WILSON v. Nw. Mut. Ins. Co.

• Decision Date: 04 November 2010
• Docket Number: Docket No. 09-1895-cv.
• Citation: 625 F.3d 54
• Parties: Michelle WILSON, Plaintiff-Appellant, v. NORTHWESTERN MUTUAL INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Second Circuit

625 F.3d 54

Michelle WILSON, Plaintiff-Appellant,

v.NORTHWESTERN MUTUAL INSURANCE COMPANY, Defendant-Appellee.

Docket No. 09-1895-cv.

United States Court of Appeals,Second Circuit.

Argued: June 10, 2010.

Decided: Nov. 4, 2010.

COPYRIGHT MATERIAL OMITTED.

Douglas Richard Dollinger, Goshen, New York, for Plaintiff-Appellant.

Cheryl F. Korman, Rivkin Radler LLP (Norman L. Tolle and Merril S. Biscone, of counsel), Uniondale, New York, for Defendant-Appellee.

Before: MINER, SACK, and HALL, Circuit Judges.

MINER, Circuit Judge:

Plaintiff-appellant Michelle Wilson (“Wilson”) appeals from a summary judgment entered on March 31, 2009, in the United States District Court for the Southern District of New York (Young, J., sitting by designation), in favor of defendant-appellee Northwestern Mutual Life Insurance Company (“Northwestern”) on Wilson's claim that she is the beneficiary of two life insurance policies issued to her late husband, Kenneth Wilson (“Kenneth”), by Northwestern. The District Court determined that there were no genuine issues of material fact as to Kenneth's termination of one life insurance policy, the “Whole Life Policy,” on February 28, 2005, and failure to pay any premiums after that date. The court further determined that Kenneth also terminated the other life insurance policy, the “Term Life Policy,” as of February 28, 2005, when, on May 23, 2005 (several weeks before his death on June 6, 2005), he directed Northwestern to “refund his last payment and let the policy lapse.”

I. Background A. The Insurance Policies: Issuance, Payments and Terminations

On May 29, 2004, Northwestern issued two life insurance policies to Kenneth: a whole life policy (“Whole Life Policy”) with a face amount of $150,000 and a term life policy (“Term Life Policy”) with a face amount of $350,000. At that time, Kenneth was thirty-five years old, a husband and father of two, and had been a Bank Officer at JP Morgan for the past eleven years.

At Kenneth's request, Northwestern set up an Insurance Service Account (“ISA”) whereby the premiums on the two policies would be paid on a monthly basis and funded through electronic fund transfers (“EFT”) from Kenneth's bank account. Each of the policies contained the following “Grace Period” provision:

Grace Period. A grace period of 31 days will be allowed to pay a premium that is not paid on its due date. The policy will be in full force during this period. If the insured dies during the grace period, any overdue premium will be paid from the proceeds of the policy.

If the premium is not paid within the grace period, the policy will terminate as of the due date unless it continues as extended term or paid-up insurance under Sections 7.2 or 7.3.

Each policy further provided for reinstatement more than thirty-one days after the end of the grace period upon submission of evidence of insurability and payment with interest of unpaid premiums. The reinstatement option would be open to the policyholder for five and three years after termination of the Whole Life and Term Life Policies, respectively.

Kenneth did not always pay on time. On three different occasions between August 2004 and early 2005, Kenneth's EFT payments to the ISA were rejected by the bank for insufficient funds, resulting in the closing of the ISA each time. Following each of the first two closings that took place on September 24, 2004, and January 11, 2005, Kenneth made subsequent EFT payments to reopen the ISA and satisfy his premiums. Following the third missed payment and the resulting ISA closing on March 15, 2005, the ISA was reopened once again on April 5, 2005, with an EFT payment of $224.85. Since that amount was insufficient to satisfy Kenneth's premium obligations beyond February 28, 2005, the ISA was “closed yet again” on April 12, 2005.

On April 27, 2005, instead of paying the delinquent payments as he had done in the past, Kenneth called Northwestern and spoke with Melissa Nowak in the Policyowner Services Department. Kenneth asked to have his ISA reopened for the Term Life Policy only and to have the premium for that policy be paid through December 28, 2005. The premium for the Whole Life Policy having been paid through February 28, 2005, and no premium payment having been made within the thirty-one-day grace period, the Whole Life Policy terminated on February 28, 2005. Kenneth provided the necessary banking information so that a one-time draft could be issued to cover the premiums for the Term Life Policy. On April 28, 2005, the ISA was reactivated for the Term Life Policy only, and on April 29, 2005, Kenneth made an EFT payment of $215.60 to his ISA, which satisfied the premiums for March through December. As a result of this transaction, Kenneth's ISA supposedly had a zero balance as of April 29, 2005.

On May 23, 2005, however, Kenneth telephoned Northwestern to inquire about a negative balance reported in his ISA and spoke with Diane Knueppel (“Knueppel”), a Senior Customer Service Representative. From her, he learned that the negative balance resulted from a $35.00 premium adjustment fee. According to Knueppel, the fee could not be waived because Kenneth's Term Life Policy was no longer a companion policy to the terminated Whole Life Policy. Knueppel's notes from her conversation with Kenneth, contemporaneously created that day in Northwestern's Casetracker system, revealed that she “[s]poke with client”; “[i]nformed him that the $35 is a policy fee that ... is no longer waived”; and that “[c]lient is now asking to be refund[ed] his last payment and let the policy lapse.” After Knueppel consulted Daniel Stein, Kenneth's Northwestern Field Representative, Knueppel telephoned Kenneth and stated that she was “working on refunding the last draft that was done on the ISA.” The record does not reveal any response from Kenneth. In her affidavit in support of Northwestern's motion for summary judgment, Knueppel noted that “[t]he last draft for the term life policy was received on April 29, 2005 and was in the amount of $215.60.”

Based on her conversation with Kenneth, Knueppel credited the premium payments for May through December 2005. Knueppel also closed the ISA, effective May 29, 2005. Northwestern then sent Kenneth notice that his Term Policy was paid to May 20, 2005, and that the grace period would expire June 29, 2005. Knueppel claims that, on May 24, 2005, she asked Joyce Barrack, Northwestern's Senior Analyst for authorization to credit the payments made by Kenneth for the months of March, April, and May 2005. Authorization was given, and on May 31, 2005, Northwestern sent two refund checks to Kenneth: (1) $154.07 for the months of June, July, August, September, October, November, and December, and (2) $81.03 for the months of March, April, and May 2005. Although the later-sent refunds purportedly resulted in the Term Life Policy being paid only through February 2005 (with a grace period thirty-one days later), Northwestern never rescinded the letter dated May 23, 2005, which, as noted above, stated that Kenneth's Term Life Policy was paid to May 29, 2005, and that the grace period would expire on June 29, 2005.

Kenneth died on June 6, 2005. After Kenneth's death, Wilson, Kenneth's wife, received the first refund check for $154.07, dated May 31, 2005. Wilson never received the second refund check. However, Northwestern's issuance of the second refund check in the amount of $81.03, payable to Kenneth, is recorded in its check registry. Northwestern's records show that the check for $81.03 was never deposited or returned. In June 2005, Wilson submitted a claim for payment on both the Whole Life and Term Life Policies. On July 21, 2006, Northwestern denied Wilson's claims on the ground that both policies were terminated as of February 28, 2005.

B. Proceedings in the District Court

On March 7, 2007, Wilson commenced an action in the New York State Supreme Court, claiming breach of contract, deceptive and misleading practices, negligence, and violation of N.Y. General Obligation and State Insurance Laws. Wilson v. Nw. Mut. Ins. Co., 603 F.Supp.2d 705, 706 (S.D.N.Y.2009). Wilson sought compensatory damages in the amount of $500,000 plus interest, as well as costs and attorneys' fees. Id. On April 6, 2007, Northwestern removed the action to federal court on the basis of diversity jurisdiction, pursuant to 28 U.S.C. § 1332. Id.

On January 31, 2008, Northwestern moved for summary judgment, and on February 25, 2008, Wilson cross-moved for summary judgment. Id. In a Memorandum and Order dated March 26, 2009, the District Court granted Northwestern's motion for summary judgment, denied Wilson's cross-motion for summary judgment, and dismissed Wilson's complaint. Id. at 715.

The District Court found that Kenneth's Whole Life Policy terminated on February 28, 2005, in that: (1) Kenneth instructed Northwestern not to include the Whole Life Policy when his ISA reopened in April; (2) Kenneth had only paid premiums for the policy through February 28, 2005; (3) Kenneth did not make any payments on the Whole Life Policy after February 28, 2005, or during the thirty-one-day grace period; and (4) Northwestern was not required to notify Kenneth of the cancellation of his Whole Life Policy in writing, pursuant to N.Y. Insurance Law § 3211. Id. at 710.

The District Court also found that Kenneth's Term Life Policy terminated on February 28, 2005, because (1) the oral agreement between Kenneth and Knueppel, cancelling the Term Life Policy, was not required to be in writing under N.Y. General Obligations Law §§ 5-701, 15-301, and N.Y. Insurance Law § 3204 because it was not a modification of the contract; (2) Kenneth's request for refund of the “last premium payment” could only be interpreted by a reasonable jury as a request for refund of the entire premium payment made on April 29, 2005, which included payments retroactive to February 2005; (3) the New York Dead Man's Statute, N.Y....