. 4]. Harrell argues the policy is enforceable because he alleges the documents containing his misrepresentations were not attached to the policy he received and because he claims his false statements were not material.

Northwestern argues it delivered the policy to Harrell alongside Harrell's original application, the signed Medical History Questionnaire, the July 2009 questionnaire indicating prescription drug usage, the September 2009 follow-up questionnaire in which Harrell denied illegal drug use in the past ten years, and Harrell's December 2009 health Declaration in which Harrell again confirmed that he had not used illegal drugs in the prior ten years. [Doc. No. 37, Exh. 6].

Harrell testified in his deposition that he did not remember the policy being delivered to him. [Doc. No. 37, Exh. 4, Harrell Depo., p. 111].[1] But Harrell apparently acknowledged that the disability policy delivered to him included his application as well his responses to the questionnaires. [Doc. No. 37, Exh. 4, Harrell Depo., p. 100-101].[2] During his deposition, Harrell did not dispute the fact that the application and follow-up questionnaires were attached to the policy. Even though Harrell reviewed the deposition transcript and made 13 pages of corrections, he did not alter this testimony or indicate that the questionnaires were not attached to the policy. [Doc. No. 44, Exh. A, Harrell Errata Sheets]. Nonetheless, in his opposition to the instant motion for summary judgment, Harrell attached an affidavit averring that he "did not receive a copy of the policy application, only the policy." [Doc. No. 41, Exh. A, Harrell Affidavit, ¶ 3].

On August 27, 2014, this Court issued a Ruling and Judgment, holding that the Employee Retirement Income Security Act of 1974 did not govern Harrell's disability policy. [Doc. Nos. 34 & 35].

On December 4, 2014, Northwestern filed the instant Motion for Summary Judgment. [Doc. No. 37]. On January 2, 2015, Harrell filed an opposition [Doc. No. 41], ...

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