Bear v. Lifemap Assurance Co.
| Decision Date | 18 November 2021 |
| Docket Number | 20200183-CA |
| Citation | 503 P.3d 507 |
| Parties | Tomi BEAR, Appellant, v. LIFEMAP ASSURANCE COMPANY and Tooele County School District, Appellees. |
| Court | Utah Court of Appeals |
David S. Head, Midvale, Attorney for Appellant
Timothy C. Houpt, Salt Lake City, and Jessica P. Wilde, Attorneys for Appellee LifeMap Assurance Company
Sean D. Reyes and Peggy E. Stone, Salt Lake City, Attorneys for Appellee Tooele County School District
Opinion
¶1 Tomi Bear, an employee of the Tooele County School District (the District), applied for an increase in life insurance benefits for herself and her ailing husband (Husband) during the District's open enrollment period. The insurance provider, LifeMap Assurance Company, required medical histories as part of the application process, which Bear failed to provide. Despite this incomplete application, due to a software glitch, for several months the District deducted premium payments corresponding to the increased life insurance benefit Bear sought for Husband. When Husband passed away, Bear sought to collect Husband's life insurance benefits. LifeMap denied Bear's claim for the increased benefit amount, asserting that it never received Husband's medical history. Bear sued LifeMap and the District for, in relevant part, breach of contract and breach of the implied covenant of good faith and fair dealing. All three parties moved for summary judgment on both claims, which the district court granted in favor of the defendants. Bear appeals, and we affirm.
¶2 Bear was employed by the District from 1993 to 2016. As part of her employment benefits, Bear was eligible to purchase voluntary group life insurance coverage for herself and Husband, which the District had contracted with LifeMap to provide since 2012.
¶3 In 2014, the District elected to self-administer the group life insurance policy (the Group Policy). This included gathering applications from its employees and forwarding them to LifeMap for underwriting. For applications that LifeMap approved, the District calculated and gathered premium payments from employees through payroll deductions, added its own premium payments, and made monthly lump sum payments to LifeMap. Under the Group Policy, the District was precluded from collecting premium payments from an employee unless LifeMap first approved the employee's application. The Group Policy further provided that a "[c]lerical error or omission will not," among other things, "cause an ineligible employee to become insured."
¶4 When making the aforementioned monthly aggregate payments, the District did not identify the individuals whose payroll deductions made up the lump sum to LifeMap. Instead, LifeMap provided a "bill" template that the District was required to fill out, which calculated the total amount of employee premiums the District collected.
LifeMap would then review the amount collected to determine whether there was a 10% increase or decrease from the previous month. If the discrepancy was 10% or higher, LifeMap would ask the District to explain the reason for the change. LifeMap was not concerned with discrepancies that were under 10% and would not contact the District in those situations. When reporting on discrepancies exceeding 10%, the District would typically explain the discrepancy by informing LifeMap that employees were either laid off or hired, or that new coverage was added. Based on the District's size, a 10% discrepancy would typically equate to an amount between approximately $2,200 and $2,900 per month. During the 2015–2016 school year, LifeMap was aware that "the District repeatedly failed to provide all the required information in the bill it sent each month to LifeMap," but LifeMap did not affirmatively act to resolve the discrepancies.
¶5 Under the Group Policy, eligible employees could apply within 31 days of eligibility for a guaranteed issue amount for themselves and their spouses without having to provide evidence of insurability (EOI).2 The maximum guaranteed issue amount was $400,000 for an employee and $50,000 for a spouse, for which employees could apply in increments of $10,000. A section of the Group Policy with the heading "WHEN WE MAY REQUIRE EVIDENCE OF INSURABILITY" stated that LifeMap "will require Evidence of Insurability for all persons applying for insurance" if, among other things, an employee did not apply for the guaranteed issue amount within the 31-day window, wished to increase coverage, or wished to apply for coverage over the guaranteed issue amount for themselves or their spouse. The Group Policy provided that "[a]pproval of coverage is subject to [LifeMap's] review of [the employee's] Evidence of Insurability." It further clarified that "[i]f Voluntary Life insurance is approved, [the employee] will receive a Confirmation Statement verifying the amount(s) and Effective Date(s) of coverage."
¶6 Employees could make changes to their benefits once a year during an open enrollment period. During the 2015–2016 school year, the District implemented a new software program, iVisions, for employees to make benefit elections during the open enrollment period. During that time, Bear, using the new software program, requested an increase in the voluntary life insurance policies for herself and Husband from $10,000 to $300,000. After checking the corresponding box to make that request, a pop-up box appeared displaying the following message:
To move to the next step, applicants were required to click a button labeled "OK." Bear did not remember seeing the link to the EOI and did not complete and submit the EOI as part of her request for an increase in life insurance benefits for her and Husband. After Bear submitted the request, iVisions generated a "Benefit Enrollment Confirmation Statement" listing the benefits Bear had elected for the 2015–2016 school year, including an increase in voluntary life insurance benefits in the amount of $300,000 for herself and Husband. The statement also indicated that Bear was authorizing the District to make payroll deductions for the selected benefits.
¶7 At the time of Bear's selection, Husband suffered from several physical ailments, including type II diabetes, stage IV chronic kidney disease, end-stage renal failure, coronary artery disease, and hypertension. Bear would have been required to disclose these medical conditions in an EOI. And it is undisputed that LifeMap would have declined the requested increase based on Husband's medical history if Bear's application had included an accurate EOI. Indeed, the Vice President of Risk Management at LifeMap testified that Husband "would have been declined, absolutely."
¶8 Bear does not recall LifeMap notifying her that her request for an increase in voluntary life insurance benefits had been approved as contemplated by the terms of the Group Policy. LifeMap asserted that it "had no information or knowledge concerning any purported application for $300,000 in life insurance for [Husband] prior to [his] death and sent no notice to [Bear] or any communication at all to [Bear] on this subject prior to [Husband's] death."
¶9 In August 2015, as part of the process of closing the open enrollment period and preparing for the September 1 effective date, the District's insurance benefits specialist (Benefits Specialist) saw that the system was set to make deductions from Bear's payroll for two $300,000 life insurance policies, which LifeMap had not approved. Benefits Specialist explained that the system updated employees’ benefits based on the requests employees made during open enrollment and that she would later have to manually change the benefit amounts to whatever was actually approved. Accordingly, because Bear had not submitted EOIs for herself and Husband and because LifeMap had not approved an increase to $300,000 for either person, Benefits Specialist manually changed the policy amount back to the original $10,000 in both policies. But when changing the policy amount for Husband, Benefits Specialist neglected to include a dollar sign in front of the 10,000 figure. Benefits Specialist later speculated that this or some other "bug" resulted in an error in which her manual override for Husband's benefits did not take effect. Accordingly, although LifeMap never approved Bear's request for an increase in benefits, between September 4, 2015, and February 5, 2016, the District erroneously deducted increased premiums from Bear's paychecks for a $300,000 life insurance policy for Husband, which it then transferred to LifeMap as part of the monthly lump sum payment.4 The District deducted the correct amount corresponding to a $10,000 life insurance policy for Bear during that same time period.
¶10 Husband died in January 2016. Shortly after, Bear contacted Benefits Specialist to submit a claim for $300,000 in life insurance to LifeMap. In February, Benefits Specialist asked LifeMap for clarification because the District's records showed that Bear was entitled to $14,0005 in life insurance benefits but Bear was claiming to have an approval letter for $300,000. LifeMap replied that it never received an EOI for Husband and that its records did not show that it had issued an approval letter for the requested increase. In April, LifeMap issued a check in the amount of $14,085.34 to Bear, which consisted of the amounts explained in footnote 5, with interest. LifeMap denied Bear's claim for the additional $290,000. The District later refunded the increased premiums for Husband's life insurance policy...
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