GILBERT WILSON v. LINCOLN BENEFIT LIFE COMPANY (2025)

In this case arising from a rescinded life insurance policy, defendant Lincoln Benefit Life Company appeals a judgment on the merits from the trial court in favor of plaintiff, Gilbert Wilson, which awards $50,000.00, the amount of the death benefit payable under the life insurance policy issued by defendant, plus attorney's fees, together with an award of bad faith damages and attorney's fees pursuant to La. R.S. 22:1811. In his answer to the appeal, Mr. Wilson seeks modification of the judgment to include bad faith damages pursuant to the former La. R.S. 22:1973(c)¹ and an order that defendant be ordered to pay all costs incurred for the appeal. For the following reasons, we affirm in part and reverse in part the judgment of the trial court.

BACKGROUND AND PROCEDURAL HISTORY

On January 25, 2013, plaintiff's brother Lionel Wade Wilson, with the aid of Lincoln's writing agent Steven Riley, completed Part 1 of a written application for life insurance, naming as beneficiary and owner of the policy his brother, Gilbert Wilson. A few days later, on January 30, 2013, Lionel engaged in a personal history interview over the phone with a teleunderwriting agent named “Carolyn,” who asked Lionel a series of questions about his work and medical history. Those oral responses given to the phone interviewer were inserted by defendant into a form entitled as Application for Life Insurance Part 2 (“Part 2”). Printed within the document is “Electronic Audio Signature on File.” Lionel never saw or signed Part 2 of the application prior to the insertion of his signature or its submission.² On March 29, 2013, Lincoln issued a $50,000.00 Flexible Premium Adjustable Life Insurance Policy. On or about April 3, 2013, Gilbert and Lionel signed a Change to Application for Insurance amending the application dated 01/25/2013.³ The policy was reissued on April 8, 2013 to reflect receipt of final delivery requirement. Gilbert paid the monthly premiums on the policy.

Lionel Wilson died on February 22, 2015 of prostate cancer. Gilbert filed a claim with Lincoln. Because Lionel died within two years of the policy's issue date, Lincoln conducted an investigation to assess the extent of its liability. On September 24, 2015, Lincoln sent a letter to Gilbert denying his claim and rescinding the policy on the basis that Lionel had made material misrepresentations in Part 2 of the application for life insurance regarding his previous medical history. In particular, Lincoln claimed that Lionel misrepresented and concealed prior treatments for mental health disorders from 2003 to 2007, and that, had it known of this previous medical history, Lincoln would not have issued the policy. Enclosed with the letter was a check refunding the full premium paid by Gilbert.

On April 18, 2016, Gilbert filed a petition for damages against defendant alleging that the denial of his claim was arbitrary, capricious, and/or in bad faith and seeking the full sum of $50,000.00, in addition to costs and damages pursuant to La. R.S. 22:1973 and La. R.S. 22:1811.

In its answer to the petition, Lincoln denied that it acted in bad faith in denying Gilbert's claim. Lincoln also asserted as an affirmative defense that Lionel made material misrepresentations with an intent to deceive in his application for insurance and therefore Lincoln was entitled to rescind the policy.

The matter came to a bench trial over three days from May 15 to May 17, 2023. At trial, the judge considered testimony of Gilbert Wilson, Janet Dever, senior manager of the Allstate Life Claim Department, and Valerie Munchez Van Der Wagt, chief underwriter at Allstate and Lincoln.⁴ The exhibits introduced included copies of the policy, Lionel's death certificate, the insurance application forms, correspondence, Lincoln's claim file, an audio recording of Lionel speaking with the teleunderwriter (Part 2 of the application), and some other authorization forms. In accordance with a pre-trial motion in limine decided on April 25, 2023, the judge did not allow defendant to introduce into evidence uncertified copies of Lionel's medical records. Following the trial, judgment was granted in favor of Gilbert ordering Lincoln to pay the full amount ($50,000.00) of the original policy as well as attorney's fees. The judge also found that Lincoln had acted in bad faith pursuant to La. R.S. 22:1811 and ordered Lincoln to pay an additional $18,850.71 in additional damages and attorney's fees.

In its appeal of the judgment, Lincoln raises four assignments of error: (1) the trial court erred as a matter of law in its interpretation and application of La. R.S. 22:860 by requiring Lincoln to prove both intent to deceive and materiality of the misrepresentations in order to rescind the policy; (2) the trial court legally erred in concluding that Lionel's misrepresentations were unenforceable under La. R.S. 9:2608; (3) the trial court erred in excluding Lionel's medical records for lack of certification under La. R.S. 13:3714; and (4) the trial court erred in awarding bad-faith damages, in particular awarding attorneys’ fees under La. R.S. 22:1811 or 1973.

Gilbert has filed an answer to the appeal arguing that the trial court erred in failing to award bad faith damages pursuant to La. R.S. 22:1973(c) and prays that the judgment be modified to include those damages. We consider these assignments of error and the answer to appeal in our discussion below.

DISCUSSION

Recission of Insurance Policies under La. R.S. 22:860

We begin our discussion with appellant's first assignment of error: the interpretation and application of La. R.S. 22:860. This presents a question of law. Appellate review regarding questions of law is simply a review of whether the trial court was legally correct or legally incorrect. Yount v. Handshoe, 14-919, p. 5 (La. App. 5 Cir. 5/28/15), 171 So.3d 381, 384. On legal issues, the appellate court gives no special weight to the findings of the trial court,⁵ but exercises its constitutional duty to review questions of law de novo and renders judgment on the record. Id.

The starting point in the interpretation of any statute is the language of the statute itself as what a legislature says in the text of a statute is considered the best evidence of its intent and will. Glorioso v. City of Kenner, 19-298, p. 2 (La. App. 5 Cir. 12/18/19), 285 So.3d 601, 603, writ denied, 20-00120 (La. 3/9/20), 294 So.3d 484. The paramount consideration in statutory construction is ascertainment of the legislative intent and the reason or reasons which prompted the Legislature to enact the law. Martin v. Thomas, 21-01490, p. 5 (La. 6/29/22), 346 So.3d 238, 242 (citing M.J. Farms, Ltc. v. Exxon Mobil Corp., 07-2371, p. 13 (La. 7/01/08), 998 So.2d 16, 27.) When a law is clear and unambiguous and its application does not lead to absurd consequences, the law shall be applied as written with no further interpretation made in search of the Legislature's intent. La. C.C. art. 9.

La. R.S. 22:860, part of the general insurance and policy requirements listed in the Louisiana Insurance Code, states in full:

§ 860. Warranties and misrepresentations in negotiation; applications

A. Except as provided in Subsection B of this Section, R.S. 22:1314, and 1315, no oral or written misrepresentation or warranty made in the negotiation of an insurance contract, by the insured or in his behalf, shall be deemed material or defeat or void the contract or prevent it attaching, unless the misrepresentation or warranty is made with the intent to deceive.

B. In any application for life, annuity, or health and accident insurance made in writing by the insured, all statements therein made by the insured shall, in the absence of fraud, be deemed representations and not warranties. The falsity of any such statement shall not bar the right to recovery under the contract unless either one of the following is true as to the applicant's statement:

(1) The false statement was made with actual intent to deceive.

(2) The false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer under the policy.

This statute provides an insurer the right of rescind an insurance policy on grounds the insured provided false statements in the application process. Under the language of the statute, Subsection A sets forth a general rule applicable to all insurance contracts that requires an insurer to show that the misrepresentation made by the insured in the negotiation of the insurance contract is made with the intent to deceive. Subsection B creates an exception to this general rule for applications for life, annuity, or health and accident insurance made in writing by the insured that allows the insurer to void or rescind the policy when it can show that the misrepresentations were made with the intent to deceive or they materially affected the acceptance of the risk or the hazard assumed by the insurer under the policy.

On appeal, the parties dispute which Subsection of La. R.S. 22:860 is applicable. Gilbert argues that Subsection A is applicable because the representations made by Lionel that were the basis for Lincoln's denial of the policy were oral representations he made to the teleunderwriter, not ones he made in writing. On the other hand, Lincoln argues that Subsection B is applicable because the audio recording of Lionel's question-and-answer session qualifies as a writing under Louisiana's Uniform Electronic Transactions Act, La. R.S. 9:2607, which states that “[a] record or signature may not be denied legal effect or enforceability solely because it is electronic form” and “[i]f a law requires a record to be in writing, an electronic record satisfies the law.”

Appellants cite no case law in which a Louisiana court has interpreted the “made in writing” language of La. R.S. 22:860 with reference to the Uniform Electronic Transactions Act. However, appellant cites two cases in support of its argument, Lamark v. Lincoln Income Life Ins. Co., 169 So.2d 203 (La. App. 4th Cir. 1964), and Green v. Pilot Life Ins., 450 So.2d 406 (La. App. 3d Cir. 1984). Each case involves an insurance company seeking to rescind a policy based on misrepresentations orally made by the applicant to an agent in an interview. However, these cases are not only factually distinguishable from the present case, but also support a conclusion opposite to that proposed by appellant.

In both Lamark and Green, oral interviews conducted in the application for insurance were transcribed by the agent, then printed and presented to the applicant for signature prior to submission to the insurer for underwriting. Lamark, 169 So.2d at 204; Green, 450 So.2d at 406.⁶ In the third case cited by appellant, Tishauna Walker v. Gov't Pers. Mut. Life Ins. Co., No. 23-303, 2024 WL 4520677, at *1, 4 (W.D. La. Oct. 17, 2024), the court denied a motion for summary judgment after finding there existed genuine issues of material fact as to whether the misrepresentations were statements by the applicant or the agent filling out the form. This case also does not support appellant's position. Where the statements made by the applicant in an oral interview were transcribed by the insurer's agent, then printed and sent to the applicant for review and signature prior to submission to the insurer for its underwriting decision, one could reasonably conclude that these are applications “made in writing” for the purposes of La. R.S. 22:860.

It is undisputed here, that, while his oral statements were used by the insurer to mark “no” responses on its Part B form for purposes of submitting the application, Lionel never reviewed or verified the written transcription of his statements prior to its submission. The plain language of La. R.S. 22:860 makes it clear that Subsection B is an exception applicable only to misrepresentations on applications for life, annuity, or health and accident insurance “made in writing.” Merriam Webster defines “writing” as “the act or process of one who writes: such as (a) the act or art of forming visible letters or characters; (b) something written: such as (a) letters or characters that serve as visible signs of ideas, words, or symbols.” The word “oral” is defined by Merriam Webster as “uttered by the mouth or in words: SPOKEN.” Under the facts presented in this case, we find that the misrepresentations made by Lionel in Part 2 of his application for life insurance were oral misrepresentations that fall under Subsection A of the statute.

Further, we do not find La. R.S. 9:2607 relevant for distinguishing between oral representations and representations “made in writing” under La. R.S. 22:860. This statue does not set forth a writing requirement. While the Louisiana Uniform Electronics Act (LUETA) does not affirmatively declare its purpose, a reading of the statutes within that chapter reflects the legislative intent to confer legal effect to records and signatures created and stored electronically. Nowhere does the Act provide for the transformation of an electronically recorded oral statement into a writing.

This case does not present a question of denying the enforceability of Lionel's signature. Further, there is no question that Lionel's false statement given in the electronically recorded oral interview with the teleunderwriter during the application process is conferred legal effect under LUETA. But those are not the legal questions presented. Rather, La. R.S. 22:860 recognizes a distinction between applications for life, annuity, or health and accident insurance made in writing and those negotiated orally. Part 1 of the insurance application is a printed form containing handwritten responses to information requested and bears the signature of “Gilbert Wilson” and the insurance agent “Steven P. Riley.” Conversely, information contained Part 2 of the application was from an oral interview of Lionel Wilson conducted by a teleunderwriter named “Carolyn.” The false statement cited by Lincoln was made in the oral portion, or Part 2, of the application process. Lincoln's proposed reading of the statute would require this Court to disregard the language of “oral” and “made in writing” as stated therein by extending LUETA to transform an oral statement into a written statement, which the Court declines to do. The words of a law must be given their generally prevailing meaning. La. C.C. art. 11.

Intent to Deceive

Lincoln next argues that the trial court erred in finding, as a factual matter, that it failed to prove Lionel's intent to deceive. In civil cases, the appropriate standard of review of factual determinations is the manifest-error-clearly wrong standard, which precludes the setting aside of a trial court's finding of fact unless that finding is clearly wrong in light of the record reviewed in its entirety. Simmons v. Jackson, 18-141, p. 2 (La. App. 5 Cir. 12/19/18), 262 So.3d 995, 998. The question is not whether the factfinder was right or wrong, but whether the conclusion was a reasonable one. Id. Where there is a conflict in the testimony, reasonable evaluations of credibility and reasonable inferences of fact should not be disturbed upon review, even though the appellate court may feel that its own evaluations and inferences are as reasonable. Id. Thus, where there are two views of the evidence, the factfinder's choice between them cannot be manifestly erroneous or clearly wrong. Id.

In order to void an insurance policy, an insurer must prove that (1) the insured made false statement; (2) the false statement was material; and (3) the false statement was made with the intent to deceive. Zydeco's II, LLC v. Certain Underwriters at Lloyd's, London, 19-562, p. 35 (La. App. 5 Cir. 5/28/21), 356 So.3d 345, 373, writ denied, 21-01745 (La. 2/8/22), 332 So.3d 640, and writ denied, 21-01755 (La. 2/8/22), 332 So.3d 665. With regard to the intent to deceive under La. R.S. 22:860, the Louisiana Supreme Court has held:

Strict proof of fraud is not required to show the applicant's intent to deceive, because of the inherent difficulties of proving one's intent. The intent to deceive must be determined from attending circumstances which indicate the insured's knowledge of the falsity of the representations made in the application and his recognition of the materiality thereof, or from circumstances which create a reasonable assumption that the insured recognized the materiality of the misrepresentations.

Johnson v. Occidental Life Ins. Co. of California, 368 So.2d 1032, 1036 (La. 1979); See also Jefferson Marine Towing, Inc. v. Underwriters at Lloyd's, London, 472 So.2d 146 (La. App. 5 Cir. 6/3/85)

The sole evidence Lincoln offered as proof of Lionel's intent to deceive was Lionel's own recorded statements: no other evidence was admitted. Appellant states, “when asked whether he had been ‘diagnosed with, or sought treatment or advice for ․ disorder of brain or nervous system [or] mental or nervous disorder’ in the last decade, he said ‘no.’ ” This is an oversimplification of the question presented to Lionel, which states in full, “[i]n the past 10 years, has the proposed insured been diagnosed with, or sought treatment or advice for: a. epilepsy or seizures, disorder of brain or nervous system, mental or nervous disorder?” This is a compound question seeking verification of at least eighteen separate true/false statements (“Have you in the last 10 years been diagnosed with epilepsy? Have you in the last 10 years sought treatment for epilepsy? Have you in the last 10 years sought advice for epilepsy?” etc.) for some of which (regarding epilepsy and seizures) Lionel's answer of “no, ma'am” was truthful. Given that some of the alleged incidents of treatment for mental disorders also extend as far back as 2003, one could also reasonably conclude Lionel believed he was answering the questions truthfully because some incidents were not within the last 10 years at the time of the application. In other words, Lionel's statements are not self-evidently solely indicative of an intent to deceive.

On the evidence presented, a fact finder could rationally conclude that Lionel was confused by or did not completely understand the questions. This last point is supported by the audio recording of the conversation wherein Lionel tells the underwriter, “you talk so fast.” In multiple other exchanges, the underwriter has to restate and present follow-up questions to Lionel. A rational factfinder could conclude that such statements indicate Lionel was not trying to mislead the underwriting agent with his answers. We find no error in the trial court's ruling that Lincoln failed to prove Lionel's intent to deceive.

In light of this finding that there is no manifest error in the trial court's determination that Lincoln failed to prove Lionel made material misrepresentations with an intent to deceive as required under La. R.S. 22:860, we pretermit further discussion of appellant's third assignment of error.

Bad Faith Damages

La. R.S. 22:1973 provides that the insurer has an affirmative duty to adjust claims fairly and promptly. An insurer breaches this duty when it fails to pay the amount of any claim due any person insured by the contract within sixty days after receipt of satisfactory proof of loss when such failure is arbitrary, capricious, or without probable cause. Great N. & S. Navigation Co. LLC French Am. Line v. Certain Underwriters at Lloyd's Subscribing to Policy No. B0621MFALL000216, 22-578, p. 13 (La. App. 5 Cir. 12/13/23), 378 So.3d 199, 209, writ denied, 24-00075 (La. 4/3/24), 382 So.3d 111. An insurer's actions are “arbitrary and capricious” when its willful refusal of a claim is not based on a good faith defense, or is unreasonable or without probable cause. La Louisiane Bakery Co. Ltd. v. Lafayette Ins. Co., 09-825, p. 30 (La. App. 5 Cir. 2/8/11), 61 So.3d 17, writ denied, 11-0493 (La. 4/25/11), 62 So.3d 95. But, where the insurer has legitimate doubts about coverage, the insurer has the right to litigate these questionable claims without being subjected to damages and penalties. Id.

The question of arbitrary and capricious behavior is a factual issue, and the trial court's findings should not be disturbed on appeal absent manifest error. Zydeco's II, LLC, 356 So.3d at 378. Whether or not a refusal to pay is arbitrary, capricious, or without probable cause depends on the facts known to the insurer at the time of its action. Id. at 379. An insurer's refusal to pay can be found to be not without just cause even though its defense is not subsequently upheld in court. Id. at 380.

In his written reasons for judgment, the trial court expressly found that defendant Lincoln acted in bad faith when it did not pay the life insurance claim within sixty days of receipt of the death certificate. The judge stated that, other than the testimony given by Lincoln's underwriters at trial, no physical evidence exists in the record that disclosure of any prior psychiatric conditions would have absolutely barred the insured from obtaining coverage with Lincoln.

We disagree. Ms. Valerie Munchez Van Der Wagt, chief underwriter for risk management for Allstate and Lincoln, testified as to Lincoln's underwriting policies and the files reviewed during the contestability period. She reviewed Lionel's file as part of the contestability claim to determine whether there had been a misrepresentation in the application and, if so, did that misrepresentation have a material effect on the decision to issue the policy based on company risk classification guidelines. She determined that Lincoln would not have issued the policy if Lionel's previous medical history of psychosis and hospitalizations would have been known. This determination was made based on Ms. Munchez Van Der Wagt's knowledge and expertise as well as a company medical underwriting manual.⁷

Upon review of the record before us, we find that the trial court manifestly erred in finding that defendant acted in bad faith in failing to pay the claim within sixty days of receiving the death certificate. The evidence indicates that prior to denial and rescinding of the policy, defendant conducted an investigation in accordance with the contestability clause stated in the policy contract, which included multiple conversations with Gilbert Wilson about the claim. Furthermore, Ms. Munchez Van Der Wagt's testimony that the policy would not have been issued had Lionel disclosed his previous medical history was uncontroverted. Finally, there is no evidence in the record to support a finding that this determination was arbitrary, capricious or outside the bounds of regular company underwriting procedures or guidelines. We therefore reverse that part of the judgment finding that plaintiff proved defendant acted in bad faith and awarding damages and attorney's fees.

CONCLUSION

To conclude, we find no legal error in the trial court's requirement that defendant was required to prove applicant Lionel Wilson made material misrepresentations with an intent to deceive when orally completing Part 2 of the insurance application. That application, which was completed orally and never seen in writing by Lionel prior to submission, was not “made in writing” for the purposes of La. R.S. 22:860(B). We find no manifest error in the trial court's determination that defendant failed to prove Lionel made material misrepresentations with an intent to deceive. That part of the trial court's judgment finding in favor of plaintiff and ordering defendant to pay $50,000.00, the face amount of the original life insurance policy, is affirmed.

We do find that the trial court manifestly erred in finding that defendant acted without just cause pursuant to La. R.S. 22:1811, or in an arbitrary, capricious, and without probable cause manner pursuant to La. R.S. 22:1873, in denying plaintiff's claim and rescinding the policy, and we accordingly reverse that part of the judgment awarding “bad faith” damages and attorney's fees in the amount of $18,850.71 and the 8% interest per annum on the amount due under the policy pursuant to La. R.S. 22:1811.

AFFIRMED IN PART, REVERSED IN PART

I concur with the majority's reversal of the trial court's judgment awarding “bad faith” damages and attorney's fees. I disagree, however, with the majority's finding that Subsection A of La. R.S. 22:860 is the applicable provision of law in this case, and with the trial court's reliance on Zydeco's II, LLC v. Certain Underwriters at Lloyd's, London, 19-562 (La. App. 5 Cir. 5/28/21), 356 So.3d 345, 373, writ denied, 21-1745 (La. 2/8/22), 332 So.3d 640, and writ denied, 21-1755 (La. 2/8/22), 332 So.3d 665, which has the same effect as applying Subsection A. Thus, I dissent.

1. Whether Subsection A or Subsection B of La. R.S. 22:860 applies

After reviewing La. R.S. 22:680 and considering the arguments of counsel, the majority concludes in its opinion that “the misrepresentations made by Lionel in Part 2 of his application for life insurance were oral misrepresentations that fall under Subsection A of the statute.” The majority states that a plain reading of La. R.S. 22:860 “makes it clear that Subsection B is an exception applicable only to misrepresentations on applications for life, annuity, or health and accident insurance ‘made in writing’ ”, and that La. R.S. 9:2607 of the Louisiana Uniform Electronic Transactions Act is not “relevant for distinguishing between oral representations and representations ‘made in writing’ under La. R.S. 22:860.”

I could not disagree more. The majority's interpretation does not sufficiently consider the express provisions of the Louisiana Uniform Electronic Transactions Act (“UETA”), La. R.S. 9:2601–2621, presumably because Lincoln could not cite to any cases. And in a civilian jurisdiction, the constitution and legislation are the primary and superior sources of law. Saloom v. Dep't of Transportation & Dev., 22-596 (La. 12/9/22), 354 So.3d 1179, 1183; Bergeron v. Richardson, 20-1409 (La. 6/30/21), 320 So.3d 1109, 1115-16; La. C.C. art. 1, Official Revision Comment (d). If legislative enactment solves a particular situation, then no jurisprudence, usage, equity or doctrine can prevail over the legislation. Saloom, supra; see also La. C.C. art. 3.

The UETA specifically states that “[a] record or signature may not be denied legal effect or enforceability solely because it is in electronic form.” La. R.S. 9:2607(A). It further provides that “[i]f a law requires a record to be in writing, an electronic record satisfies the law.” La. R.S. 9:2607(C). An “electronic record” is broadly defined as “a record created, generated, sent, communicated, received, or stored by electronic means.” La. R.S. 9:2602(7).¹

Finally, the Official Comment 2001(a) to La. R.S. 9:2607 states:

This Section sets forth the fundamental premise of this Chapter: namely, that the medium in which a record, signature, or agreement is created, presented or retained does not affect its legal significance. Subsections A and B of this Section are designed to eliminate the single element of medium as a reason to deny effect or enforceability to a record, signature, or agreement. The fact that the information is set forth in an electronic, as opposed to paper, record is irrelevant.

The UETA also only applies to records that are stored or preserved by electronic means. “Record” under the UETA is defined as “information that is inscribed on a tangible medium or that is stored in an electronic or other medium and is retrievable in perceivable form.” La. R.S. 9:2602(13). Official Comment 2001(9) to La. R.S. 9:2602 explains that a “record” as defined in the UETA “does not include oral or other communications which are not stored or preserved by some means. Information that has not been retained other than through human memory does not qualify as a record.”

Therefore, had Lionel Wilson's statements not been properly recorded and preserved electronically, I would agree that Subsection A would govern as an oral misrepresentation. But because the statements were electronically recorded and properly preserved, they qualify as ‘writings’ under the UETA, triggering the application of Subsection B of La. R.S. 22:680.

Further proof that the UETA is applicable in this case can be found in La. R.S. 9:2603, which establishes the broad scope of the UETA, and provides in pertinent part:

A. Except as otherwise provided in Subsection B of this Section, this Chapter applies to electronic records and electronic signatures relating to a transaction.2

B. This Chapter shall not apply to:

(1) A transaction to the extent it is governed by a law governing the creation and execution of wills, codicils, or testamentary trusts.

(2) A transaction to the extent it is governed by the provisions of Title 10 of the Louisiana Revised Statutes of 1950.

* * *

(4)(a) Repealed by Acts 2021, No. 68, § 3, eff. Jan. 1, 2022.

(b) Any notice of any of the following:

(i) The cancellation or termination of utility services, including water, heat, and power.

(ii) Default, acceleration, repossession, foreclosure, or eviction, or the right to cure, under a credit agreement secured by, or a rental agreement for, a primary residence of an individual.

(iii) The cancellation or termination of health insurance or benefits or life insurance benefits, excluding annuities.

(iv) Recall of a product, or material failure of a product, that risks endangering health or safety.

* * *

C. This Chapter applies to an electronic record or electronic signature otherwise excluded from the application of this Chapter under Subsection B of this Section to the extent it is governed by a law other than those specified by Subsection B of this Section.

D. A transaction subject to this Chapter is also subject to other applicable substantive law.

(Emphasis added.)

After reviewing La. R.S. 9:2603, there can be no question that the UETA applies to transactions involving life insurance policies, except for a notice of cancellation or termination of life insurance benefits. La. R.S. 9:2603(B)(4)(b)(iii). Certainly, if the Legislature had not intended for the UETA to apply to applications and agreements pertaining to life insurance policies, there would be no need to create an exception for a notice cancelling life insurance benefits.

Professor Henry Gabriel explained it well in the Prefatory Note to the UETA:

With the advent of electronic means of communication and information transfer, business models and methods for doing business have evolved to take advantage of the speed, efficiencies, and cost benefits of electronic technologies. These developments have occurred in the face of existing legal barriers to the legal efficacy of records and documents which exist solely in electronic media. The purpose of the Louisiana Uniform Electronic Transactions Act is to remove barriers to electronic commerce by validating and effectuating electronic records and signatures. It is not a general contracting statute--the substantive rules governing agreements and other legal transactions remain unaffected by this Chapter.

* * *

The need for certainty for the scope and applicability of this Chapter is critical, and makes any sort of a broad, general exception based on notions of inconsistency with existing writing and signature requirements unwise at best. The uncertainty inherent in leaving the applicability of the Chapter to judicial construction of this Chapter with other laws is unacceptable if electronic transactions are to be facilitated.

* * *

These provisions are designed to assure that records and signatures will be treated in the same manner as written records and manual signatures.

La. R.S. § T. 9, Codebook III, Code Title IV, Ch. 1 of the Louisiana Uniform Electronic Transactions Act.

The Louisiana Legislature clearly enacted the UETA to facilitate business transactions and promote commerce in the State of Louisiana by validating and authorizing the use of electronic records. Thus, when a business relies on our Legislature's enactment of the UETA by utilizing an electronic record as part of a transaction, it is incumbent upon our courts to properly apply the UETA enacted by the Legislature and recognize the legal status of the electronic record as a writing.

Notwithstanding the above, the majority contends that accepting Lincoln's proposed reading of the UETA would require this Court to disregard the language in La. R.S. 22:860 that distinguishes between an oral representation and representations made in writing. I respectfully submit that it is the majority's interpretation that overlooks and disregards the significant provisions in the UETA above that directly address this issue.

In the present case, it is undisputed that Lionel Wilson (1) agreed to apply for the life insurance policy over the phone,³ and (2) gave an oral statement to the writing agent for Lincoln that was recorded by electronic means. It is also undisputed that (3) the oral statement was reduced to writing by the insurance agent,⁴ and (4) attached to the application for insurance and the policy. In fact, both parties introduced copies of the insurance policy and the attached application into evidence.⁵

Thus, the majority erred when it concluded that the misrepresentations by Lionel were oral misrepresentations that fall under Subsection A of § 22:860, and not under Subsection B.

In fact, to find otherwise, would invalidate the life insurance policy entirely because La. R.S. 22:856, entitled “Application for insurance required,” uses the same “in writing” language and requires an application for insurance to be in writing for the policy to be effective. La. R.S. 22:856 provides:

No life, annuity, or health and accident insurance contract upon an individual, except a contract of group life insurance or of group or blanket health and accident insurance as defined in this Code, shall be made or effectuated unless at the time of the making of the contract the individual insured, being of competent legal capacity to contract, in writing applies therefor or consents thereto, except in the following cases:

(1) A spouse may effectuate such insurance upon the other spouse.

(2) Any person having an insurable interest in the life of a minor, or any person upon whom a minor is dependent for support and maintenance, may effectuate insurance upon the life of the minor.

(Emphasis added.)

But no one, including the majority, is suggesting that the UETA does not generally apply to insurance contracts in Louisiana so that the policy Lincoln issued is invalid. See Bonck v. White, 12-1522 (La. App. 4 Cir. 4/24/13), 115 So.3d 651 (Applying La. R.S. 9:2606 and 2607 to an automobile insurance policy in Louisiana); Rapalo-Alfaro v. Lee, 15-209 (La. App. 4 Cir. 8/12/15), 173 So.3d 1174, 1182 (recognizing that the purpose of the UETA is to remove barriers to electronic commerce, and finding that an electronically signed uninsured motorist waiver was valid); Jackson v. Liberty Pers. Ins. Co., 20-13 (La. App. 5 Cir. 7/2/20), 299 So.3d 1256, 1268, writ denied, 20-967 (La. 11/4/20), 303 So.3d 641 (citing Bonck, and finding that La. R.S. 9:2602, et seq., applies to automobile insurance policies and UM forms).

It is also of no moment whether or not the decedent reviewed the transcription prior to the submission of his application. That is not a requirement under La. R.S. 22:856. And if it were, the trial court found that a “Change to Application For Insurance” document was signed by both Lionel (on April 2, 2013) and Gilbert (on April 3, 2013), so they clearly had an opportunity to correct any misrepresentations or errors prior to the issuance of the policy on April 8, 2013. Lionel even confirmed at the end of the phone call that he understood his responses would be “transcribed as part of the application and ․ become part of the insurance contract.”

2. Whether Lincoln proved intent to deceive

I agree with the majority that under the facts presented in this case, there is no manifest error in the trial court's determination (1) that Lionel made material misrepresentations in Part 2 of his application for life insurance, and (2) that Lincoln failed to prove his material misrepresentations were made with an actual intent to deceive.

3. Whether Lincoln carried his burden under Subsection (B)

But I disagree with the trial court that the language in Subsection B of La. R.S. 22:680 is in the conjunctive. A plain reading of Subsection B, which includes the phrase “unless either one of the following is true,” shows that the provisions are stated in the alternative. Thus, an insurance company must prove either Subsection (B)(1) or Subsection (B)(2). It is not necessary to prove both.

This reading is evidenced by the fact that La. R.S. 22:860 was amended in 2008 by Act 454,⁶ which changed the language in Subsection B and added subparts (1) and (2), making it clear that the subparts should not be considered in the conjunctive.

La. R.S. 22:860(B) states:

B. In any application for life, annuity, or health and accident insurance made in writing by the insured, all statements therein made by the insured shall, in the absence of fraud, be deemed representations and not warranties. The falsity of any such statement shall not bar the right to recovery under the contract unless either one of the following is true as to the applicant's statement:

(1) The false statement was made with actual intent to deceive.

(2) The false statement materially affected either the acceptance of the risk or the hazard assumed by the insurer under the policy.

(Emphasis added.)

Unfortunately, the majority, in addition to applying Subsection A, has endorsed the “and” test from Zydeco's, 356 So.3d at 373, despite the 2008 amendments to La. R.S. 22:860. Citing Zydeco's, the majority states:

In order to void an insurance policy, an insurer must prove that (1) the insured made a false statement; (2) the false statement was material; and (3) the false statement was made with the intent to deceive. Willis v. Safeway Ins. Co. of La., 42,665 (La. App. 2 Cir. 10/24/07), 968 So.2d 346, 350; Darby v. Safeco Insurance Company of America, 545 So.2d 1022, 1026 (La. 1989).

Id. (Emphasis added.)

I would suggest that this is error. As shown in the above quote, the court in Zydeco's relied upon Willis and Darby, which are both pre-2008 cases that relied upon the previous version of La. R.S. 22:860(B). The court in Zydeco's also relied upon Sims v. Maison Insurance Company, 16-1661 (La. App. 1 Cir. 9/15/17), 231 So.3d 656, 659 and Cousin v. Page, 372 So.2d 1231, 1233 (La. 1979) for the proposition that “[a] finding of intent to deceive is essential to defeating coverage.” Id. Although Sims was a 2017 case, it did not distinguish between the different subsections of La. R.S. 22:860 and also relied upon Cousin, a pre-2008 case. As a result, as interpreted by the majority, there is now no distinction between Subsection A and Subsection B in this Circuit.

In conclusion, the language of La. R.S. 22:860(B) is clear. Lincoln is required to prove that (1) Lionel made a false statement with an intent to deceive, OR (2) Lionel made a false statement that materially affected either the acceptance of the risk or the hazard assumed by Lincoln under the policy. Lincoln does not need to prove both.

(a) Whether Lionel's medical records were properly excluded

While I agree that there is merit in this assignment of error, I would find that the exclusion of the medical records was harmless.

(b) Materiality of the misrepresentations

In order for misrepresentations made by an applicant to be considered material, the misrepresentations must have affected the acceptance of the risk by the insurer. Jones v. United Sav. Life Ins. Co., 486 So.2d 1110, 1113 (La. App. 2nd Cir. 1986). The test of materiality is whether the knowledge of the facts would have influenced the insurer in determining whether to assume the risk or in fixing premiums. Id. In Zydeco's, this Court stated that: “․ to prove the materiality of a false statement, the insurer must show that the statement was of such a nature that, had it been true, the insurer would either not have contracted or would have contracted only at a higher premium rate.” Zydeco's, 356 So.3d at 373. The trial court's conclusion that “Lincoln failed to show how the psychiatric conditions discovered has any effect on the insured's ultimate cause of death” was error. This is not the law. There is no requirement that the misrepresentations need to be causally related to the death of the insured.

As noted by the majority, the evidence admitted at trial indicates that prior to rescinding the policy, Lincoln conducted an investigation in accordance with the contestability clause stated in the policy contract. The investigation included multiple conversations with Gilbert Wilson about the claim. Furthermore, as recognized by the majority, Ms. Munchez Van Der Wagt's testimony that the policy would not have been issued had Lionel disclosed his previous medical history was uncontroverted. And the underwriting opinion signed on September 14, 2015, prepared as part of Lincoln's investigation following Lionel's death, stated:

“Had we known of his lengthy history of psychiatric disorder and treatment and his multiple hospitalizations for psych treatment, suicide attempts and violent past[,] we would not have issued this policy[,] we would have declined coverage.”

This evidence, irrespective of the proffered medical records, is sufficient to show that Lincoln proved that it would not have issued the policy if it had known of Lionel's complete medical history. Accordingly, I would find that the false statements made by Lionel were material misrepresentations under La. R.S. 22:860(B)(2).

4. Whether Lincoln was in bad faith under La. R.S. 22:1973

I agree with the majority that the trial court manifestly erred in finding that Lincoln acted in bad faith in failing to pay the claim within sixty days of receiving the death certificate. As discussed above, Lincoln's actions were not arbitrary and capricious. Thus, Mr. Wilson is not entitled to bad faith damages.

Conclusion

For all of the above reasons, I would reverse the judgment of the trial court in its entirety, render judgment in favor of Lincoln, and dismiss this case with prejudice.

FIFTH CIRCUIT

101 DERBIGNY STREET (70053)

POST OFFICE BOX 489

GRETNA, LOUISIANA 70054

www.fifthcircuit.org

SUSAN M. CHEHARDY

CHIEF JUDGE

FREDERICKA H. WICKER

JUDE G. GRAVOIS

MARC E. JOHNSON

STEPHEN J. WINDHORST

JOHN J. MOLAISON, JR.

SCOTT U. SCHLEGEL

TIMOTHY S. MARCEL

JUDGES

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FOOTNOTES

1.   La. R.S. 22:1973 was repealed by Acts 2024, No. 3, § 2, eff. July 1, 2024.

2.   The evidence in the record, including the testimony of Lincoln representatives, indicates that Lionel never saw Part 2 of the application form in writing either blank or with his transcribed answers prior to submission.

3.   Evidence in the record indicates the policy was reissued with an increased rate of premium because a medical examination of Lionel indicated elevated blood glucose levels.

4.   The record indicates that at the time the policy was issued and the claims were being reviewed, Lincoln Benefit Company was under the umbrella of Allstate. Both Ms. Dever and Ms. Munchez Van Der Wagt were involved in the handling and investigation of the Wilson claim.

5.   We additionally note, appeals are taken from the judgment, not the written reasons for judgment. Greater New Orleans Expressway Comm'n v. Olivier, 02-2795 (La. 11/18/03), 860 So.2d 22.

6.   The Court in Lamark also stated, “[w]e concede ․ that where an agent assumes the responsibility for answering the questions asked in the application and answers falsely or incorrectly without the applicant knowing the manner in which they are answered the insurer will be estopped to claim that the representations were false or incorrect. This doctrine is too well settled to require citation to authorities.” 169 So.2d at 205-6. See also State Farm Mut. Auto. Ins. Co. v. Bridges, 45,162 (La. App. 2 Cir. 5/19/10), 36 So.3d 1142, (holding that the insurer could not prove applicant had made a false statement in the insurance application where the applicant was not presented with the transcribed application for review prior to signature and submission.)

7.   This manual was not introduced into evidence.

1.   Official Comment 2001(6) to La. R.S. 9:2602 explains that audio recordings are electronic records under the UETA.

2.   A “transaction” is defined as “an action or set of actions occurring between two or more persons relating to the conduct of business, commercial, or government affairs.” La. R.S. 9:2602(16). Official Comment 2001(11) to this provision explains that “[i]t is essential that the term ‘commerce and business’ be understood and construed broadly to include commercial and business transactions involving individuals who may qualify as ‘consumers’ under other applicable law.”

3.   La. R.S. 9:2608(A)(1) states:If parties have agreed to conduct a transaction by electronic means and a law requires a person to provide, send, or deliver information in writing to another person, the requirement is satisfied if the information is provided, sent, or delivered in an electronic record capable of retention by the recipient at the time of receipt.

4.   Ms. Van Der Wagt, chief underwriter at Allstate and Lincoln, testified that Allstate does not allow applications to be completed orally, and that all applications must be reduced to writing.

5.   La. R.S. 22:857, entitled “Application as evidence; life, annuity, or health and accident insurance,” provides in Subsection A:No application for life, annuity, or health and accident insurance shall be admissible in evidence in any action relative to the policy or contract, unless a correct copy of the application was attached to or otherwise made a part of the policy, or contract, when issued and delivered. This provision shall not apply to policies or contracts of industrial insurance subject to R.S. 22:149(2) and 975(A)(1).

6.   La. R.S. 22:860 was previously numbered “La. R.S. 22:619,” and was renumbered in 2008 by Act No. 415 to the presently numbered “La. R.S. 22:860.”

TIMOTHY S. MARCEL JUDGE

CONCURS IN PART AND DISSENTS IN PART WITH REASONS SUS