Opinion
CIVIL ACTION NO. 3:97-CV-2014-P.
March 6, 2000.
MEMORANDUM OPINION AND ORDER
Now before the Court are the following:
1. Defendant's Motion for Summary Judgement on Plaintiff's Amended Claims with accompanying memorandum of law and appendix filed October 22, 1999;
2. Plaintiff's Response to Defendant's Motion for Summary Judgment with accompanying memorandum of law and appendix filed November 12, 1999; and
3. Defendant's Reply Brief in Support of its Motion for Summary Judgment on Plaintiff's Amended Claims filed November 29, 1999.
After full consideration of the motions, responses and applicable law, the court hereby GRANTS Defendant's Motion for Summary Judgment.
FACTS
The parties do not dispute the relevant facts of the case. On August 4, 1984, Executive Life Insurance Company ("ELIC") issued to John H. Hill Jr., Trustee ("Plaintiff") a whole life insurance policy ("Original Policy") on the life of John H. Hill, Sr. ("Senior"). In 1991, ELIC was placed into receivership by the California Insurance Department due to its insolvency. The California Insurance Commissioner restructured most of ELIC's policies, and on September 3, 1993, Aurora National Life Assurance Company ("Defendant" or "Aurora") assumed substantially all of the restructured policies ("Restructured Policy" or "Policy"), including the restructured version of the Original Policy held by Plaintiff.
The Original Policy and the Restructured Policy contained an automatic premium loan provision, which automatically paid an insured's unpaid policy premium at the end of a thirty-one day grace period by charging the premium due (plus interest) as a loan against the cash value of the Policy, provided there was sufficient cash value available. The 1990, 1991, 1992 and 1993 annual premiums for Plaintiff's Original Policy were all paid pursuant to the Automatic Premium Loan Provision ("the Provision"). The Provision typically worked in the following way; 1) a premium notice was sent to the policyholder informing them of the need to pay the upcoming premium due; 2) if the premium was not paid by the due date then a Premium Reminder Notice was sent to the policyholder prior to the expiration of the thirty-one day grace period; 3) if the premium remained unpaid at the conclusion of the thirty-one day grace period, and, if there was sufficient value on the policy, the Provision would become active and a loan against the policy in the amount of the premium due would be made — thus, paying the premium due and preventing a lapse of the policy; and 4) after the Provision had been triggered and a loan was issued, a notice was then sent to the policyholder informing them that the Provision had covered their premium due. This was the typical sequence followed with Plaintiff in 1990, 1991, and 1992.
In 1993, however, the events did not follow the typical course. As mentioned above, on September 3, 1993, Defendant assumed most of ELIC's restructured policies, including Plaintiff's. This was one day before the expiration of Plaintiff's thirty-one day grace period for nonpayment of premium. Consistent with the previous years, Plaintiff failed to pay the premium, but at this point there was insufficient value on the Policy to permit the Provision to operate. Thus, on September 4, 1993, the Policy could have lapsed to an extended term policy. However, due to the administrative demands associated with the restructuring, policyholders had not been given any information regarding their new account values. In light of these demands, and consistent with the Rehabilitation Plan, Defendant could not immediately process all of the restructured policies.
On September 29, 1993, Defendant sent Plaintiff a letter advising him that Defendant expected to be able to calculate the availability of the Provision in sixty days. Pl's App. at 169. On November 1, 1993, the Defendant sent a letter to soliciting agents about an alternative method of calculating the availability of the Provision for policies which would have ordinarily expired between September 3, 1993 and December 31, 1993. Pl's App. at 322. Under certain, specified conditions, this letter also guaranteed reinstatement of any policy that lapsed or was placed on extended term insurance before December 31, 1993. The Plaintiff contends that neither he nor his soliciting agent received a copy of the November 1, 1993 letter. Pl's App. at 320.
Between November 16, 1993 and December 4, 1993, the California Insurance Commissioner had prepared the contract values summary to include in the Election Guide Package for each Restructured Policy. On December 13, 1993, the Defendant notified the Plaintiff by letter, advising him that the premium on his Restructured Policy had been payed under the Provision. Def's App. at 338. On January 14, 1994, the Plaintiff received an election package and his contract values summary.
The next communication between the parties occurred on July 13, 1994 when Aurora mailed Plaintiff a Premium Notice indicating that the annual premium to maintain the Policy was due on August 4, 1994. Def's App. at 471-72. Plaintiff maintains that he requested information on the Policy twice in July 1994, but that Defendant's response to these requests failed to set forth the necessary information to determine whether the Policy would qualify for the Provision that allowed for an automatic premium loan. When Plaintiff did not pay the premium, Aurora sent Plaintiff a Premium Reminder Notice on August 24, 1994. Def's App. at 459-460. On September 3, 1994, Defendant sent notice that the grace period for paying the premium had expired; however, Plaintiff contends that this notice was not accompanied by sufficient information for Plaintiff to calculate the availability of the Provision. Def's App. at 478. The thirty-one day grace period elapsed without Plaintiff paying the premium, and the cash value of the Policy was insufficient to qualify for a premium payment loan under the automatic Provision. Thus, the Policy lapsed, because the premium was not paid and the Provision was unavailable due to insufficient cash value. Def's App. at 479. On October 12, 1994, Aurora sent Plaintiff notice that the Policy had lapsed, effective August 4, 1994. Id. Subsequent correspondence from Plaintiff revealed that he did not pay the premium because the employee responsible for making the payment was extremely ill. Def's App. at 482.
In May 1994, John Hill Sr. was diagnosed with pancreatic cancer, to which he eventually succumbed on September 12, 1995. On July 16, 1997, Plaintiff sought to recover death benefits under the Policy — a request that Aurora denied on July 21, 1997. Two days after Aurora's denial of benefits, Plaintiff filed this suit asserting causes of action for breach of contract, promissory and equitable estoppel, and Article 21.55 of the Texas Insurance Code. On March 30, 1999, this Court granted summary judgment in favor of the Defendant as to all of these causes of action. A few days prior to the Court's ruling, however, the Court granted Plaintiff leave to file his First Amended Complaint asserting two new causes of action against Aurora for violation of the DTPA and Article 21.21 of the Texas Insurance Code.
As best the Court can tell, the Plaintiff asserts that the Defendant's December 13, 1993 letter misrepresented the availability of the automatic premium loan provision. Specifically, the Plaintiff asserts that the September 4, 1993 letter led the Plaintiff to believe that a very conservative calculus would be used to determine whether a policy qualified for the Provision. However, it then changed the calculus in a letter dated November 1, 1993, which the Plaintiff never received, making the Provision more widely available for the few months following Aurora's assumption of the Restructured Policies. Because the Plaintiff never received that letter, he argues that the December letter made a misrepresentation and led him to believe that Plaintiff's Policy qualified for the Provision when it in fact did not qualify. Plaintiff argues that if the September terms had been used to disqualify him from the Provision, then the Policy would have lapsed. After the lapse, he could have then filed for an automatic reinstatement pursuant to the terms of the November letter and kept his whole life insurance policy. Instead, he mistakenly believed that the Policy qualified for the Provision under the conservative calculus and further believed that he would therefore continue to qualify for the Provision. Plaintiff argues that this mistaken belief, coupled with the lack of information provided by Aurora, created a misrepresentation which resulted in his failure to pay the premium and lapse of the Policy.
Defendant now moves for summary judgment on those claims arguing that Plaintiff cannot demonstrate that Aurora made a misrepresentation. Moreover, Defendant argues that even if there was a misrepresentation, Plaintiff cannot prove that it was the producing cause of his injuries. Finally, the Defendant argues that the statute of limitations bars Plaintiff's new claims.
SUMMARY JUDGMENT STANDARD
Summary Judgment shall be rendered when the pleadings, depositions, answers to interrogatories and admissions on file, together with affidavits, if any, show that there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(c); Celotex Corp. v. Catrett, 477 U.S. 317, 323 (1986). All evidence and the inferences to be drawn therefrom must be viewed in the light most favorable to the party opposing the motion. United States v. Diebold, Inc., 369 U.S. 654, 655 (1962). The party defending against the motion for summary judgment cannot defeat the motion unless he provides specific facts that show the case presents a genuine issue of material fact, such that a jury might return a verdict in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256-57 (1986).
Once the moving party has made an initial showing, the party opposing the motion must come forward with competent summary judgment evidence of the existence of a genuine fact issue.Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Mere assertions of a factual dispute unsupported by probative evidence will not prevent summary judgment.Anderson, 477 U.S. at 248-50; Abbot v. Equity Group, Inc., 2 F.3d 613, 619 (5th Cir. 1993). In other words, conclusory statements, speculation and unsubstantiated assertions will not suffice to defeat a motion for summary judgment. Douglass v. United Servs. Auto. Ass'n, 79 F.3d 1415, 1429 (5th Cir. 1996) (en banc). If the nonmoving party fails to make a showing sufficient to establish the existence of an element essential to is case, and on which he bears the burden of proof at trial, summary judgment must be granted. Celotex Corp., 477 U.S. at 322-23.
Finally, the Court has no duty to search the record for triable issues. Guarino v. Brookfield Township Trustees, 980 F.2d 399, 403 (6th Cir. 1992). The Court need only rely on the portions of the submitted documents to which the nonmoving party directs the Court. Id.
DISCUSSION
The Plaintiff brings claims under sections 17.46(5) and 17.46(12) of the Deceptive Trade Practices Act ("DTPA"). Tex. Bus. Comm. Code § 17.46(b)(5), 17.46(b)(12) (West Supp. 2000). He also alleges a cause of action under article 21.21 of the Texas Insurance Code. Tex. Ins. Code Ann. art. 21.21 § 4(1) (West Supp. 2000). Both of these allegations require that Plaintiff demonstrate that Defendant made a misrepresentation that was a producing cause of Plaintiff's injuries. See Doe v. Boys Club of Greater Dallas, Inc., 907 S.W.2d 472, 478 (Tex. 1994) (listing the elements for a DTPA claims as 1) the plaintiff is a consumer; 2) the defendant engaged in false, misleading, or deceptive acts; and 3) these acts constituted a producing cause of the consumer's damages); Crawford Co. v. Garcia, 817 S.W.2d 98, 102 (Tex.App.-El Paso 1991, writ denied) (requiring that under article 21.21, plaintiff must show deceptive act was the producing cause of the alleged injury); Moore v. Whitney-Vaky Ins. Agency, 966 S.W.2d 690, 692-93 (Tex.App.-San Antonio 1998, no pet.) (holding that insured's mistaken belief about coverage was not actionable under DTPA or Insurance Code, since agent made no misrepresentation about the insurance). Because the Court finds that Plaintiff has failed to demonstrate either of these elements, summary judgment is proper as to these claims.
Section 17.46(5) makes it illegal to "represent that goods or services have sponsorship, approval, characteristics, ingredients, uses, benefits, or quantities which they do not have or that a person has sponsorship, approval, status, affirmation, or connection which he does not." Tex. Bus. Comm. Code § 17.46(b)(5) (West. Supp. 2000).
Section 17.46(12) makes it unlawful to "represent that an agreement confers or involves rights, remedies, or obligations which it does not have or involve, or which arc prohibited by law." Tex. Bus, Comm. Code § 17.46(b)(12) (West. Supp. 2000).
Article 21.21 § 4(1) imposes liability on an insurer for misrepresentations based upon "making, issuing, circulating, or causing to be made, issued or circulated, any estimate, illustration, circular or statement misrepresenting the terms of any policy issued or to be issued . . . or making any misrepresentation to any policyholder insured in any company for the purpose of inducing or tending to induce such policyholder ot lapse, forfeit, or surrender his insurance."
A. Misrepresentations
Plaintiff alleges that the December 13, 1993 letter made a misrepresentation about the status of his Policy. Plaintiff argues that the December 13, 1993 letter led the Plaintiff to believe that under the terms of the Restructured Policy and the September 29, 1993 letter, his Policy had not lapsed and he qualified for application of the Provision. He makes a very convoluted argument that the letter misrepresented that Plaintiff qualified for the automatic premium loan under the conservative guidelines of the Provision as outlined in the September 29, 1993 letter because Plaintiff did not receive the November 1, 1993 letter informing agents that a more liberal calculus would be used and that any policies that lapsed due to the unavailability of the Provision during that time would be guaranteed reinstatement. Although these statements would have been true under the concealed November 1, 1993 letter, the Defendant's statements were false under the September 29, 1993 letter. Therefore, according to Plaintiff's argument, the December 13, 1993 letter's omission of the liberal calculus that was used to determine the availability of the Provision and the guaranteed reinstatement provision of the November 1, 1993 letter mislead the Plaintiff as to the availability of the Provision, the need to make payments against the Policy, and the lapse of the Policy in 1993 when guaranteed reinstatement was available.
It seems that the essence of Plaintiff's argument is that if the conservative calculus had been used, then his Policy would have been disqualified from using the automatic loan provision. The Policy would have then lapsed or been converted to an extended term policy that would have been subject to reinstatement. He would have then paid to have the Policy reinstated and would have known that he would not qualify for the Provision in the future. While this information is more relevant to the Court's analysis of the `producing cause,' it may also be helpful in understanding the rationale behind Plaintiff claiming that Defendant made misrepresentations.
The Court finds that Defendant's December 13, 1993 letter does not contain any misrepresentations. The letter merely states that the Policy premium was payed through the automatic premium loan provision, which is true, regardless of which calculus the Plaintiff assumed that Aurora used in qualifying his Policy. Def's App. at 337. The premium was paid through the Provision, which meant that the Policy did not lapse and that no payments were then due. The letter informed Plaintiff that the next premium would be due on August 4, 1994, and made no representations about the future availability of the Provision.Id. Regardless of Plaintiffs attempt to overly complicate this matter, the letter simply does not make any material misrepresentations.
B. Producing Cause
Even if the December 13, 1993 letter did constitute a misrepresentation, it would not constitute the producing cause of Plaintiff's injury. The producing cause is a substantial factor which brings about the injury and without which the injury would not have occurred. Doe v. Boys Club of Greater Dallas, Inc., 907 S.W.2d 472, 481 (Tex. 1994). Plaintiff alleges that "if the defendant had enforced the Policy as represented in the September 13, 1993 letter under a conservative calculus, the Policy would have been subject to reinstatement. . . . But even if reinstatement had not been guaranteed, Senior was an insurable risk in 1993 and Plaintiff had the ability to pay the 1993 and 1994 premium." Pl's Br. at 17. Therefore, Plaintiff argues that he would not have been injured if the Policy had lapsed under the terms of the September letter because he could have been reinstated, and he would have known, upon reinstatement, that the automatic premium loan provision was not available for the 1994 year. Knowing that information, he would have ensured that the premium was payed in cash and on time.
Though Plaintiff's argument may demonstrate that a lapse in 1993 would have caused him to pay his 1994 premium on time, Plaintiff's argument does not prove the inverse of that statement — that the December letter caused him to not pay his 1994 premium. Moreover, Plaintiff has not demonstrated any reliance upon the alleged misrepresentation. Texas law does not require the Plaintiff to demonstrate reliance as a separate element of a DTPA claim, but reliance may be a factor in deciding whether the defendant's actions was a producing cause of the plaintiffs injury. See Century 21 Real Estate Corp. v. Hometown Real Estate Co., 890 S.W.2d 118, 130 (Tex.App.-Texarkana 1994, writ denied). A complete lack of reliance will disprove the conduct as a producing cause because "a misrepresentation cannot be theoretically the producing cause of injury if it was not at all relied upon." Id. Plaintiffs letter admits that he did not pay his premium on time because the person responsible for making the payment was ill. Def's App. at 482. Plaintiff's letter to Aurora seeking a reinstatement of the Policy never makes a single reference to a reliance upon the previous year's `misrepresentations' or the mistaken belief that the Provision should have automatically payed the 1994 premium. Id. At any time he could have called Aurora and simply asked if his Policy qualified for the Provision. In the December 13, 1993 letter, Defendant did not make any misrepresentation regarding the future availability of the Provision. In light of these facts, the Court finds that even if Defendant made misrepresentations in the December 13, 1993 letter, those statements were not the producing cause of Plaintiff's injuries.
CONCLUSION
For the reasons stated herein, the Court finds that for the purposes of Plaintiff's DTPA and Texas Insurance Code claims, the Defendant's actions were neither misrepresentations nor the producing cause of Plaintiff's alleged injury. Therefore, the Court GRANTS the Defendant's Motion for Summary Judgment as to all claims and declines to consider the parties' arguments regarding the applicability of the statute of limitations to this action.
So ordered this 6th day of March, 2000.