All American Life Insurance v. Puckett Bros. Mfg.

• Decision Date: 27 March 2001
• Docket Number: No. 1:99CV2078-ODE.,1:99CV2078-ODE.
• Citation: 139 F.Supp.2d 1386
• Parties: ALL AMERICAN LIFE INSURANCE COMPANY, Plaintiff, v. PUCKETT BROS. MFG. CO. INC., Defendant.
• Court: U.S. District Court — Northern District of Georgia

139 F.Supp.2d 1386

ALL AMERICAN LIFE INSURANCE COMPANY, Plaintiff, v. PUCKETT BROS. MFG. CO. INC., Defendant.

No. 1:99CV2078-ODE.

United States District Court, N.D. Georgia, Atlanta Division.

March 27, 2001.

Kenan G. Loomis, Stephen Mann Brooks, Smith Helms Mulliss & Moore, Atlanta, GA, for Plaintiff.

Charles A. Mullinax, Office of Charles Alan Mullinax, James Edwin Howard, Office of James E. Howard, Stone Mountain, GA, for Defendant.

ORDER

ORINDA D. EVANS, District Judge.

This declaratory action, based on diversity of citizenship, is presently before the court on Defendant Puckett Bros. Mfg.'s ("Puckett Bros.") and Plaintiff All-American Life Insurance Company's ("All-American") cross motions for summary judgment. For the reasons set forth below, Plaintiff's motion for summary judgment is granted in its entirety.

On May 26, 2000, All-American filed a motion for summary judgment, or alternatively for partial summary judgment, asking the court to absolve it of any liability under two life insurance policies. Plaintiff alleges that a suicide exclusion provision contained in one of the policies bars Puckett Bros.' claim for proceeds under the policy. Conversely, in its motion for summary judgment, Defendant Puckett Bros. contends that the new policy is a "substantially similar replacement policy" so that a suicide provision in the original policy, which no longer has effect, is operative, and thus would not bar recovery.

The following facts are undisputed except as where otherwise noted: The controversy in this case arises from two life insurance policies covering Mr. James Puckett ("Mr.Puckett"). In 1984, Plaintiff issued a term life insurance policy in the amount of one million dollars to Defendant Puckett Bros., insuring its president, Mr. Puckett. The policy was a renewal term life policy for which Mr. Puckett was required to re-apply twelve different times between 1987 and 1998. In August, 1998, Mr. Puckett completed an application for what Plaintiff refers to as "a new term policy to replace the old 1984 policy." On the 1998 application, the insurance agent wrote the words "will replace All-American Policy." The 1998 policy was also a term life policy in the amount of one million dollars. The 1998 policy, which has a different policy number than the original policy, was facilitated by Mr. Douglas Enfield ("Enfield").¹ Because a new underwriting process was initiated for the 1998 policy, the application process for the 1998 policy was more elaborate and different than the renewal process with respect to the 1984 policy. (Thompson Depo., pp. 63, 86).

In his declaration, Enfield states that, "[i]n 1998, I discovered that the premium to renew [Mr. Puckett's] 1984 policy was going to be $2,129.35 per month. Accordingly, I suggested that [Mr. Puckett] drop his [1984 policy] and obtain a new "level term" policy altogether." (Enfield Decl. ¶ 3). Additionally, Enfield states that the 1998 policy contained a premium of $930.13 per month and that it was not written pursuant to a conversion provision. (Enfield Decl. ¶¶ 6,7). The 1998 policy contained the same beneficiary and the amount of insurance as was provided under the 1984 policy. The 1998 policy also contained a suicide provision which stated: "In the event of the suicide of the insured, while sane or insane, within two years of the date of issue, our liability will be limited to the premiums paid." (Plaintiff's Exh. 3). The 1998 policy also contained an incontestability clause which stated that the Plaintiff "[w]ill not contest this policy after it has been in force during the lifetime of the insured for two years from the date of issue." (Plaintiff's Exh. 15, p. 3).

On February 1, 1999, Puckett died from what was determined by the medical examiner to be a self-inflicted gunshot wound to the chest. This date was within two years of the 1998 policy's issuance. Accordingly, because of the suicide provision in the 1998 policy, Plaintiff limited its pay-out liability to the policy premiums which were paid between August 26, 1998 and February 1, 1999. Thus, on August 13, 1999, Plaintiff filed the instant declaratory judgment action seeking the court to declare that it is not obligated to pay the one million dollar amount of the policy. On September 7, 1999, Defendant Puckett Bros. filed its answer and counterclaim alleging that Plaintiff All-American breached the terms and conditions of its contracts of insurance in its refusal to pay the policy amount of one million dollars. Defendant also filed a counterclaim for bad faith refusal to pay under O.C.G.A. § 33-4-6 in the amount of twenty-five (25) percent of the policy amount or two hundred and fifty thousand dollars ($250,000). As noted above, both parties have filed motions for summary judgment in this case.

Summary judgment is appropriate only "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the [Defendants are] entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). In ruling on Defendants' motion, the court must view the evidence in a light most favorable to Plaintiff. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 26 L.Ed.2d 142 (1970). To prevail in their motion for summary judgment, Defendants must show that the evidence is insufficient to establish an essential element of Plaintiff's case. Celotex Corp. v. Catrett, 477 U.S. 317, 325, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). If Defendants make a sufficient showing, then Plaintiff "must come forward with `specific facts showing that there is a genuine issue for trial.'" Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986) (quoting Fed.R.Civ.P. 56(e)). If the evidence supporting Plaintiff's claims is insufficient for a jury to return a Plaintiff's verdict, or is merely colorable or not significantly probative, then Defendants are entitled to summary judgment. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). If, however, reasonable minds could differ as to the import of the evidence, and a reasonable interpretation of the evidence could lead to a Plaintiff's verdict, then summary judgment is inappropriate. Id. at 251-52, 106 S.Ct. 2505.

Federal jurisdiction in this case is based on diversity of citizenship. Accordingly, the substantive law of the state of Georgia is controlling. In its motion for summary judgment, Defendant Puckett Bros. maintains that the primary issue before the court is whether the suicide clause of the 1984 policy should extend to the 1998 policy. Defendant Puckett Bros. states that "[t]he important inquiry is whether or not [the 1998] policy was meant to be a `replacement' of the [1984] policy, and whether it is substantially similar." Founders Life Assurance v. Poe, 242 Ga. 748, 748, 251 S.E.2d 247 (1978). Under the Founders case, courts must look at the two policies in order to determine whether or not the second policy constitutes an "entirely new agreement." Id. As pointed out by Plaintiff, however, the primary factor to be considered in analyzing whether a new insurance contract has been created, or whether the old contract was merely renewed, is the intent of the parties. Georgia Farm Bureau Mutual Ins. Co. v. Hand, 211 Ga.App. 703, 705, 440 S.E.2d 92 (Ga.App.1994). Here, Plaintiff contends that Defendant Puckett Bros. has not refuted Enfield's declaration stating that the parties intended to enter into a new agreement. (Enfield Decl., ¶ 8).

Under similar factual circumstances, the court in the Founders case stated that:

When a policy of insurance is canceled or surrendered and replaced by a new agreement, the new policy does not create a new contract of insurance, but effects a continuance of the original contract so that the liability of the insurer for death by suicide is not affected by the fact that death occurred within the period specified in the new policy's suicide clause. If the new policy is so different as to constitute an entirely new agreement the original suicide clause is inapplicable; but where the latter is identical or at least substantially similar to the old policy, it is usually held that the policies should be considered one agreement.

Id. at 750, 251 S.E.2d 247 (emphasis added). Thus, in this case, Defendant Puckett Bros. states that it must demonstrate both that the 1998 policy replaced the 1984 policy and that the two policies are substantially similar. In the present case, Defendant states that the "replacement policy" is substantially similar to the 1984 policy. Specifically, Defendant maintains that the principal risk in both policies was the life of James Puckett and both were of the same type—level death benefit term. Defendant Puckett Bros. also asserts that the policies are substantially similar with respect to payment intervals, suicide exclusion, payment of proceeds, incontestability provisions, definition of age, policy anniversaries, grace periods, and renewal premiums. (Enfield Depo., pp. 136-156). Based on these similarities, and in light of the holding in the Founders case, Defendant argues that it is entitled to judgment as a matter of law and that Plaintiff should be required to pay under the terms of the 1998 policy insuring the life of Mr. Puckett.

Plaintiff contends, however, not only was the 1998 policy not a replacement policy, but also that the similarities cited above are merely boiler-plate provisions which are required to be placed in all term life insurance policies issued in Georgia. For instance, Plaintiff notes that, with respect to payment intervals, "virtually all policies of any type allow an insured to pay premiums on a monthly basis." (Plaintiff's Brief, p. 7). Moreover, Plaintiff states that the payment of proceeds provision which was included in both policies is also required by Georgia...