Jefferson-Pilot Life Ins. Co. v. Spencer

• Decision Date: 18 May 1993
• Docket Number: No. 9221SC178.,9221SC178.
• Parties: JEFFERSON-PILOT LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. Ann L. SPENCER, Defendant-Appellant.
• Court: North Carolina Court of Appeals

429 S.E.2d 583

110 N.C. App. 194

JEFFERSON-PILOT LIFE INSURANCE COMPANY, Plaintiff-Appellee, v. Ann L. SPENCER, Defendant-Appellant.

No. 9221SC178.

Court of Appeals of North Carolina.

May 18, 1993.

Bell, Davis & Pitt, P.A., by Stephen M. Russell and D. Anderson Carmen, Winston-Salem, for plaintiff appellee.

Bowden & Rabil, P.A., by S. Mark Rabil, Winston-Salem, for defendant appellant.

COZORT, Judge.

Plaintiff insurance company filed an action to determine the rights to proceeds of a life insurance policy. Defendant, the wife of the insured, filed counterclaims grounded in (1) unfair and deceptive trade practices, (2) fraud, (3) negligence and (4) breach of contract, contending she would have been the beneficiary of the policy if not for the providing of false information by an employee of the insurance company to the insured. The trial court granted summary judgment on all of defendant's counterclaims, ruling that the proceeds of the policy be distributed to the insured's business, the designated beneficiary in the policy, and not to his wife, the defendant. We reverse the trial court's granting of summary judgment on the unfair and deceptive trade practice counterclaim and affirm summary judgment on the remaining counterclaims. The facts follow.

In March 1974, John K. Spencer, Jr., purchased a $100,000 life insurance policy, No. XXXXXXXXX (No. 612), from Jefferson-Pilot Life Insurance Company (Jefferson-Pilot). Ann Lanier Spencer, John Spencer's wife, was the beneficiary of the policy. From 1974 to his death on 10 July 1988, John Spencer was the president and manager of a family owned business, Winston Steam Laundry, Inc. (Laundry). Other family members owning stock in the Laundry were John's mother, Kathleen H. Spencer; John's two brothers, C. Huntley Spencer and James Y. Spencer; and his first cousin, William O. Spencer, III. On 21 June 1974, John changed the beneficiary of Policy No. 612 from Ann Spencer to the Laundry. John then transferred ownership of Policy No. 612 to the Laundry on 3 July 1974.

In May 1975, John purchased another life insurance policy from Jefferson-Pilot, Policy No. 861155 (No. 155). John originally designated the Laundry as beneficiary; he changed the beneficiary to Ann Spencer in September 1975. In 1978, Wayne Sykes became the servicing agent for the Jefferson-Pilot policies John purchased. In 1979, John began experiencing health problems and sought a waiver of premium based upon disability. That same year, the Laundry ceased operating because of economic difficulties.

In September 1979, John telephoned Mr. Sykes to inquire about the ownership and beneficiary status of Policies No. 612 and No. 155. Mr. Sykes contacted the home office of the insurance company and requested the information. On 18 September 1979, Jefferson-Pilot responded by memorandum to Mr. Sykes' inquiry and stated incorrectly that "the beneficiary for Policy Number 832612 is Ann Lanier Spencer, wife of the Insured if living; otherwise the surviving lawful children of the Insured, share and share alike." Mr. Sykes then relayed the incorrect information to John.

Two years later, in January 1981, John again inquired as to the ownership and beneficiary status of Policy No. 612. Mr. Sykes again sought the information from the home office. On 22 January 1981, Jefferson-Pilot again responded incorrectly that Ann Spencer was the beneficiary of the policy. The incorrect information was relayed to John. In June 1981, Jefferson-Pilot denied John's application of waiver of premium; it later reversed that decision in December 1981. John suffered a stroke in December 1982. While he was in the hospital recovering from the stroke, John told Ann, "I have two life insurance policies.... Don't forget to look into it.... They are one hundred thousand dollars each." At some later date when John was again hospitalized, he told Ann in the presence of at least two of their children, "Don't forget that there are two insurance policies." On 23 June 1983, Jefferson-Pilot informed William Spencer, III, John's cousin and a Laundry shareholder, that the Laundry was the beneficiary of Policy No. 612. John died in July 1988.

On 16 November 1990, Jefferson-Pilot filed interpleader and declaratory judgment actions to determine the rights of Ann Spencer and the Laundry to the proceeds of Policy No. 612. Proceeds from Policy No. 155 were paid to Ann Spencer and Policy No. 155 is not at issue in this case. Ann Spencer filed an answer and counterclaims against Jefferson-Pilot and Sykes alleging (1) unfair and deceptive trade practices, (2) fraud, (3) negligence, and (4) breach of contract. Jefferson-Pilot and the Laundry moved for summary judgment. Judge Peter Hairston granted the motions for summary judgment, allowed the interpleader action, and ordered payment of the policy proceeds to the clerk of court for distribution to the Laundry. Defendant Ann Spencer appeals.

Summary judgment is appropriate if there are no genuine issues of material fact and any party is entitled to judgment as a matter of law. N.C.Gen.Stat. § 1A-1, Rule 56 (1990). If the moving party presents evidence to negate an essential element of a claim, the non-moving party may not rest upon the allegations or denials in her pleadings, but must affirmatively take steps to show that there is a genuine issue for trial. If the non-moving party fails to meet her burden, summary judgment is proper. Id. On appeal, defendant Ann Spencer argues that the trial court erred in granting summary judgment because there were genuine issues of material fact as to each of her claims. We address defendant's unfair or deceptive trade practice claim first. Specifically, defendant argues that Jefferson-Pilot's misrepresentations to John that she was the beneficiary of Policy No. 612 constituted an unfair or deceptive trade practice. N.C.Gen.Stat. § 58-63-15(1) (1991) provides that "making ... any ... statement misrepresenting the terms of any policy issued ... or the benefits or advantages promised thereby" is an unfair and deceptive act or practice in the business of insurance. A violation of § 58-63-15 as a matter of law constitutes an unfair and deceptive trade practice in violation of N.C.Gen.Stat. § 75-1.1 (1988). Pearce v. American Defender Life Ins. Co., 316 N.C. 461, 470, 343 S.E.2d 174, 179 (1986). To avoid summary judgment, defendant must show (1) that the representations made by Jefferson-Pilot had the capacity or tendency to deceive; and (2) that she suffered actual injury as a proximate result of Jefferson-Pilot's misrepresentation. Id. at 470-71, 343 S.E.2d at 180. Defendant need not show that the statements were made with the intent to deceive. Forbes v. Par Ten Group, Inc., 99 N.C.App. 587, 601, 394 S.E.2d 643, 651 (1990), disc. review denied, 328 N.C. 89, 402 S.E.2d 824 (1991).

Since there is no dispute between the parties as to the falsity of Jefferson-Pilot's representations, we must focus on the element of reliance. This Court addressed a similar factual situation in Pearce, in which the wife of a deceased United States Air Force pilot sued the American Defender Life Insurance Company alleging unfair trade practices, breach of contract, breach of fiduciary duty, negligence, fraud, and breach of duty to investigate claims in a fair and equitable manner. After her husband's death in 1979, American Defender paid plaintiff the proceeds of a $20,000 life insurance policy purchased in 1968. The company refused to pay proceeds under a $40,000 accidental death rider because the rider excluded coverage for death occurring while the insured was a member of an aircraft flight crew. The trial court granted American Defender's motion to dismiss; the Court of Appeals vacated and remanded the action. Pearce, 316 N.C. at 465, 343 S.E.2d at 177 (citing Pearce v. American Defender Life Ins., Co., 62 N.C.App. 661, 303 S.E.2d 608 (1983)).

On remand, plaintiff presented evidence that in response to her husband's coverage inquiry in 1971, American Defender stated that the basic policy was "in full force and effect regardless of his occupation," and that the accidental death rider would be in force if his death occurred while he was in the Armed Forces, but not as a result of an act of war. Id. at 463-64, 343 S.E.2d at 176. Plaintiff further presented evidence of a conversation with her husband in which he stated to her that "he knew he was covered, and that while he was on flying status the accidental death, or ... double indemnity, was in effect, and that she didn't need to worry about it." Id. at 471-72, 343 S.E.2d at 180. In the same conversation, plaintiff's husband stated that "he had inquired about it when he went on to flying status, and he had been made aware by the company, he had checked into it and that he was covered." Id. at 472, 343 S.E.2d at 180. At the close of plaintiff's evidence, the trial court directed verdict for the defendant on the fraud and unfair trade practices claims. The jury found coverage under the accidental death rider, but the trial court allowed American Defender's motion for judgment notwithstanding the verdict, and this Court affirmed. Id. at 465, 343 S.E.2d at 177 (citing Pearce v. American Defender Life Ins. Co., 74 N.C.App. 620, 330 S.E.2d 9 (1985)).

On appeal, the North Carolina Supreme Court considered only the breach of contract, fraud, and unfair trade practice claims. The Court found insufficient evidence to support the first two claims. As to the unfair trade practices claim, the Court reversed, finding that plaintiff had presented sufficient evidence of a deceptive statement made by the defendant, detrimentally relied upon by plaintiff's husband, and proximately causing injury to plaintiff. The Court rejected defendant's contention that the above noted conversation between plaintiff and her husband was hearsay, reasoning that the deceased's state of mind, his belief as to the extent of his life insurance coverage, and the basis of that...