Dall v. Am. Gen. Life & Accident Ins. Co.

• Decision Date: 03 February 2012
• Docket Number: Case No. 4:11CV592 CDP.
• Citation: 858 F.Supp.2d 1019
• Court: U.S. District Court — Eastern District of Missouri
• Parties: Natasha DALLAS, Plaintiff, v. AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE CO., Defendant.

858 F.Supp.2d 1019

Natasha DALLAS, Plaintiff,

v.AMERICAN GENERAL LIFE AND ACCIDENT INSURANCE CO., Defendant.

Case No. 4:11CV592 CDP.

United States District Court,

E.D. Missouri,

Eastern Division.

Feb. 3, 2012.

David C. Knieriem, David C. Knieriem, St. Louis, MO, for Plaintiff.

Adam D. Hirtz, Husch Blackwell, LLP, St. Louis, MO, for Defendant.

MEMORANDUM AND ORDER

CATHERINE D. PERRY, District Judge.

Plaintiff Natasha Dallas applied for a life insurance policy on her father's life when she was employed as an agent for defendant American General Life and Accident Insurance Company. She set up her initial premium payment as an automatic withdrawal from her bank account, but the initial withdrawal failed. Dallas's father then died, after which Dallas made the initial premium payment. After American General refused her request for coverage because the initial premium was not paid until after the insured's death, Dallas brought this suit. The parties have filed cross-motions for summary judgment. Because the undisputed evidence demonstrates that the insurance policy does not provide coverage if the initial premium has not been paid, I conclude that the policy was not effective at the time of Walker's death. I will therefore grant defendant's motion for summary judgment as to all claims.

Background

From October 26, 2009 through November 29, 2010, plaintiff Dallas was employed as an insurance agent for American General. On May 25, 2010, Dallas applied for a life insurance policy on her father, Alvin Walker's, life. It was a ten-year, term life insurance policy with a total benefit of $100,000. Dallas was listed as the beneficiary, and the monthly premium was $142.75, although it was increased to $196.30 on June 7, 2010. The policy was issued with a policy date of June 28, 2010.

As part of the application, Dallas executed an Automatic Bank Check authorization agreement (ABC agreement). This permitted American General to debit the monthly premium payment from a designated bank account. On the form, Dallas reported her checking account number incorrectly, and she also listed her father as the account holder. Because the account number was wrong, the initial ABC premium payment failed, and American General sent notification of this failure to Walker (as the listed account holder) on July 4, 2010. Dallas learned about the failed initial premium payment on July 13, 2010, and Walker died of a heart attack on July 29, 2010.

Dallas submitted a claim under the life insurance policy to American General on August 2, 2010. She then sent one month's payment to American General on August 20, 2010, and she sent another month's payment on August 21, 2010. On November 5, 2010, American General refunded those payments with an explanation that premium payments are not accepted after the insured's death, and American General formally denied her claim for benefits on January 21, 2011.

As a basis for its denial of the claim, American General explained that a policy does not become effective until the first premium payment is made, and that it is their policy not to accept premium payments after an insured's death. Dallas, as an agent for American General, had access to internal documents regarding the due dates for premium payments. Her computer program showed a “PNO lapse date” of August 27, 2010 on one document and August 29, 2010 on another. She argues that this lapse date allowed the initial premium to be paid at any time before that deadline, with the policy then becoming effective as of the original issue date. A representative of American General, however, testified during a deposition that this lapse date merely signified the time by which an applicant could make an initial payment after the first attempt failed, without having to go through the entire application process again, and that, regardless, the policy would not become effectiveuntil the date on which the initial premium payment was made.

The Insurance Policy

Several provisions of the insurance policy are at issue regarding the requirements for the initial premium payment. The policy lists the named insured as Alvin Walker, and the face amount of the policy is $100,000. It also states that the policy date is June 28, 2010. The policy explains that the “policy date” is used “to determine premium due dates, Policy years and Policy anniversaries.”

Under the section of the policy entitled “Paying Premiums,” the policy states: “The initial premium is due on the policy date.... Each premium must be paid on or before its due date.” It also contains two provisions regarding missed payments:

Grace Period: If a premium, other than the Initial Premium, has not been paid on its due date, Your Policy will remain in force for a Grace Period of 31 days (emphasis added).

Lapse: If any premium is not paid before the end of its Grace Period, this Policy will lapse. The date of lapse is the date on which the unpaid premium was due. Lapse will terminate this policy unless it is later reinstated.

The policy also contains a general provision stating that “[t]his contract is made in consideration of Your application and the payment of premiums as provided.”

In addition to the insurance contract itself, the terms in the ABC authorization agreement are also part of the policy. The agreement sets out the terms for making payments by automatic debit and states: “I (we) understand that no insurance applied for will become effective unless the Company issues a policy from the application for this policy, the first premium is paid, and any other terms and conditions of the policy are met.”

Discussion

In determining whether summary judgment should issue, I must view the facts and inferences from the facts in the light most favorable to the nonmoving party, here plaintiff. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). The moving party has the burden to establish both the absence of a genuine issue of material fact, and that it is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 247, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). Once the moving party has met this burden, the nonmoving party may not rest on the allegations in its pleadings but by affidavit or other evidence must set forth specific facts showing that a genuine issue of material fact exists. Fed.R.Civ.P. 56(e).

Under Missouri law, which applies to this diversity case, the rules governing the interpretation of insurance polices are well settled. Columbia Mut. Ins. Co. v. Schauf, 967 S.W.2d 74, 77 (Mo.1998) (en banc). A court must apply the general rules of contract construction when interpreting an insurance policy, because insurance policies are contracts. Todd v. Mo. United Sch. Ins. Council, 223 S.W.3d 156, 160 (Mo.2007) (en banc). When interpreting a contract, a court must give the contract's terms their plain and ordinary meaning, unless a term is ambiguous. Farmland Indus., Inc. v. Republic Ins. Co., 941 S.W.2d 505, 508 (Mo.1997) (en banc); Peters v. Employers Mut. Cas. Co., 853 S.W.2d 300, 301 (Mo.1993) (en banc). A term's plain and ordinary meaning is the meaning that an average layperson would give the term. Farmland Indus., Inc., 941 S.W.2d at 508. In addition, a court “should not interpret policy provisions in isolation but rather evaluate policies as a whole.” Ritchie v. Allied Prop. & Cas. Ins. Co., 307 S.W.3d 132, 135 (Mo.2009). Finally, in interpreting an insurance contract, the court must “endeavor to give each provision a reasonable meaning and to avoid an interpretation that renders some provisions useless or redundant.” Dibben v. Shelter Ins. Co., 261 S.W.3d 553, 556 (Mo.Ct.App.2008).

A term is ambiguous only if the terms are “reasonably and fairly open to different constructions, and there is duplicity, indistinctness, or uncertainty of meaning.” Miller's Classified Ins. Co. v. French, 295 S.W.3d 524, 526 (Mo.Ct.App.2009) (citations and internal quotation marks omitted). When an ambiguity exists in an insurance policy, the court must interpret the policy in favor of the insured. Todd, 223 S.W.3d at 160. If, however, the policy is unambiguous, the court must enforce the contract's terms as written. Id.

Coverage Under the Life Insurance Policy

Generally, to establish coverage under a life insurance policy under Missouri law, the insured must show: “(1) issuance and delivery of the policy; (2) payment of the premium; (3) a loss caused by a peril insured against; and (4) notice and proof of loss to the insurer.” Valentine–Radford, Inc. v. Am. Motorists Ins. Co., 990 S.W.2d 47, 51 (Mo.Ct.App.1999). The element at issue in this case is the payment of the premium, specifically whether it must be paid before the insured's death in order for the policy to become effective.

The language in the life insurance policy at issue is unambiguous: the policy could not become effective until the initial premium was paid. The policy itself states that the “initial premium is due on the policy date,” and that “[e]ach premium must be paid on or before its due date.” Though the policy provides for a grace period of thirty-one days and corresponding lapse date for missed premium payments, those provisions explicitly exclude the initial premium payment. Thus, by the terms of the insurance policy itself, the initial premium must be paid on the policy date, which was June 28, 2010 in this case. There is not an exception or grace period for the requirement of an initial...