Wolinetz v. Berkshire Life Ins. Co.

• Decision Date: 18 March 2004
• Docket Number: No. 01-1217.,01-1217.
• Citation: 361 F.3d 44
• Parties: Harvey D. WOLINETZ, Plaintiff, Appellant, v. BERKSHIRE LIFE INSURANCE COMPANY, Defendant, Appellee.
• Court: U.S. Court of Appeals — First Circuit

361 F.3d 44

Harvey D. WOLINETZ, Plaintiff, Appellant, v. BERKSHIRE LIFE INSURANCE COMPANY, Defendant, Appellee.

No. 01-1217.

United States Court of Appeals, First Circuit.

Heard August 1, 2003.

Decided March 18, 2004.

Douglas M. Brooks with whom Gilman and Pastor, LLP, Patrick F. Morris, Morris and Morris, LLC, Michael B. Hyman, William H. London and Much Shelist Freed Denenberg Ament & Rubenstein, P.C. were on brief, for appellant.

John A. Shope with whom Michael B. Keating, Kirk G. Hanson and Foley Hoag LLP were on brief, for appellee.

Before BOUDIN, Chief Judge, BALDOCK,^* Senior Circuit Judge, and HOWARD, Circuit Judge.

HOWARD, Circuit Judge.

In this case, we consider whether the district court correctly entered summary judgment dismissing Harvey Wolinetz's fraud-related claims against Berkshire Life Insurance Company on statute of limitations grounds. Because we conclude that the date on which Wolinetz learned or should have learned of his claims against Berkshire presents a jury question, we vacate and remand for further proceedings.

I. Background

This case concerns a vanishing premium life insurance policy that Wolinetz purchased from Berkshire. This type of policy provides that the insured pays the insurer a certain number of premiums before the policy becomes self-funding. The policy is marketed on the premise that enough cash value will accumulate over a limited period so that, on a fixed date, future premiums will be paid by the policy's accumulated value rather than by the insured. The speed with which the cash value increases depends on prevailing interest rates and the success of the insurer's investments. High interest rates and successful investments result in the policy becoming self-funding at an earlier date.

In 1987, Wolinetz contacted Richard Lewis, a Berkshire agent, to discuss purchasing life insurance. Lewis encouraged Wolinetz to purchase a vanishing premium policy with a $3 million death benefit. Lewis explained to Wolinetz that, after paying fourteen yearly premiums of $20,000, the policy would become self-funding. As part of his presentation, Lewis showed Wolinetz an illustration (the "original illustration") confirming that, based on current performance and expected interest rates and dividends, the policy would become self-funding after fourteen years. In addition to this projection, the original illustration contained a disclaimer which stated:

Dividends and, if applicable, interest rates and dividend purchases are neither estimated nor guaranteed but are based on current scales ... Dividends are dependent on investment earnings, mortality experience and expenses ... The current dividend scale is interest sensitive which means significant changes in interest rates may affect future earnings.

Thus, the original illustration disclosed to Wolinetz that the fourteen-year premium promise was based, in part, on predictions about future events and therefore not guaranteed.

On December 2, 1987, Wolinetz signed the policy application. Berkshire mailed Wolinetz his policy in the fall of 1988. The policy stated that premiums could be payable for life; nowhere did the policy guarantee a dividend or interest rate.

Beginning in 1991, Wolinetz received annual reports from Berkshire indicating that his policy was underperforming. Each report announced a reduction in Berkshire's dividends. These reports also provided reasons for the poor performance grounded in changes in the economic environment. For example, the 1991 report stated, "[M]ost, if not all, major insurance companies in the United States reduced their dividends during 1991, Berkshire among them. And with good reason, primarily reflecting the lower earnings available in the marketplace, but also reflecting the impact of new federal taxation of life insurers." Similarly, the 1993 report announced falling dividends because "[l]ow interest rates have forced well-reputed mutual life insurance companies, including Berkshire, to reduce their dividend scales."

In addition to these annual reports, Wolinetz received individual policy statements showing lower than projected dividends during the 1991-1994 period. During this same period, Wolinetz also received cash value statements showing lower than expected cash values for his policy. Finally, in 1992 and 1994, Wolinetz received two form letters from Berkshire's president stating that vanishing premium policyholders may be required to pay additional future premiums because of falling dividends.

In May 1996, a broker from another insurer approached Wolinetz to sell him more life insurance. As part of his discussions with this agent, Wolinetz provided a copy of his Berkshire policy, the original illustration, and the other materials that he had received from Berkshire. After reviewing these materials, the agent told Wolinetz that the Berkshire agent's prognostications about vanishing premiums was incorrect and that under current conditions, Wolinetz would have to pay an annual premium of $37,000 for nineteen years for the policy to become self-funding.

In light of this information, on August 20, 1997, Wolinetz sued Berkshire in the United States District Court for the Southern District of New York. Wolinetz asserted several claims against Berkshire: fraud, fraudulent inducement, negligent supervision, unjust enrichment, imposition of a constructive trust, breach of contract, breach of the covenant of good faith and fair dealing, and violation of Mass. Gen. L. ch. 93A.

Wolinetz's complaint pled two theories of liability. His contract claims alleged that Berkshire broke its guarantee that his policy would become self-funding after fourteen annual premiums. Wolinetz's tort and ch. 93A claims alleged that Berkshire used fraudulent information to produce the original illustration which induced him to purchase the policy.

On October 27, 1997, Wolinetz's case was transferred to the District of Massachusetts. See 28 U.S.C. § 1404(a). On October 6, 1998, Wolinetz filed a First Amended Complaint and Consolidated Class Action Complaint, which Berkshire moved to dismiss. See Fed.R.Civ.P. 12(b)(6). On May 25, 1999, the district court dismissed the contract claims but permitted the tort and ch. 93A claims to proceed. On June 22, 1999, the court ordered that discovery be limited to "the statute of limitations issue." After preliminary discovery, Berkshire moved for summary judgment on the ground that Wolinetz's claims were untimely. On December 12, 2000, the district court granted Berkshire's motion and entered judgment in its favor. Wolinetz appealed.

II. Standard of Review

We review the district court's summary judgment ruling de novo. See Rosenberg v. Everett, 328 F.3d 12, 17 (1st Cir.2003). We consider all evidence in the record and accord Wolinetz all reasonable inferences supported by the evidence. Id. We will affirm the district court's ruling if "the pleadings, depositions, answers to interrogatories, admissions on file, together with affidavits, if any, show that there is no genuine issue as to any material fact and that [Berkshire] is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c).

III. Discussion

Before addressing the parties' arguments, we emphasize the theory of liability at issue in this appeal. Wolinetz no longer pursues his contract claims which the district court dismissed. As Wolinetz conceded at the summary judgment argument, the only potentially viable claims arise from his contention that the original illustration contained fraudulent data on which he reasonably relied in purchasing his policy. See Cooper v. Berkshire Life Ins. Co., 148 Md.App. 41, 810 A.2d 1045, 1058-62 (2002) (distinguishing between "guaranteed premium" claim and "fraudulent illustration" claim). Thus, we focus only on whether Wolinetz's fraudulent illustration claims are untimely. The parties agree that Massachusetts law governs the statute of limitations issue.

Wolinetz has pled several common law tort claims which are subject to a three-year limitations period. See Mass. Gen. L. ch. 260, § 2a.¹ He has also pled a Mass. Gen. L. ch. 93A claim which is subject to a four-year limitations period. See Mass. Gen. L. ch. 93A, § 9. Wolinetz filed suit on August 20, 1997. Generally, the limitations period begins when the plaintiff suffers an injury, see Taygeta Corp. v. Varian Assocs., Inc., 436 Mass. 217, 763 N.E.2d 1053, 1063 (2002), which would be December 2, 1987, the date on which Wolinetz purchased the policy from Berkshire. If Wolinetz's claims accrued on this date, his suit would be untimely. Wolinetz contends, however, that because his fraudulent illustration claim was inherently unknowable when he purchased the policy, the discovery rule tolls the running of the limitations period until May 1996, when the insurance broker reviewed his Berkshire policy and the accompanying materials.

Massachusetts recognizes a "discovery rule" that tolls the running of the limitations period in certain circumstances. See Franklin v. Albert, 381 Mass. 611, 411 N.E.2d 458, 463 (1980); see also Int'l Mobiles Corp. v. Corroon & Black/Fairfield & Ellis, Inc., 29 Mass.App.Ct. 215, 560 N.E.2d 122, 125-26 (1990) (holding that discovery rule applies in Mass. Gen. L. ch. 93A actions). Under this rule, "a cause of action ... does not accrue until the plaintiff knew, or in the exercise of reasonable diligence should have known of the factual basis for his cause of action." Patsos v. First Albany Corp., 433 Mass. 323, 741 N.E.2d 841, 846 (2001). For a plaintiff to have sufficient information to trigger the limitations period, he need not know every fact required to prevail on his claim. See Riley v. Presnell, 409 Mass. 239, 565 N.E.2d 780, 784 (1991). It is sufficient that the plaintiff has enough information to suggest that he has suffered an injury caused by the defendant's conduct. See Int'l Mobiles, 560 N.E.2d at 124. Thus, if a plaintiff has information suggesting an injury caused by the defendant, he...