Szymanski v. BOSTON MUTUAL LIFE INSURANCE COMPANY

• Decision Date: 07 November 2002
• Docket Number: No. 99-P-1756.,99-P-1756.
• Citation: 56 Mass. App. Ct. 367,778 NE 2d 16
• Parties: JAMES SZYMANSKI v. BOSTON MUTUAL LIFE INSURANCE COMPANY.
• Court: Appeals Court of Massachusetts

56 Mass. App. Ct. 367

778 NE 2d 16

JAMES SZYMANSKI v. BOSTON MUTUAL LIFE INSURANCE COMPANY.

No. 99-P-1756.

Court of Appeals of Massachusetts, Suffolk.

March 7, 2002.

November 7, 2002.

Present: BROWN, DREBEN, & DOERFER, JJ.

Douglas M. Brooks for the plaintiff.

Beth I.Z. Boland (William M. Cowan with her) for the defendant.

Victoria E. Fimea, Evan M. Tager, & Peter C. Choharis, for American Council of Life Insurers, amicus curiae, submitted a brief.

Thomas F. Reilly, Attorney General, & Matthew S. Buehler & Thomas M. O'Brien, Assistant Attorneys General, for the Attorney General, amicus curiae, submitted a brief.

BROWN, J.

At issue is the defendant insurer's promotional materials and representations made by its insurance agent indicating that a so-called "vanishing-premiums" life insurance policy sold to the plaintiff would accumulate sufficient value in nine years to cover the cost of the annual premiums thereafter.¹ A judge of the Superior Court allowed the defendant's motion for summary judgment on the basis of statutes of limitations. We reverse.

Background. In 1986, the plaintiff, James Szymanski,² then a foreman with an associate's degree in manufacturing, owned a fully paid $5,000 life insurance policy with Boston Mutual Life Insurance Company (Boston Mutual). In March, 1986, William Pittella, a Boston Mutual agent, told Szymanski about a new kind of Boston Mutual life insurance policy that operated so that annual premium payments would vanish in a fixed number of years. Pittella suggested that Szymanski's existing $5,000 policy could be used to pay a portion of the premiums for a new policy, which afforded a death benefit of $25,000 and the premiums for which would "vanish" after nine years.

Szymanski purchased the vanishing-premiums policy in May, 1986, paying his initial premium from dividends on his existing $5,000 policy. When the policy was mailed to Szymanski in May, 1986, it was accompanied by two illustrations that showed projected policy values over the next twenty years. The first illustration demonstrated that after nine years Szymanski's premiums could be paid from the accumulated value of his policy, so that no further out-of-pocket premiums would be required. The second indicated that continued payment of outof-pocket premiums after the ninth year could increase the policy's death benefit significantly. Both illustrations utilized what was described as the "current" interest rate of 10.5 percent, though stating that the rate was not guaranteed beyond the first policy year. The following year, the plaintiff surrendered the $5,000 policy to pay the annual premiums on the new policy. The proceeds from that policy paid Szymanski's premiums until 1992; Szymanski thereafter received an annual premium bill, which he paid out of pocket. Pursuant to the policy terms, each May Szymanski also received an annual statement from Boston Mutual, showing the accumulated value of his policy and the interest rate for the coming year. After the first year of the policy, the annual statement showed that the rate would drop to 9.0 percent; the rate continued to drop over the next eight years.

In May, 1996, ten years after purchasing the policy, Szymanski received an "additional premium bill" and, upon inquiry to his agent, he was made to understand that he would have to make twenty or more payments before the policy would become self-funding.

Szymanski filed the original complaint in this action on February 18, 1998 (amended on May 11, 1998), claiming, among other things, breach of contract, fraud, and violation of G. L. c. 93A. A Superior Court judge allowed Boston Mutual's motion for summary judgment on the basis of the statutes of limitations³ that pertain to causes of action for contract (six years), tort (three years), and G. L. c. 93A (four years). The judge reasoned that Szymanski was on notice at least by the 1987 annual statement, when the interest rate dropped from 10.5 percent to 9.0 percent, that his premiums would not vanish as promised.⁴

We conclude that the triggering event cannot be pinpointed as matter of law, but poses a question of fact as to when a reasonable policy holder should have realized from the available information that the policy was not performing as allegedly promised and that the so-called vanishing premiums were a fiction. "In most instances, the question when a plaintiff knew or should have known of its cause of action is one of fact that will be decided by the trier of fact." Taygeta Corp. v. Varian Assocs., 436 Mass. 217, 229 (2002).

A. The discovery rule. Actions in both contract and tort may be tolled until such time as the plaintiff discovers the facts giving rise to the cause of action. Frank Cooke, Inc. v. Hurwitz, 10 Mass. App. Ct. 99, 106 (1980). The discovery rule also applies to actions based on G. L. c. 93A. See International Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass. App. Ct. 215, 221 (1990). In opposing the defendant's motion for summary judgment on the basis of the statutes of limitations, Szymanski relied on the discovery rule, arguing that he did not discover, or was prevented from discovering until the 1996 premium bill, that the vanishing-premiums policy would not operate as promised. "The rule, which operates to toll a limitations period until a prospective plaintiff learns or should have learned that he has been injured, may arise in three circumstances: where a misrepresentation concerns a fact that was `inherently unknowable' to the injured party, where a wrongdoer breached some duty of disclosure, or where a wrongdoer concealed the existence of a cause of action through some affirmative act done with the intent to deceive." Patsos v. First Albany Corp., 433 Mass. 323, 328 (2001). The plaintiff relies on all three theories.

1. Inherently unknowable standard. In Massachusetts, when a plaintiff can not reasonably ascertain the injury or breach at the time it occurred, his cause of action accrues when the plaintiff knows or should know that he has suffered appreciable harm resulting from the defendant's actions. Schwartz v. Travelers Indem. Co., 50 Mass. App. Ct. 672, 678 (2001). The "`inherently unknowable' standard is no different from and is used interchangeably with the `knew or should have known' standard." Albrecht v. Clifford, 436 Mass. 706, 714 (2002), citing Williams v. Ely, 423 Mass. 467, 473 n.7 (1996). When, as here, the parties press different events as triggering accrual, the factual inquiry focuses on which was the first event reasonably likely to put the plaintiff on notice that the defendant's conduct had caused him injury. See Eck v. Kellem. 51 Mass. App. Ct. 850, 853 (2001). "Notice here refers not to discovery of every fact necessary to prevail on the claim, but rather to discovery of the plaintiff's injury as causally connected to the defendant's negligence." International Mobiles Corp. v. Corroon & Black/ Fairfield & Ellis, Inc., 29 Mass. App. Ct. at 218. The plaintiff may be put on "inquiry notice" when he is informed of the facts that suggest he has been injured. Pagliuca v. Boston, 35 Mass. App. Ct. 820, 824 (1994), citing Felton v. Labor Relations Commn., 33 Mass. App. Ct. 926, 927-928 (1992). It is important to remember that notice is predicated on the view of a reasonably prudent person in the plaintiff's position. See generally Bowen v. Eli Lilly & Co., 408 Mass. 204, 210 (1990).

Boston Mutual contends that Szymanski's claims accrued in 1986, when he first received his policy containing no reference to the vanishing of his premiums after eight years, but rather requiring that premiums be paid through 2041. The defendant additionally urges that, at least by 1992, the plaintiff knew from the annual statements that interest rates had dropped to 8.25 percent and that, as a consequence, the policy's accumulated value would not pay the premiums after nine years. At that point, the defendant argues, the plaintiff should have at least inquired about the declining interest rates and would then have discovered that additional out-of-pocket premiums would be necessary beyond the vanishing date originally represented.

The plaintiff maintains that his cause of action accrued in 1996, when he received his first bill to pay out-of-pocket for an annual premium beyond the date he thought his premiums would vanish. He claims that he did not understand that the annual statements sent to him between 1986 and 1995 contained information revealing that the accumulated value of his policy could not possibly cover the cost of premiums, as had been represented to him when he executed the policy.

A review of the vanishing-premiums cases from other jurisdictions offers no uniform rule regarding the accrual date of these actions. In deciding the limitations issue those cases often go into exhaustive detail in describing the information made available to the policy holder, what it should have meant from the policy holder's perspective, and when it should have prompted inquiry.⁵

The critical determination in a summary judgment context is whether, as matter of law, we can identify the point at which Szymanski should have known or should have made inquiry, based on the information available to him, about the shortfall in the accumulated value of his policy that would preclude covering the cost of annual premiums at the end of nine years. We now review the materials in the summary judgment record.

a. The 1986 illustrations. In 1986, two illustrations were sent to Szymanski with his policy. The first illustration, the more significant for our purposes, shows the column for annual premiums stopping at year nine. Both 1986 illustrations indicate that the plaintiff's policy would become self-sustaining, that is, require no further out-of-pocket premiums, after the ninth year based on the then-current interest rate of 10.5 percent. In tiny print at the bottom of the page, in reference to the ninth-year figures on...