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Plaintiff, ) )

) v.
GERMAINE TOMLINSON INSURANCE TRUST, DATED JANUARY 23, 2006, by and through its Trustees lB. CARLSON, MICHELE HARRAAND WILMINGTON TRUST COMPANY, as Trustees of the Germaine Tomlinson Trust, dated January 23, 2006; THE CARLSON MEDIA GROUP, as beneficial owner of the Germaine Tomlinson Insurance Trust, dated January 23,2006; and GEOFFREY A. VANDERPAL, Defendants. ESTATE OF GERMAINE "SUZY" TOMLINSON; and TOMISUE HILBERT, Intervenor Defendants. ) ) Civil Action No. 1:08-CV-17 47-SEB-JMS

) )
) ) ) ) ) )


) ) )



AND THE CARLSON MEDIA GROUP'S BRIEF IN SUPPORT OF MOTION FOR PARTIAL SUMMARY JUDGMENT Defendants Germaine Tomlinson Insurance Trust dated January 23,2006 (the "Tomlinson Trust"), its Trustee JB Carlson and the Carlson Media Group ("CMG") (collectively, the "Trust Defendants"), respectfully submit this supporting brief with their Motion For Partial Summary Judgment, filed concurrently. An appendix C"App.") of the materials referenced supra

in the Statement of Material Facts Not In Dispute was also filed concurrently pursuant to Local Rule 56.l(a). .

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Plaintiff American General Life Insurance Company ("AlG") brought this declaratory judgment action after receiving the Trust Defendants' claim for $15 million in life insurance benefits. AlG asks the Court to declare its Policy, UM0036206L (the "Policy") void due to what it alleges was a lack of insurable interest on the life of CMG's then director, Germaine Tomlinson. AlG contends that material misrepresentations concerning the ownership

ofthe policy, the purpose of the insurance, and Ms. Tomlinson's net worth and income fraudulently induced AlG to issue the Policy. See, e.g., Amended Complaint For Declaratory Relief And Disgorgement, ~~ 1,24,26,32,39,41 (Dkt. 12,4/1/2009).

AlG's fraud contentions, however, fail as a matter of law due to the two-year incontestability clause in AlG'sPolicy. Entry ofa partial summary judgment in favor of the

Trust Defendants is appropriate and necessary at this time. AlG's pleadings and written discovery in this action have demonstrated its firm intention to present evidence and arguments contending that some representations during the application process were not accurate when

made. The Court should resolve at the outset whether the law permits the insurer to contest a claim on the Policy on such grounds inasmuch as this ruling will directly affect the remaining deposition discovery and the general course this action will follow. There are no genuine issues that could preclude partial summary judgment for the Trust Defendants concerning the effect of the incontestability clause in this life insurance contract. Factually, there is no dispute that AlG issued the Policy in January 2006, that Ms. Tomlinson died more than two years later in September 2008, or that the Trust Defendants timely presented a claim for death benefits. The Policy contains a two-year incontestability clause, the

minimum allowed by state statute. Because it is undisputed that AlG took no efforts to rescind

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the Policy until after the incontestability period had already expired, AIG should be deemed estopped as a matter oflaw from contesting this insurance claim on grounds of any alleged fraud or misrepresentations in the application process.




AIG issued Policy No. UM0036206L effective January 28, 2006 on the

life of Germaine Tomlinson. 2. The Policy contains the following provision:


We rely on the statements made in the application for the policy and applications for any reinstatements or increases in Specified Amount. These statements, in the absence of fraud, are considered representations and not warranties. No statement may be used in defense of a claim under the policy unless it is in such applications.

Except as stated below, We cannot contest this policy after it has been in force during the Insured's lifetime for 2 vears from the Date of Issue.
Exceptions: We cannot contest any claim related to an increase in Specified Amount after such increase has been in effect during the Insured's lifetime for 2 years. If this policy is reinstated, We cannot contest this policy after it has been in force during the Insured's lifetime for 2 years from the date of reinstatement. We can contest a reinstatement or an increase in Specified Amount for a 2-year period following the date of an increase or reinstatement solely on the basis of the information furnished in the application for such reinstatement or increase. This 2.:.year limitation does not apply to benefits provided by any Disability or Accidental Death Benefit rider, or to the nonpayment of premium.

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Policy UM0036206L "General Provisions", p. 16 (App., Ex. 1) (emphasis added).' 3. The total Specified Amount (or face amount) of the Policy is $15 million.

Id., p. 3. No increase in the Policy's Specified Amount was ever requested or granted.
Declaration of JB Carlson, ~ 4 (App., Ex. 2). 4. 5. at~ 6. 6. Germaine Tomlinson died on September 29, 2008.

All premiums owing on the Policy have been paid. Id. at ~ 5. The Policy never lapsed and was never reinstated following a lapse. Id.

Marion County

Death Certificate, App., Ex. 3.. 7. AIG did not raise any contentions about fraud or misrepresentations in the

application process until after Germaine Tomlinson's death, September 29, 2008, and more than two years after the Policy's date of issue, January 28, 2006. Declaration of JB Carlson, ~ 7 (App., Ex. 2).

ARGUMENT I. The Policy Contains a Two-YearIncontestability Clause as Required By State Statute.
The incontestability protections in AlO's Policy are not unique and are not new.

Courts long ago recognized the unfairness of insurers' tendencies to accept years oflife premiums and to wait to investigate the representations of insurance applicants only after the

insurers had received a claim on the policy. As the Indiana Supreme Court recognized in 1913, "the holding of the courts of this country has been almost universally that every defense to a

I This provision appears on page 16 of the PDP copy of the Policy in the Trust Defendants' Appendix, but it is labeled as "Page 15" on the Policy's face. Because the Policy's "Page 3" is continued onto a second page and because not every page of the Policy is numbered, all references here are to the page numbers of the PDP copy.

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policy of insurance embraced within the terms of the 'incontestable clause' is completely lost to the insurer ifit fails to make the defense or take affirmative action within the time limited by the policy." Indiana Nat. Life Ins. Co. v. Mctiinnis, 180 Ind. 9, 101 N.E. 289,292 (Ind. 1913) (citing 19 precedents from at least a dozen different states). State legislatures also responded to these insurance practices by enacting statutes that require insurers to add specific forms of incontestability Forty-three states now have incontestability clauses to life insurance policies.

statutes covering life insurance policies. 29

APPLEMAN ONINSURANCE § 178.03[A], p. III (2006). The Seventh Circuit Court of Appeals 2d long ago recognized this trend and held that "incontestable clauses and statutes are favored in the law," because they are grounded in the following important public policies and fairness principles: In our approach we must recognize that the incontestable clause. provisions of the state statutes were inserted to protect the insured against efforts of the insurers to avoid liability after death had sealed the lips of the insured. It was believed unfair to the insured, whose death made it impossible for him to explain his answers or give his version of questions and answers in the application, to permit the insurer to assert misrepresentations unless this defense were made within a reasonable time. Likewise, it was not thought consonant with fair dealing, to permit the insurer to receive and retain premiums indefinitely and wait the judgment of Fate to finally determine the intention of the insurer in respect to the insured's alleged false statements. It was likewise unfair to permit the insurer, after years had elapsed and the insured was dead, to bring up these misstatements when often the insurer's agent knew or had reason to believe they were false when he took the insured's application. In short, these statutes were enacted to protect the insured. Their purpose was to compel the insurer to act within a reasonable time to rescind its contract, because of the insured's misstatements, or be bound by its death payment obligations.

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Miccolis v. Mutual Ben. Health & Accident Ass'n, 115 F.2d 579, 582 (ih Cir. 1940) (applying Indiana law to add the statutory incontestability provision to an insurance policy that contained no such clause). At the time AIG issued the Policy in 2006, Indiana's statute required that every life insurance policy include a provision at least as favorable to the policyholder as the following incontestability requirement: 27-1-12-6 Required provisions of policies after transition or January 1, 1948. date

Sec. 6. (a) No policy of life insurance, other than industrial insurance, group life insurance or reinsurance, bearing a date of issue which is the same as or later than a transition date to be selected by the company pursuant to section 12 of this chapter, such transition date in no event to be later than January 1, 1948, shall be delivered or issued for delivery in this state or issued by a company organized under the laws of this state unless the same shall provide the following: ... (3) That the policy, together with the application therefor, a copy of which application shall be attached to the policy and made a part thereof, shall constitute the entire contract between the parties and shall be incontestable after it shall have been in force during the lifetime of the insured for two (2) years from its date, or, at the option of the company after it shall have been in force for two (2) years from its date, except for nonpayment of premiums, and except for violation of the conditions of the policy relating to naval and military service in time of war, and at the option of the company provisions relative to benefits in the event of total and permanent disability and provisions which grant additional insurance specifically against death by accident may also be excepted. Ind. Code § 27-1-12-6 (2009) (emphasis added).

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The Policy states on its face that "THIS IS AN INDIANA CONTRACT."


Ex. 1, p. 3. Thus, it is hardly surprising that AIG's Indiana form contract includes a two-year incontestability provision that tracks Indiana's statute. After the Policy had been in force and

paid up for two years, the plain and unambiguous wording of the contract (as well as the statute) prohibits AIG from contesting the validity of the Policy or denying a claim for the Policy's life insurance benefits on grounds of fraud or misrepresentations. See Policy, p. 16 ("Except as

stated below, We cannot contest this policy after it has been in force during the Insured's lifetime for 2 years from the Date ofIssue.") II. (App., Ex. 1).

Incontestability Clauses Operate Like Statutes of Limitations or Repose to Compel Insurers to Act Within a Reasonable Time. The Policy's incontestable clause means just what it says: AlG was required to

investigate and act on any alleged fraud in the application process within two years of the date of issue, that is, by January 28, 2008. That AIG did not do so acts as a total bar to its current attempts to smear the Trust Defendants with fraud allegations. This bar is absolute and it is of no consequence AIG may contend that it did not and could not have discovered that any information it received was allegedly false: The incontestable clause of a life insurance policy is in the nature of a statute of limitation or repose. The purpose of statutory enactments requiring such a clause is to protect the insured and the beneficiary from contests arising out of the policy after the expiration of the statutory period of time, and to compel the insurerto act within a reasonable time to rescind its contract because of the insured's misrepresentations. 16 Ind. Law Encycl. Insurance § 137 (2009) (citing Columbian Nat. Life Ins. Co. v. Wallerstein, 91 F.2d. 351 (ih Cir. 1937), McGinnis, 101 N.E. 289 (Ind. 1913), and McMiccolis, (7th CiL 1940)) (emphasis added). 115 F.2d 579

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The facts in the Indiana Supreme Court's Mcthnnis decision illustrate just how fmnly Indiana law upholds the bar of a life insurance incontestable clause. In December 1907, in his application for life insurance, McGinnis declared and warranted that he was in good health, disease-free, never drank liquor, and never used tobacco. 289 N.E. at 290. In November 1908, the insurer tracked McGinnis down in a Colorado sanitarium and determined that McGinnis had lied and knew at that time he applied for insurance that "[he] was not in good health, but had consumption and knew it; that he was addicted to the use of intoxicating liquors to the extent that he frequently became intoxicated, that he was a habitual user of tobacco to excess, so that its use had impaired his health.

Id. McGinnis died a few months later and his

wife and mother sued the insurer for the policy's death benefits. The Indiana Supreme Court affirmed judgment for the beneficiaries and held that the one-year incontestable clause in the policy constituted a reasonable time period from the date of issue for the insurer to investigate and take action to rescind the policy. The court held, "The incontestable clause is construed by us to be binding upon the [insurer], and to mean just what it says, that 'after one year from the date of issue, this policy shall be incontestable if the premiums have been duly paid.''' Id. at 293. The court described the state of the law as follows: It seems to be a well-recognized principle of insurance law that a provision in a contract of insurance limiting the time in which the insurer may take advantage of certain facts that might otherwise constitute a good defense to its liability on such contract is valid, and precludes every defense to the policy other than the defenses excepted in the provision itself. It also seems to be generally held that such a clause precludes the defense of fraud, as well as other defenses, and that it is not invalid on the theory that it is against public policy, provided the time in which the defenses must be made is not unreasonably short. Indiana Nat. Life Ins. Co. v. McGinnis, 101 N.E. at 292.

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The leading insurance law treatises likewise recognize that incontestability clauses and statutes are intended to force insurers to investigate and take timely steps to rescind their policy or else the policy will be valid and almost every defense to payment of life insurance proceeds will be barred. See 29 APPLEMAN ONINSURANCE §178.03[C][1], p. 119 2d ("incontestability stands as a bar to defenses of fraud, misrepresentations and concealment"); 17

COUCHONINSURANCE §240:6 ("Provisions of insurance policies, or benefit certificates and 3d contracts, which render them incontestable as against all but specified defenses, are generally regarded as valid, being neither unreasonable nor against public policy"); §240:89 ("if the insurer desires to contest the policy, it must take appropriate steps to that end, either by a defense to an action brought on the policy in case of the death of the insured, or, ifno action has been brought, by proper affirmative action in a court of equity to avoid the policy, at any time before the period expires.")


Because AIG Waited Until After the Incontestability Period Expired to Request Rescission, the Insurer is Estopped to Contest The Policy On Grounds of Alleged Misrepresentation or Fraud.
There is no genuine issue that the insurer did nothing to rescind or otherwise

contest the validity of the Policy prior to expiration of the incontestable period. Nor do any of the incontestability "Exceptions" in the Policy have any application to this case. As for the

"Specified Amount" exception, the face amount of the Policy has remained $15 million continuously from the date of issue. Likewise, all owing premiums were paid and received by the insurer without dispute. Never did the Policy lapse or become reinstated. Finally, the

"Disability or Accidental Death Benefit rider" exception has no application either. The Trust's claim on the Policy is for the $15 million dollar death benefit only.


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To the extent AIG could have any argument concerning supposed fraud or material misstatements, it waited too long to raise them. AIG is estopped from contesting the clause.

validity of the Policy as a matter of law by operation of its own incontestability Summary judgment is therefore appropriate. interpreting a statutory incontestability

Such was the result the district court reached when

clause under Indiana law in a disability policy. The

Equitable Life Assurance Society of the United States v. Bell, 818 F. Supp. 245 (N.D. Ind. 1993). The court granted the insured's motion for summary judgment notwithstanding the evidence that

the insured had been aware that his multiple sclerosis had manifested itself and misrepresented that fact in the application.

"[B'[olstered by the history and policy behind incontestability

clauses," the district court concluded that the insurer's fraud and scope of coverage defenses were completely barred because the incontestability period had previously elapsed. 818 F. Supp. at 252. The same result is necessary and entirely appropriate here.

CONCLUSION For each of these reasons the Trust Defendants respectfully request the Court to enter summary judgment in their favor declaring that the Policy's incontestability clause estops

the insurer from contesting the validity of Policy or denying their claim because of any alleged fraud or misrepresentations in the application process.

Respectfully submitted, IslKevin M Toner Kevin M. Toner, # 11343-49 300 North Meridian Street, Suite 2700 Indianapolis, Indiana 46204-1782 (317) 237-0300 (317) 237-1000 (fax) kevin. - 10BDDB015939341,,1

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Kyle B. Osting, #26532-02 III East Wayne Street, Suite 800 Fort Wayne, Indiana 46802 (260) 424-8000 (260) 460-1700 (fax) Dennis F. McCrosson, # 10240-49 6249 U.S. Highway 31 South, Suite A Indianapolis, Indiana 46227 (317) 791-7800

Attorneys for Defendants Germaine Tomlinson Insurance Trust Dated January 23, 2006; J.B Carlson, Trustee; and Carlson Media Group, Beneficial Owner



I certify that on December 2,2009, a copy ofthe foregoing was sent via electronic notification and/or via first class, United States mail, postage prepaid, to the following parties in interest: Todd J. Kaiser, Esq. Ogletree Deakins Nash Smoak & Stewart, P.c. III Monument Circle, Suite 4600 Indianapolis, IN 46204 Vince Antaki, Esq. Reminger Co., LPA 101 Prospect Avenue, West 1400 Midland Building Cleveland, OH 44115

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Michael D. Mulvaney David P. Donahue Maynard Cooper & Gale, P.c. 1901 Sixth Avenue North, Suite 2400 Birmingham, AL 35203 Judy L. Woods Curtis T. Jones Bose McKinney & Evans LLP 111 Monument Circle, Suite 2700 Indianapolis, Indiana 46204

IslKevin M Toner

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