Martin Carls, a San Francisco teacher and counselor, applied for disability insurance from Standard Insurance Co. on April 4, 1996. On the application and supplement, Carls ticked “no” in response to whether he suffered recurring headaches, heart disease, skin problems, a spinal condition, or immune system disorder. He also denied taking any prescription medicine, stated that he had beneficiary cargo insurance cash surrender value coinsurance clause disability double indemnity endowment insurance fire insurance policy freight insurance homeowners insurance policy hull insurance incontestability clause inland marine insurance insurance agent insurance broker insured insurer liability insurance marine insurance ocean marine policy risk subrogated term insurance underwriter whole life insurance Chapter 36 Insurance 841 visited doctors only for general checkups in the past five years, and stated that he was covered under one additional disability insurance policy. Standard issued a disability policy with an effective date of June 12, 1996. On February 2, 1999, Carls filed a claim for benefits under the policy, stating that he had become totally disabled by symptoms of AIDS. After investigating the claim, Standard denied coverage and filed a lawsuit seeking rescission of the insurance policy based on fraud. According to Standard, at the time Carls submitted his insurance application, he suffered from a variety of serious ailments, including recurrent migraines, heart disease, chronic back pain, and HIV-positive status.

Also, Standard asserts that Carls willfully failed to disclose extensive medical treatments, prescription drugs, and four additional disability insurance policies.

What defense will be raised on behalf of Carls? How would you decide this case? [Standard Insurance Co. v Carls, 2000 WL 769222 (ND Cal)]

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