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In a $1 million victory for an insurer, the 3rd U.S. Circuit Court of Appeals has ruled that a dead man’s psychotherapeutic privilege cannot be asserted by parties who are nothing more than beneficiaries of his life insurance policy because they lack standing to do so. The ruling in Burkert v. The Equitable Life Assurance Society of the U.S. upholds a lower court’s decision that said the insurer had no duty to pay a claim where the dead man withheld the truth about the extent of his illegal drug use and later died of an overdose. Lawyers for plaintiff Grace Burkert argued in the appeal that U.S. District Judge Jan E. DuBois of the Eastern District of Pennsylvania erred by allowing the insurer’s lawyers to introduce treatment records from Seth Jamison’s marriage counselor and psychiatrist that showed he had been treated for addiction and that he had continued to abuse illegal drugs beyond 1990. Now the 3rd Circuit has ruled that DuBois correctly ruled that Burkert had no standing to assert Jamison’s psychotherapeutic privilege because she was not his spouse or the executrix of his estate. Third Circuit Judge Richard L. Nygaard said the 3rd Circuit was forced to predict how the Pennsylvania Supreme Court would rule on the issue. In an opinion joined by Senior 3rd Circuit Judge Walter K. Stapleton and visiting U.S. District Judge A. Richard Caputo of the Middle District of Pennsylvania, Nygaard predicted that the Pennsylvania justices would decide the issue “precisely” as DuBois had. “We have found no case that would lead us to predict that Pennsylvania courts would extend standing in this situation to third party beneficiaries of an insurance policy, who after all, may well be total strangers — personally and legally — to the policy holder/ decedent,” Nygaard wrote. In the absence of state case law, Nygaard found that DuBois correctly relied on Pennsylvania decisions involving the attorney-client privilege which have consistently held that only the client has standing to assert the privilege. Nygaard found that while the privilege survives the patient’s death, it “logically follows” that someone must be able to assert it. But Nygaard rejected Burkert’s argument that life insurance policy beneficiaries have standing to assert the privilege since they have an interest in representing the decedent’s interests. Dodging the remainder of the question, Nygaard said in a footnote that the court opted to “limit our inquiry to the third-party beneficiaries in this case and leave the question of who can rightfully assert the privilege to the Pennsylvania courts or legislature, and another day.” Turning from the evidentiary question to the coverage issue, Nygaard found that DuBois was also correct in holding that Jamison gave false answers in his initial application that evidenced bad faith on his part and called for voiding the policy. DuBois had ruled that an insured’s misrepresentations about drug use should always be deemed to have been made in “bad faith.” “Although it appears that no court applying Pennsylvania law has squarely addressed the issue of misrepresentations regarding drug use, the court concludes that misstatements regarding drug use should also be deemed to be made in bad faith as a matter of law,” DuBois wrote. DuBois also rejected the argument that Jamison’s answers to Equitable’s questions were ambiguous and that the insurer therefore had the duty to investigate before issuing the policy. Instead, DuBois found that Jamison’s answers were “consistent and unambiguous” and that in such an instance, “Pennsylvania law does not impose a duty on insurers to investigate.” According to court papers, Jamison applied for an Equitable life insurance policy in July 1997 and completed a medical questionnaire that asked about his illegal drug use in the previous 10 years. Jamison responded by writing: “late ’80s — 1990 — occasional use of cocaine,” and stated that he had received inpatient treatment at the Institute of Pennsylvania for 28 days with “no problems since.” Equitable then sent Jamison a “confidential questionnaire” that asked more questions about his drug use. In response, he stated that he had used minimal quantities of cocaine less than one time per month from 1988 to 1989. In response to the question, “Have you used alcohol in combination with any drug?” he wrote: “I used cocaine on approximately 10 occasions while drinking over the above two-year period.” He was also asked if he had ever stopped using drugs and later returned to using them, to which he answered “no.” Equitable issued a $1 million life insurance policy in November 1997 that designated Grace Burkert and Jacob Jamison as beneficiaries, with each receiving a 50 percent share. Seth Jamison died on Jan. 10, 1998, in the Four Seasons Hotel in Toronto, Canada, as a result of an overdose of heroin and cocaine. Because his death came within two years of the issuance of the policy, Equitable initiated a routine investigation. Investigators discovered that Jamison’s psychotherapy records showed his drug problems had persisted into the 1990s. Treatment records revealed that he had abused alcohol and cocaine within five years prior to applying for life insurance and was treated for addiction to alcohol during that time — none of which was disclosed in his application. As a result, Equitable rescinded the policy. The court battle began when Burkert, who is represented by attorney Robert G. Bauer of Philadelphia’s Abraham Bauer & Spalding, filed suit seeking her half of the $1 million proceeds. Equitable’s lawyer, Daniel J. Zucker, responded by filing a counterclaim that asked the court to declare the policy void ab initio due to Jamison’s material misrepresentations about his drug and alcohol use and treatment. Bauer quickly moved for a protective order to prevent Equitable from using Jamison’s treatment records from two psychologists on the ground that they were covered by Pennsylvania’s psychotherapeutic privilege. But DuBois refused to grant it, saying Burkert did not have standing to assert Jamison’s psychotherapeutic privilege and that the privilege had been waived. With the records in, DuBois found that Equitable easily won the case because Jamison had made “blatant” misrepresentations. “In light of substantial evidence that decedent regularly used cocaine and alcohol, the court concludes that decedent’s representation regarding his use of cocaine in 1988-90, with ‘no problems since,’ was made fraudulently and in bad faith,” DuBois wrote. On appeal, Bauer argued that Jamison’s answers were ambiguous, or, at worst, incomplete, and that a jury should therefore decide if he had answered in bad faith. Nygaard disagreed, saying “Given that the drug use and treatment/counseling for drug and alcohol use were substantial, and proximate in time (even ongoing) when decedent completed his application … [the] so-called ambiguity argument is frivolous.”

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