Nagel v. Provident Mutual Life Insurance

• Decision Date: 13 December 2000
• Docket Number: P-2371
• Citation: 51 Mass.App.Ct. 763,749 N.E.2d 710
• Parties: (Mass.App.Ct. 2001) IRA A. NAGEL, administrator <A HREF="#fr1-1" name="fn1-1">1 vs. PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA. 98-Appeals Court
• Court: Appeals Court of Massachusetts

749 N.E.2d 710 (Mass.App.Ct. 2001)

IRA A. NAGEL, administrator¹ vs. PROVIDENT MUTUAL LIFE INSURANCE COMPANY OF PHILADELPHIA.

98-P-2371 Appeals Court

IN THE COURT OF APPEALS OF MASSACHUSETTS

December 13, 2000.

June 5, 2001.

County: Suffolk.

Present: Rapoza, Dreben, & Smith, JJ.

Insurance, Life insurance, Cancellation. Practice, Civil, Summary judgment, Interest. Contract, Insurance, Performance and breach. Interest.

Civil action commenced in the Superior Court Department on October 1, 1996.

The case was heard by Charles T. Spurlock, J., on a motion for summary judgment.

Walter J. Connelly for the defendant.

Howard S. Fisher for the plaintiff.

DREBEN, J.

On January 11, 1995, Sandra Caulfield (Sandra) was killed by her husband, William, who thereafter committed suicide. The principal question before us is whether prior to her death Sandra effectively cancelled a $500,000 life insurance policy issued by the defendant insurer.² A judge of the Superior Court concluded that the policy was still in effect and allowed the plaintiff's motion for summary judgment on two counts of his complaint.³ We affirm in part and reverse in part.

The policy, which was sent to Sandra on December 13, 1994, provided for cancellation without penalty during two periods.⁴ Sandra subsequently received a "Notice of Withdrawal Right" which set forth an additional time period for cancellation.⁵ All three, sometimes referred to as the right to "free look," required a return of the policy. Except for the argument in the margin,⁶ which we reject, the defendant does not contest the judge's correct conclusion that Sandra did not comply with any of the three "free look" provisions as she neither cancelled within the specified dates nor returned the policy.

1. The defendant's main contention is that there was a mutual agreement to cancel the policy. In the absence of a provision in the policy permitting unilateral action, a mere notification of an intent to cancel a policy is insufficient. Copley v. Pekin Ins. Co., 111 Ill. 2d 76, 86 (1986). 2 Couch, Insurance § 31:47, at 63-64 (3d ed. 1995). There must be some affirmative action by the insurer "by way of an indorsement or otherwise" cancelling the policy. See Benoit v. Fisher, 341 Mass. 386, 389 (1960). The parties may, however, by mutual consent cancel the policy in ways other than those expressed in the policy. Celi v. Pennsylvania Fire Ins. Co., 269 Mass. 225, 228 (1929). O'Neil's Case, 293 Mass. 41, 44 (1935). Couch, supra, § 31:47, at 62. See G. L. c. 175, § 187C, fifth par. See also Berton v. Atlas Assurance Co., 203 Mass. 134, 138 (1909); Flood v. Midland Natl. Life Ins. Co., 419 Mass. 176, 181 n.4 (1994).

In order to assess the argument that the policy was cancelled by mutual consent, a recitation of the uncontested facts is required. The first portion of our narrative is taken from affidavits of William Moffly and Michael Adler filed by the defendant in opposition to the plaintiff's motion for summary judgment.

Sandra and William Caulfield were clients of William Moffly, an employee of Fidelity Investments Institutional Services Company (Fidelity Investments). When informed that they were interested in purchasing life insurance, Moffly arranged an appointment for them with Michael Adler, an insurance representative employed by Fidelity Insurance Agency Inc. (Fidelity Insurance), a company licensed to sell life insurance for the defendant. Adler met with the Caulfields on or about November 17, 1994, and William and Sandra each applied for $500,000 life insurance. On December 8, 1994, a policy was issued to Sandra. About three weeks later, on December 30, Moffly received a telephone call from William stating that the Caulfields wanted to cancel their policies. Moffly told William "that he would have to send in a written request." Moffly, who was in Braintree, notified Fidelity Insurance in Boston of William's telephone call. Also on December 30, Adler, informed by his office that the Caulfields wanted to cancel their policies, called William Caulfield. The latter stated he and Sandra could no longer afford the policies and said he wanted to cancel them. Adler "told him that there would probably be no problem with his policy because it had not yet issued and . . . told him someone would get back to him with regard to Sandra's." Adler notified Lesley Hutt, a case manager at Fidelity Insurance, of the substance of the conversation.

Lisa Glass, the keeper of the records for Fidelity Insurance, stated in a deposition that she never spoke to Sandra or William Caulfield as she was not permitted to speak directly to clients. She acknowledged receiving from Sandra a letter of cancellation which she forwarded, on January 9, 1995, to the person in charge of "free looks" at the defendant's office. Sandra's undated letter was addressed to "Ms. Glass," and stated:"In regards to the above policy #9020437 I wish at this time to exercise my free look provision and cancel the policy. Could you please return all premiums paid. Thank-you."

Although the defendant was advised of Sandra's death on January 12, 1995, the defendant did not, until January 16, 1995, indicate on its policy master record that the policy was "not taken." The defendant's supervisor of policy transactions acknowledged in her deposition that "anybody looking at that file . . . on January 12 would find that that policy was still outstanding." On January 16, 1995, the defendant sent Sandra a check returning the premium of $306.00, together with a statement "policy marked not taken."

To buttress its argument that Sandra's letter was effective to cancel the policy on the basis of mutual consent, the defendant relies on the following: (1) Lisa Glass's⁷ deposition testimony that to the best of her knowledge a letter would suffice to "free look" the policy; (2) the statement of the supervisor of policy transactions in her deposition that all the company required for "surrender" of a policy was a signed letter from the insured; and (3) an affidavit from Rose Kiely, a policy transaction specialist of the defendant, who processed cancellations of policies, stating that the defendant had a practice of allowing a free look cancellation even if a few days late.⁸

The materials before the judge hearing the motion for summary judgment were insufficient to show either that the policy was cancelled by mutual consent or that, as the defendant also argues, there are genuine issues of material fact.⁹

The defendant's reliance on a practice of accepting late notification without submission of the policy as evidencing a mutual consent to cancel is misplaced. There is no evidence that such practices were communicated to Sandra by any person having authority regarding cancellation. Assuming that the statement of Moffly to William Caulfield that he should "send in a written request" implied that such a request would be sufficient to cancel, a tenuous assumption, and assuming that William was Sandra's agent, there is no showing that Moffly, an employee of Fidelity Investments, and not of Fidelity Insurance, was authorized to take any action or discuss procedures with respect to the cancellation of policies.

In order to rely on Moffly's statement, the defendant would have to sustain its burden of showing he had authority to bind the defendant. Benoit v. Fisher, 341 Mass. 386, 389 (1960). Markel v. Travelers Ins. Co., 510 F.2d 1202, 1207 (10th Cir. 1975) (applying Kansas law). See 2 Couch, Insurance § 31:42, at 54 (3d ed. 1995) (indicating that even a broker who sells insurance does not by that fact have authority to cancel or modify). We also note, as previously mentioned, that after Moffly spoke to William Caulfield, Adler, of Fidelity Insurance, told Caulfield that someone would get back to him concerning Sandra's policy.

The defendant, the party asserting cancellation, also has the burden of showing the policy was cancelled. Benoit v. Fisher, 341 Mass. at 389. Couch, supra, § 30:19, at 26.

We now turn to Kourouvacilis v. General Motors Corp., 410 Mass. 706, 716 (1991), for the standard to be applied by the judge in allowing summary judgment.

"[A] party moving for summary judgment in a case in which the opposing party will have the burden of proof at trial is entitled to summary judgment if he demonstrates, by reference to material described in Mass. R. Civ. P. 56 (c), [365 Mass. 824 (1974)], unmet by countervailing materials, that the party opposing the motion has no reasonable expectation of proving an essential element of that party's case. To be successful, a moving party need not submit affirmative evidence to negate one or more elements of the other party's claim."

In view of the materials before the judge, we conclude that the plaintiff has shown that the defendant has no reasonable expectation of proving that the policy was cancelled either unilaterally in accordance with the free look provisions of the policy or by mutual consent. Accordingly, the allowance of the plaintiff's motion for summary judgment on count I of the complaint was correct.

2. Although the judge in ruling on count II of the complaint concluded that there was a breach of the covenant of good faith and fair dealing, he did so "for the same reasons" that he determined there was a breach of contract by the defendant under count I. Not every breach of contract, however, is a breach of the implied covenant of good faith and fair dealing. The record does not support the conclusion that there was such a breach. In view of the "cancellation" letter of Sandra which was received by the defendant before her death, its action in contesting payment, while ultimately proven incorrect, did not rise to bad faith or unfair dealing. The allowance of the plaintiff's motion on count II of the complaint must therefore be reversed and judgment entered for the defendant thereon.

3. The judge also made rulings on counts III and IV of the complaint, which alleged violations of G. L....