Widow gains reprieve in attempt to secure life insurance benefits

Applying a combination of Federal and Ohio state law, the Sixth Circuit in Ramsey v. Penn Mutual reinstated Mrs. Ramsey's attempt to obtain the life insurance payout her husband had purchased.  The trial judge had summarily dismissed her claim at the insurer's request after Ramsey was diagnosed with cancer and died soon after the policy was initiated. The insurer claimed fraud and misrepresentation.

Ramsey had disclosed that he had colitis, and on the basis of this disclosure, Penn Mutual had rated him and charged a higher premium.  It also delayed issuance of the policy for several months while it investigated his health. During that process, he was required to file an amended statement about his health and also during that process he was compelled to return to his doctor with symptoms. 

The insurer basically argued that as his symptoms popped up during the investigation, Ramsey was under a legal duty to go back and clarify his earlier answers.  It claimed, and the lower court held that his failure to amend his answers and make "fuller" disclosure entitled the insurer to void his policy.

The judges of the Sixth Circuit rejected this argument as a basis for summary disposition.  They pointed out that taking the facts as alleged by Ramsey at face value--as they must be viewed on summary disposition--the parties had created a genuine issue for decision by the jury.  The defendant insurer had been fully informed by Ramsey of an accurate medical diagnosis that resulted in higher risk of death and cancer and had upgraded his premium in response.  Since his answers were accurate at the time they were given, it was for the jury to determine whether his policy should be voided based on a material misrepresentation.  Applying Ohio law, the judges noted that insurance policies can be voided only under certain limited circumstances and that Ohio does not recognize a continuing duty of the insured to inform insurers of the insured's medical condition.