Opinion
CIVIL ACTION NO. 02-1836, SECTION "L" (1).
July 25, 2003.
ORDER REASONS
Before the Court are the Plaintiffs' Motion for New Trial, or, in the Alternative Request for Amendment to Judgment, and Defendant's Motion to Alter or Amend Final Judgment. Both motions relate to the Judgment of this Court entered May 21, 2003. For the following reasons the Plaintiffs' Motion for New Trial, or, in the Alternative Request for Amendment to Judgment is GRANTED IN PART and DENIED IN PART, and the Defendant's Motion to Alter or Amend Final Judgment is DENIED.
I. BACKGROUND:
The underlying dispute in this matter involves the rights and interests held by two co-owners and co-beneficiaries to a life insurance policy. Edward Beall, the father of the two Plaintiffs, Rebecca Beall Fielding and Donald Beall, applied for a life insurance policy with Defendant MTL on March 27, 2000, and listed the two Plaintiffs as 50% co-owners of the policy and 50% co-beneficiaries. The original face amount of that policy was $856,740, but it was later decided to reduce both the value of the policy and the monthly insurance premiums. Plaintiff Rebecca Beall Fielding signed a policy change form and consented to a reduction in the face value of the policy. Plaintiff Donald Beall never received the policy change form and never consented to a reduction in the face value of the policy. Despite this defect, MTL endorsed the policy change and reduced the face amount of the policy to $371,576. MTL also reduced the insurance premium from an annual premium of $66,999.93 to a monthly premium of $2,500.
Edward Beall died on September 30, 2001, and on October 23, 2001, the two Plaintiffs submitted claim forms for the proceeds of the policy. Defendant MTL did not make payment on the policy within the time expected, and Rebecca Fielding requested a copy of the policy documentation. Fielding discovered that the policy change indicated that it must be signed by the owner of the policy. Because her brother, a co-owner, did not sign this form, the Plaintiffs retained counsel and demanded the original face value of the policy, $856,740.
On February 18, 2002, the Plaintiffs submitted a demand letter to MTL for the original face value of the insurance policy plus judicial interest. Along with the letter, the Plaintiffs submitted a tender of the difference between the premiums due on the original face value of the policy and the reduced amount of $371,756. On February 28, 2002, MTL rejected that offer, returned the Plaintiffs' check for the difference in premiums, and made a counter offer to pay $371,756 without interest provided that the Plaintiffs waive all rights to additional funds. The Plaintiffs refused and brought suit on May 24, 2002. The Plaintiffs' law suit seeks to recover the original face amount of the policy, plus interest and attorney's fees.
On September 16, 2002, nearly four months after suit was filed, MTL made an unconditional tender to the Plaintiffs of $400,164.76, representing the reduced policy face amount plus 8% from the date of Edward Beall's death.
The matter was submitted to the Court on cross motions for summary judgment. This Court granted in part and denied in part Plaintiffs' and Defendant's cross motions for summary judgment in its Order Reasons entered May 5, 2003. The Court determined that the April 2001 policy change was defective and invalid because it was not approved by both co-owners. Nonetheless, the Court determined that the Plaintiffs were not entitled to the original full face amount of the insurance policy. The Court ruled that the principle of waiver precluded Plaintiff Rebecca Fielding from claiming her share of the $856,740 original face value of the life insurance policy. Rebecca Fielding had executed a policy change form knowingly with the intent to reduce the value of the insurance policy from $856,740 to $371,576, in exchange for a lower monthly insurance premium.
This Court's May 5, 2003, order did not apply the principle of waiver to Plaintiff Donald Beall's right to his 50% share of the original insurance contract. Beall had no knowledge of the change in the value of the policy and did not consent or join in the request for the reduction. Beall's right to his share of the contract was reduced, however, by the value of the premiums that he did not pay to prevent his unjust enrichment. Beall thus was entitled to his share of the original face value of the contract reduced by $9,249.99, the difference in premiums that Beall did not pay during the six months following the policy change.
The current motions relate to the calculation and payment of the interest due to the Plaintiffs. The terms of the insurance policy provided that MTL would pay interest on the lump sum payment at the rate of 3% from the date of death. This rate of contractual interest is not debated by the parties. The Plaintiffs and the Defendant dispute whether the Plaintiffs are also entitled to 8% interest under Louisiana Revised Statute 22:656 and also disagree on the base amount from which the Court should calculate interest.
II. LAW ANALYSIS:
The purpose of a motion for reconsideration is to correct manifest errors of law or fact or to present new evidence to the court. Harsco Corp. v. Zlotnicki, 779 F.2d 906, 909 (3d Cir. 1985). Relief from a grant of summary judgment under Federal Rule of Civil Procedure 59(e) is proper only if the movant demonstrates: "(1) an intervening change of controlling law; (2) the availability of new evidence; and/or (3) the need to correct a clear and manifest error of fact or law." Washington v. CSC Credit Servs., Inc., 180 F.R.D. 309, 311 (E.D. La. 1998), rev'd and vacated on other grounds, 199 F.3d 263 (5th Cir. 2000). The decision to grant a motion under Rule 59 rests within the discretion of the district court. See Edward H. Bohlin Co., Inc. v. The Banning Co., Inc., 6 F.3d 350, 355 (5th Cir. 1993).
First, the Defendant fails to demonstrate that the Court made a manifest error of law in its award of penalty interest to Plaintiffs. Louisiana imposes an interest penalty on insurers who fail to pay claims promptly without just cause. Louisiana Revised Statute 22:656 provides:
All death claims arising under policies of insurance issued or delivered within this state shall be settled by the insurer within sixty days after the receipt of due proof of death, and if the insurer fails to do so without just cause, the amount due shall bear interest at the rate of eight percent per annum from date of receipt of due proof of death by the insurer until paid.
The record reveals that Defendant MTL failed to settle the death claim filed by the Plaintiffs within sixty days of proof of death. Neither party disputes this. Nevertheless, the Plaintiffs and Defendant dispute whether that refusal was "without just cause."
The Louisiana interest penalty does not apply in cases where the insurer had a reasonable defense for refusing to pay the claim, even though that refusal is not upheld by the Court. Neider v. Cont'l Assur. Co., 35 So.2d 237, 241 (La. 1948); Carr v. Port Ship Serv., Inc., 406 So.2d 632, 635 (La.Ct.App. 4th Cir. 1981); Cf. Cartwright v. CUNA Mut. Ins. Soc'y, 476 So.2d 915, 918 (La.Ct.App. 2d Cir. 1985) ("This court has consistently held that an insurer's refusal to pay contested benefits is not without just and reasonable cause where that refusal is based on a reasonable interpretation of policy language which has not been construed to the contrary by the courts of this state."). The Defendant claims that its refusal to make payment to the Plaintiffs was based on a rational reading of Allianz Life Insurance Co. of North America v. Oates, 756 So.2d 677 (La.Ct.App. 2d Cir. 2000). This Court distinguished this matter from Allianz in its May 5, 2003, Order Reasons, acknowledging that the issues raised in this matter are novel to Louisiana insurance law.
Had MTL made timely payment of the undisputed portion of the insurance policy, its reliance on Allianz might have been a reasonable explanation of its refusal to pay the difference between the original face value and the reduced value of the policy. See Remedies v. Trans World Life Ins. Co., 546 So.2d 1380, 1383 (La.Ct.App. 3d Cir. 1989). Here, however, MTL refused to make any payment for five months after the death of the insured, despite the fact that clearly had an obligation to pay the Plaintiffs some death benefit. In other words, MTL owed either $371,756 or $856,740. It chose to pay neither.
An insurer has some duty of good faith to tender reasonable undisputed damages to the insured. In McDill v. Utica Mutual Insurance Co., 475 So.2d 1085, 1092 (La. 1985), the Supreme Court of Louisiana awarded penalty interest where the insurer had been fully apprised that they had some liability yet failed to make any payment. Although the Plaintiff in McDill received penalty interest on his underinsured motorist claim pursuant to Louisiana Revised Statute 22:658, the same good faith obligation to make an unconditional tender of the undisputed funds exists in the life insurance context. It is undisputed that MTL had an obligation to pay the Plaintiffs at least $371,576, the value of the reduced insurance policy. Nonetheless, MTL failed to offer the Plaintiffs' any funds until February 28, 2002, and even that offer was conditioned on the waiver of the Plaintiffs' rights to the disputed sum. MTL's refusal to pay the Plaintiffs' claims was without just cause and the Plaintiffs are entitled to penalty interest.
Louisiana Revised Statute 22:658(B)(1) provides for penalty interest for "[f]ailure to make such payment within thirty days after receipt of such satisfactory written proofs and demand therefor. when such failure is found to be arbitrary, capricious, or without probable cause. . . ."
Commentators have likewise regarded Louisiana's good faith "unconditional tender" rule to have general application to Louisiana interest penalty statutes. See W. Shelby McKenzie H. Alston Johnson, Review of Recent Developments: 1992-1993, insurance, 54 La. L. Rev. 651, 658 (1994) "When only the amount of the insured's claim is in dispute, the insurer has the duty under the penalty statutes [La.R.S. 22:656-658, 1220 (1995)]to tender a reasonable amount to the insured within the statutory payment period."
Second, though the Plaintiffs are entitled to penalty interest, the Court rejects Plaintiffs' arguments that each Plaintiffs interest should be calculated based on original face value of the insurance policy. The Court made no manifest error of law in determining that each Plaintiffs interest award should be based on the principal to which he or she is entitled as specified in the Court's May 5, 2003, Order Reasons.
Rebecca Beall Fielding is entitled to penalty interest based on the principal amount of $185,788, the value of Plaintiff Fielding's ownership stake as specified in the Court's May 5, 2003, Order Reasons. The penalty interest shall be calculated at the rate of 8% from the date of receipt of due proof of death to the date of payment. The record indicates that MTL already paid this amount of interest in September 2002.
Rebecca Fielding is also entitled to contractual interest on her ownership stake at the rate of 3% per annum from the date of death to the date of payment, pursuant to the death benefit payment clause of the insurance policy. Unlike the 8% penalty interest, this contractual interest has yet to be paid by Defendant MTL.
Likewise, Donald Beall is entitled to both penalty interest and contractual interest on the value of his ownership stake in the insurance policy. A potion of that principal and interest was paid by Defendant MTL in September 2002.
III. CONCLUSION
For the foregoing reasons, the Plaintiffs' Motion for New Trial is DENIED. Plaintiffs' alternative Motion for Amendment to Judgment is GRANTED IN PART as to the Plaintiffs' rights to 3% contractual interest and 8% penalty interest, and DENIED IN PART as to the principal amount from which that interest is to be calculated. The Defendant's Motion to Alter or Amend Final Judgment is DENIED.
The Court's judgment entered May 21, 2003, is hereby VACATED and judgment shall be entered in accordance with the above.