Rosenberg v. PHL Variable Ins. Co.
| Decision Date | 05 January 2023 |
| Docket Number | Civil Action 21-2673-KSM |
| Parties | SARA ROSENBERG, Plaintiff, v. PHL VARIABLE INSURANCE COMPANY, et al., Defendants. |
| Court | U.S. District Court — Eastern District of Pennsylvania |
Plaintiff Sara Rosenberg, acting as trustee for the Douglas Rosenberg 2004 Trust (the “Trust”), brings claims for breach of contract, fraudulent misrepresentation, negligent misrepresentation, and violation of Pennsylvania's Unfair Trade Practices & Consumer Protection Law (“UTPCPL”) against Defendant PHL Variable Insurance Company.[1] PHL Variable moves for summary judgment in its favor on all claims. For the reasons discussed below, the motion is granted.
I. BACKGROUND FACTS
Viewing the evidence in the light most favorable to Plaintiff, the relevant facts are as follows.
On May 8, 2001, PHL Variable issued a $20 million Phoenix term life insurance policy on the life of Maury Lane Rosenberg (the “Policy”). (Doc. No. 40-15 at 2.) Douglas Rosenberg is Maury's son and the named beneficiary for the Trust, which is, in turn, the named owner and beneficiary on the Policy.[2] (Doc. No. 46 at ¶¶ 2-3, 7; see also Doc. No. 40-17 (); Doc. No. 19 at ¶¶ 16, 18.) The Policy was set to last 32 years with an expiration date of May 8, 2033. (Doc. No. 40-15 at 2.) During the first 20 years that the Policy was in effect, the annual premium was fixed at a rate of $68,675- resulting in premium payments totaling more than $1.3 million.[3](Id. at 4; see also Doc. No. 46 at ¶ 8; Doc. No. 40-4 at 13 ().)
In addition to paying those premiums and being entitled to the death benefit, the Trust retained certain “lifetime benefits,” including the right to convert the Policy to a new policy of insurance during the first 20 years that it was in effect. (See Doc. No. 40-16 at 5 (Form T604 PA); Doc. No. 46 at ¶ 6 (); see also Doc. No. 40-15 at 2 ().) More specifically, during that time, the Trust could “convert this Policy, without evidence of insurability, to a new Policy on the life of the same insured under this Policy but on a different plan of insurance.” (Doc. No. 40 16 at 10.)
This conversion right extended to “any whole life or universal life insurance plan” that PHL Variable or its affiliates “offer[ed] at the time of conversion.” (Id.)
Whole life insurance and universal life insurance are the “two most common types of ‘permanent' insurance,” but they “differ with respect to features and benefits.” (Doc. No. 40-23 at ¶ 9.) Whole life policies “are more rigid and provide more certainty because they require fixed, periodic premiums be paid in exchange for fixed benefits and guaranteed cash value accumulation.” (Id.) Universal life policies, by contrast, are “more flexible but have less certainty because they allow the policyholder to vary the timing and amount of premiums and permit the insurer to periodically adjust the cost of insurance rates and credited interest rates that can impact the cash value accumulation and the amount of premiums needed to maintain coverage.” (Id.)
In 2019, PHL Variable and its affiliates offered only one whole life policy and one universal life policy for conversion: a universal life product titled PAUL IV and a whole life product known as Remembrance Life. (Doc. No. 40-3 at 5; Doc. No. 40-4 at 6; Doc. No. 40-23 at ¶¶ 13-14; Doc. No. 46-13 at 52:15-23.)
PHL Variable developed PAUL IV in the late 2000s, but by 2009, it had stopped marketing PAUL IV for new sales. (Doc. No. 40-23 at ¶¶ 10, 14.) The company made its last new sale of PAUL IV in 2016 (Doc. No. 40-3 at 6), and although it remained an option for term conversions, regulatory changes in 2017 foretold the end of PAUL IV as a term conversion option (see Doc. No. 40-4 at 8, 13; Doc. No. 46-13 at 27:15-28:21). That year, state regulations and the federal tax code were amended to require all life insurance contracts issued on or after January 1, 2020 to be priced based on the 2017 commissioners standard ordinary (“CSO”) mortality table and to consider principal-based reserving. (Doc. No. 40-4 at 8, 13; Doc. No. 4613 at 27:15-28:21.) PAUL IV was based on the 2001 CSO mortality table, not the 2017 table, and PHL Variable lacked the “infrastructure needed to calculate principal-based reserves for the PAUL IV product.” (Doc. No. 40-4 at 8, 13.) Thus, PHL Variable knew in 2017 that it would not be able to offer PAUL IV in any capacity after December 31, 2019.
Accordingly, PHL Variable began having internal discussions about discontinuing PAUL IV as a conversion option in September 2019, with the expectation that it would be replaced by Remembrance Life beginning January 1, 2020 (Doc. No. 40-4 at 8; Doc. No. 46-1 (); Doc. No. 46-5 () (responding with his “initial thoughts” on the company's conversion program); see also Doc. No. 40-4 at 8-9 ( that the company formally decided on November 5, 2019 to offer Remembrance Life beginning January 1, 2020 and discontinue use of PAUL IV after December 31, 2019); Doc. No. 46-25.) To this end, PHL Variable's conversion program team developed a new cost simulator, sought regulatory approval in those states where Remembrance was not approved, and outlined strategies for telling customers about the transition. (See generally, e.g., Doc. No. 46-1; Doc. No. 46-2; Doc. No. 46-5; Doc. No. 46-19; Doc. No. 46-25.)
As to this last issue, at the end of October, PHL Variable began including a specific warning on conversion quotes for policyholders: “Please be advised our PAUL IV product will no longer be available after 12/31/2019 as a conversion options product.” (Doc. No. 46-2 (); see also, e.g., Doc. No. 40-17 at 2 (November 15, 2019 conversion quote sent to Plaintiff).) Call center representatives also told clients about the upcoming change, but were not themselves supposed to discuss the specifics of the new policy until mid-December 2019. (See Doc. No. 46-19 at 2 (); Doc. No. 46-4 at 2-3 () (telling call center representatives that they should not discuss available products but instead should tell policyholders that “the product available for conversion will be covered in the quote and illustration” sent to the relevant policyholder)[4]; see also Doc. No. 46-23 at 2 (November 8, 2019 email from one call center representative to a superior showing that representatives knew only that the new conversion option would be to a whole life policy).) On December 17, PHL Variable sent an email blast, telling call center representatives, (Doc. No. 46-24 ().)
December 31, 2019 was the last day that PAUL IV was available in any state. (Doc. No. 40-11 at 172:4-8; see also Doc. No. 40-23 at ¶ 11.) Beginning January 1, 2020, Remembrance Life was the only option for conversion offered by PHL Variable. (Doc. No. 40-3 at 5; Doc. No. 40-6 at 6.)
While PHL Variable worked internally to transition from PAUL IV to Remembrance Life as its primary conversion product, the Trust's agents were exploring conversion options for the Policy, which had a final conversion date of May 8, 2021. Typically, when a policyholder- either directly or through an agent authorized to act on the owner's behalf-requests a conversion quote, a call center representative records the request and the face value for conversion and sends the request to PHL Variable's conversion processing team, which prepares a written quote and application for the policyowner's consideration. (Doc. No. 40-4 at 10; see also Doc. No. 46-4 at 3 ().) If the policyowner wishes to move forward with conversion, they complete the application and submit it with a check for the initial premium. (Doc. No. 40-4 at 10.)
Although Plaintiff Sara Rosenberg is the only trustee for the Trust, she deferred to her son, Douglas Rosenberg, and the Trust's insurance agent, Professional Planning Associates (“PPA”), to request information on conversion options for the Policy. ( ).)
Records[5]and deposition testimony show that Douglas and PPA reached out to PHL Variable three times in late 2019 to formally request conversion quotes. First, on November 15 PHL Variable sent the Trust a quote to convert the full $20 million Policy to PAUL IV....
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