Noveletsky v. Metro. Life Ins. Co.
| Decision Date | 24 September 2014 |
| Docket Number | Civil No. 2:12–cv–00021–NT. |
| Court | U.S. District Court — District of Maine |
| Parties | Hollie T. NOVELETSKY, Thomas Heaney, and Joshua W. Rosenthal, Plaintiffs, v. METROPOLITAN LIFE INSURANCE COMPANY, INC., Francine Temkin, and Alan L. Silverman, Defendants. |
Benjamin S. Piper, Sigmund D. Schutz, John J. Cronan, III, Preti, Flaherty LLP, Portland, ME, for Plaintiffs.
Daniel R. Mawhinney, Elizabeth G. Knox Peck, Thompson & Bowie, LLP, Phillip S. Bixby, Jonathan M. Dunitz, Verrill Dana LLP, Heidi J. Hart, John S. Whitman, Richardson, Whitman, Large & Badger, Portland, ME, for Defendants.
ORDER ON PARTIES' CROSS–MOTIONS FOR SUMMARY JUDGMENT
Before the Court are four motions for summary judgment: (1) Defendant FrancineTemkin's motion for summary judgment (ECF No. 175); (2) Defendant Alan Silverman's second motion for summary judgment (ECF No. 178); (3) Defendant Metropolitan Life Insurance Company, Inc.'s (“MetLife ”) motion for summary judgment (ECF No. 182); (4) and Plaintiffs Thomas Heaney and Joshua Rosenthal's cross-motion for partial summary judgment against Defendant Temkin (ECF No. 191). For the reasons that follow, the Defendants' motions for summary judgment are GRANTED, and the Plaintiffs' cross-motion for partial summary judgment is DENIED. Additionally, the Defendants' Daubert motions (ECF Nos. 174, 180, 183, 220, 221, 222) are GRANTED IN PART. The remainder of the objections raised in the Defendants' Daubert motions and all the objections raised in the Plaintiffs' Daubert motion (ECF No. 176) are DENIED AS MOOT.
In 1999, Hollie Noveletsky's father died, and she and her sister inherited their father's structural steel fabrication company, Novel Iron Works. SSMF ¶¶ 1–2.1 Noveletsky already owned her own steel erection company, Rose Steel, Inc. SSMF ¶¶ 2, 5; PSMF ¶ 22. At the time of her father's death, his estate was valued at almost $13 million, but Novel Iron Works lacked the liquidity to pay the $6 million in estate taxes owed. SSMF ¶¶ 1, 3. The estate entered an agreement with the IRS to pay off the tax debt incrementally over ten years. SSMF ¶¶ 1, 5. Noveletsky wanted to make sure that her own son, Joshua Rosenthal,2 had sufficient funds to pay the estate taxes when he inherited the company after she died. SSMF ¶ 4; TSMF ¶ 7. Noveletsky told Tom Heaney, Novel Iron Works' executive vice president, that she wanted to buy $5 million of life insurance for Rosenthal. TSMF ¶ 43; PSMF ¶ 20.
Noveletsky turned to Francine Temkin for help. TSMF ¶ 8. Temkin, Noveletsky's best friend and the sister of Noveletsky's ex-husband, was a long-time life insurance agent for MetLife. TSMF ¶ 8; PSMF ¶ 10. Temkin told Noveletsky that her situation was “too complex” for her and referred Noveletsky to Alan Silverman, a MetLife agent, as well as a chartered life underwriter and financial consultant and certified public accountant and financial planner, who did business under the names Silverman Wealth and Income Strategies and Silverman Estate Planning and Financial Group. PSMF ¶¶ 2–4, 47; SSMF ¶ 28.
Before his first in-person meeting with Noveletsky, Silverman asked Noveletsky to provide him with some of her financial records. PSMF ¶ 52. Silverman developed a sense that the MetLife Life98 life insurance policy (the “Metlife Policy ”) (ECF No. 93–2), a whole life policy with a $5 million death benefit, accumulating cash value, and variable dividends, would likely be appropriate for her. SSMF ¶¶ 8(e)-(f); PSMF ¶ 53.
Noveletsky, Silverman, and Temkin met face-to-face on May 11, 2001, and discussed Noveletsky's desire to obtain life insurance that would help her son pay the estate taxes when she died. PSMF ¶¶ 56–58. At the time, Noveletsky was a healthy 41–year–old with an actuarial life expectancy of 40 years. SSMF ¶ 6. Silverman recommended Noveletsky purchase the Metlife Policy. SSMF ¶¶ 9, 15; PSMF ¶ 54. At the meeting, Noveletsky and Silverman also discussed term life policies, which Silverman did not recommend. SSMF ¶ 8; PSMF ¶¶ 68, 98. Silverman did not present the option of universal life insurance to Noveletsky, though he knew that a generic universal life policy would have had annual premiums about half as large as those of the MetLife Policy. PSMF ¶¶ 66, 98.
Silverman told Noveletsky that under the MetLife Policy she “would only have to pay for 10, maybe 12 years max and the policy would pay for itself out of its dividends.” SSMF ¶ 17; PSMF ¶ 69. Noveletsky understood that the number of payments she would have to make depended on the economy. SSMF ¶ 17; MSMF ¶ 30.3 Noveletsky understood Silverman to mean that she would be required to pay only for ten years in a good economy but up to twelve years in a not-so-good economy. PSMF ¶¶ 70–71.
Silverman's file contained two Life Insurance Policy Illustrations—one dated May 10, 2001, and labeled “Prepared For Hollie Noveletsky” and the other dated July 12, 2001, and labeled “Prepared For Hollie T. Noveletsky–Rosenthal.” SSMF ¶ 30; MSMF ¶¶ 24, 26; May 10, 2001 Illustration (“May Illustration ”) (ECF No. 93–5); July 12, 2001 Illustration (“July Illustration ”) (ECF No. 93–6). Both illustrations give projections for the MetLife Policy, although the May Illustration assumes a preferred rating and $1 million in coverage while the July Illustration assumes a standard rating and $5 million in coverage. MSMF ¶ ¶ 24, 26; May Illustration 2; July Illustration 2. The illustrations show when the MetLife Policy would become self-funding at the “guaranteed” dividend scale, at the “non-guaranteed current dividend scale” being paid by MetLife, and at a “non-guaranteed reduced dividend scale.” May Illustration 14–16; July Illustration 14–16. Both illustrations show the policies becoming self-funding at 10 and 12 years at current and reduced dividend scales, respectively. May Illustration at 14–16; July Illustration at 14–16. Both illustrations also show that the policies would not become self-funding until year 57 under the guaranteed scale. May Illustration at 14–16; July Illustration at 14–16. Finally, both illustrations contain the following language:
The policy is eligible for annual dividends beginning at the end of the second policy year. Dividends are based on factors such as MetLife's investment returns, taxes, persistency, claims experience (mortality) and expenses. The amount of any future dividend cannot be guaranteed and is subject to change by MetLife. Actual results may be more or less favorable than those shown.
MSMF ¶ 28; May Illustration at 2; July Illustration at 2.
Noveletsky confirmed that before the MetLife Policy was issued, in the company of Silverman and Temkin, she saw and reviewed an illustration similar in format to the July Illustration, although she could not be sure that it was the July Illustration that she had seen. MSMF ¶ 29;4 May 5, 2013 Dep. of Hollie Noveletsky Pt. 1 at 24 (105:1–8).
Silverman also recommended that Noveletsky establish an irrevocable life insurance trust, or ILIT, to hold the policy, and he referred her to trusts attorney John Hughes to advise her. SSMF ¶¶ 11–12; PSMF ¶ 87. He also told Noveletsky to submit a trial application to MetLife on her own behalf, though it was his intention that the ILIT purchase the policy, not Noveletsky. PSMF ¶ 99. Noveletsky followed Silverman's recommendations. SSMF ¶¶ 12–13; PSMF ¶ 100.
After Noveletsky submitted the trial application, MetLife required her to disclose her medical records and undergo a medical exam in order to make an underwriting decision about how much the MetLife Policy would cost. PSMF ¶ 102. On July 19, 2001, MetLife gave Noveletsky a “standard” rating, as opposed to a “preferred” rating. PSMF ¶ 103. In accordance with that decision, MetLife set the price of the annual premiums for the MetLife policy at $66,750 a year. PSMF ¶¶ 54, 104. The premiums would have been lower had Noveletsky received a “preferred” rating. PSMF ¶ 104.
At Noveletsky's request, Attorney Hughes drafted a trust instrument (the “Trust Instrument ”) for the ILIT. SSMF ¶ 12; ECF No. 181–8. The primary purpose of the trust was to hold the life insurance policy on Noveletsky's life and to enable payment of estate taxes at Noveletsky's death. TSMF ¶ 78. The Trust Instrument included provisions purporting to excuse the Trustee from certain duties, including:
Trust Instrument 7.
Trust Instrument 12–13. Another provision of the Trust Instrument, § 12(A), requires the trustee to “render accounts of the administration of the trust annually.” Trust Instrument 13.
Noveletsky chose Temkin to be the ILIT's trustee.5 SSMF ¶ 13; PSMF ¶ 113; Trust Instrument 1–18. Temkin was appointed as trustee for the sole purpose of purchasing the MetLife Policy, which had already been selected by Noveletsky at the time Temkin became trustee. TSMF ¶ 116. Noveletsky, Silverman, and Temkin met on July 26, 2001 to execute the Trust Instrument. PSMF ¶ 112.
On August 9, 2001, Silverman, Temkin, and Noveletsky met again....
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