United States Court of Appeals
Fifth Circuit
F I L E D
UNITED STATES COURT OF APPEALS
March 2, 2007
for the FIFTH CIRCUIT
Charles R. Fulbruge III
Clerk
No. 05-51609
ASSURITY LIFE INSURANCE COMPANY,
Plaintiff-Appellant-Cross-Appellee,
VERSUS
VARSHA GROGAN, individually and as independent
executrix of the estate of J.C. THOMAS GROGAN, deceased,
Defendant-Appellee-Cross-Appellant.
Appeals from the United States District Court
for the Western District of Texas
(1:03-CV-486)
Before BARKSDALE, DeMOSS, and PRADO, Circuit Judges.
DeMOSS, Circuit Judge:
INTRODUCTION
Plaintiff-Appellant Assurity Life Insurance Company
(“Assurity”) appeals the district court’s entry of final
judgment in favor of Varsha Grogan entitling her to
proceeds from her husband’s life insurance policy.
Assurity argues that, under Texas law, the policy it
issued to Mr. Grogan never took effect because it
contains a “good health” condition precedent to its
effectiveness; and, Assurity contends, Mr. Grogan was not
in good health on the date relevant to the policy’s
effectiveness. In the alternative, Assurity argues that
the policy should be rescinded because Mr. Grogan made
material misrepresentations during the application
process regarding his general heath and medical history.
Because we find persuasive Assurity’s first argument,
we need not address its second argument. For the reasons
below, we reverse in entirety the district court’s
judgment in favor of Mrs. Grogan and render judgment in
favor of Assurity.
FACTUAL BACKGROUND
On April 4, 2002, Mr. Grogan submitted to Assurity an
application for $1,000,000 of whole life insurance on his
own life. For reasons unimportant to this appeal, Mr.
Grogan’s application did not progress in a timely manner;
and in June 2002, Assurity notified Mr. Grogan that his
application had been closed. But on August 8, 2002, Mr.
Grogan sent to Assurity a letter reaffirming his desire
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to apply for the policy.
On August 26, 2002, Mr. Grogan faxed to Assurity a
new application along with another request to reopen his
application. The new application is identical to the
first in all material respects. The last page of the
application provides the following paragraph in bold:
C. In the event the first full premium on
the policy applied for is not paid upon
the date of this application, the insurance
under such policy shall not take effect
unless the application is approved by the
Company at its Home Office, such policy
issued and delivered to the Proposed
Insured/Owner, and such first full premium
paid during the Proposed Insured’s lifetime
and continued good health . . . .
Assurity issued the policy on August 27, 2002, and
mailed it to Mr. Grogan, along with delivery
instructions, on August 30, 2002. Mr. Grogan completed
the delivery instructions by returning to Assurity a
“Delivery Certificate” he had signed and marked as
“received September 3.”
The Delivery Certificate provides:
As requested, this policy has been issued
without the first premium having been collected
with the application.
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It is hereby certified that there has been no
change in the good health of the Insured since
the date of the application and it is understood
and agreed that the policy shall be effective as
of the date of issue only upon payment of the
first premium during the lifetime and continued
good health of the Insured.
Mr. Grogan paid his first premium on September 6, 2002,
and Assurity received the signed Delivery Certificate on
September 20, 2002.
On October 7, 2002, Mr. Grogan found out that a lump
on his neck, which he had known about for at least a
year, most likely was cancerous. On October 24, 2002, he
began chemotherapy treatment for Hodgkin’s disease. Mr.
Grogan died on February 17, 2003, due to complications
stemming from chemotherapy treatment for his cancer.
In March 2003, Mrs. Grogan as beneficiary applied for
the proceeds from the life insurance policy. However,
because Mr. Grogan died during the policy’s two-year
contestability period, Assurity requested his medical
records for the five years preceding his death. After
reviewing the records, Assurity determined that Mr.
Grogan was not in good health on the date relevant to the
policy’s effectiveness. Therefore, Assurity refused to
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pay the proceeds to Mrs. Grogan.
PROCEDURAL HISTORY
Assurity brought this action seeking a declaration
that the life insurance policy never took effect due to
the failure of a condition precedent. Mrs. Grogan
counterclaimed that Assurity, by refusing to pay the
proceeds, breached the terms of the alleged insurance
contract. She primarily sought to recover the proceeds
under the policy. Additionally, however, she sought
attorney’s fees and the enforcement against Assurity of
a Texas statutory penalty for failure to timely pay
proceeds.
The district court held that the insurance policy did
take effect and that Mrs. Grogan was entitled to the
proceeds. The court also awarded Mrs. Grogan attorney’s
fees and imposed against Assurity the statutory penalty.
This timely appeal followed.
DISCUSSION
We review de novo a district court’s interpretation
of an insurance policy. Riner v. Allstate Life Ins. Co.,
131 F.3d 530, 533 (5th Cir. 1997). The parties agree that
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Texas law governs our analysis.
As we noted, Assurity’s policy in one part states
that “[the policy] shall not take effect unless . . .
[the] first full premium [is] paid during the Proposed
Insured’s lifetime and continued good health . . . .” The
policy in another part states that “[the policy] shall be
effective as of the date of issue only upon payment of
the first premium during the lifetime and continued good
health of the Insured.”
In short, we do not see how Assurity could have made
the policy language much clearer. The policy
unambiguously states that in order for it to take effect
the insured/proposed insured must make the first premium
payment while in good health.
Although the policy’s plain language alone makes it
sufficiently clear that good health is a condition
precedent to effectiveness, we note that this Court and
the Texas Supreme Court numerous times have deemed
similar language a condition precedent.
In Beck v. Conn. Gen. Life Ins. Co., this Court
surveyed Texas law and concluded that the following
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language qualified as a good health condition precedent:
“no insurance shall take effect unless . . . the first
premium [is] paid during the lifetime and good health of
the proposed insured . . . .” 456 F.2d 1040, 1041 (5th
Cir. 1971). The language in Beck is virtually identical
to the language in Assurity’s policy.
Similarly, in Bryant v. Standard Ins. Co., we applied
Texas law and concluded that the following language was
a condition precedent: “no insurance shall be considered
in effect . . . until the first full premium is paid and
delivered . . . during the continued good health of the
Proposed Insured.” 348 F.2d 649, 654 n.6 (5th Cir. 1965).
As in Beck, the language in Bryant is identical in all
material respects to the language in Assurity’s policy.
In addition, the Texas Supreme Court has deemed
similar language a good health condition precedent. For
example, in Great Nat. Life Ins. Co. v. Hulme, the court
addressed whether a life insurance policy ever took
effect as an insurance contract. 136 S.W.2d 602, 603
(Tex. 1940). In deciding that the policy was void from
inception, the court took as a given that the following
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language was a good health condition precedent: “the
insurance hereby applied for shall not take effect until
. . . delivered to and accepted by me while I am in good
health.” Id. at 603.
We find unavoidable the conclusion that the language
in Assurity’s life insurance policy is materially
indistinguishable from the language in the policies in
Beck, Bryant, and Hulme.1 Therefore, Assurity’s policy
contains a good health condition precedent to its
effectiveness.
Having determined that the policy contained a
condition precedent, we turn now to whether the condition
was satisfied such that the policy ever took effect. For
the reasons below, we conclude that Mr. Grogan did not
1
On the other hand, the language in Assurity’s policy is materially distinguishable
from policies that Texas courts have found did not contain conditions precedent. For
example, in Protective Life Ins. Co. v. Russell, a Texas appellate court held that the
following language was not a good health condition precedent: “[n]o insurance will
take effect unless . . . (3) there has been no change in health and insurability from that
described in this application . . . .” 119 S.W.3d 274, 281 (Tex. App.-Tyler 2003, pet.
denied) (emphasis added). Assurity’s policy, however, contains no such qualifying
language. Paragraph C states that good health is a prerequisite to effectiveness. It does
not purport to turn on any answers given by the applicant. Therefore, this case is
distinguishable from cases like Russell.
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satisfy the good health condition precedent.
Again, for the policy to take effect, Mr. Grogan was
required to be in good health when he paid his first
premium. Mr. Grogan paid the premium on September 6,
2002. Therefore, we need only to determine whether he was
in good health on that date.
Texas courts have consistently held that a person is
not in good health when he or she suffers from a serious
illness that continues and eventually causes their death.
See Great Am. Reserve Life Ins. Co. v. Britton, 406
S.W.2d 901, 905 (Tex. 1966) (citing Tex. Prudential Ins.
Co. v. Dillard, 307 S.W.2d 242, 247 (Tex. 1957). The
record facts stipulated to by the parties at the district
court make clear that Mr. Grogan indeed suffered from
such an illness when he paid his first premium.
Mr. Grogan ultimately died from complications
stemming from chemotherapy administered to combat his
cancer. Although Mr. Grogan was not diagnosed with
Hodgkin’s disease until October 2002, the record reveals
that he had cancer long before his formal diagnosis.
Mr. Grogan possibly had cancer as early as 2000, when
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he began seeking medical attention for a sore throat.
Over the next year and half, he sought medical attention
for a sore throat seven times. In any event, by September
4, 2001, Mr. Grogan had developed and sought medical care
for a painful lump on the left side of his neck. Mr.
Grogan again sought care for the lump on his neck on
August 26, 2002. By that time, the lump was the size of
a golf ball. On September 20, 2002, a biopsy was
conducted and later showed that the lump on the left side
of Mr. Grogan’s neck was Hodgkin’s lymphoma. Without
doubt, Mr. Grogan had cancer prior to September 6, 2002,
and therefore was not in good health when he paid his
first premium.
In sum, the life insurance policy contained a good
health condition precedent to its effectiveness. That
condition was not satisfied, and therefore the policy
never took effect.
CONCLUSION
For the foregoing reasons, we REVERSE the district
court’s judgment in favor of Mrs. Grogan and RENDER
judgment in favor of Assurity.
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REVERSED and RENDERED.
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