a. Why do you think Mr. Cummings did not admit his drug use on the life insurance application?
b. What did Ms. Cummings mean when she said that her sons' drug use was not a material fact because "it would seem that having been shot would present a greater underwriting risk (especially in light of the fact that that was how he died), than an allegation of cocaine use, where the insured's test results were negative for any drug use in [the] paramedical exam."?
c. Why did the court say that such a conclusion is irrelevant to her argument?
During a visit to a hospital emergency room for a gunshot wound, John Cummings tested positive for cocaine use. Six months later, Cummings applied for life insurance, naming his mother as beneficiary. On the application for the insurance Cummings was asked if he had, within the prior five years, used any controlled drugs without a prescription by a physician. Mr. Cummings answered "No." Four months later, when completing the application, Mr. Cummings was asked "have you ever (b) used cocaine, marijuana, heroin, controlled substances, or any other drug except as legally prescribed by a physician?" Mr. Cummings answered "No." During the required medical exam, Mr. Cummings did not test positive for illegal drug use.
Mr. Cummings was issued a life insurance policy for $91, 351. Mr. Cummings died a year later from a gunshot wound to the head. In investigating his death, the insurance company obtained medical records from the emergency room that treated Mr. Cummings before he applied for life insurance. These records indicated that he had tested positive for cocaine, opiates, and benzodiazepine. The doctor's notes stated, "COCAINE ABUSE-CONTINUOUS."
American General rescinded Cummings life insurance policy claiming he had made a material misrepresentation on the application. His mother filed suit seeking payment under the policy and American General filed a motion to dismiss.