Boehm v. Riversource Life Ins. Co.

• Decision Date: 19 May 2015
• Docket Number: No. 1999 WDA 2013,1999 WDA 2013
• Citation: 117 A.3d 308,2015 PA Super 120
• Parties: Robert J. BOEHM and Beverly Lynn Boehm v. RIVERSOURCE LIFE INSURANCE COMPANY and James Day, II, Appellants.
• Court: Pennsylvania Superior Court

117 A.3d 308

2015 PA Super 120

Robert J. BOEHM and Beverly Lynn Boehm

v.RIVERSOURCE LIFE INSURANCE COMPANY and James Day, II, Appellants.

No. 1999 WDA 2013

Superior Court of Pennsylvania.

Argued Sept. 9, 2014.

Filed May 19, 2015.

Kathy K. Condo, Pittsburgh, for appellants.

Kenneth R. Behrend, Pittsburgh, for appellees.

BEFORE: FORD ELLIOTT, P.J.E., SHOGAN and MUSMANNO, JJ.

Opinion

OPINION BY FORD ELLIOTT, P.J.E.:

Riversource Life Insurance Company (“Riversource”) and James Day, II, appeal from the judgment entered December 13, 2013, following a non-jury trial on plaintiffs/appellees', Robert J. Boehm and Beverly Lynn Boehm, Unfair Trade Practices and Consumer Protection Law (“UTPCPL”) claims. This is one of a series of cases in Allegheny County alleging fraudulent misrepresentation in connection with the sale of life insurance policies. Judgment was entered for the plaintiffs in the amount of $295,305.78, including attorneys' fees and costs. After careful review, we affirm.¹

A jury trial resulted in a defense verdict on plaintiffs' common law fraud claims.

The parties then proceeded to a non-jury trial before the Honorable Paul F. Lutty, Jr., on the UTPCPL claims.² Using a preponderance of the evidence standard, the trial court found that the defendants purposely and intentionally misrepresented the terms of the policy. The trial court found the plaintiffs' testimony on the contested issues to be credible, and that of the defendants to be not credible. (Trial court opinion, 2/24/14 at 2.) The trial court adopted the plaintiffs' proposed findings of fact and conclusions of law, and awarded $125,000 in damages. Those factual findings, in their entirety, are as follows:

1. On November 20, 1986, Douglas Sedlak and Barry Wilhide on behalf of American Express and IDS Life approached Robert and Beverly Boehm in order to do a financial and insurance analysis and asked the Plaintiffs questions relating to their current financial status, existing life insurance coverage, and insurance and financial goals. Testimony of Beverly Boehm, Trial Transcript, pp. 509:24–511:8 (“He asked if we could do the financial analysis. They gathered information for that to run the analysis. So they were asking a lot of questions and financial information that they needed to run the projections.”)

2. As a result of the financial analysis, a recommendation was made on or about November 28, 1986 for the Boehms to cash-surrender their existing Prudential Insurance policies and replace them with a $100,000 universal life insurance policy from IDS Life. The policy provided $100,000 on Mr. Boehm and $100,000 on Mrs. Boehm. See Trial Exhibit 2, Bates No. 000125; Testimony of Beverly Boehm, Trial Transcript, pp. 511:9–512:9.

3. To get the policy started the Boehms were directed to deposit a “start-up fee” of $2,000 into the policy. See Trial Exhibit 6; Testimony of Beverly Boehm, Trial Transcript, pp. 514:17–20.

4. The Boehms were informed that the premium payments were $50 per month thereafter. See Testimony of Beverly Boehm, Trial Transcript, pp. 516:17–19.

5. Between December 1986 and January 1996, the Boehms were billed monthly in the amount of $50.00. See Testimony of Beverly Boehm, Trial Transcript, pp. 516:20–516:25.

6. The Boehms paid the $50.00 monthly bills to IDS for the 1986 Policy. Id.

7. In November of 1995, the Boehms were called on the telephone by James Day, who represented that he was their new financial advisor and that he wanted to review their 1986 UL policy with IDS Life since he believed it may need to be replaced. See Testimony of Beverly Boehm, Trial Transcript, pp. 517:11–518:1 (“It was like around December, [Day] called, and he said that we would need to have a meeting, that the policy, the Universal Life policy was going to be obsolete and outdated, and we really needed to set a meeting. He'd really like to talk with us.”)

8. The Boehms scheduled a meeting with James Day in late 1995, but it had to be rescheduled. They were unable to meet until Monday January 29, 1996. See Testimony of Beverly Boehm, Trial Transcript, pp. 518:2–518:14.

9. At the meeting on January 29, 1996, James Day explained that the 1986 UL was outdated and had to be replaced. See Testimony of Beverly Boehm, Trial Transcript, pp. 521:18–522:2 (“Q. What did he tell you about your 1986 UL Policy at that meeting? A. He explained to us that the Universal Life policy from '86 was going to be obsolete. He was telling us that was going to be like in jeopardy. He could take the cash value of the Universal Life policy and roll it into a new vehicle, which would then be the Variable he then proposed.”).

10. At the meeting on January 29, 1996, James Day recommended that the Boehms replace the 1986 $100,000 UL policy with a new product offered by IDS Life, a variable universal life insurance policy (VUL) that would also provide $100,000 in coverage on Mr. Boehm and $100,000 in coverage on Mrs. Boehm through a spousal rider, just like the 1986 UL Policy.

A. Well, I remember there being a cash value from the UL that he had said would be in jeopardy if we didn't move it. So, he said he could move that, I believe, $5,400 over, into the cash value of this policy, and that cash value wouldn't be lost.

The payments—for the monthly payments I had told him they were $50 in the other policy. He said this would be $50 also. So, this would be $50.

I said but it was a $100,000 policy. He said it would be $100,000 for Robert. But I think I was a rider on the other policy. He said you'll still be a rider on this policy. So, I says it would be $50 a month. He said that was the yearly figure, $600. It was 50 times 12 for a year. He was showing the yearly.

See Testimony of Beverly Boehm, Trial Transcript, pp. 524:13–525:5[.]

11. James Day explained that the monthly cost of the new 1996 VUL policy would remain the same at $50 per month. Also, they should cash-surrendering [sic] the 1986 UL policy and rolling-over the cash-surrender amount of $5,400 into the new 1996 VUL policy. The cash-surrender amount would cover the start-up fee. See Testimony of Beverly Boehm, Trial Transcript, pp. 524:13–525:5[.]

12. In conformation [sic] of his sales representations, James Day completed the premium payment amount section in the application for the new 1996 VUL policy in the amount of $600 per year. (A premium payment of $600 per year equals 12 monthly payments of $50). See Testimony of Beverly Boehm, Trial Transcript pp. 526:12–20; 537:4–18; Trial Exhibit 62.

13. James Day also completed the application sections indicating that the 1986 UL would be replaced by the new 1996 VUL policy and that 100% of the cash-surrender amount would be transferred from the 1986 UL policy into the new 1996 VUL policy. See Testimony of Beverly Boehm, Trial Transcript pp. 537:19–538:7; Trial Exhibit 62.

14. Since the Boehms were not informed by James Day to bring their financial information with them to the meeting, the application could not be completed. See Testimony of Beverly Boehm, Trial Transcript pp. 526:18–527:5.

15. James Day then had the application highlighted and mailed to the Boehms as part of a packet of documents that required the Boehms to complete and/or sign and return. See Trial Exhibit 101; Testimony of Beverly Boehm, Trial Transcript pp. 526:15–18; 532:9–533:1.

16. The Boehms read and completed the application and signed where indicated. See Trial Exhibit 101; Testimony of Beverly Boehm, Trial Transcript pp. 526:15–18; 532:9–533:1.

17. The Boehms also read the information completed by James Day on the application regarding the premium payment amount of $600 annually and the transfer of the cash-surrender amount from the 1986 UL policy. See Testimony of Beverly Boehm, Trial Transcript pp. 537:19–538:7.

18. Included in the packet of information was also a copy of a sales illustration for the policy, which showed payments of $600 per year, with an initial dump-in of the $5,400. See Trial Exhibit 101; Testimony of Beverly Boehm, Trial Transcript pp. 532:3–532:8.

19. At trial, Jack Kis[p]ert, a Vice President of IDS Life, testified that the dollar amounts set forth on the sales illustration had a ZERO percent chance of working as set forth on the illustration. Specifically, Kispert testified as follows:

Q. IDS Life has no ability to project the future performance of this policy with any accuracy beyond one year. Isn't that true?

A. We can't even—for the overall performance, we can't predict it for more than one day because it's invested in the underlying funds.

That's the cash value. We can predict death benefits that could be in effect because this has a death benefit guarantee feature in it.

Q. So the Boehms—slide it up. Let me rephrase. It would be wrong of the Boehms to believe that this policy is actually going to grow in value as set forth on this illustration. Is that true?

A. It's not wrong for them to believe that. The illustration also includes the zero percent rate of return to give them an idea of the range of possibilities to make an informed decision.

* * *

Q. What is the likelihood or chance that this illustration is going to work exactly as set forth for the first 20 years?

A. You asked what's the likelihood that this would be exactly as illustrated?

Q. Yes.

A. Zero. Because he might have earned ten percent one day. He might have better than ten percent. One day less than ten percent.

So if you say is this going to be exactly true? No, it will never happen precisely like that. It may be better. It may be worse.

Q. So, it will never happen as illustrated. Is that correct?

A. That's correct. Because it's invested in the market. It's a hypothetical performance. It is not actual values. We can't predict the future on investments.

See Testimony of Jack Kispert, Trial Transcript, pp. 153:7–155:11.

20. Jack Kispert further confirmed that even at the ten percent investment rate set forth on the illustration mailed to the Boehms, the policy would not remain in force until age [ ] 100.

Q. The Boehms put in $50 a month. Any possibility

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