Nicolson v. Life Ins. Co. of Southwest
| Decision Date | 10 March 1986 |
| Docket Number | No. 85-3518,85-3518 |
| Citation | 783 F.2d 1316 |
| Parties | Yvonne NICOLSON, Plaintiff-Appellant, v. LIFE INSURANCE COMPANY OF the SOUTHWEST, Defendant-Appellee. Summary Calendar. |
| Court | U.S. Court of Appeals — Fifth Circuit |
David L. Colvin, Gretna, La., for plaintiff-appellant.
Phelps, Dunbar, Marks, Claverie & Sims, Virginia N. Roddy, New Orleans, for defendant-appellee.
Appeal from the United States District Court for the Eastern District of Louisiana.
Before GEE, REAVLEY and ROBERT MADDEN HILL, Circuit Judges.
Plaintiff Yvonne S. Nicolson 1 appeals from the district court's grant of summary judgment for Life Insurance Company of the Southwest (LICSW). Finding that the insurance policy sued under was not in force on the date of the death of the insured, Roger A. Gifford, because he had previously effected the cancellation of the policy and no grace period applied, we therefore affirm.
There is no dispute among the parties concerning the facts central to this appeal. On or about February 5, 1983, Nicolson and Gifford each completed applications for life insurance which were forwarded to LICSW. LICSW accepted these applications and issued two policies. LICSW issued the policy in question, number 137985 ("the policy"), a one year renewable term life insurance policy, to Gifford; the face amount of the policy was $100,000, the beneficiary was Nicolson, and the effective date was March 15, 1983. LICSW also issued policy number 137984 to Nicolson.
Nicolson wrote a check dated February 5, 1983, to pay the first premiums for both policies. Also on February 5, Gifford and Nicolson signed a "request for preauthorized check plan." This authorization provided for LICSW to draw checks on Nicolson's bank account to pay the premiums on the policies, each check to be deposited on the fifteenth day of the month. Pursuant to the authorization, LICSW drew checks on the account for monthly premiums until February 1984.
On or about January 28, 1984, Gifford applied for life insurance with the Massachusetts Indemnity and Life Insurance Company (MILCO). Next to a space on the application marked "Existing Insurance" Gifford listed his $100,000 policy with LICSW. Under the heading "Replacement" Gifford checked "yes." MILCO issued a policy to Gifford naming Nicolson as beneficiary. According to Nicolson, following the death of Gifford she received $125,000 in benefits under this policy.
Nicolson called her bank and requested them not to pay the LICSW premiums due on February 15, 1984. The bank complied and the check deposited by LICSW for the premium due February 15 was stamped "payment stopped, do not redeposit" and returned by the bank to LICSW on February 22. According to Nicolson, she stopped payment of the premiums because she and Gifford had purchased other life insurance.
Gifford and Nicolson also wrote to LICSW to cancel their policies. The letter stated the following:
Re: Cancellation of Policy
or Policies
Gentlemen:
This is official notification that I am cancelling the following insurance policies with your company as of this date:
Policy # 137985
Please forward all cash values, dividends and interest from these policies to the above address. Do not exercise the automatic premium loan provision of my policies to pay any premiums, as I prefer to have all cash benefits sent directly to me.
Please do not have an agent contact me. Immediate action on this request will be greatly appreciated.
The letter was signed by Gifford and Nicolson. Although the letter was undated LICSW received it on February 23, 1984. Included with the letter were policies 137984 and 137985. On March 7, 1984, LICSW wrote to Gifford stating "our records have been changed to terminate this policy as of the paid to date, term insurance does not have value." Gifford died on March 10, 1984.
On September 21, 1984, Nicolson filed suit in Louisiana state court against LICSW for $100,000, the face amount of the policy. Nicolson claimed the policy was in effect at Gifford's death because of a thirty-one day grace period provided for by the policy and by statute. LICSW succeeded in removing the case to federal court, where diversity jurisdiction existed. On cross-motions for summary judgment, the district court without opinion granted LICSW's motion and entered judgment for LICSW. Nicolson now appeals.
This case was an appropriate one for resolution by summary judgment, because there were no genuine issues as to any material facts. The parties agree that virtually every fact relevant to this appeal is undisputed. 2 The dispositive issue is one of law: whether Louisiana law providing for a mandatory thirty-day grace period applies where the insured has affirmatively cancelled his policy.
Nicolson argues that two Louisiana statutory provisions require a thirty-day grace period extending coverage beyond the date when coverage would otherwise lapse. Since Gifford died within thirty days after his cancellation of the policy, Nicolson contends that these provisions kept the policy in force and entitled her to recover the face amount of the policy as its beneficiary. One provision requiring a grace period states in relevant part:
No policy of life insurance ... shall be delivered or issued for delivery in this state unless it contains in substance the following provision or provisions which in the opinion of the commission of insurance are more favorable to the policyholder:
A provision that the insured is entitled to a grace period either of thirty days or, at the option of the insurer, of one month within which the payment of any premium after the first may be made, during which period of grace the policy shall continue in full force, but if a claim arises under the policy during such grace before the overdue premiums or the deferred premiums of the current policy year, if any, are paid, the amount of such premiums, together with interest, not in excess of six per cent per annum, on any overdue premium, may be deducted from any amount payable under the policy in settlement.
La.Rev.Stat.Ann. Sec. 22:170(A)(1) (West 1959). Another provision is entitled "Written notice required before lapsing life policies," and states in part:
No life insurer shall within one year after default in payment of any premium, installment, loan or interest, declare forfeited or lapsed any policy issued or renewed, and not issued upon the payment of monthly or weekly premiums or for a term of one year or less, for nonpayment when due of any premium, installment, loan or interest, or any portion thereof required by the terms of the policy to be paid, unless a written or printed notice stating:
(1) The amount of such premium, installment, loan or interest, or portion thereof due on such policy; and
(2) The place where it shall be paid and the person to whom the same is payable, shall have been duly addressed and mailed to the person whose life is insured ... at least fifteen and not more than forty-five days prior to the date when the same is payable.
No policy shall in any case be forfeited or declared forfeited or lapse until the expiration of thirty days after the mailing of such notice. Any payment demanded by such notice and made within the time limit shall be taken to be full compliance with the requirements of the policy in respect to the time of such payment.
La.Rev.Stat.Ann. Sec. 22:177 (West 1959).
The policy itself contained a clause concerning the grace period contemplated by section 22:170(A)(1). It provided the following:
We allow each premium after the first one to be paid within 31 days after its due date. These 31 days are called the grace period. The policy remains in effect during the grace period. If the insured dies during this period, the unpaid premium will be deducted from the amount we would otherwise pay.
The policy did not have a specific provision concerning cancellation of the policy. Since Gifford died within thirty days of the letter from LICSW acknowledging cancellation of the policy, Nicolson contends that the policy was still in force.
The parties agree that Louisiana law governs in this diversity case. In determining the applicability of these statutory and contractual provisions, we must interpret the law as would a Louisiana court. Erie R.R. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1128 (1938). However, no reported Louisiana case has addressed the applicability of a statutory grace period when an insured has affirmatively cancelled his policy. When making an Erie guess in the absence of specific guidance from the Louisiana Supreme Court, our predication of state law looks to other sources: (1) lower state court decisions and Supreme Court dicta, (2) the lower court ruling in this case, (3) the general rule on the issue, (4) the rule in other states looked to by Louisiana courts, and (5) other available legal sources, such as treatises and law review commentaries. See Jackson v. Johns-Manville Sales Corp., 781 F.2d 394, 397 (5th Cir.1986) (en banc).
The long-standing rule applied by Louisiana courts is that an insured has "the irrevocable right to demand the cash surrender value of his policy at any time." Tucker v. Equitable Life Assur. Soc., 174 La. 598, 141 So. 71 (1932); Fowler v. State Insurance Co., 160 So. 139 (La.Ct.App.1935). This rule has been extensively modified by Louisiana's Standard Nonforfeiture Law for Life Insurance, which details the provision of nonforfeiture benefits upon surrender of the policy. See La.Rev.Stat.Ann. Sec. 22:168 (West Supp.1986). However, this statute has not eliminated the Tucker rule that an insured may surrender his policy when he chooses. The insured's right to cancel is recognized in other states as well. E.g., ...
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