United of Omaha Life Ins. Co. v. Honea
| Citation | 458 F.3d 788 |
| Decision Date | 17 August 2006 |
| Docket Number | No. 05-3892.,05-3892. |
| Parties | UNITED OF OMAHA LIFE INSURANCE COMPANY, Plaintiff-Appellant, v. Ross C. HONEA, Defendant-Appellee. |
| Court | United States Courts of Appeals. United States Court of Appeals (8th Circuit) |
Counsel who presented argument on behalf of the appellee was Gary D. Marts of Little Rock, AR. Edwin L. Lowther, Jr. and Regina A. Young of Little Rock, AR appeared on the brief.
Before LOKEN, Chief Judge, BOWMAN and BYE, Circuit Judges.
United of Omaha Life Insurance Company issued a $500,000 term life policy effective August 1, 1996. The insured, John L. Rauch, died on June 26, 1998. The beneficiary of record, Pioneer Nursing and Rehab Center, Inc. ("Pioneer"), filed a claim for the policy proceeds that United of Omaha denied. Pioneer sued. United of Omaha eventually settled the lawsuit for $390,500 and commenced this suit for indemnification against the broker who procured the policy application, Ross Honea. The district court1 granted summary judgment in favor of Honea, concluding that under Arkansas law Honea was an agent of the prospective insured, not United of Omaha, and therefore had no affirmative duty to disclose that the application was in substance identical to a prior application United of Omaha had rejected. On appeal, United of Omaha asserts new breach of contract theories that are not supported by the sparse factual record. Accordingly, we affirm.
Honea and United of Omaha entered into a Broker's Contract providing that Honea would procure applications for United of Omaha's insurance products, "comply with all Company practices and procedures," and act "in an ethical, competent and professional manner." The Contract further provided that Honea would indemnify United of Omaha against third party claims resulting from "the Broker's wrongdoing, or the Broker's breach of this Contract."
In early 1996, Pioneer engaged Linco Construction Company ("Linco") to build a nursing home in Melbourne, Arkansas. Rauch was Linco's president and owner. When Linco could not obtain a sufficient performance bond, Honea submitted an application to United of Omaha for a $750,000 "key person" term life insurance policy, naming Rauch as the insured and Pioneer as the policy owner and beneficiary. United of Omaha rejected the application. Honea then submitted a second application for a $750,000 policy, allegedly naming Rauch as the insured, Linco as the policy owner, and Rauch's estate as the beneficiary.2 United of Omaha accepted the new application and sent a printed policy to Honea on July 29, 1996, conditioning its acceptance on Linco agreeing to reduce the face amount of the policy from $750,000 to $500,000. Rauch signed an amendment to this effect on August 28. United of Omaha issued the policy on September 10, effective August 1.
The policy provided that the policyholder "may change the ownership of this policy or pledge it as collateral by assigning it," so long as United of Omaha recorded and acknowledged the assignment. On August 2, 1996, after United of Omaha mailed the policy to Honea but before Rauch accepted the reduced face amount, Rauch in Honea's presence signed a United of Omaha form entitled Absolute Assignment. This document irrevocably assigned Linco's ownership interest in the policy to Pioneer and named Pioneer the beneficiary of record. United of Omaha received and recorded the assignment on September 12. Thereafter, United of Omaha received premium payments from Pioneer and mailed premium reminder notices to Pioneer. On two occasions before Rauch's death, United of Omaha sent policy lapse letters to Pioneer and reinstated the policy when Pioneer applied for reinstatement and paid the required premiums.
In its complaint, United of Omaha sought indemnification on the ground that Honea violated his duties to United of Omaha "under the law and his broker's contract" by submitting an application that negligently failed to disclose or fraudulently concealed information that Honea knew would make the risk unacceptable to United of Omaha — that Pioneer was the intended policy owner and beneficiary. Honea moved for summary judgment, arguing that Arkansas law does not recognize the tort of negligent misrepresentation and that United of Omaha could not...
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