Opinion
No. 3:01-CV-1769-H
December 9, 2002
MEMORANDUM OPINION AND ORDER
Before the Court is Defendant's Motion to Reconsider filed September 26, 2002; Plaintiffs' Brief in Opposition to Defendant's Motion to Reconsider, filed October 15, 2002; and Defendant's Reply to Plaintiffs' Response to Motion to Reconsider, filed October 31, 2002. In addition the Court has before it Defendant's Motion for Summary Judgment, filed May 1, 2002; Plaintiffs' Response thereto, filed June 7, 2002; Defendant's Reply, filed June 17, 2002; and Plaintiffs Objections to and Motion to Strike Summary Judgment Evidence, filed June 7, 2002 which was denied as moot on June 24, 2002 when the Court denied Defendant's original Motion for Summary Judgment.
This is an action brought by the estate of Barbara Benjamin Lande to recover benefits of an accidental death insurance policy. Defendant seeks reconsideration of the Court's June 24, 2002 Memorandum Opinion and Order. Defendant asserts that the decedent's policy was not in effect at the time of her death and in the alternative, the decedent's death was not covered under the terms of the insurance contract. Upon review of the pleadings, briefs, and relevant authorities, the Court is of the opinion for the reasons stated below that Defendant's Motion to Reconsider its Motion for Summary Judgment should be GRANTED. The Court's DENIAL of Plaintiffs Objections to and Motion to Strike Summary Judgment Evidence is upheld as moot, as the Court did not employ the evidence to which Plaintiffs objected in reaching its decision.
I. BACKGROUND
This is a case to recover accidental death insurance benefits. The undisputed facts of the case include the following: In April 1999, the Defendant Monumental Life Insurance Co. ("Monumental") issued a $100,000 Certificate of Accidental Death to the decedent, Barbara Lande. (Def.'s App. at 7). The policyholder was American Express Company, through its division American Express Travel Related Services Company, Inc. ("American Express"). (Def's App. at 2). Terms of the policy included a provision that insurance coverage would end automatically on the "premium due date [the policyholder] fail[s] to pay the required premium, except as provided in the Grace Period." ( Id. at 9). The Grace Period is defined, in part, as: "a 31 day [period] for the payment of each premium due after the first premium." ( Id.)
The $14.00 monthly premium for the policy was billed directly to Ms. Lande's American Express card account. (Def's Summ. J. Br. at 2). Coverage under the contract began April 6, 1999. ( Id. at 3). Monumental charged Ms. Lande's American Express account from May through November 1999. (Def.'s App. at 95-121). When it attempted to charge a premium payment on December 6, 1999, however, it was informed electronically by American Express that the charge would not be allowed. (Def.'s Summ. J. Br. at 3-4). After this notification Defendant attempted to charge the account on two separate occasions in early December, and was denied both times. ( Id. at 4). Ms. Lande's American Express card bill from December does not show a charge from Monumental. (Def.'s App. at 122).
On December 10, 1999 Defendant sent Ms. Lande a letter explaining that it had attempted to charge her account unsuccessfully. This letter instructed her to contact American Express and the Defendant in order that she might continue to be billed by American Express for her premiums. (Def.'s App. at 88). Ms. Lande did not contact the Defendant. (Def.'s Summ. J. Br. at 4).
On January 10, 2000 Monumental sent her a billing notice for the premium due. (Def.'s App. at 60). Ms. Lande did not submit payment pursuant to the invoice. (Def's Summ. J. Br. at 4). On January 20, 2000 Monumental mailed Ms. Lande a "Final Notice" with an invoice for the premiums due for December and January totaling $28.00 (Def.'s App. at 61). Defendant did not receive any response to this mailing from Ms. Lande. ( Id. at 61-63).
In late February or early March 2000 Defendant sent Ms. Lande a "Guaranteed Acceptance Form For Increased Coverage," ("Acceptance Form") giving her the opportunity to increase her coverage to $200,000. (Def. Summ. J. Br. at 5). The form provided that payments would be made by charging her American Express card, and that the increased coverage would only become effective upon payment of the first premium. (Def.'s App. at 93). On March 10, 2000 Ms. Lande signed the form and returned it to Monumental. ( Id.) On March 20, 2000 Monumental informed Ms. Lande by letter that the Acceptance Form had been received, and that it would continue to bill her American Express card account. ( Id.) This letter reads in part:
The Guaranteed Acceptance Form for Increased Coverage provides the following for the applicant's signature: I hereby enroll for additional coverage under the American Express Family Shield Supplement, a Group Accidental Death Insurance Plan underwritten by Monumental Life Insurance Company and issued to American Express Travel Related Services Company, Inc. I authorize the premium for the total coverage I have selected above to be processed and remitted to Monumental Life through my enrolled American Express Card account. This authorization is to remain in effect until I cancel it by written notice to Monumental Life Insurance Company at least 30 days in advance of the intended termination date of my coverage. I acknowledge that I have read the fraud warnings on the reverse side, if applicable. Additional coverage becomes effective on the Effective Date stated on the Certificate of Insurance, provided the first premium is paid." It further provides: " Send no money. When your additional coverage is activated, your premium will be conveniently billed to your American Express Card account monthly. The beneficiary of your coverage will be your estate unless you have previously designated otherwise" (emphasis added). (Def's App. at 93).
Your Guaranteed Acceptance Form to increase your American Express Family Shield Supplement coverage has been received and placed in effect.
Your new coverage and premium are displayed above. The premium will continue to be conveniently collected through your American Express Card Account.
Please place this letter with your other important insurance papers.
You made a wise decision updating your coverage and we thank you for your continued confidence in our organization. ( Id.)
Defendant did not bill Ms. Lande's account, however. (Def.'s Summ. J. Br. at 5). Ms. Lande received statements from American Express for the months of January, February, March, April, May, June, July, and August 2000 in which no premiums were charged to her account. (Def's App. 124-147). Monument did not notify Ms. Lande of its failure to bill the American Express card account. (Pls.' Summ. J. Resp. at 3).
Ms. Lande died on July 7, 2000. (Pls.' First Am. Compl. at 2). Although the Parties disagree as to the cause of death, they agree that one of the causes of Ms. Lande's death was hyperthermia after prolonged exposure to the sun. (Pls.' Summ. J. Resp. at 4, Def.'s Summ. J. Br. at 6). Cathy O'Reilly (Ms. Lande's daughter and executrix of her estate), Wayne O'Reilly, Timothy O'Reilly, and Thomas O'Reilly made separate claims for benefits in November 2000. (Def's App. at 148-155). Defendant informed them by individual letters on December 1, 2000 that their claims were denied, because Ms. Lande's coverage had lapsed as of December 6, 1999 (the date American Express denied Monumental's billing) and was not in effect at the time of her death. ( Id. at 172, 174, 176, and 178). In addition, the letters stated that Ms. Lande's death "did not result from an accidental injury independent of all other causes as required by the policy." ( Id.). Plaintiffs claim that Defendant mailed one last bill on January 6, 2001 for $280.00. (Pls.' Summ. J. Resp. at 4).
Plaintiffs contend that Ms. Lande's death was accidental and covered by the insurance policy, and that Monumental has breached the insurance contract by not paying them $200,000. (Pls's Summ. J. Resp. at 11-14, Pls.' First Am. Compl. at 4). In addition, Plaintiffs assert a number of other causes of action against Monumental including that Monumental: has waived or is estopped from asserting the forfeiture provision of the policy; breached its of duty of fair dealing and good faith; committed fraud in knowingly misrepresenting material facts relating to the policy and claims on it; and committed negligent misrepresentation in its business dealings with Ms. Lande and the Plaintiffs. Further, Plaintiffs ask for attorney's fees in the case. (Pls.' First Am. Compl. at 4-7).
Defendant argues that Plaintiffs are not entitled to benefits from the decedent's insurance policy, because the policy had lapsed according to its terms due to unpaid premiums at the time of Ms. Lande's death. (Def.'s Summ. J. Br. at 11, 22-24). Defendant also denies all of Plaintiffs' claims that would find that Defendant either waived or was estopped from denying coverage, or that it acted to deceive the decedent. ( Id. at 13-14). Further, Defendant contends that the circumstances of decedent's death were not covered by the insurance policy. ( Id. at 14-22).
II. ANALYSIS
A. Summary Judgment Standard
Summary judgment is appropriate where the facts and law as represented in the pleadings, affidavits and other summary judgment evidence show that no reasonable trier of fact could find for the nonmoving party as to any material fact. Fed.R.Civ.P. 56; Lujan v. National Wildlife Federation, 497 U.S. 871, 888 (1990); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 251 (1986); Celotex Corp. v. Catrett, 477 U.S. 317, 323-25 (1986); Innovative Database Systs. v. Morales, 990 F.2d 217 (5th Cir. 1993). "The moving party bears the initial burden of identifying those portions of the pleadings and discovery in the record that it believes demonstrate the absence of a genuine issue of material fact, but is not required to negate elements of the nonmoving party's case." Lynch Properties, Inc. v. Potomac Ins. Co. of Ill., 140 F.3d 622, 625 (5th Cir. 1998) (citing Celotex, 477 U.S. at 322-25). If the movant fails to meet its initial burden, the motion must be denied, regardless of the nonmovant's response. Little v. Liquid Air Corp., 37 F.3d 1069, 1075 (5th Cir. 1994).
If the movant does meet its burden, the nonmovant must go beyond the pleadings and designate specific facts showing that a genuine issue of material fact exists for trial. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986); Edwards v. Your Credit, Inc., 148 F.3d 427, 431 (5th Cir. 1998). A party opposing summary judgment may not rest on mere conclusory allegations or denials in its pleadings unsupported by specific facts presented in affidavits opposing the motion for summary judgment. Fed.R.Civ.P. 56(e); Lujan, 497 U.S. at 888; Hightower v. Texas Hosp. Assn., 65 F.3d 443, 447 (5th Cir. 1995).
In determining whether genuine issues of fact exist, "[f]actual controversies are construed in the light most favorable to the nonmovant, but only if both parties have introduced evidence showing that a controversy exists." Lynch, 140 F.3d at 625; see also Eastman Kodak v. Image Technical Services, 504 U.S. 451 (1992). However, in the absence of any proof, the Court will not assume that the nonmoving party could or would prove the necessary facts. Lynch, 140 F.3d at 625. A party must do more than simply show some "metaphysical doubt as to the material facts." Matsushita, 475 U.S. at 586. "If the record, taken as a whole, could not lead a rational trier of fact to find for the non-moving party, there is no genuine issue for trial." Friou v. Phillips Petroleum Co., 948 F.2d 972, 974 (5th Cir. 1991).
B. Waiver of Forfeiture
Plaintiffs argue that Monumental issued two insurance policies to Ms. Lande before her death, the $100,000 policy issued in April 1999 and a $200,000 policy issued in response to the solicitation form mailed to Ms. Lande in March 2000. Both parties agree that the $100,000 policy lapsed for nonpayment of premiums under the forfeiture clause of the policy. Plaintiffs argue, however, that Monumental waived the forfeiture of the policy by sending Ms. Lande the March 20 letter offering to increase her coverage. Plaintiffs also argue that Monumental waived forfeiture of the $200,000 insurance coverage, because it failed to bill Ms. Lande's credit card under the terms of the increased insurance agreement. The issues before the Court are thus: (1) Did Monumental waive the forfeiture for nonpayment of premiums of the $100,000 policy? (2) If so, did Monumental waive the forfeiture of the reinstated coverage for nonpayment of premiums by not billing Ms. Lande through her American Express card? (3) Is Monumental equitably estopped from asserting the forfeiture provision on the reinstated coverage?
The relevant termination provision states:
A Covered Person's insurance automatically ends on the first of the following dates:
(1) The date the Policy is terminated.
(2) The premium due date you fail to pay the required premium, except as provided in the Grace Period.
(3) The premium due date after you are no longer a member of the Policyholder.
(4) The premium due date next following the date you reach age 75.
The Policy defines "Grace Period" as:
You will have a 31 day Grace Period for the payment of each premium due after the first premium. Coverage will continue in force during the Grace Period. It will terminate at the end of the Grace Period if all premiums which are due are not paid. We will require payment of all premiums for the period this coverage continues in force including the premiums for the Grace Period.
In addition, there is a "Reinstatement of Insurance" clause in the policy which,
allows insured parties to "reinstate coverage within 90 days following the last unpaid premium due date" if the company terminates the insurance for nonpayment of a premium.
(Def.'s App. at 9) (emphasis added).
The Parties agree that the insurance policy for $100,000 lapsed in December 1999 due to Ms. Lande's failure to pay the premiums. Texas courts provide that under certain circumstances an insurance company might waive a forfeiture, and the policy would remain in force. See MacIntire v. Armed Forces Benefit Ass'n and AFBA Life Insurance Co., 27 S.W.3d 85, 89 (Tex.App.-San Antonio 2000, no writ). "[W]aiver of the forfeiture of a policy of insurance will result, in the absence of any agreement to that effect, from negotiations or transactions with the insured, after knowledge of the forfeiture, by which the insurer recognizes the continued validity of the policy or does acts based thereon." Equitable Life Insurance Society v. Ellis, 147 S.W. 1152, 1156 (Tex. 1912). To establish waiver, the Plaintiffs must show that (1) the insurer had "knowledge of the facts constituting the forfeiture of the policy in question"; (2) the forfeiture was "complete and absolute"; and (3) there was "an unequivocal act on the part of the insurer which recognized the continuance of the policy, or which was wholly inconsistent with the forfeiture." Bankers Life Loan Ass'n v. Ashford, 139 S.W.2d 858, 860 (Tex.App.-Galveston 1940, no writ).
The first prong is satisfied: Monumental knew of the forfeiture. The second prong is satisfied, because the forfeiture was complete and absolute under the forfeiture provisions of the policy when Ms. Lande failed to pay her premium in response to Monumental's "Final Notice" which was sent on January 20, 2000. The third prong relates to an unequivocal act by the Defendant recognizing the continuance of the policy. Monumental mailed Ms. Lande a Guaranteed Acceptance Form for Increased Coverage ("Acceptance Form") which she signed and returned to them. In response, Monumental sent Ms. Lande the March 20, 2000 letter confirming that her new coverage amount was $200,000 and that her new premium would be $28.00. As noted above, this letter stated: "Your Guaranteed Acceptance Form to increase your American Express Family Shield Supplement coverage has been received and placed in effect." (Def's App. at 93.) Her policy and certificate numbers remained the same as for the $100,000 policy. (Def's App. at 7, 93, Pls.' App. at 76).
The Court finds that this letter is sufficient to constitute "an unequivocal act on the part of the insurer which recognized the continuance of the policy, and which was wholly inconsistent with the forfeiture." Ashford, 139 S.W.2d at 860 (noting that accepting premiums after the expiration of a grace period for fourteen months prior to the death of the insured constituted an unequivocal act recognizing the continuance of the policy). Thus, the Court finds that the Defendant waived the forfeiture provision under the $100,000 policy when it informed the decedent in the March 20 letter both that it had increased her coverage to $200,000 and that this policy was "in effect."
Plaintiffs also argue that Monumental's failure to bill Ms. Lande's American Express account for the $200,000 coverage constitutes a waiver of the forfeiture provision of this policy, and that Monumental should be estopped from claiming that the policy had lapsed. (Pls.' Summ. J. Resp. at 7-10). As noted above, the third element a plaintiff must show in order to prove a waiver of a forfeiture by an insurance company is that the insurer made "an unequivocal act . . . which recognized the continuance of the policy, or which was wholly inconsistent with the forfeiture." Ashford, 139 S.W.2d 858 at 860. In the instant case, the Plaintiffs are unable to show any such action, but rather rely on the fact that Monumental did not bill Ms. Lande's American Express account as it stated it would in the Acceptance Form and the March 20 letter. The Court finds that because the Plaintiffs can show no action taken by Monumental which is either inconsistent with the forfeiture of the coverage, or that recognized the continuance of the coverage, Monumental did not waive the forfeiture of the $200,000 coverage.
C. Lapse of the $200,000 Coverage for Nonpayment of Premiums
In attempting to reconstruct the terms of the $200,000 coverage, the Court looks to three documents before it: the Accidental Death Insurance Certificate for the $200,000 coverage (establishing the terms of the $200,000 coverage), the "Acceptance Form" which Ms. Lande signed on March 10, 2000, and the March 20 letter to Ms. Lande from Monumental. (Pls.' App. at 73-82, Def's App. at 93-94).
According to the Certificate of Insurance the effective date of the $200,000 coverage is April 6, 1999 (the effective date of the initial policy). (Pls.' App. at 76). The Acceptance Form states that "additional coverage becomes effective on the Effective Date stated on the Certificate of Insurance, provided the first premium is paid." (Def's App. at 93). Regarding the means and timing of payment it instructs: "Send no money. When your additional coverage is activated, your premium will be conveniently billed to your American Express Card account monthly." ( Id.).
Monumental argues that this $200,000 coverage never went into effect, because Ms. Lande did not pay the initial premium, as required by the Acceptance Form. It further argues that even if the coverage did go into effect, it lapsed after the 31-day Grace Period expired under the policy's forfeiture provision, because Ms. Lande never paid a premium on it, and never attempted to reinstate the insurance prior to her death on July 7. (Def's Summ. J. Br. at 8).
According to the terms of the Acceptance Form, premium payments were to be made on a monthly basis. (Def's App. at 93). Ms. Lande paid no premium between the time she received the March 20 letter and her death on July 7, 2000.
In MacIntire v. Armed Forces Benefit Assoc., 27 S.W.3d 85, 88 (Tex.App.-San Antonio 2000, no writ) the Court held that the threshold question in an insurance breach of contract case is whether a valid contract exists. In MacIntire a married couple had purchased life insurance in which the premiums were to have been automatically deducted from their bank account. The automatic payments did not take place. The couple paid several payments directly to the company, but were often delinquent. At the time of the husband's death, they were at least five months delinquent in their payments. After the death the wife paid the delinquent payments and contacted the company to inquire about the death benefits. The company informed her that the insurance had lapsed. She claimed that she had not been notified about the termination of the policy before that time, and sued the company for breach of contract. The MacIntire court held that because of the delinquency in premium payments there was no contract in force at the time of the husband's death. "An insured's failure to pay premiums when they come due causes the insurance policy to lapse and become ineffective. . . When a grace period on a policy passes without payment of the defaulted premium, the policy lapses and terminates." Id. at 89. See also Walker v. Federal Kemper Life Assurance Co., 828 S.W.2d 442, 447 (Tex.App.-San Antonio 1992, writ denied); P.M. Baker v. Penn Mutual Life Ins. Co., 617 S.W.2d 814, 815 (Tex.Civ.App.-Houston [14th Dist.] 1981, no writ). Further the MacIntyre court held that an insurance company "need not advise an insured that his policy has lapsed." MacIntyre, 27 S.W.3d at 88.
In Walker v. Federal Kemper Life Assurance Co., 828 S.W.2d 442, 449. (Tex.App.-San Antonio 1992, writ denied) the Court held that where there is a claim of breach of insurance contract for non-payment of benefits in a case where the insurance company asserts a lapse of insurance based on the insured's non-payment of premiums, the essential inquiry is "whether the policy, as a whole, conditions the receipt of benefits on the payment of premiums." In the instant case, the original Certificate of Insurance issued to Ms. Lande in 1999, the Certificate issued for the $200,000 coverage, and the Acceptance Form condition benefits on payment of premiums.
It is uncontested that Ms. Lande did not pay any premiums to Monumental after November 1999. For purposes of this motion the Court need not decide whether the $200,000 coverage actually went into effect. Even if it did go into effect when Monumental sent her the March 20 letter, it lapsed by its own terms under the termination provisions before Ms. Lande's death, and Monumental had no duty to inform her of the lapse.
D. No Estoppel from Denying Benefits under the $200,000 Coverage
Plaintiffs also claim that Monumental should be estopped from denying benefits based on the forfeiture of the $200,000 coverage, because it misrepresented material facts about their billing procedures to Ms. Lande. In order for Plaintiffs to establish an equitable estoppel they must show: (1) a false representation or concealment of material facts, (2) made with knowledge, actual or constructive of those facts, (3) to a party without knowledge, or the means of knowledge of such facts, (4) with the intention that it should be acted on, and (5) reliance by the party to whom the representation was made, to that party's detriment. Gulbenkian v. Penn, 151 Tex. 412, 418, 252 S.W.2d 929, 932 (1952); Schroeder v. Texas Iron Works, Inc., 813 S.W.2d 483, 489 (Tex. 1991).
Plaintiffs claim that Monumental should be estopped from enforcing the forfeiture of Ms. Lande's policy, because the March 20 letter misrepresented the material fact of how the company would collect her insurance premiums, and concealed the fact that it actually intended to collect the premiums by direct-billing. (Pls.' Summ. J. Resp. at 10).
The Court finds that even if the $200,000 coverage did go into effect, Plaintiffs have failed to establish the third and fifth element of equitable estoppel. They have not shown that Ms. Lande had no knowledge or means of obtaining knowledge of Monumental's billing procedures. Copies of Ms. Lande's American Express bills from January through June of 2000 establish that she, in fact, did have knowledge that she was not being billed through her American Express account. (Def.'s App. 124-127). In addition, Plaintiffs provide no evidence that Ms. Lande detrimentally relied on Monumental's statement about how it would bill her. They allege that she expected to be billed as she had for the initial $100,000 coverage. The evidence shows, however, that in December and January of 2000 after Monumental was unable to collect the premium from American Express on December 6, Ms. Lande was repeatedly informed that she would need to pay the company directly. (Def's App. at 60, 61, 88). Plaintiffs have not provided competent summary judgment evidence to support the Defendant being equitably estopped from denying benefits for Ms. Lande's policy.
III. OTHER CLAIMS AND MOTION TO STRIKE
Defendant's Motion for Summary Judgment on Plaintiffs' claims of breach of duty of good faith and fair dealing, fraud, and negligent misrepresentation is GRANTED for the reasons stated above, and because Plaintiffs have provided no additional evidence that Ms. Lande reasonably or justifiably relied on any representation by Monumental. Reliance is an element for both fraud and negligent misrepresentation. See Ernst Young v. Pacific Mutual Life Ins. Co., 51 S.W.3d 573, 577 (Tex. 2001) (for elements of fraud); Federal Land Bank Ass'n. v. Sloan, 825 S.W.2d 439, 442 (Tex. 1991) (for elements of negligent misrepresentation). The Court's decision to deny as moot Plaintiffs' Motion to Strike remains in force, as the Court did not rely on the evidence to which the Plaintiffs had objection in reaching this decision. For purposes of this motion the Court does not reach a decision on whether Ms. Lande's death was due to accidental injury as required under the term of the policy.
IV. CONCLUSION
In conclusion, this case — which seemingly presents with many issues of fact — boils down to one uncontested issue: that Ms. Lande paid no premium for her accidental life insurance policy with Monumental after November 1999. Uncontested facts show that her original $100,000 policy lapsed as of December 6, 1999. There would have been no insurance contract between Ms. Lane and Monumental had the company not made an error in offering to increase her coverage on that policy to $200,000, and by then declaring that her new coverage was "in effect." This error — the offer and confirmation — waived the forfeiture provision of the $100,000 policy. Any dispute about whether the forfeiture of the $100,000 policy also upgraded her coverage to $200,000 becomes moot in the face of Ms. Lande's nonpayment of premiums. It is undisputed that Monumental billed insured persons on a monthly basis, and that both Insurance Certificates issued by Monumental to Ms. Lande provided 31-day Grace Periods, and 90-day Reinstatement Periods. There are no facts to show that Ms. Lande paid a premium during either the Grace or Reinstatement Periods that would have saved her policy from forfeiture before her death in July 2000. Monumental, although it did not bill her as it stated it would, took no positive action that would have waived the forfeiture on the reinstated policy. In addition, the Plaintiffs provide no evidence that Ms. Lande relied on Monumental's statement that it would bill her via her American Express account, or that she had no means of obtaining the information that the company was not billing her as it said it would. At the time of her death Ms. Lande had no life insurance policy with Monumental in effect.
For the reasons stated above, Defendant's Motion to Reconsider and Motion for Summary Judgment are GRANTED. Judgment will be entered accordingly.