Barnett v. Life Ins. Investors Co. of America

• Decision Date: 21 October 2003
• Docket Number: No. 02-1464-WEB.,02-1464-WEB.
• Citation: 293 F.Supp.2d 1220
• Parties: Barbara BARNETT, Plaintiff, v. LIFE INSURANCE INVESTORS COMPANY OF AMERICA, Defendant.
• Court: U.S. District Court — District of Kansas

293 F.Supp.2d 1220

Barbara BARNETT, Plaintiff, v. LIFE INSURANCE INVESTORS COMPANY OF AMERICA, Defendant.

No. 02-1464-WEB.

United States District Court, D. Kansas.

October 21, 2003.

Burck Bailey, Fellers Snider Blankenship Bailey & Tippens-Oklahoma City, Oklahoma City, OK, Todd A. Nelson, Fellers Snider Blankenship Bailey & Tippens PC-Tulsa, Tulsa, OK, for Plaintiff.

Craig S. O'Dear, Lynn S. McCreary, Juliet A. Cox, Bryan Cave LLP-Kansas City, Kansas City, MO, Edward D. Greim, Bryan Cave LLP—NY, New York, NY, for Defendant.

MEMORANDUM AND ORDER

WESLEY E. BROWN, Senior District Judge.

Now before the Court in this diversity action are the parties' cross motions for summary judgment.

I. FACTS

For purposes of summary judgment, the Court finds that the following facts are uncontroverted. Plaintiff Barbara Barnett (Barbara) is the primary beneficiary of a life insurance policy (Policy) underwritten by Defendant Life Insurance Investors Company of America (Life Investors) for Barbara's late husband Charles Barnett (Charles). The Policy provided term coverage from its date of issue, October 6, 2000, until its date of expiry, October 6, 2048. Charles signed as the sole owner of the Policy, but the initial monthly premium was paid by a check signed by Barbara and drawn on a checking account held jointly by Charles and Barbara. Barbara also signed the form allowing Life Investors to obtain the subsequent monthly premiums of $62.52 by automatic withdrawals from another account held jointly by Charles and Barbara. Life Investors internal records designated Charles as the sole insured and Barbara as the signor for purposes of billing. Life Investors regularly withdrew the monthly premiums from the joint account on or about the sixth day of each month.

The Policy states that it is a legal contract between the owner and Life Investors. It provides that "[n]o agent or other person except or President, a Vice President, or our Secretary or Assistant Secretary has authority to bind us ... or to agree to change this policy," and that "[a]ny such change must be in writing." Defendant's Exhibit A, at 6. The Policy states that, "[a]ny unearned premiums will be refunded to the policyowner upon cancellation of this policy," and that "[t]here shall be no other premium refund except as required by law." Id, at 7. The Policy also has two riders. The first rider, which waives premium payments upon disability, states, "[y]ou may cancel these provisions by sending us written notice at our Administrative Office", and that "[i]f these provisions are canceled, the premium for the policy will be reduced by the amount of premium for this Benefit." Id, at 12. The second rider, which provides accelerated benefits upon terminal illness, states, "[t]his benefit ends on the first of: a) the termination of the Policy to which it is attached; or b) receipt of the Policyowner's written request for termination of this Benefit, provided there is no outstanding Accelerated Benefit." Id., at 14. Other than these provisions, the Policy gave no rights to either party to surrender or cancel the Policy unilaterally.

In late November 2001, Charles and Barbara were attempting to reduce their regular expenses due to financial pressures. Charles met with Diana Farr (Farr), a local agent of Life Investors, to reduce the premiums on the insurance policies Charles and Barbara held. Defendant has submitted an affidavit from Farr regarding a number of communications with Charles, many of which Plaintiff object to as hearsay, but it is uncontroverted from the Plaintiff's own testimony that she and Charles were surprised some time later when their monthly insurance premiums had not been reduced as they expected. Further communications with Farr ensued, and on January 15 or 16, 2002, Farr faxed a "Customer Service Value Form" (Form) to Charles. The Form is captioned with Life Investor's name and home office address, but the record does not otherwise show the origin or authorship of the Form.

The Form has a number of options regarding insurance coverage which could be checked or filled in as needed. One option was entitled "Surrender," with two choices under the heading: "[r]equest termination of policy/certificate (return policy contract with this form)," and "[r]equest termination I have lost my policy/certificate." Plaintiff's Exhibit 1, at 2. Neither of these choices was checked, however, and nothing before the Court shows that Charles returned the Policy to Life Investors or had lost the Policy previously.

Instead, before the Form was faxed to Charles, Farr wrote under an option entitled, "[a]dditional changes or special instructions," the instructions, "[p]lease cancel Policy effective 11-30-2001." Id. Farr also wrote "12-01-01", as the date next to Charles' signature line. Id. When Charles received the Form, he signed it, filled in his social security number and date of birth, and faxed it back to Farr. Farr then faxed the Form to Life Investors.

Life Investors received the Form on January 16, 2002. In a letter to Charles dated January 22, 2002 (Letter), a Life Investors customer service employee wrote, "[a]s requested, protection provided by this policy has been discontinued effective December 6, 2001." Defendant's Exhibit G, at 1. Life Investors practice is to cancel only on policy issue dates, in this case the sixth of the month. The Letter also stated, "[e]nclosed is a check for $122.70, representing a refund of premium." Id. The Letter did not discuss the derivation of the refund amount, and the record, beyond establishing that Life Investors' computer calculated the amount, does not show how it was derived. An internal e-mail by a Life Investors employee records her opinion that the computer calculated the refund by days, not in discrete monthly increments, and this same employee later testified that she mistakenly failed to compare the computer-generated refund amount with the actual monthly premiums. In any event, the check was made payable to Charles, and both it and the Letter were mailed to Charles on January 23, 2002.

Charles died on January 26, 2002, which was a Saturday. The letter was not delivered until after Charles' death. Neither the check accompanying the Letter, nor a subsequent one made payable to Charles's estate, were negotiated.

II. LEGAL STANDARDS

A. Procedural

Summary judgment shall be rendered if the pleadings, depositions, answers to interrogatories, admissions on file, and affidavits show there is no genuine issue as to any material fact, and that the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c). The Court must examine the factual record and draw reasonable inferences in the light most favorable to the nonmoving party. See Simms v. Okla. ex rel. Dept. of Mental Health, 165 F.3d 1321, 1326 (10th Cir. 1999), cert. denied 528 U.S. 815, 120 S.Ct. 53, 145 L.Ed.2d 46 (1999). "Where the record taken as a whole could not lead a rational trier of fact to find for the nonmoving party, there is no `genuine issue for trial.'" Matsushita Elec. Ind. Co. v. Zenith Radio, 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538, 552 (1986). On cross motions for summary judgment, the Court may assume that no evidence need be considered other than that supplied by the parties, but summary judgment remains inappropriate if disputes as to material facts exist. James Barlow Family Ltd. Partnership v. David M. Munson, Inc., 132 F.3d 1316, 1319 (10th Cir.1997).

B. Substantive

The parties do not contest that Kansas law applies. See State Farm Mut. Auto. Ins. Co. v. Blystra, 86 F.3d 1007, 1010 (10th Cir.1996). The terms of an insurance policy, like any contract, must be considered as a whole and, if possible, be construed to give effect to the intention of the parties. O'Bryan v. Columbia Ins. Group, 274 Kan. 572, 56 P.3d 789, 792 (2002). If an insurance policy is ambiguous, it is given the construction most favorable to the insured. Schartz v. Kansas Health Ins. Ass'n, 275 Kan. 515, 66 P.3d 866, 869 (2003).

Where a right to cancel unilaterally is not set out in the policy or otherwise provided for by law, the parties may cancel only by mutual consent. See Markel v. Travelers Ins. Co., 510 F.2d 1202, 1207 (10th Cir.1975); Shunga Plaza, Inc. v. American Employers' Ins. Co., 204 Kan. 790, 465 P.2d 987, 995 (1970)(dissenting opinion, adopted as opinion of the court upon rehearing at 206 Kan. 16, 476 P.2d 642, 643 (1970)); Riddle v. Rankin, 146 Kan. 316, 69 P.2d 722, 726 (1937); Bennett v. Colonial Life and Acc. Ins. Co., 7 Kan. App.2d 441, 443, 643 P.2d 1133 (1982); 2 Couch on Insurance 3d, § 31:58; 45 C.J.S. Insurance, § 507; 43 Am.Jur.2d Insurance, § 444. "The burden of proof that an insurance policy has been cancelled lies upon the insurer alleging it, no matter what method of cancellation is relied upon." Shunga Plaza, Inc., 465 P.2d at 994 (dissenting opinion, adopted as opinion of the court upon rehearing at 476 P.2d at 643).

III. DISCUSSION

Although the Policy contemplates the possibility of cancellation, it provides no method by which it might be effected. This case, therefore, is distinguishable from cases in which the policy has such a provision. See, e.g., LaDow v. New England Mut. Life Ins. Co., 727 F.Supp. 1399, 1401 (D.Kan.1989) (a policy which stated it could be canceled, "at any time by notice to the Company in writing" created a "continuous and irrevocable offer of surrender ....").

The Policy's riders did have cancellation language, but the Court will not read these provisions into the Policy as a whole. The first rider stated that Charles' premiums would be reduced by cancellation of the rider, meaning it was severable from the Policy itself. The second rider specified that it would remain in force until either the Policy was terminated or the owner made a written request to terminate the benefit. In other words, the termination of the Policy would terminate the benefit, not the other way...