Dolan v. Guarantee Trust Life Ins. Co, 3:05-CV-00147-CFB.
| Decision Date | 15 March 2007 |
| Docket Number | No. 3:05-CV-00147-CFB.,3:05-CV-00147-CFB. |
| Parties | Gayle R. DOLAN, Plaintiff, v. GUARANTEE TRUST LIFE INSURANCE COMPANY, Defendant. |
| Court | U.S. District Court — Southern District of Iowa |
Steven J. Havercamp, Stanley, Lande & Hunter, Davenport, IA, for Plaintiff.
Tonya Marie McCarty, McKnight, Kitzinger, McCarty & Pravdic, Chicago, IL, Robert T. Park, Snyder Schwarz Park & Nelson PC, Rock Island, IL, for Defendant.
RULING AND ORDER ON MOTION FOR SUMMARY JUDGMENT
The Court has before it Defendant Guarantee Trust Life Insurance Company's (GTL) Motion for Summary Judgment (Clerk's No. 16), filed October 22, 2006, challenging Plaintiff Gayle R. Dolan's claims.
Dolan filed her Complaint in the Iowa District Court for Clinton County on September 2, 2005, and GTL removed the case to this Court. Dolan asserts causes of action against GTL for breach of contract and bad faith denial of life insurance benefits. In its Motion for Summary Judgment, GTL challenges both claims on the basis that no genuine issue of material fact is in dispute and it is entitled to judgment as a matter of law.
Plaintiff filed a Resistance to the summary judgment motion; GTL filed a Reply; and Plaintiff filed a Surreply.
The case was referred on October 19, 2005, to a United States Magistrate Judge for the conduct of all further proceedings and the entry of judgment in accordance with 28 U.S.C. § 636(c), and the parties' consent. This matter is fully submitted. After carefully considering the evidence in the record and the parties' memoranda, the Court finds and holds as follows on the issues presented.
In determining whether to grant a defendant's motion for summary judgment, a court must first examine the record to see whether the defendant, "in depositions, answers to interrogatories, admissions, affidavits and the like, has demonstrated `the absence of a genuine issue of material fact'" and "entitlement to judgment as a matter of law." Beard v. Banks, ___ U.S. ___, ___, 126 S.Ct. 2572, 2578, 165 L.Ed.2d 697 (2006) (citing Fed.R.Civ.P. 56; Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986)). If the defendant has done so, the Court must next determine whether the plaintiffs have, "`by affidavits or as otherwise provided' in Rule 56 () `set forth specific facts showing that there is a genuine issue for trial.'" Id. (quoting Rule 56(e) (emphasis deleted)). If not, the court must enter judgment in the defendant's favor. See id.
To preclude entry of summary judgment, the nonmovant must make a showing sufficient to establish the existence of every element essential to his case, and on which he has the burden of proof at trial. Celotex, 477 U.S. at 322-23, 106 S.Ct. 2548; Laughlin v. Schriro, 430 F.3d 927, 928 (8th Cir.2005).
On a motion for summary judgment, the "evidence of the nonmovant is to be believed, and all justifiable inferences are to be drawn in [his] favor." Groh v. Ramirez, 540 U.S. 551, 562, 124 S.Ct. 1284, 157 L.Ed.2d 1068 (2004) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986)) (alteration revised); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986); Crossett Paper Mills Employees Fed. Credit Union v. Cumis Ins. Soc., Inc., 476 F.3d 578, 580 (8th Cir.2007).
The following facts are either undisputed or viewed in the light most favorable to Dolan, the nonmoving party.
On May 6, 1993, Jolene Starr, an insurance agent, applied for a life insurance policy from New York Life Insurance naming Kevin Dolan as owner and beneficiary, and his mother, Dorothy Goettsch, as the insured. Goettsch and her son wanted the policy, because the benefits would allow Kevin to buy out his five sisters' shares of the family farm when Goettsch died.
Mr. Dolan told Starr he wanted a life insurance policy insuring his life and naming his wife, Gayle, as beneficiary. If Mr. Dolan died, his wife could then use the benefits from the second policy to continue paying premiums for the New York Life policy.
Because of Mr. Dolan's health history, Starr could find only one acceptable life insurance policy for him. On July 30, 1993, Starr met with the Dolans and obtained information from Mr. Dolan to fill out the application for a life insurance policy with GTL. Mr. Dolan signed the application as the proposed insured. The application listed Gayle Dolan as the sole beneficiary. The application did not mention an automatic premium loan option, and Starr did not discuss, such an option with the Dolans. Mr. Dolan listed his name and address on the application as Kevin J. Dolan, 1970 280th Avenue, De Witt, Iowa 52742. (Pl.'s App. at 16.)
On August 20, 1993, Grinnell issued Policy Number GTL1098018, a whole life insurance policy, to Mr. Dolan as both the insured and the policy owner. The policy defined "owner" as, "the person who may exercise all policy privileges and rights while the insured is living." (Pl.'s App. at 39.) The policy provided that the owner may exercise all policy rights, "by making written request to us." (Pl.'s App. at 10.)
The policy had a full face value of $75,000 and a quarterly premium payment of $315.58. The policy stated the premiums were payable for the rest of Mr. Dolan's life.
On September 16, 1993, GTL sent Starr a copy of Mr. Dolan's life insurance policy to review and deliver to him. When Starr delivered the policy to Mr. Dolan, she explained about the premium structure and coverage, and that if, after reviewing the policy, Mr. Dolan had any problems or concerns about it, he must contact the insurance company within 20 days for a full premium refund. Starr testified she explained about the grace period and the importance of paying the premiums on time.
Under the heading "Grace Period," the policy stated as follows:
If you do not pay a premium on a premium due date, we will keep this policy and riders in force for a Grace Period of 31 days. We will mail you and any assignee shown on our records a notice of the amount of premium that must be paid to keep this policy in force beyond the end of the Grace Period.
In the subsection entitled, "Lapse and Reinstatement," the policy provided, "If a premium is not paid before the end of the 31 day Grace Period, this policy will lapse and no further premium payments may be made." Id. "Lapse" meant, "this policy is not in force, except as may be provided in the Policy Values section, because a premium was not paid when due." Id. In a subsection called, "Premium Due and Unpaid," the policy stated, "This policy will lapse, as of the premium due date, if the premium is not paid before the end of the Grace Period." Id. Unlike the subsection discussing the grace period, the provision describing lapse and reinstatement contained no notice provision.
If a policy lapsed, a policy owner could ask GTL to reinstate the policy to a premium paying basis. The policy defined "reinstatement" as meaning, "this policy is put back in force after it has lapsed." Id. at 9. To reinstate a policy, GTL required the owner's written request; proof acceptable to GTL of the insured's continued insurability; payment of all past due premiums, with interest, during the insured's lifetime; and payment of interest compounded annually on all past due premiums and any indebtedness according to the rates shown on the policy's schedule page. Id. at 11. The schedule for Mr. Dolan's policy showed the reinstatement rate was six percent per year. Id. at 7.
The policy allowed the owner to borrow up to the policy's available loan value. Policy loans included an option for automatic premium loans (APL), described as follows:
Automatic Premium Loans
You can arrange for an automatic premium loan if you asked for this option in your application, or if you write us and ask for this option after this policy has been issued. You can also write to us at any time and tell us you do not want this option ....
If you have elected this option and you have not paid the premium that is due before the end of the Grace Period, we will make a policy loan to pay the balance of the premium.
The APL provision required "enough loan value to pay at least a quarterly premium," or, "this policy will lapse." Id. The loan value was the surrender value determined as of the date to which the premium was paid.
The policy's schedule page listed the interest rate on an automatic premium loan as 7.40%, payable in advance on each policy anniversary. (Def.'s App. at 32.) If unpaid, the interest would be added to the loan.
Starr did not mention the automatic premium loan option when she delivered the policy to Mr. Dolan.
From the issuance Of the policy until August 20, 2000, the parties agree that the Dolans paid the policy premiums either by the initial premium-due date, or before the 31-day grace period had expired. (Def.'s App. at 30.)
Thomas Purtell, GTL's Assistant Vice President of Policy Accounting, testified in his affidavit that the company automatically generates premium notices through a computer-based billing program. He stated that on July 31, 2000, GTL's computerbased billing program automatically generated a premium notice with a due date of August 20, 2000, for Mr. Dolan's life insurance policy. (GTL Affidavit at ¶¶ 5-6, ll.) The record contains a "Life Premium Notice" for policy number GTL1098018 showing the quarterly amount of $315.58 was due August 20, 2000, and a mailing address of Kevin J. Dolan, 1970 280th Ave., De Witt, IA 52742. (Def.' Supp.App. at 6.)
Purtell testified that on August 30, 2000, because GTL had not received Mr. Dolan's premium payment due August 20, the company's computer system generated a premium reminder notice. According to Purtell, the insurer mailed all notices to Mr. Dolan at 1970...
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