McGilvray v. Farmers New World Life Ins. Co.

• Decision Date: 06 July 2001
• Docket Number: No. 25577.,25577.
• Parties: Kenneth McGILVRAY, Ermajean McGilvray, husband and wife, and Stephany McGilvary, minor daughter of Kenneth McGilvray and Ermajean McGilvray, Plaintiffs-Appellants, v. FARMERS NEW WORLD LIFE INSURANCE COMPANY, Defendant-Respondent.
• Court: Idaho Supreme Court

28 P.3d 380

136 Idaho 39

Kenneth McGILVRAY, Ermajean McGilvray, husband and wife, and Stephany McGilvary, minor daughter of Kenneth McGilvray and Ermajean McGilvray, Plaintiffs-Appellants, v. FARMERS NEW WORLD LIFE INSURANCE COMPANY, Defendant-Respondent.

No. 25577.

Supreme Court of Idaho, Boise, January 2001 Term.

July 6, 2001.

Douglas W. Crandall, Boise, argued for appellants.

Elam & Burke, P.A., Boise, for respondent. Jeffrey A. Thomson argued.

WALTERS, Justice.

Kenneth and ErmaJean McGilvray appeal from the district court's summary judgment dismissing all of their claims related to the denial of life insurance benefits upon the death of their infant son, Tylar McGilvray. We affirm the dismissal of the action.

FACTUAL AND PROCEDURAL BACKGROUND

Shortly after his twin sons, Tylar and Kyle, were born on May 4, 1993, Kenneth McGilvray contacted an insurance agent to purchase life insurance policies on his wife, his daughter Stephany, and the two boys. The agent was L. Brent Pfleger, from whom the McGilvrays had previously bought insurance coverage. On June 1, 1993, Pfleger asked Kenneth the questions contained on the individual applications for insurance and filled in the answers according to the information provided by Kenneth. Kenneth signed the applications in the spaces provided, but he later claimed he had not read through them.

Kenneth elected to pay the premiums on the new life insurance policies as he had been paying the life insurance premiums on his own policy previously purchased from Pfleger. Premium payments were to be made to Pfleger and deposited into the "Life Insurance Premium Account," which was a checking account maintained by Pfleger. Kenneth was a signatory on the account and had authorized automatic withdrawals of premium amounts to be paid to the insurance company from the account. On June 18, 1993, Kenneth paid $70.00 to Pfleger, and he paid another $63.34 on August 4, 1993. These amounts were deposited into the account, but they were only estimates of premiums to be applied generally to the family's pending life insurance applications. The monies were only to be transferred to Farmers New World Life on the date specified in the automatic bank withdrawal.

Farmers New World Life had received the signed application for insurance on Tylar's life as of June 28, 1993. At that time, the first of the payments described above was on deposit in the Life Insurance Premium. Account managed by Pfleger. At the time of Tylar's death on August 16, 1993, the second payment had also been deposited into the Life Insurance Premium Account.

The McGilvrays made a claim for benefits on the life insurance policy in Tylar's name. Farmers New World Life denied the claim, asserting that no premium payment had been received with the application for life insurance to put a policy in force. The McGilvrays contacted the Idaho Department of Insurance to investigate the matter.

On March 26, 1996, the McGilvrays brought suit against L. Brent Pfleger, agent, and Farmers New World Life Insurance Company, alleging breach of contract, estoppel, bad faith, breach of implied covenant of good faith and fair dealing, and intentional and/or negligent infliction of emotional distress. The McGilvrays filed a motion for leave to amend the complaint to add new claims including recovery of punitive damages, which was denied after a hearing.

Pursuant to stipulation, the district court dismissed the McGilvrays' action against Pfleger with prejudice. On November 17, 1997, the district court issued its decision and orders on the various motions filed by the McGilvrays and Farmers New World Life. The district court denied the McGilvrays' motion for partial summary judgment, determining there was no contract for temporary insurance in effect when Tylar died. The district court granted, in part, Farmers New World Life's motion for summary judgment, dismissing the claims of Stephany McGilvray and dismissing the remaining allegations except the claim alleging breach of contract of an actual policy of insurance.

The McGilvrays filed a second motion for summary judgment seeking a declaration that a policy of insurance was in effect on August 16, 1993, the date of Tylar's death. Farmers New World Life submitted a cross-motion for summary judgment seeking dismissal of the sole remaining breach of contract claim. The district court granted the defendant's motion on April 19, 1999. Concluding that the effective date of the policy issued in Tylar's name was four days after the infant's death, the district court dismissed the action against Farmers New World Life. The McGilvrays filed a timely appeal from the district court's order dismissing the action.

ISSUES

The McGilvrays present the following issues on appeal:

1. Did the district court err in concluding that no temporary insurance was in effect on the date of Tylar's death?

2. Did the district court err in concluding that no contract of insurance existed on the child's date of death?

3. Did the district court err in dismissing the plaintiff's bad faith claim?

4. Did the district court err in denying the plaintiffs' motion to amend the complaint to add a punitive damage claim?

STANDARD OF REVIEW

When this Court reviews a district court's grant of summary judgment, it uses the same standard properly employed by the district court originally ruling on the motion. McKay v. Owens, 130 Idaho 148, 152, 937 P.2d 1222, 1226 (1997). Summary judgment is proper "if the pleadings, depositions, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law." I.R.C.P. 56(c). Summary judgment dismissal of a claim is appropriate when the plaintiff fails to submit evidence to establish an essential element of a claim. Nelson By and Through Nelson v. City of Rupert, 128 Idaho 199, 911 P.2d 1111 (1996). Summary judgment must be entered against the non-moving party who fails to make a showing sufficient to establish existence of an element, which is essential to his case and upon which he will bear the burden of proof at trial. Smith v. Meridian Joint School Dist. No. 2, 128 Idaho 714, 918 P.2d 583 (1996); State v. Shama Resources Ltd. Partnership, 127 Idaho 267, 899 P.2d 977 (1995); Badell v. Beeks, 115 Idaho 101, 102, 765 P.2d 126, 127 (1988), citing Celotex v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 2552, 91 L.Ed.2d 265, 273 (1986)

. If the nonmoving party cannot make a showing on elements essential to his claims, "there can be no genuine issue of material fact since a complete failure of proof concerning an essential element on the nonmoving party's case necessarily renders all other facts immaterial." Celotex, supra, 477 U.S. at 322-23,

106 S.Ct. at 2552,

91 L.Ed.2d at 273.

DISCUSSION

I. The plaintiffs' breach of contract claim was properly dismissed.

A. Temporary Insurance Contract

On appeal, the McGilvrays argue that the district court should have concluded that temporary insurance on Tylar was in effect on the day he died. First, they argue the conditions which gave rise to a contract of temporary insurance in Toevs v. Western Farm Bureau Life Ins. Co., 94 Idaho 151, 483 P.2d 682 (1971), are present here and should operate to bind Farmers New World Life to provide coverage for Tylar's death. The McGilvrays also assert that all of the conditions set forth on the receipt form used by the insurance company were met, thus the company was obligated under the temporary insurance agreement to pay benefits upon Tylar's death.

In Toevs, this Court affirmed the lower court's decision holding the insurer liable for double indemnity on the death of the insured, even though Toevs had not yet obtained a medical examination required in conjunction with his application for insurance when he died from an accidental shooting. Id. at 155, 483 P.2d at 686. The Court considered the ambiguous language in the application and in the receipt as to the effective date of coverage, as well as the unequal bargaining power between the insurer and the insured whereby the insurer required payment in full of the premium with the application. Id. Specifically, the Court held that the insurer's use of a "conditional premium receipt," which allowed the company to rescind and withdraw its promise of coverage, created a temporary contract of insurance. Id. The conditions that led the Court to adopt the doctrine of temporary insurance in Toevs, however, are not found in the McGilvrays' case. There was no delivery of a conditional premium receipt to the McGilvrays at the time the application for insurance was completed. The payments that were to be applied to the insurance premiums were only made subsequent to the date the application was signed and had yet to be processed by means of the automatic withdrawal authorization procedure.

In order for the doctrine of temporary insurance to apply, there must exist an ambiguity regarding the effective date of insurance. Wells v. United States Life Ins. Co., 119 Idaho 160, 804 P.2d 333 (Ct.App. 1991), citing Toevs, supra. Because the evidence is clear that Kenneth and Pfleger had never discussed whether temporary insurance was available on Tylar's application or when specifically the policy on Tylar's life was to become effective, the McGilvrays cannot reasonably claim an ambiguity in the information conveyed to them as to when the insurance would take effect. Kenneth's belief, therefore, that coverage began upon payment of the premium was not based on representations made by Pfleger nor derived from language found in the application itself, which Kenneth testified he had not read. The district court correctly concluded in this case, that there was not the unequal bargaining power between the insurer and the insured, which caused the Court in Toevs to hold that temporary insurance was in effect. We uphold the district court's decision...