Koger v.Harford Life Ins.

• Decision Date: 29 August 2000
• Citation: 28 S.W.3d 405
• Parties: (Mo.App. W.D. 2000) Frank W. Koger, Appellant v. Hartford Life Insurance Company, Respondent WD57544 0
• Court: Missouri Court of Appeals

28 S.W.3d 405 (Mo.App. W.D. 2000)

Frank W. Koger, Appellant v. Hartford Life Insurance Company, Respondent

WD57544

Missouri Court of Appeals Western District

08/29/2000

Appeal From: Circuit court of Jackson County, Hon. Jay A. Daugherty

Counsel for Appellant: Dale K. Irwin and Robert Plotkin

Counsel for Respondent: Andrew McCue and David A. Jones

Opinion Summary: Life insurance policyholder's policy was transferred to Hartford Life Insurance Company after Fidelity Bankers Life Insurance Company was placed into receivership. Policyholder declined to increase his premium, as suggested by Hartford in a letter sent to thousands of policyholders. Hartford debited policyholder's checking account for the increased amount. Policyholder filed a petition for various claims as well as a petition for class certification. The circuit court dismissed policyholder's petitions as to all counts except the count for breach of good faith and fair dealing, granted summary judgment to Hartford on policyholder's claim of breach of good faith and fair dealing, and overruled policyholder's motion for class certification. Policyholder appealed.

Court holds: (1) The policyholder's claim of injury is not typical of the proposed class and, therefore, is not representative of the proposed class. (2) The policyholder did not adequately plead claims of breach of fiduciary duty and fraud. (3) The trial court was correct in granting summary judgment to Hartford on policyholder's claim of breach of the duty of good faith and fair dealing since policyholder was unable to show how Hartford breached this duty to him or the others he attempted to represent in the class. (4) The policyholder's motion for leave to file a second amended petition was properly denied as to all claims except conversion. (5) The case is remanded with instructions to allow policyholder leave to amend his first amended petition as to conversion claim. (6) The policyholder cannot seek punitive damages for claims he was not entitled to submit for actual damages.

Harold L. Lowenstein

FACTS

In 1983, Appellant Frank W. Koger ("Koger") purchased and was issued a flexible premium adjustable life insurance policy by Fidelity Bankers Life Insurance Company ("Fidelity"). The policy provided a death benefit of $500,000.00 and a maturity date of June 15, 2025. The policy was designed to work as follows: The policyholder had the right to determine the size of the monthly premium to be paid on the policy, with certain limitations. At the very least, the policyholder had to pay enough to cover the "cost of insurance," an amount determined by Fidelity, which was supposed to be the actual monthly cost of the insurance provided by the policy. Fidelity had the right to periodically adjust the cost of insurance, which became progressively higher as the insured became older. Fidelity placed any amounts paid in excess of the cost of insurance in a "cash value account" on which Fidelity paid a rate of interest that fluctuated with the market. The policy would terminate if the premium paid plus the policy's cash value was insufficient to cover the monthly cost of insurance.

In 1991, Fidelity was placed in receivership. In March 1992, Defendant-Respondent Hartford Life Insurance Company ("Hartford") signed an agreement with the Fidelity receiver under which Hartford would assume the policies of Fidelity policyholders who so elected. Koger and thousands of other policyholders elected to have Hartford assume their policies. The policy, after assumption by Hartford, contained essentially the same provisions as the original policy issued by Fidelity.

On February 3, 1994, Hartford sent to Koger a letter (the "Premium Increase Letter") which stated in pertinent part as follows:

Now that your policy has been transferred to Hartford Life we have had the opportunity to review your current situation. We have found that, due to the interest rate decline and the impact of the conservation proceedings at the Fidelity Bankers Life, your policy, like many others, now has a cash value that may not be sufficient to maintain insurance protection for its full term. In order to enhance your universal life policy's cash value, Hartford Life suggests you increase your premium to $900.00 beginning in April. This change will be made unless you notify us by April 1. Of course, you may continue at any premium level you choose. However, your new suggested premium will improve your policy's cash value and help ensure that your future cash values and insurance match your policy's original objectives.

More than 16,000 policyholders received a letter substantially similar to that just detailed. Nearly 13,000 of those policyholders elected to be billed an increased premium.

In a letter dated February 23, 1994, Koger replied to Hartford and requested that Hartford "not raise my premium until I specifically direct that it be done." As the result of an administrative mistake, Hartford did not follow Koger's instructions and began debiting his checking account an additional $150.00, raising the deduction from $750.00 to $900.00, in March 1994.¹ In some sixteen months, Hartford erroneously debited a total of $2,400.00 from Koger's checking account.

On March 7, 1995, Koger filed his original petition in this action. After Hartford's motion for a more definite statement was granted, Koger filed a first amended petition on January 27, 1996. Koger alleged Hartford employed "an unlawful scheme to cause thousands of its policyholders to pay increased premiums based on, among other things, misleading solicitations." Koger brought the action "on behalf of himself and all other persons who purchased Flexible Premium Adjustable Life Insurance policies from Fidelity Bankers Insurance Company and who ...elected to have Hartford assume those polices." Koger asserted the following claims: breach of fiduciary duty, fraud, breach of duty of good faith and fair dealing, negligent misrepresentation, rescission and declaratory relief and a request for an accounting. Additionally, on February 9, 1996, Koger filed a motion for class certification relating to the above claims.

On February 20, 1996, Hartford filed a motion to dismiss Koger's amended petition for failure to state a claim upon which relief could be granted. On August 12, 1996, Koger filed a motion requesting the appointment of a special master to oversee the case, which motion was granted on October 4, 1996. In December 1996, the trial judge granted Hartford's motion to dismiss Koger's amended petition as to all counts excluding the count for breach of good faith and fair dealing.

On January 31, 1997, Hartford filed a motion for summary judgment as to Koger's claim for breach of good faith and fair dealing, the only remaining claim asserted in the first amended petition. Hartford asserted Koger could not prove Hartford acted in bad faith with respect to one of the express obligations set forth in the written contract, and therefore had no claim for breach of good faith and fair dealing. On February 18, 1997, Hartford filed a second motion for summary judgment as to Koger's claim for breach of good faith and fair dealing, this time asserting Koger could not prove damages even if he could prove liability at trial. Hartford asserted, and it is uncontested, that on February 17, 1997, a check was tendered to Koger in the amount of $2,706.13, the amount of the erroneous debits from Koger's checking account plus interest, an amount which satisfied all of Koger's pleaded actual damages.

On March 13, 1997, the Special Master assigned by the trial judge held hearing on Koger's motion for class certification and Hartford's first and second motions for summary judgment. The Special Master issued a report which included recommendations to the trial court for resolution of those issues on December 18, 1998. The Special Master advised as follows:(1) Hartford's first motion for summary judgment should be overruled.

(2) Hartford's second motion for summary judgment should be sustained.

(3) Koger's motion for class certification should be overruled.

Koger filed objections to the report of the Special Master on January 20, 1999. Additionally, Koger offered to the court two affidavits, the first an affidavit given by Koger himself and the second by Alan Nadolna, a financial planner. Each of the affidavits propounded upon the deceptiveness of the Premium Increase Letter. Hartford filed objection as to each of the affidavits.

Koger motioned for leave to file a second amended petition on February 11, 1999. The second petition added as "supplemental allegations concerning the unlawful acts against plaintiff," Hartford's conduct regarding the unauthorized withdrawals from Koger's checking account. The second petition also contained "additional individual claims" of conversion/theft, breach of fiduciary duty, prima facie tort and breach of contract.

On June 23, 1999, the trial judge issued its order and judgment which fully disposed of all claims and motions relating to this case. The court ordered as follows:

(1) Koger's objections to the report of the Special Master were overruled.

(2) The court adopted the findings of fact made by the Special Master.

(3) Hartford's objections to the affidavits of Alan Nadolna and Frank Koger were sustained.

(4) Hartford's first and second motions for summary judgment were sustained.

(5) Koger's motion for class certification was overruled.

On appeal, Koger asserts the trial court erred by:

(1) Granting Hartford's second motion for summary judgment based on inability to prove damages because Koger asserted a claim for both compensatory and punitive damages and only the claim for compensatory damages had been extinguished;

(2) Denying Koger leave to file his second amended petition because amendment should be liberally granted and there would be no prejudice to Hartford;

(3) Dismissing Koger's claim for breach of fiduciary duty because...