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Rubes v. Mega Life And Health Ins. Co., Inc.2/27/2002
physician.
Rubes admitted at trial that the application contained false responses concerning *268 his arrest record for drunk driving, substance abuse treatment and hospitalizations. He ascribed any misrepresentation, however, to MEGA's agent, Steiner. It is undisputed that Steiner asked the questions and filled out the form. Rubes maintains that he answered all inquiries about his alcoholism and drunk driving arrests truthfully, consistent with his customary AA routine. He insists that Steiner told him matters predating the application by five years were irrelevant and need not be reported. He acknowledged that he personally signed the application, attesting to its truthfulness, but asserts he did not read it before doing so.
Steiner, an insurance agent for over thirty years, adamantly denied editing either the questions or Rubes' answers. But he admitted on cross-examination that he had no personal recollection of meeting Rubes or completing his application; he based his testimony on decades of customary practice, reading the questions as written and recording the applicants' answers precisely as given.
Rubes' application was approved and MEGA issued a policy of insurance effective August 1, 1998. In November 1998 Rubes was hospitalized for severe gastrointestinal bleeding. In his words, he "about bled to death" at home. He was diagnosed with "cirrhosis probably secondary to hepatitis C infection" and referred to the University of Nebraska Medical Center for consultation about a liver transplant. University staff advised that his policy with MEGA contained a one-year exclusion for pre-existing medical conditions so that a transplant would not be covered until August 1, 1999, at the earliest. Given the waiting list for organ transplants, the delay in payment was the least of Rubes' concerns.
Rubes' November 1998 hospitalization claims triggered MEGA's review of Rubes' insurance application. It was during this investigation that MEGA examined the medical records relating to his May 1998 hospitalization. That record, of course, revealed Rubes' history of alcoholism as well as the extent to which liver disease was suspected at that time.
MEGA paid none of Rubes' pending hospital bills. In a letter dated August 12, 1999, MEGA advised Rubes that material misrepresentations regarding his health history were found in his application. Had Rubes revealed the full extent of his medical history, the company advised, it would have declined coverage. Before taking action to rescind the policy, however, MEGA gave Rubes fifteen days to furnish additional information concerning his previous illness and medical treatment. Rubes did not respond to the letter. On August 13, 1999, he filed this declaratory judgment action concerning his coverage under the policy. MEGA counterclaimed for rescission of the insurance contract.
While the declaratory judgment action was pending, Rubes' plans for a liver transplant proceeded. He was assigned to a patient transplant financial coordinator, Michael Chaney, who communicated with MEGA concerning Rubes' insurance coverage. Chaney testified that he received both written and oral confirmation that Rubes' transplant was deemed by the company to be "medically necessary and approved." He admitted, however, that MEGA's correspondence also carried customary language disclaiming any "guarantee" to benefit payment "prior to services actually being rendered." From August 3, 1998 to May 8, 1999, Chaney periodically confirmed Rubes' active status as a policyholder. At no time did Rubes or MEGA advise Chaney that the parties were engaged in litigation over his coverage.
On May 10, 1999, MEGA took action to rescind Rubes' policy by issuing him a *269 refund check for all premiums paid less claims paid for prescriptio
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