Overstreet v. Kentucky Cent. Life Ins. Co.

• Decision Date: 04 December 1991
• Docket Number: No. 90-2217,90-2217
• Citation: 950 F.2d 931
• Parties: Johnny OVERSTREET, Administrator of the Estate of David Wilkey, Deceased, Plaintiff-Appellant, v. KENTUCKY CENTRAL LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Fourth Circuit

Page 931

950 F.2d 931

Johnny OVERSTREET, Administrator of the Estate of David

Wilkey, Deceased, Plaintiff-Appellant, v. KENTUCKY CENTRAL LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 90-2217.

United States Court of Appeals, Fourth Circuit.

Argued April 11, 1991.

Decided Dec. 4, 1991.

S.D. Roberts Moore, Gentry, Locke, Rakes & Moore, Roanoke, Va., argued (Tod Wright Holliday, on brief), for plaintiff-appellant.

William Beverly Poff, Woods, Rogers & Hazlegrove, Roanoke, Va., argued (Frank K. Friedman, Leslie Edwin Hagie, on brief), for defendant-appellee.

Before BUTZNER and CHAPMAN, Senior Circuit Judges, and WILLIAMS, District Judge for the Eastern District of Virginia, sitting by designation.

OPINION

BUTZNER, Senior Circuit Judge:

Johnny Overstreet, administrator of the estate of David Wilkey, appeals a summary judgment in favor of Kentucky Central Life Insurance Company in a diversity action alleging wrongful death, entitlement to policy proceeds under the North Carolina Slayer Statute, and unjust enrichment. The suit was brought after David Fisher, beneficiary on a policy insuring Wilkey's life, was convicted of procuring Wilkey's murder. The district court held that the company was not estopped from pleading the statute of limitations, that Fisher's fraud voided the policy, that the company was absolved from liability because it entered into a good faith settlement with Fisher, and that the company was not unjustly enriched. See Overstreet v. Kentucky Cent. Life Ins. Co., 747 F.Supp. 1195 (W.D.Va.1990).

Because the record discloses genuine issues of material fact, we vacate the summary judgment on the wrongful death and Slayer Statute claims. Finding no unjust enrichment, we affirm the judgment dismissing this claim.

I

Kentucky Central asserts that it cannot be equitably estopped from relying on the limitation applicable to the Virginia wrongful death act, Va.Code Ann. § 8.01-244 (Michie 1984), because the limitation is substantive. The district court did not adopt this theory, but the company may seek affirmance on an issue addressed in the record even though it is not the basis of the court's judgment. Schweiker v. Hogan, 457 U.S. 569, 585 & n. 24, 102 S.Ct. 2597, 2607 & n. 24, 73 L.Ed.2d 227 (1982).

The common law provided no cause of action for wrongful death, and this omission was remedied only by the passage of Lord Campbell's Act in 1846. The first Virginia wrongful death statute, passed in 1871, was modeled on Lord Campbell's Act. Wilson v. Whittaker, 207 Va. 1032, 1035, 154 S.E.2d 124, 127 (1967). Under this and successor statutes, "a new right of action is given decedent's personal representative only through the grace of legislative enactment." 207 Va. at 1036, 154 S.E.2d at 127. When the legislature creates a right of action that did not exist at common law, the limitations specified in the statute operate as a substantive limit on the right to recover. Continental Casualty Co. v. The Benny Skou, 200 F.2d 246, 248 (4th Cir.1952); Dowell v. Cox, 108 Va. 460, 465, 62 S.E. 272, 273 (1908). This distinction--often called that between a remedial or procedural statute of limitations and a substantive statute--is easier to state than to justify in the context of estoppel. Some authorities have held that a substantive limitation extinguishes the plaintiff's right to sue at the expiration of the specified time regardless of any equitable considerations, see 2 Stuart M. Speiser, Recovery for Wrongful Death 2d § 11:24 (2d ed. 1975 & Supp.1990), but this text also notes that equitable estoppel is a valid defense to the plea of the statute of limitations in Virginia, § 11:24 at 147 (2d ed. Supp.1990). Moreover, the mechanistic distinction between the types of limitations has been falling into disfavor for at least 50 years. In Scarborough v. Atlantic Coast Line R.R. Co., 178 F.2d 253 (4th Cir.1949), we held that the distinction should not bar an action under the Federal Employers' Liability Act where the plaintiff had been induced by fraud to permit the limitations period to expire:

We cannot see a distinction and a difference, so clear and so real, between the two classes of statutes of limitations--the remedial and the substantive--as to justify the courts in fully giving effect to fraud in tolling the statute of one type (remedial) and then flatly denying that effect to fraud in the other type (substantive). The ancient maxim that no one should profit by his own conscious wrong is too deeply embedded in the framework of our law to be set aside by a legalistic distinction between the closely related types of statutes of limitations.

178 F.2d at 259.

The United States Supreme Court has held that a "substantive" statute of limitations is nonetheless tolled by the principle of equitable estoppel, which it noted was "older than the country itself." Glus v. Brooklyn Eastern Terminal, 359 U.S. 231, 234, 79 S.Ct. 760, 763, 3 L.Ed.2d 770 (1959). The Supreme Court noted elsewhere:

[T]he fact that the right and limitation are written into the same statute does not indicate a legislative intent as to whether or when the statute of limitations should be tolled. Thus, the "substantive"-"procedural" distinction would seem to be of little help in deciding questions of extending the limitations period.

Burnett v. New York Central R.R. Co., 380 U.S. 424, 427 n. 2, 85 S.Ct. 1050, 1054 n. 2, 13 L.Ed.2d 941 (1965). More than 20 years ago, we noted that "[e]ven when the time limitation is fixed by the same statute which creates the cause of action, the modern trend is to extend or toll the period of limitations to avoid injustice." Belton v. Traynor, 381 F.2d 82, 86 (4th Cir.1967). See also 4 Fowler & Harper, et al., The Law of Torts § 24.7 at 483-84 (Oscar S. Gray ed. 1986).

In 1926, the Virginia Supreme Court applied equitable tolling to the state's Workmen's Compensation Act, even though the statute contained a substantive limitations clause. The court rejected the distinction between types of statutes as precluding tolling:

Independently of statutes of limitation, or of jurisdiction as determined by statutes fixing the time within which applications for hearing shall be filed, in a court of equity, when one by his acts, or by his silence or through culpable negligence induces another to believe certain facts to exist, and such other rightfully relies and acts upon such belief, so that he will be prejudiced if the former is permitted to deny the existence of such facts, estoppel arises.

American Mut. Liab. Ins. Co. v. Hamilton, 145 Va. 391, 403, 135 S.E. 21, 24 (1926).

The District Court for the Eastern District of Virginia applied these principles to the Virginia wrongful death statute and held that equitable estoppel would toll that statute. Beverage v. Harvey, 456 F.Supp. 1044, 1046 (E.D.Va.1978), aff'd on other grounds, 602 F.2d 657 (4th Cir.1979).

Kentucky Central mistakenly relies on Dodson v. Potomac Mack Sales & Service, Inc., 241 Va. 89, 400 S.E.2d 178 (1991), for the proposition that the wrongful death limitation cannot be tolled. Dodson dealt with the conflict between the general tolling statute for nonsuits and the specific tolling statute for the abatement of a wrongful death action, holding that the general statute did not apply to wrongful death actions. 241 Va. at 95, 400 S.E.2d at 180-81. Dodson had nothing to do with equitable estoppel or fraudulent concealment, and its language cannot be read out of context to bar equitable tolling.

In American Mutual, the Virginia Supreme Court rejected an argument similar to Kentucky Central's, saying that an earlier opinion describing the wrongful death limitations as substantive and consequently subject to demurrer was not authority for denying the tolling of a similar substantive limitation in the Workmen's Compensation Act. The Court aptly observed that the earlier wrongful death case did not "deal with the question of legal fraud and estoppel." 145 Va. at 404, 135 S.E. at 25.

The rule of American Mutual and Beverage applies here, and we hold that the limitations provision of the Virginia Wrongful Death Act is subject to tolling by equitable estoppel or fraudulent concealment. To deny tolling would lead to unjust results. For example, denial would enable a murderer to escape civil liability by concealing his identity or the nature of his crime until the expiration of the period of limitations.

II

An insurance company has "the duty to use reasonable care not to issue a policy of life insurance in favor of a beneficiary who has no interest in the continuation of the life of the insured." Liberty Nat'l Life Ins. Co. v. Weldon, 267 Ala. 171, 185, 100 So.2d 696, 708 (1957). Breach of the duty is the proximate cause of the death of the insured if the trier of fact finds that this result was reasonably foreseeable. Weldon, 267 Ala. at 188-89, 100 So.2d at 709-11; accord Ramey v. Carolina Life Ins. Co., 244 S.C. 16, 26-27, 135 S.E.2d 362, 367-68 (1964). The same principles apply to a change of beneficiary. Bacon v. Federal Kemper Life Assurance Co., 400 Mass. 850, 855, 512 N.E.2d 941, 944 (1987) (dictum).

On September 14, 1983, David Fisher met with Kenneth Tietsort, a Charlotte insurance agent who represented Kentucky Central, to procure insurance on the life of David Wilkey, Fisher's 18-year-old employee. Fisher applied for a $50,000 life insurance policy on Wilkey, with provision for an additional $50,000 in coverage in case of accidental death. Tietsort, in violation of company policy, accepted the application even though he knew Fisher had no insurable interest in Wilkey's life. Tietsort certified that he had witnessed Wilkey's signature on the application, that he had known Wilkey for a month, and that Fisher was Wilkey's guardian.

On September 22, Kentucky Central disapproved the application because of Fisher's lack of an insurable interest. Tietsort, however, suggested to Fisher that Wilkey's estate could be named as beneficiary for...