The United States Life Ins. Co. In the City of N.Y. v. Wilson

• Decision Date: 28 April 2011
• Docket Number: 2009.,No. 2544,Sept. Term,2544
• Citation: 198 Md.App. 452,18 A.3d 110
• Parties: The UNITED STATES LIFE INSURANCE COMPANY IN the CITY OF NEW YORK, et al.v.Elizabeth WILSON.
• Court: Court of Special Appeals of Maryland

198 Md.App. 452

18 A.3d 110

The UNITED STATES LIFE INSURANCE COMPANY IN the CITY OF NEW YORK, et al.

v.Elizabeth WILSON.

No. 2544

Sept. Term

2009.

Court of Special Appeals of Maryland.

April 28, 2011.

Adrienne C. Publicover, San Francisco, CA (Cynthia Maskol, Angela W. Russell, Wilson Elser, Moskowitz, Edelman & Dicker, LLP, on the brief) Baltimore, MD, for appellant.

Paul D. Berkman (Katharine O. Porwick, Salsbury, Clements, Bekman, Marder & Adkins, LLC, on the brief) Baltimore, MD, for appellee.Panel: EYLER, DEBORAH S., KEHOE, and J. FREDERICK SHARER, (Retired, Specially Assigned), JJ.DEBORAH S. EYLER, J.

The principal issue in this case is whether a policy of insurance on the life of John G. Griffith, M.D., was in force the day he died. We hold that it was.

In the Circuit Court for Baltimore City, Elizabeth Wilson, Dr. Griffith's widow and the appellee, filed a breach of contract action against the United States Life Insurance Company in the City of New York (“US Life”) and AMA Insurance Agency, Inc. (“AMAIA”), the appellants, claiming they had failed to pay the death benefit and accidental death benefit on a policy insuring Dr. Griffith's life (“the Policy”). The appellants maintained that the Policy no longer was in force when Dr. Griffith died. Ms. Wilson acknowledged that the Policy had lapsed but maintained that it had been reinstated before Dr. Griffith died. The court agreed with Ms. Wilson and granted summary judgment in her favor.

In this appeal, the appellants present two questions for review, which we have rephrased:

I. Did the circuit court err in ruling on the summary judgment record that the Policy was in force when Dr. Griffith died?

II. Did the circuit court err in ruling on the summary judgment record that AMAIA was jointly and severally liable with U.S. Life for payment under the Policy?

We conclude that the circuit court correctly ruled that the Policy was in force when Dr. Griffith died. It erred, however, in ruling that AMAIA had any contractual obligation to pay benefits under the Policy. Accordingly, we shall affirm the judgment against U.S. Life and reverse the judgment against AMAIA. In addition, we shall remand the case to the circuit court with instructions to enter judgment in favor of AMAIA.

FACTS AND PROCEEDINGS

Effective November 15, 1998, Dr. Griffith purchased an “American Medical Association–Sponsored Group Level Term Life Insurance Policy,” Certificate Number 9500108167, which was underwritten by U.S. Life. The Policy was for a 10–year term. Dr. Griffith was the owner of the Policy and was the named insured. Ms. Wilson was the primary beneficiary. Under the Policy, if Dr. Griffith died “while this [life] insurance is in force,” then, upon presentation of proof of his death to U.S. Life, U.S. Life would pay the beneficiary the scheduled benefit. The scheduled benefit for death was $400,000, with an additional accidental death benefit of $250,000.

Dr. Griffith purchased the Policy through AMAIA, a subsidiary of the American Medical Association. AMAIA's office is located in Chicago, Illinois. AMAIA acted as the third-party administrator for U.S. Life, meaning that, with respect to U.S. Life policies, including this Policy, it was responsible for, among other things, billing and collecting premiums. AMAIA was authorized to receive premium payments on the Policy.

The Policy contained the following “PREMIUM PAYMENTS” provision:

Premiums will be due annually, or at another agreed upon frequency, as long as you remain eligible for insurance.

Payment can be made to United States Life at United States Life's Home Office or to our authorized agent. Payment of any premium will not maintain insurance in force past the next premium due date, except as provided in the Grace Period provision.

As permitted by AMAIA, Dr. Griffith elected to make semi-annual premium payments for the Policy, due on or before May 15 and November 15 of each year. The premiums were billed by AMAIA and the premium payments were made to it, at its office in Chicago.

The Policy “GRACE PERIOD” provision, as referenced in the “PREMIUM PAYMENTS” clause, read as follows:

Each premium, after the first, may be paid up to 31 days after its due date. This period is the grace period. The insurance provided by the group policy will stay in effect during this period. If the premium is not paid by the end of this period, such insurance will end at that time.

United States Life may extend the grace period by written notice. Such notice will state the date insurance will end if the premium remains unpaid.

Premiums must be paid for a grace period and any extension of such period.

The Policy further contained a “REINSTATEMENT” clause detailing how coverage could be reinstated after a lapse:

If the coverage ceases as provided in the Grace Period provision, you may reinstate it. Reinstatement must be made within 90 days after the due date of the first unpaid premium.

Such reinstatement is subject to:

1. Payment of all overdue premiums; and

2. Written approval by United States Life of the required evidence of insurability. However, such evidence will not be required within 31 days after the end of the Grace Period. ¹

Dr. Griffith made his semi-annual premium payments from 1998 through 2006. Before his May 15, 2007 premium came due, AMAIA sent him an undated “BILL NOTICE” reminding him of the upcoming payment due date. During that period of time, Dr. Griffith was obtaining quotes from other life insurance companies for similar coverage, with the apparent purpose of changing insurers. Dr. Griffith failed to pay the May 15, 2007 Policy premium. After he missed the payment, AMAIA sent him an undated “REMINDER NOTICE,” stating: “To assure active coverage, full payment of the premium must be received no later than 60 days from the due date.” The due date was again listed as May 15, 2007.

On a date that is not disclosed by the record, but probably was not long after June 15, 2007, AMAIA sent Dr. Griffith an undated “LAPSE NOTICE.” It stated:

This coverage remained in effect during the 31 day Grace Period. Since the premium was not paid by the end of the grace period, your coverage has now lapsed.

If you wish to reinstate simply complete and sign the enclosed Reinstatement Form and mail it along with the remittance portion of this notice. A pre-addressed envelope is enclosed for your convenience. Please note that your forms must be received within the next 30 days.

The form accompanying the “LAPSE NOTICE” was entitled “APPLICATION FOR REINSTATEMENT OF COVERAGE,” and subtitled, “STATEMENT OF

GOOD HEALTH AND INSURABILITY.”

Until Monday, July 23, 2007, Dr. Griffith still had not taken any steps to pay the overdue May 15, 2007 premium. That day, he accessed by computer his on-line bank account with Bank of America and electronically directed that a premium payment of $369.46 be made to AMAIA. Bank of America documents in the summary judgment record show that a check for that amount “was sent to AMA Insurance Agency on [Wednesday] 07/25/07 and delivered on [Monday] 07/30/07.” The check, bearing Dr. Griffith's “Authorized Signature,” which appears to have been created electronically, was drawn on JP Morgan Chase Bank, N.A., and was dated July 30, 2007. Dr. Griffith did not send U.S. Life the “APPLICATION FOR REINSTATEMENT OF COVERAGE” or any other evidence of insurability.

On Saturday, July 28, 2007, Dr. Griffith, Ms. Wilson, and their children were on vacation in Bethany Beach, Delaware. Dr. Griffith went on an early morning bike ride. He was kneeling beside his bicycle on the shoulder of State Route 1 at 7:40 a.m. when he was struck and killed by a car that drifted off the road when its driver fell asleep at the wheel. Dr. Griffith was 44 years old when he died.

As noted above, AMAIA received Dr. Griffith's premium check on July 30, 2007. On August 2, 2007, AMAIA rejected the payment and returned the check enclosed in a letter advising that, because Dr. Griffith's “payment was received after the closing of the 30–day grace period,” he no longer could renew his insurance coverage simply by making the premium payment. Instead, he could apply for reinstatement of coverage by completing and returning an “APPLICATION FOR REINSTATEMENT OF COVERAGE,” although approval was not guaranteed. When the August 2, 2007 letter was sent, AMAIA had no information that Dr. Griffith had died.

On September 28, 2007, Ms. Wilson, through counsel, submitted a claim to AMAIA for the death benefit and accidental death benefit under the Policy. AMAIA denied her claim by letter of April 14, 2008, stating that the Policy had lapsed on May 15, 2007, and therefore was not in force when Dr. Griffith died.

On May 30, 2008, in the Circuit Court for Baltimore County, Ms. Wilson filed suit against U.S. Life and AMAIA for breach of contract. Pursuant to the court's scheduling order, a period for discovery was followed by a June 29, 2009 deadline for filing motions for summary judgment.

On June 26, 2009, U.S. Life and AMAIA jointly filed a motion for summary judgment; and then, on June 30, 2009, they filed a second, substitute motion for summary judgment, advancing slightly different arguments than they had originally. In the meantime, on June 29, 2009, Ms. Wilson filed her own motion for summary judgment. The parties requested a hearing and filed oppositions to their opponents' motions.

The cross-motions for summary judgment came on for a hearing on August 7, 2009. The court denied U.S. Life and AMAIA's summary judgment motion and granted Ms. Wilson's summary judgment motion, directing that judgment be entered in her favor for $650,000, plus costs. Orders to that effect were entered on August 21, 2009.

Within 10 days, U.S. Life and AMAIA filed a motion for reconsideration and Ms. Wilson filed a motion to alter or amend, seeking pre-judgment interest. The post-judgment motions were argued before the court on December 17, 2009. On December 22, 2009, the...