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"Tomlinson Trust"), its Trustee JB Carlson and the Carlson Media Group ("CMG") (collectively,
the "Trust Defendants"), respectfully submit this supporting brief with their Motion For Partial
Summary Judgment, filed concurrently. An appendix C"App.") of the materials referenced supra
in the Statement of Material Facts Not In Dispute was also filed concurrently pursuant to Local
Rule 56.l(a). .
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declaratory judgment action after receiving the Trust Defendants' claim for $15 million in life
insurance benefits. AlG asks the Court to declare its Policy, UM0036206L (the "Policy") void
due to what it alleges was a lack of insurable interest on the life of CMG's then director,
Germaine Tomlinson. AlG contends that material misrepresentations concerning the ownership
ofthe policy, the purpose of the insurance, and Ms. Tomlinson's net worth and income
fraudulently induced AlG to issue the Policy. See, e.g., Amended Complaint For Declaratory
AlG's fraud contentions, however, fail as a matter of law due to the two-year
incontestability clause in AlG'sPolicy. Entry ofa partial summary judgment in favor of the
Trust Defendants is appropriate and necessary at this time. AlG's pleadings and written
discovery in this action have demonstrated its firm intention to present evidence and arguments
contending that some representations during the application process were not accurate when
made. The Court should resolve at the outset whether the law permits the insurer to contest a
claim on the Policy on such grounds inasmuch as this ruling will directly affect the remaining
deposition discovery and the general course this action will follow.
There are no genuine issues that could preclude partial summary judgment for the
Trust Defendants concerning the effect of the incontestability clause in this life insurance
contract. Factually, there is no dispute that AlG issued the Policy in January 2006, that Ms.
Tomlinson died more than two years later in September 2008, or that the Trust Defendants timely
presented a claim for death benefits. The Policy contains a two-year incontestability clause, the
minimum allowed by state statute. Because it is undisputed that AlG took no efforts to rescind
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the Policy until after the incontestability period had already expired, AIG should be deemed
estopped as a matter oflaw from contesting this insurance claim on grounds of any alleged fraud
1. AIG issued Policy No. UM0036206L effective January 28, 2006 on the
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3. The total Specified Amount (or face amount) of the Policy is $15 million.
Id., p. 3. No increase in the Policy's Specified Amount was ever requested or granted.
5. The Policy never lapsed and was never reinstated following a lapse. Id.
at~ 6.
7. AIG did not raise any contentions about fraud or misrepresentations in the
application process until after Germaine Tomlinson's death, September 29, 2008, and more than
two years after the Policy's date of issue, January 28, 2006. Declaration of JB Carlson, ~ 7
ARGUMENT
The incontestability protections in AlO's Policy are not unique and are not new.
Courts long ago recognized the unfairness of insurers' tendencies to accept years oflife
premiums and to wait to investigate the representations of insurance applicants only after the
insurers had received a claim on the policy. As the Indiana Supreme Court recognized in 1913,
"the holding of the courts of this country has been almost universally that every defense to a
I This provision appears on page 16 of the PDP copy of the Policy in the Trust Defendants' Appendix, but it is
labeled as "Page 15" on the Policy's face. Because the Policy's "Page 3" is continued onto a second page and
because not every page of the Policy is numbered, all references here are to the page numbers of the PDP copy.
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policy of insurance embraced within the terms of the 'incontestable clause' is completely lost to
the insurer ifit fails to make the defense or take affirmative action within the time limited by the
policy." Indiana Nat. Life Ins. Co. v. Mctiinnis, 180 Ind. 9, 101 N.E. 289,292 (Ind. 1913) (citing
that require insurers to add specific forms of incontestability clauses to life insurance policies.
Forty-three states now have incontestability statutes covering life insurance policies. 29
long ago recognized this trend and held that "incontestable clauses and statutes are favored in the
law," because they are grounded in the following important public policies and fairness
principles:
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Miccolis v. Mutual Ben. Health & Accident Ass'n, 115 F.2d 579, 582 (ih Cir. 1940) (applying
Indiana law to add the statutory incontestability provision to an insurance policy that contained
no such clause).
At the time AIG issued the Policy in 2006, Indiana's statute required that every
life insurance policy include a provision at least as favorable to the policyholder as the following
incontestability requirement:
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The Policy states on its face that "THIS IS AN INDIANA CONTRACT." App.,
Ex. 1, p. 3. Thus, it is hardly surprising that AIG's Indiana form contract includes a two-year
incontestability provision that tracks Indiana's statute. After the Policy had been in force and
paid up for two years, the plain and unambiguous wording of the contract (as well as the statute)
prohibits AIG from contesting the validity of the Policy or denying a claim for the Policy's life
stated below, We cannot contest this policy after it has been in force during the Insured's lifetime
The Policy's incontestable clause means just what it says: AlG was required to
investigate and act on any alleged fraud in the application process within two years of the date of
issue, that is, by January 28, 2008. That AIG did not do so acts as a total bar to its current
This bar is absolute and it is of no consequence AIG may contend that it did not
and could not have discovered that any information it received was allegedly false:
16 Ind. Law Encycl. Insurance § 137 (2009) (citing Columbian Nat. Life Ins. Co. v. Wallerstein,
91 F.2d. 351 (ih Cir. 1937), McGinnis, 101 N.E. 289 (Ind. 1913), and McMiccolis, 115 F.2d 579
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The facts in the Indiana Supreme Court's Mcthnnis decision illustrate just how
fmnly Indiana law upholds the bar of a life insurance incontestable clause. In December 1907,
in his application for life insurance, McGinnis declared and warranted that he was in good
health, disease-free, never drank liquor, and never used tobacco. 289 N.E. at 290. In November
1908, the insurer tracked McGinnis down in a Colorado sanitarium and determined that
McGinnis had lied and knew at that time he applied for insurance that "[he] was not in good
health, but had consumption and knew it; that he was addicted to the use of intoxicating liquors
to the extent that he frequently became intoxicated, that he was a habitual user of tobacco to
excess, so that its use had impaired his health. It Id. McGinnis died a few months later and his
wife and mother sued the insurer for the policy's death benefits. The Indiana Supreme Court
affirmed judgment for the beneficiaries and held that the one-year incontestable clause in the
policy constituted a reasonable time period from the date of issue for the insurer to investigate
and take action to rescind the policy. The court held, "The incontestable clause is construed by
us to be binding upon the [insurer], and to mean just what it says, that 'after one year from the
date of issue, this policy shall be incontestable if the premiums have been duly paid.''' Id. at 293.
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clauses and statutes are intended to force insurers to investigate and take timely steps to rescind
their policy or else the policy will be valid and almost every defense to payment of life insurance
contracts, which render them incontestable as against all but specified defenses, are generally
regarded as valid, being neither unreasonable nor against public policy"); §240:89 ("if the insurer
desires to contest the policy, it must take appropriate steps to that end, either by a defense to an
action brought on the policy in case of the death of the insured, or, ifno action has been brought,
by proper affirmative action in a court of equity to avoid the policy, at any time before the period
expires.")
ID. Because AIG Waited Until After the Incontestability Period Expired
to Request Rescission, the Insurer is Estopped to Contest The Policy
On Grounds of Alleged Misrepresentation or Fraud.
There is no genuine issue that the insurer did nothing to rescind or otherwise
contest the validity of the Policy prior to expiration of the incontestable period. Nor do any of
the incontestability "Exceptions" in the Policy have any application to this case. As for the
"Specified Amount" exception, the face amount of the Policy has remained $15 million
continuously from the date of issue. Likewise, all owing premiums were paid and received by
the insurer without dispute. Never did the Policy lapse or become reinstated. Finally, the
"Disability or Accidental Death Benefit rider" exception has no application either. The Trust's
claim on the Policy is for the $15 million dollar death benefit only.
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To the extent AIG could have any argument concerning supposed fraud or
material misstatements, it waited too long to raise them. AIG is estopped from contesting the
validity of the Policy as a matter of law by operation of its own incontestability clause.
Summary judgment is therefore appropriate. Such was the result the district court reached when
interpreting a statutory incontestability clause under Indiana law in a disability policy. The
Equitable Life Assurance Society of the United States v. Bell, 818 F. Supp. 245 (N.D. Ind. 1993).
The court granted the insured's motion for summary judgment notwithstanding the evidence that
the insured had been aware that his multiple sclerosis had manifested itself and misrepresented
that fact in the application. "[B'[olstered by the history and policy behind incontestability
clauses," the district court concluded that the insurer's fraud and scope of coverage defenses were
completely barred because the incontestability period had previously elapsed. 818 F. Supp.
CONCLUSION
For each of these reasons the Trust Defendants respectfully request the Court to
enter summary judgment in their favor declaring that the Policy's incontestability clause estops
the insurer from contesting the validity of Policy or denying their claim because of any alleged
Respectfully submitted,
IslKevin M Toner
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CERTIFICATE OF SERVICE
I certify that on December 2,2009, a copy ofthe foregoing was sent via electronic
notification and/or via first class, United States mail, postage prepaid, to the following parties in
interest:
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Michael D. Mulvaney
David P. Donahue
Maynard Cooper & Gale, P.c.
1901 Sixth Avenue North, Suite 2400
Birmingham, AL 35203
Judy L. Woods
Curtis T. Jones
Bose McKinney & Evans LLP
111 Monument Circle, Suite 2700
Indianapolis, Indiana 46204
IslKevin M Toner
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