Lin v. John Hancock Variable Life Insurance Company, B189108 (Cal. App. 4/30/2007)

• Decision Date: 30 April 2007
• Docket Number: B189108
• Court: California Court of Appeals Court of Appeals
• Parties: YANZI LIN et al., Plaintiffs and Appellants, v. JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY, Defendant and Respondent.

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YANZI LIN et al., Plaintiffs and Appellants, v. JOHN HANCOCK VARIABLE LIFE INSURANCE COMPANY, Defendant and Respondent.

B189108

Court of Appeals of California, Second Appellate District, Division One

April 30, 2007

NOT TO BE PUBLISHED

Appeal from a judgment of the Superior Court of Los Angeles County, No. GC034139, Jan A. Pluim, Judge. Reversed with directions.

Yanzi Lin and Marilyn Chen, in pro. per., for Plaintiffs and Appellants.

Barger & Wolen, John C. Holmes and Richard B. Hopkins, II for Defendant and Respondent.

JACKSON, J.^*

INTRODUCTION

Plaintiffs Yanzi Lin (Lin) and Marilyn Chen (Chen) appeal from a summary judgment in favor of defendant John Hancock Variable Life Insurance Company. We agree in part with their challenges to the summary judgment and therefore reverse it, with directions as to how to proceed as to plaintiffs' various causes of action.

FACTS

Lin and Chen, his wife, lived in Monterey Park. Lin operated an immigration consultation business in Monterey Park.

In early 2000, Jing Sun (Sun) approached Lin for assistance with her immigration status. During the course of assisting her, Lin and Sun became friends. Sun told him that after coming to the United States, she had become a licensed stockbroker and a life insurance agent. Sun urged Lin to purchase life insurance.

In May or June 2001, Lin called Sun, saying that he had made some money from his consulting business and was ready to do something. In meeting with Sun, he explained that his wife did not need life insurance, in that his retirement pension would cover her if something happened to him. Additionally, their daughter was grown with a graduate degree, so she did not need protection. Lin, who was then 57 years old, was interested in investing for retirement.

Sun recommended a variable life insurance policy from defendant. The policy would have a death benefit of $1 million. Sun said Lin would have to pay annual premiums of $30,000 for five years. She also said that age 70, he could borrow $500,000 against the policy, tax free, and he would not have to repay the loan. Sun did not tell him that the returns were not guaranteed and the policy would lapse if he did not continue paying after five years. She also did not tell him the cost of life insurance at his age or the commission that would be due.

Lin told Sun about his prior experience with MetLife. In 1988, an insurance agent whom he did not know approached him to sell him life insurance. At the time, he had just come to the United States as a student and understood nothing about insurance. The agent scared him by asking what would happen to his wife and daughter if he were in an accident. The agent said the monthly premium was $129.60, but he would only need to pay premiums for seven years. The dividend created from the premiums would be used to pay future premiums. In 1997, realizing that he had been paying premiums for over seven years, Lin had his daughter call MetLife to find out why he still had to pay on the policy. His daughter told him that MetLife said the dividend scale had changed and he had already withdrawn a dividend, so he would have to keep paying until 2001. He did not understand but kept paying.

Chen also spoke to Sun about a variable life insurance policy similar to Lin's. Sun recommended a policy with a $14,000 annual premium which she would need to pay for six years only. Chen mentioned Lin's experience with Metlife, but Sun assured her that she would need to pay for six years only.

Sun prepared the applications for Lin and Chen, and they signed the applications. When Lin got his policy, he checked to make sure that he would have to pay premiums for five years only. The premium section said that the planned premium was for five years, but after four years he needed to check the schedule for possible additional years of payment. The schedule just stated that he had to pay premiums for five years.

In the fall of 2001, Lin and Chen signed the contracts. They began paying the premiums for defendant's policies. On March 28, 2003, Chen and her daughter met with Sun to review the policies. Sun said that Chen and Lin might have to keep paying the policy premium for 20 years or let the policy lapse and lose the money he had put into it—about $45,000. Sun said Lin could surrender the policy and get back $20,000. The following day, however, Sun said Lin could not surrender the policy, in that the charge would be higher than $20,000. Since Lin was close to retirement and would not be able to pay for another 20 years, he and Chen decided to let the policies lapse.

Lin was surprised, angry and distressed, believing that he had been defrauded by Sun and defendant. He tried for a year to get Sun or defendant to resolve the matter, but neither was willing to do anything for him.

The application for the policies contained an "Illustration Explanation" which stated: "How Much Will My Insurance Cost? While premiums are payable for the lifetime of the insured, your illustration may show reduced or discontinued premiums in future years. If actual investment performance is less than illustrated, additional premium may be required to keep the policy in force. John Hancock recommends that you review additional illustrations using various investment returns to understand how actual performance may affect policy values and premium payment schedule."

The section of Lin's application setting forth the payment details reads as follows:

"2. Planned Premium

"(Check a or b, or Guaranteed Death Benefit Premium will be billed.)

"a. [x] $30,000____ annually for 5 year(s)[.]

"Additional first year Planned Premium $____."

A separate page in the application states that it "must be completed for all variable products." Section K on the page has a section which states that "[l]iquidity restrictions apply when allocating funds to the Fixed Account." The section contains four questions, for which the "yes" boxes were checked: "1. Have you received a prospectus for the policy applied for? (If YES, Prospectus Date: May 2001 .) [¶] 2. Do you understand that the amount of Death Benefit above any Guaranteed Minimum Death Benefit and the entire amount of the Account Value may increase or decrease depending on investment experience? [¶] 3. Is the policy and allocation of subaccounts in accord with your insurance objectives and your anticipated financial needs? [¶] Have you received an illustration of benefits based on your Planned Premium?" According to Lin, Sun checked the "yes" boxes and did not go over the questions with him.

The "agreement and signatures" page of the application has two provisions that "apply only to variable products." They provide: "All benefits, payments, and values, including the Death Benefit and Account Value, under any policy issued which is based upon the investment experience of a separate investment account may increase or decrease in accordance with investment experience of the separate investment account and are not guaranteed as to fixed dollar amount. The Account Value may even decrease to zero. . . . A prospectus for the policy applied for has been given to the Proposed Insured and/or the Applicant."

The policies themselves stated on the first page: "THE POLICY IS A LEGAL CONTRACT BETWEEN THE OWNER AND THE COMPANY. READ YOUR POLICY CAREFULLY." Page 3 of Lin's policy sets forth the premium as follows:

                 ----------------------------------------------------------------------------------------
                | "Planned Premium                 |  $30,000 for years 1 thru 4 thereafter according to |
                |                                  |  the schedule indicated in the application          |
                |                                  |                                                     |
                | "Target Premium                  |  $28,090.00 per year                                |
                |                                  |                                                     |
                | "5-Year Guaranteed Death         |  $1,077.50 per month                                |
                | Benefit Premium                  |                                                     |
                |                                  |                                                     |
                | "Age 65 or 10 Years Guaranteed   |  $2,340.83 per month                                |
                | Death Benefit Premium            |                                                     |
                |                                  |                                                     |
                | "Age 100 Guaranteed Death        |  $3,089.17 per month                                |
                | Benefit Premium                  |                                                     |
                |                                  |                                                     |
                | "Billing Interval                |  QUARTERLY                                          |
                 ----------------------------------------------------------------------------------------
                

"Notice: The actual premiums paid will affect the Account Value, the duration of insurance coverage, and the amount of Death Benefit as described in Section 4. Even if the Planned Premiums shown above are paid as scheduled, they may not be sufficient to continue the policy in force until the death of the insured. . . ."

An illustration attached to each policy states at the top of each page: "This illustration is hypothetical and may not be used to predict or project actual performance." On the bottom of each page, it states: "THIS IS AN ILLUSTRATION ONLY AND IS NOT INTENDED TO PREDICT ACTUAL PERFORMANCE." "Valuable Information About Your Life Insurance Illustration" includes illustrations showing an additional premium required after year 11 assuming a 12 percent rate of return, and maximum administrative charges. The illustrations also showed an additional premium required after eight years, assuming a zero percent rate of return and maximum administrative charges.

The "Valuable Information About Your Life Insurance...