Morgan v. Allianz Life Ins. Co. of North America

Decision Date29 August 1997
Docket NumberCivil Action No. 5:96-1978.
CourtU.S. District Court — Southern District of West Virginia

Eric M. Francis, Lewisburg, WV, for Plaintiff.

Mary H. Sanders, Charleston, WV, for Defendant.


HADEN, Chief Judge.

Pending is Defendant Allianz Life Insurance Company of North America's motion for summary judgment. For the reasons that follow, the Court GRANTS the motion.


In December 1988, Roy L. Morgan (the Decedent) purchased a group term life insurance policy with a value of $100,000.00. North American Life and Casualty Company, now known as Allianz Life Insurance Company of North America, Incorporated (the Insurer), assumed the policy obligations in October 1991. According to the Insurer, Citicorp Insurance Services, Incorporated, the group's third-party administrator (TPA), notified the Decedent by letter in February 1993, announcing a reduction in the group policy coverage from $100,000.00 to $50,000.00. The letter contained a new certificate of insurance stating the new policy amount of $50,000.00 and a rate schedule reflecting the reduction of the policy coverage. The letter also advised the insured he could convert the amount of coverage that was being terminated to an individual policy.

Mr. Morgan died on August 18, 1993, never having exercised the conversion privilege. After his death, the beneficiary of the policy, the Decedent's brother Ray Morgan (the Beneficiary), submitted a claim for benefits under the policy. The TPA approved the claim and on October 13, 1993 sent the Beneficiary a check for $50,000.00. The Beneficiary then filed this civil action, alleging the Insurer breached the insurance contract by failing to pay the Beneficiary full policy benefits of $100,000.00.1

Resolution depends on the answer to the following: Did the Decedent receive the February 1993 letter from the TPA indicating the reduction in policy coverage? The parties apparently agree that if he did, the actual coverage is limited to $50,000.00, Def.'s Mem. Supp. at 5, and thus the Insurer committed no breach.

Neither the Beneficiary nor his witnesses have direct or indirect knowledge of whether the Decedent received the letter. In the form of an uncontested affidavit of Larry Williams, president of the TPA for the Allianz policy issued to the Decedent, the Insurer has offered the sole evidence the Decedent received the letter. Williams states he has personal knowledge that in February 1993 his company sent all members of the Decedent's group term life insurance plan a letter describing the reduction in coverage. See Williams Aff. I ¶ 4. Williams attests the company sent the Decedent such a letter on February 20, 1993. Id. ¶ 5. To corroborate, Williams has provided the company's computer printout records indicating the letter was mailed on that date, as well as a copy of the letter itself.

A. Admissibility of Williams' testimony

The Beneficiary invokes West Virginia Code § 57-3-1, commonly known as the Dead Man's Statute, to challenge the admissibility of Larry Williams' testimony and the supporting documentary evidence. The Dead Man's Statute is an exception to the general rule of witness competency that "[n]o person offered as a witness in any civil action ... shall be excluded by reason of his interest in the event of the action ... or because he is a party thereto[.]" W.Va.Code § 57-3-1; cf. W.Va.R.Evid. 601; Fed.R.Evid. 601. See generally Meadows v. Meadows, 196 W.Va. 56, 60, 468 S.E.2d 309, 313 (1996) (Cleckley, J.) (discussing history of Dead Man's Statute). The Dead Man's Statute provides that no "party ... [or] interested person [who] derives any interest or title ... shall be examined as a witness in regard to any personal transaction or communication between such witness and a person [who] at the time of such examination [is] deceased...."2

The purpose of the Statute is to prevent the injustice that would result from a surviving party to a transaction testifying favorably to himself or herself and adversely to the interest of a Decedent, when the Decedent's representatives would be hampered in attempting to refute the testimony by reason of the Decedent's death.... [T]he underlying rationale of dead man's statutes is that a survivor's lips should be sealed because the lips of the Decedent are sealed. In these instances, the Decedent is unable to confront the survivor, give his or her version of the transaction or communication and expose the possible omissions, mistakes or even outright falsehoods of the survivor.

Meadows, 196 W.Va. at 60, 468 S.E.2d at 313 (quotations and cited authority omitted).

To limit the restrictions to the general rule of witness competency and adhere to the liberal thrust of the evidence rules, courts must construe the Dead Man's Statute strictly and limit it to its narrowest application. Id. at 61, 468 S.E.2d at 314 (citing Harper v. Johnson, 162 Tex. 117, 345 S.W.2d 277 (1961)). See also Cross v. State Farm Mut. Auto. Ins. Co., 182 W.Va. 320, 325, 387 S.E.2d 556, 561 (1989) (citing syl. pt. 1, Keller v. Hartman, 175 W.Va. 418, 333 S.E.2d 89 (1985); syl. pt. 5, Sayre v. Whetherholt, 88 W.Va. 542, 107 S.E. 293 (1921)) (stating Statute is to be strictly construed and testimony in question is admissible unless clearly excluded). With this caveat in mind, the Court must determine whether the Statute applies here.

For the Dead Man's Statute to bar Mr. Williams' testimony, three conditions must be satisfied. See syl. pt. 10, Moore v. Goode, 180 W.Va. 78, 375 S.E.2d 549 (1988). First, Mr. Williams' testimony must relate to a personal transaction with the Decedent. See id. Second, Mr. Williams must be a party to this lawsuit or interested in its event or outcome. See id. Third, his testimony must be against the Decedent's personal representative, heir at law, or beneficiary. See id.

The third condition is clearly met; the first is arguably met.3 However, because the second condition, relating to Mr. Williams' interest in the action, plainly is not satisfied, the Court need not resolve the applicability of conditions one and three to find the Dead Man's Statute inoperative under the present facts. It is axiomatic that for the Statute to apply, the interest of the person whose testimony is at issue must be "present, certain, and vested, not remote, uncertain, or contingent." Cross, 182 W.Va. at 325, 387 S.E.2d at 561 (citing Lilly v. Ellison, 107 W.Va. 402, 405-06, 148 S.E. 380, 381 (1929)). Accord Moore, 180 W. Va. at 90 n. 19, 375 S.E.2d at 561 n. 19.

Interests held so remote as to bar operation of the Dead Man's Statute include: the interest of a corporate agent who is not a shareholder in the interested corporation, syl. pt. 2, Stansbury v. Bright, 109 W.Va. 651, 156 S.E. 62 (1930); the interest of an insurance agent where the only assertion is that the agent is an incompetent witnesses by virtue of his interest as an agent, syl. pt. 3, Cross, 182 W. Va. 320, 387 S.E.2d 556; and the interest of a bank official in the outcome of a lawsuit in which the bank is a party, Silling, 885 F.Supp. at 888 n. 5. On the other hand, courts have excluded testimony offered by a bank executive where the executive was a stockholder interested in the outcome of the lawsuit. Stansbury, 109 W.Va. at 652, 156 S.E. at 62.

By contrast, Williams' interest is remote indeed. He is an officer not of the Insurer, but of the TPA. The TPA is not a party to this action, is entirely separate from the Insurer, and has "no financial interest whatsoever in the determination of ... the limits of" the policy. Aff. of Larry Williams II ¶¶ 3, 4, 5. Williams personally has no direct financial interest in the Insurer or in the outcome of this case. Id. ¶ 6. Applying the law to the facts presented here, the Court holds Williams has no interest in the event or outcome of this litigation. The Dead Man's Statute does not bar his testimony.

B. Establishing the presumption of Decedent's receipt of notice

Having concluded Williams' evidence is admissible, the Court next must determine the effect of this evidence on the summary judgment inquiry. The Insurer contends Williams' evidence establishes a presumption that the Decedent received the letter, a point the Beneficiary disputes. As instructed by Federal Rule of Evidence 302, the Court looks to state law to determine the validity of the Insurer's argument. Hottle v. Beech Aircraft Corp., 47 F.3d 106, 107 n. 1 (4th Cir.1995) (federal court sitting in diversity generally applies state law of presumptions, privileges and competency) (citing Fed. R.Evid., Rules 302, 501, 601).

In West Virginia, where an insurance notice is placed in the mail, a rebuttable presumption of receipt is established. National Grange Mut. Ins. Co. v. Wyoming County Ins. Agency, Inc., 156 W.Va. 521, 526, 195 S.E.2d 151, 155 (1973) (citing 58 Am.Jur.2d, Notice, § 33). While it is true, as the Beneficiary contends, that the cases relied upon for this proposition, National Grange and Adkins v. State Compensation Dir., 149 W.Va. 540, 142 S.E.2d 466 (1965), involve letters sent by certified mail, the courts have not held application of the presumption requires notice be mailed in such a fashion. On the contrary, in an appeal of a diversity case from this Court, the Court of Appeals observed "`[a] letter properly addressed, stamped and mailed is presumed to have been duly delivered to the addressee.' The presumption is especially strong when the delivery is by certified mail." Federal Deposit Ins. Corp. v. Schaffer, 731 F.2d 1134, 1137 n. 6 (4th Cir.1984) (quoting C. McCormick, McCormick's Handbook of the Law of Evidence § 343 (1972)). See also Franklin D. Cleckley, Handbook on Evidence for West Virginia Lawyers § 3-1(C)(o)(quoting Schaffer and McCormick, supra). The Supreme Court of Appeals has observed in a...

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