Lebbin v. Transamerica Life Ins. Co.

• Court: U.S. Court of Appeals — Eleventh Circuit
• Writing for the Court: PER CURIAM.
• Decision Date: 02 August 2021
• Docket Number: 20-11756
• Citation: Lebbin v. Transamerica Life Ins. Co., 20-11756 (11th Cir. Aug 02, 2021)
• Parties: GARY H. LEBBIN, Plaintiff, v. TRANSAMERICA LIFE INSURANCE COMPANY, Defendant-Appellant. THE LEBBIN-SPECTOR FAMILY TRUST BY AND THROUGH ITS TRUSTEES ROGER M. LEBBIN AND CAROLE SUE LEBBIN, Plaintiff - Appellee,

GARY H. LEBBIN, Plaintiff, THE LEBBIN-SPECTOR FAMILY TRUST BY AND THROUGH ITS TRUSTEES ROGER M. LEBBIN AND CAROLE SUE LEBBIN, Plaintiff - Appellee, v. TRANSAMERICA LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 20-11756

United States Court of Appeals, Eleventh Circuit

August 2, 2021

DO NOT PUBLISH

Appeal from the United States District Court for the Southern District of Florida D.C. Docket No. 9:18-cv-80558-DMM

Before WILSON, MARTIN, and ROSENBAUM, Circuit Judges.

PER CURIAM.

Transamerica Life Insurance Company appeals the district court's order granting summary judgment in favor of the Lebbin-Spector Family Trust (the "Trust") and awarding the Trust $2.53 million in damages. According to Transamerica, the life insurance policies at issue terminated in 2017, and it is not required to pay out any death benefits. According to the Trust and the district court, the terms of the life insurance policies are ambiguous and must be construed against Transamerica. After careful review, we reverse the district court's order granting summary judgment in favor of the Trust on the breach of contract claim and remand to the district court for grant of summary judgment in favor of Transamerica on that claim. Having concluded there was no breach of contract, we also vacate the court's order awarding the Trust damages.

I.

This case involves two "second-to-die" life insurance policies that jointly insured Gary Lebbin and his wife Bernice, and had a combined coverage amount of $3.2 million. These types of policies insure the lives of two people and pay a death benefit upon the death of the second insured to die.

In 1990, Gary purchased a $2 million policy (the "1990 Policy"). Gary and Bernice, the Joint Insureds, both turned 73 that year. The owner and beneficiary was the Trust with Gary's children, Roger and Carole Sue Lebbin, as trustees. Gary purchased another policy the following year in the amount of $1.2 million (the "1991 Policy"). The Trust was again the owner and beneficiary. Both Policies had identical payout provisions. Transamerica agreed to

pay the death benefit to the Beneficiary if both Joint Insureds die before the policy anniversary nearest Joint Equal Age 100. . . . If both or either Joint Insured is living at the policy anniversary nearest Joint Equal Age 100 we will pay the net cash value, if any, to you.

The Policies defined "Joint Equal Age" as "the adjusted age of the Joint Insureds which reflects a risk that would be equivalent to two people of the same age, class of risk and smoking status." When the 1990 Policy was issued, it listed the Joint Equal Age as 73, and when the 1991 Policy was issued, it listed the Joint Equal Age as 74. The Policies also contained identical termination provisions. "The policy will terminate at the earliest of," in relevant part, "the policy anniversary nearest Joint Equal Age 100."

Over almost three decades, the Trust paid Transamerica more than $1.5 million in Policy premiums. In 2015, Bernice passed away at the age of 97.

At some point, the trustees learned the 1990 Policy and the 1991 Policy would terminate on July 9, 2017, and December 20 2017, respectively, unless Gary passed before then. Transamerica stated that when the Policies terminated on those dates, it would pay only the accumulated cash value in the Policies to the Trust. Because Gary lived past the respective termination dates-he turned 100 on September 6, 2017 and is now almost 103-the Policies terminated. Transamerica issued checks to the Trust for $2, 574.47 and $55.18, the net cash values of each Policy.^[1]

In July 2017, the Trust, through Roger and Carol Sue as trustees (the "Plaintiffs"), sued Transamerica in the District of Maryland.^[2] The Plaintiffs alleged that Transamerica marked the Policies "as permanent coverage that would insure the Lebbins for life" and guarantee the Trust would receive death benefits. The complaint alleged, in relevant part, that Transamerica breached the Policies by terminating them in 2017.

As relevant to this appeal, both sides filed cross-motions for summary judgment. The Plaintiffs sought summary judgment on their breach of contract claim, while Transamerica sought summary judgment in its favor on all of the Plaintiffs' claims. Transamerica made several arguments, including that the Plaintiffs' claims were barred by the applicable statute of limitations and that the terms of the Policies clearly indicated their termination dates.

The district court granted summary judgment in favor of the Plaintiffs. With respect to the statute of limitations argument, the court first found (and the parties do not dispute on appeal) that the three-year statute of limitations under Maryland law applies to this case.^[3] Md. Code Ann., Cts. & Jud. Proc. § 5-101. The court also found that Maryland has adopted the discovery rule, which provides that a cause of action accrues "when a plaintiff in fact knows or reasonably should know of the wrong." Hecht v. Resol. Tr. Corp., 635 A.2d 394, 399 (Md. 1994).

The district court rejected what it described as Transamerica's "principal theory" concerning notice. Transamerica argued the cause of action accrued when Gary first received the Policies and the plain language of the Policies "did not include any reference to the 'permanent insurance' he was allegedly promised and which contradicted any promise that coverage would never terminate." The court said that if Gary understood the terms of the Policies to be consistent with the statements on which he relied when he purchased the Policies, "it would be unjust and unreasonable to hold the Trust accountable, at this time, for a disjunction that Gary did not perceive."

Transamerica's other theory was based on actual knowledge. It argued the Plaintiffs had actual knowledge of the Policies' termination dates based on Roger Lebbin's realization that the Policies would terminate when his parents reached age 100. Roger testified that the servicing agent for the Policies told him the Policies would terminate if Gary reached age 100. He expounded: "I think that was my day of reckoning. . . . I thought that the policy was a guarantee, an absolute certainty that it pays when the second to die passes away." Roger was then shown a June 10, 2014, email confirming his understanding as of that date that if one of his parents lived past 100, he would receive the cash value of the Policies rather than the multi-million-dollar death benefit. He went on to say: "This is what I referred to as my 'aha' moment. . . . It was a 'Houston, we have a problem' moment" because this would "defeat the whole purpose of the policy." Based on these facts, Transamerica argued the Plaintiffs had actual knowledge of the cause of action on June 10, 2014.

The district court also rejected this theory. It reasoned that "when the Policies were breached in this action necessarily depends on whether they were breached."

The court then proceeded to analyze the terms of the Policies, finding that because the term "adjusted" in the definition of Joint Equal Age was not defined, the definition of Joint Equal Age was ambiguous.^[4] Based on this ambiguity, the court adopted the Plaintiffs' "reasonable" proffered interpretation-that the term "adjusted" required Transamerica to independently perform an adjustment to Gary's and Bernice's ages and notify the Plaintiffs of the effect of that adjustment. And, because Transamerica did not do any such adjusting to Gary and Bernice's Joint Equal Age, the district court found Transamerica breached the Policies.^[5]

The district court then issued an order determining the damages to which Plaintiffs were entitled. The court rejected the Plaintiffs' theory of damages. Instead, it adopted Transamerica's theory, which proposed awarding the Trust the amount of the Policies less the amount of premiums-monthly mortality and expense charges-that would be required to keep the Policies active during Gary's remaining life expectancy. It then sua sponte calculated damages by using an "average yearly increase" methodology that estimated premiums and used Gary's estimated remaining lifespan, which assumed a shorter lifespan than Gary actually came to have. However, because no party had advanced this calculation and Gary's actual lifespan exceeded the estimate of his life expectancy, the court allowed additional briefing on the issue. Ultimately, the district court awarded the Plaintiffs $2, 530, 154 in damages.

Transamerica appealed from the final judgment and final order on damages. It makes several arguments in this appeal, including that the district court erred (1) by finding that the Plaintiffs' claims were not barred by the statute of limitations; (2) in interpreting the term Joint Equal Age in the Policies; (3) by declining to consider extrinsic evidence to resolve any alleged ambiguity in the Policies; and (4) by awarding the Trust over $2.5 million in breach of contract damages. We conclude the District Court did not err in finding the claims were not barred by the statute of limitations, but it erred in finding the term Joint Equal Age ambiguous.

II.

We review de novo the district court's grant of summary judgment to the Trust, including its application of the statute of limitations and its interpretation of a contract. M.H.D. v. Westminster Schools, 172 F.3d 797, 802 n.13 (11th Cir. 1999); Hegel v. First Liberty Ins. Corp., 778 F.3d 1214, 1219 (11th Cir. 2015). We apply the same legal standards applied by the district court in the first instance. Yarbrough v. Decatur Hous. Auth., 941 F.3d 1022, 1026 (11th Cir. 2019). Summary judgment should be granted only if there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a).

III.

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