JANUARY 8, 2001 VOLUME 8, NUMBER 28
Norma Steinback was interested in purchasing long term care insurance for her husband Jack. When she saw a solicitation from Bankers Life and Casualty Company she returned the postcard indicating an interest. Shortly thereafter Bankers Life agent James Van Noten visited the Steinbacks at their Montana home.
During Mr. Van Noten’s visit Mrs. Steinback did most of the talking. She told the insurance agent that her husband suffered from a variety of health problems. She listed them for Mr. Van Noten: diabetes, a heart condition, “hardening of the arteries,” and vision restrictions related to the diabetes.
One of the questions Mr. Van Noten asked was whether Mr. Steinback had “seen a doctor professionally or had medical treatment or advice for Parkinson’s Disease, memory loss, Alzheimer’s Disease, or any other organic brain disorder.” The Steinbacks answered “no” to that question, and Mr. Van Noten filled in the corresponding box on the application form. Bankers Life ultimately issued a long-term care policy for Mr. Steinback.
Eighteen months later Mr. Steinback was admitted to a nursing home in Billings. The insurance company investigated the resultant claim and denied coverage.
The insurance company’s investigation revealed that Mr. Steinback had seen his doctor three months before the insurance application, and had been treated for “moderate to severe organic brain deficit.” One possible diagnosis listed by the physician during two months of treatment had been Alzheimer’s Disease.
Because the application contained false information Bankers Life refused coverage and refunded the premiums. Mrs. Steinback filed a lawsuit charging that the insurance company had acted improperly and seeking coverage for her husband’s nursing home stay (Mr. Steinback died five months after his admission to the nursing home).
In her complaint Mrs. Steinback acknowledged that her husband had received medical treatment for organic brain disorder. In fact, she argued, the insurance agent must have been able to tell her husband was suffering from problems even during their short interview in the Steinback home. At the time, she insisted, Mr. Steinback was “so visibly confused that he didn’t even understand what was going on, or why.”
If Mrs. Steinback could show that the insurance agent had actual knowledge of her husband’s mental limitations her claim would be successful, since the insurance company would be deemed to have issued the policy despite what it knew. In this case, however, the evidence was far from clear that Mr. Van Noten actually saw a confused and disoriented applicant, and so Bankers Life was permitted to rescind the policy. Steinback v. Bankers Life, December 12, 2000.