v. Transamerica Occidental Life Ins. Co.

• Court: U.S. District Court — Eastern District of Missouri
• Writing for the Court: JOHN A. ROSS UNITED STATES DISTRICT JUDGE
• Decision Date: 15 August 2018
• Docket Number: No. 4:16-CV-00396 JAR,4:16-CV-00396 JAR
• Citation: C.F.C.S. Invs., LP v. Transamerica Occidental Life Ins. Co., No. 4:16-CV-00396 JAR (E.D. Mo. Aug 15, 2018)
• Parties: C.F.C.S. INVESTMENTS, LP, et al., Plaintiffs, v. TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, et al., Defendants.

C.F.C.S. INVESTMENTS, LP, et al., Plaintiffs, v. TRANSAMERICA OCCIDENTAL LIFE INSURANCE COMPANY, et al., Defendants.

No. 4:16-CV-00396 JAR

UNITED STATES DISTRICT COURT EASTERN DISTRICT OF MISSOURI EASTERN DIVISION

August 15, 2018

MEMORANDUM AND ORDER

This matter is before the Court on the following motions: Transamerica Life Insurance Company's Motion for Summary Judgment or, in the alternative, Partial Summary Judgment (Doc. No. 91); Transamerica Life Insurance Company's Motion to Disqualify or, in the alternative, to Bar Opinions of Plaintiff's Proffered Expert (Doc. No. 97); Plaintiff C.F.C.S. Investments, LP's Motion for Summary Judgment on Count II of Plaintiff's Second Amended Complaint (Doc. No. 101); Plaintiff C.F.C.S. Investments, LP's Motions to Strike and Exclude Expert Testimony of Gregory Doby (Doc. No. 104) and Burke Christensen (Doc. No. 107); Defendant MAFG Services, Inc.'s Motion for Summary Judgment or, in the alternative, Partial Summary Judgment (Doc. No. 109); and Defendant MAFG Services, Inc.'s Motion to Bar Testimony and Opinions of Plaintiffs' Proffered Expert Stephen C. Burgess (Doc. No. 112). The motions are fully briefed and ready for disposition.¹

I. Background

Plaintiffs C.F.C.S. Investments, LP ("CFCS") and Jewell A. Clark ("Clark") filed thisaction against Defendants Transamerica Life Insurance Company ("Transamerica") and MAFG Services, Inc. ("MAFG"), alleging wrongful termination of a $2 million life insurance policy, Policy No. 92543172 ("the Policy"), issued to CFCS by Transamerica in April 1997. The Policy required annual premium payments and provided a 31-day grace period if an annual premium payment was not timely paid. The Policy also had a procedure for reinstatement of a lapsed policy, so long as reinstatement was requested in writing within five years after the date of lapse. CFCS timely paid the annual premiums on the Policy through 2010, totaling approximately $487,000.00.

Plaintiffs allege that in August 2011, Transamerica informed CFCS that the Policy had lapsed and then denied CFCS's attempts to reinstate the Policy. According to Plaintiffs, Transamerica and MAFG failed to send notices regarding the Policy's grace period and subsequent lapse to the correct address for CFCS, failed to investigate the correct address, and failed to reinstate the Policy. In Counts I and III of the operative complaint, Plaintiffs assert claims for negligence against Transamerica and MAFG. As part of those claims, Plaintiffs allege that Transamerica and MAFG breached their fiduciary duties to Plaintiffs. In Count II, Plaintiffs seek damages against Transamerica for breach of contract, and in Count IV, Plaintiffs request a judgment against Transamerica declaring that the Policy did not lapse and remains in full force and effect, and that the benefit is due and owing following Jewell Clark's death.

CFCS moves for summary judgment on its breach of contract claim on the grounds that Transamerica breached its contractual duty to notify CFCS of the grace period and lapse by failing to send notice to CFCS's correct address or by failing to determine and send notice to CFCS's correct address. Transamerica moves for summary judgment on the grounds that it had no duty to investigate a new address for CFCS or Clark or to attempt to locate either of them.Likewise, MAFG moves for summary judgment on the grounds that as an insurance broker, its duty is limited to procurement. Thus, it was under no duty to CFCS when the Policy lapsed in 2011.

II. Legal Standard

Summary judgment is appropriate when no genuine issue of material fact exists in the case and the movant is entitled to judgment as a matter of law. See Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986). The initial burden is placed on the moving party. City of Mt. Pleasant, Iowa v. Associated Elec. Co-op., Inc., 838 F.2d 268, 273 (8th Cir. 1988). If the record demonstrates that no genuine issue of fact is in dispute, the burden then shifts to the non-moving party, who must set forth affirmative evidence and specific facts showing a genuine dispute on that issue. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249 (1986). In determining whether summary judgment is appropriate in a particular case, the evidence must be viewed in the light most favorable to the nonmoving party. Osborn v. E.F. Hutton & Co., Inc., 853 F.2d 616, 619 (8th Cir. 1988). When both parties move for summary judgment, the Court must analyze each motion individually and on its own merits. Wermager v. Cormorant Township Bd., 716 F.2d 1211, 1214 (8th Cir. 1983).

III. Facts²

CFCS is a family-owned partnership founded by Harold Clark in 1996 as part of his estate plan. In furtherance of that plan, insurance broker MAFG procured a Transamerica universal life insurance policy, Policy No. 92543712 (the "Policy"), on the life of Harold Clark's wife, Jewell Clark. The Policy was issued by Transamerica on April 17, 1997, with a $2 milliondeath benefit, which was intended to cover estimated estate taxes. CFCS was the owner and sole beneficiary of the Policy; Jewell Clark was the insured.

With respect to payment of premiums, the Policy provided:

You³ must pay the Required Premium Per Year for the first 10 policy years. These premiums may be paid cumulatively in advance. At the end of each of the first 10 policy years, we will calculate the cumulative total of all premiums paid, less any Partial Surrenders and Surrender-Penalty-Free Withdrawals. We will divide this total by the number of years since the policy date. This amount must equal or exceed the Required Premium Per Year for each year in the required premium period or your policy will enter the Grace Period . . . If your policy enters the Grace Period . . . and there is any net cash value remaining at the end of the Grace Period, we will apply it to the Nonforfeiture Option . . . If there is no net cash value remaining at the end of the Grace Period, your policy will lapse.⁴

In the event an annual premium payment was not timely made, the Policy provided for a "Grace Period":

A Grace Period is a period of 31 days after (a) a monthly date when the accumulation value minus any existing loan is less than the monthly deduction due, or (b) a policy anniversary on which the cumulative Required Premium Per Year has not been paid during the first 10 policy years. (See Payment of Premiums provision number 2 on page 9.) We will notify you that the Grace Period has begun and that you must pay a premium large enough to keep the policy in force before the 31 days are up. If you do not pay enough premiums, and there is no net cash value, your policy will lapse. If there is any net cash value remaining at the end of the Grace Period, we will apply it to the Nonforfeiture Option. (See Nonforfeiture Option provision on page 17).

Since a monthly deduction is made on each monthly date for the prior month, and a nominal 31-day grace period is provided after that monthly date, there will always be at least a 62-day effective grace period for payment of overdue premiums.

(Emphasis added.)

The Policy further provided that "[Transamerica] will send any notice under the provisions of this policy to your last known address and to any assignee of the policy." On CFCS's Application for the Policy, under "Special Information for Premium Notices," the billing address was listedas: 5391 Brown Ave., St. Louis, MO 63120 (the "Brown Address").

From the time the Policy was issued through October 2010, CFCS paid $460,715.75 in premiums to Transamerica. Over this period of time, MAFG earned approximately $60,000 in commissions from Transamerica for each premium payment made by CFCS. MAFG asserts there was no contact or communications between itself and CFCS after the Policy was delivered in 1997 and prior to its lapse in 2011. CFCS disputes this, arguing there may have been some communications during this time period but that according to MAFG's corporate representative, some of its records "would have been lost in the transition" from MAFG's affiliation with First Union back solely to MAFG.

CFCS did not have any customary operations or employees or its own office or telephone number. CFCS shared the Brown Address with Clark Properties, a separate property management company managed by Harold Clark's son, Michael Clark. During the relevant time, employees of Clark Properties performed services for CFCS, including paying the Policy premiums.

In 2009, CFCS moved to 3901 Union Boulevard, Suite 104A. (the "Union Address"). Through October of 2010, Transamerica continued to send quarterly premium due notices to the Brown Address. These notices were not returned as undeliverable and CFCS made at least three premium payments in 2010.

Transamerica's premium due notices and premium reminder notices stated on the front side, in the portion of the notice to be detached and returned to Transamerica:

[ ] For change of address check box, print new address on back.

The back side of the premium due and reminder notices provided a form on which to write in change of address information that stated:

If the address to which billing notices should be sent has changed, please fill in the correct address below.

List all your Transamerica policy numbers for which an address change should be made.

This change of address form included lines for the policy owner's name and address "for changes of address only" and a place for "policy number(s)" to which the address change should apply.

There is no record of CFCS reporting a change of address to Transamerica on the form provided on the premium notices. However, CFCS asserts that "correspondence with" Transamerica dated May 19, 2010 and July 13, 2010 "included its new Union Boulevard return address." Transamerica maintains that the only communications between the parties on those dates are copies of checks for premium payments with the following address in the upper left hand corner of the check:

CFCS Investments, L.P. c/o HLC Properties

3901 Union...