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Steinback v. Bankers Life and Casualty, Co. - 1999 ML 38

Rule:

A rescinded contract is treated as a void agreement and it never attains the legal effect as a contract. 

Facts:

On May 11, 1995, James Van Noten, an agent of defendant Bankers Life and Casualty, Co. ("Bankers"), visited the home of plaintiffs Norma J. Steinback and her husband, Jack Steinback, in order to fill out an application for nursing home insurance on behalf of Mr. Van Noten was aware of Mr. Steinback's heart condition, diabetes, and vision problems associated with the diabetes. Van Noten was also told that Mr. Steinback suffered from "a hardening of the arteries." Based on these medical conditions, Van Noten decided that Mr. Steinback would only be eligible for a higher risk policy. Van Noten then proceeded to interview Mr. Steinback and also Mrs. Steinback in order to fill out the application for the insurance policy. After the interview and submission of the application, an insurance policy was then bound for Mr. Steinback. The Steinbacks were given a copy of the application along with the policy, which contained a notice advising the Steinbacks to notify Bankers of any erroneous information found in the application. On Nov. 1, 1996, Mr. Steinback was placed in a nursing home in Billings, Montana, and he submitted a claim for benefits. On April 3, 1997, Mr. Steinback died. On May 12, 1997, bankers denied the claim based upon information obtained in an investigation that Mr. Steinback had been treated in 1995 for a "brain deficit," which a doctor believed could have been Alzheimer's Disease. Bankers rescinded the policy and refunded the premiums to the Steinbacks. Mrs. Steinback, as personal representative of Mr. Steinback's estate, filed an action in Montana state court alleging breach of contract and violations of the Unfair Claims Settlement Practices Act; Mrs. Steinback also sought punitive damages. Both parties filed motions for summary judgment as to the breach of contract claim. Bankers argued that the Steinbacks provided false information on their application by not disclosing the 1995 treatment and diagnosis. Therefore, Bankers argued, it was entitled to rescind the nursing home policy under 33-15-403, MCA, and no breach of contract claim could be maintained. Mrs. Steinback argued that Mr. Steinback's condition was disclosed to Van Noten when it was mentioned that Mr. Steinback suffered from "hardening of the arteries."

Issue:

Was Bankers entitled to rescind the insurance contract?

Answer:

Yes.

Conclusion:

The court held that under the present facts, the Steinbacks failed to accurately disclose Mr. Steinback's medical condition. Mrs. Steinback could not assert estoppel because of this omission. Thus, Bankers was entitled to rescind the insurance policy because the Steinbacks did not disclose a medical condition and Bankers was not put on inquiry notice to inquire further. The court granted Bankers' motion for partial summary judgment on the breach of contract claim.

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