Lincoln Benefit Life v. Wilson
MEMORANDUM AND ORDER that Plaintiff's motion for oral argument (Filing No. 127 ) is denied. Plaintiff's motion for summary judgment (Filing No. 97 ) is denied in all respects. Defendant's motion for oral argument (Filing No. 128 ) i s denied. Defendant's motion for summary judgment (Filing No. 98 ) is granted in part and denied in part, as follows: a. Plaintiff's damage claims (counts I, II, and III of the complaint) are dismissed with prejudice. b. Plaintiff is precl uded from asserting as a defense that Defendant breached the agent's contract in connection with the sale of the term life insurance policies. c. In all other respects, the motion is denied. This matter is referred to Magistrate Judge Cheryl R. Zwart for further progression, as appropriate. Ordered by Senior Judge Richard G. Kopf. (JSF)
UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF NEBRASKA
LINCOLN BENEFIT LIFE,
JAMES W. WILSON,
In a memorandum and order entered on July 7, 2015, the court advised the
parties that it was inclined to rule as a matter of law, in deciding cross-motions for
summary judgment, that the plaintiff is collaterally estopped from proving its damage
claims, but that ruling on the motions would be deferred pending supplementation of
the record and additional briefing. See Filing No. 139 at CM/ECF p. 22 (citing
Fed.R.Civ.P. 56(e)(1); Fed. R. Evid. 104).1 The motions are now ripe for decision,
The court directed the defendant to “file a copy of the complete record in the
case of Stephen Carb as Trustee of Lollytogs, Inc. Trust v. Lincoln Benefit Life
Company, Inc., Case No. 09cv2980, in the United States District Court for the
Southern District of New York,” and authorized the plaintiff to file any supplemental
evidence it desired (Filing No. 139 at CM/ECF p. 22). In response to a request for
clarification from the defendant, the court subsequently indicated that the “complete
record” of the New York litigation “should include all pleadings, trial transcripts,
exhibits marked into evidence, and all trial related submissions to the court (including,
but not limited to, pretrial conference orders and reports, trial briefs, motions in
limine, requests to charge, and proposed jury interrogatories), plus any other court
filings [the defendant] Wilson deems relevant to the issue of collateral estoppel”
(Filing No. 142).
The defendant produced most of this litigation record on a compact disc (Filing
No. 147), but some additional trial documents were later filed electronically (Filing
No. 148). The plaintiff has also made a supplemental filing of evidence, all of which
post-dates New York litigation (Filing No. 151).
without oral argument.2 For the reasons discussed below, and in the court’s previous
memorandum and order, the plaintiff’s motion for summary judgment will be denied
and the defendant’s motion for summary judgment will be granted in part and denied
in part. As a result, the plaintiff’s damage claims will be dismissed and the case will
proceed to trial on the defendant’s counterclaim for damages.
The plaintiff, Lincoln Benefit Life (“LBL”), is a life insurance company. The
defendant, James W. Wilson, is an insurance broker. LBL sues Wilson to recover
approximately $15 million in damages, claiming a right to indemnity or contribution
at common law (count I), breach of contract (count II), and negligence (count III).
LBL also seeks to obtain a declaratory judgment that no additional commissions are
owed to Wilson (count IV). Wilson counterclaims to recover approximately $2.7
million in damages, alleging a single claim for breach of contract for nonpayment of
In addition, because the plaintiff’s argument references the entire course of
proceedings in the prior litigation, the court on its own motion takes judicial notice of
certain facts contained in other filings in the Carb case which are publicly available
on the website maintained by the United States District Court for the Southern District
of New York. See Great Plains Trust Co. v. Union Pac. R. Co., 492 F.3d 986, 996
(8th Cir. 2007) (court may take judicial notice of proceedings in other courts that
relate directly to matters at issue); Fed. R. Evid. 201(b)(2) (“The court may judicially
notice a fact that is not subject to reasonable dispute because it ... can be accurately
and readily determined from sources whose accuracy cannot reasonably be
questioned.”); Fed. R. Civ. P. 56(c)(3) (“The court need consider only the cited
materials, but it may consider other materials in the record.”). Documents referencing
these judicially noticed facts are cited as “SDNY Doc. No. __ at CM/ECF p. __.”
The parties’ respective motions for oral argument (Filing Nos. 127, 128) will
be denied because the facts and legal arguments are adequately presented in the briefs
and record and oral argument would not significantly aid the decisional process.
In 1999, Wilson was retained by shareholders of Lollytogs, Inc., to procure
insurance on the life of one of the company’s co-founders, Samuel Gindi, in order to
fund a buyout of Gindi’s interest in Lollytogs upon his death. The shareholders
wanted to replace an existing policy that had been issued by a company other than
LBL. Wilson entered into a special agent’s agreement with LBL, which then issued
two term policies with 10-year level premium periods. After 10 years the premiums
would escalate, but the term policies allowed for conversion to permanent insurance
“[p]rior to the earlier of the policy anniversary next following the insured’s seventieth
birthday or the end of the level premium period” (Filing No. 103-14 at CM/ECF p. 10;
Filing No. 104-1 at CM/ECF p. 10). Gindi was 75 years old when the term policies
After receiving the term policies in 2000, the shareholders questioned Wilson
about the policies’ convertibility, and he in turn questioned LBL. A faxed response
from LBL, dated July 13, 2000, stated: “This policy will have conversion privileges
up to the term of the policy” (Filing No. 106-2). In 2003, Wilson again contacted LBL
regarding the policies’ conversion rights. This time LBL took the position that the
policies were not convertible due to Gindi’s advanced age, but stated that “due to the
misinformation that was provided on July 13th, 2000, we will honor a conversion of
both policies within 30 days” (Filing No. 106-11). LBL subsequently issued five
universal life insurance policies for a “free look” period, but these policies were not
accepted by the Lollytogs shareholders. LBL then reinstated the two term polices.
In 2007, the Lollytogs shareholders notified LBL that they intended to convert
the two term policies before the end of their 10-year level premium periods in 2009.
LBL responded that although an exception was made in 2003, “these policies are not
convertible due to the insured’s age” (Filing No. 106-15).
In fact, Gindi’s age was stated on pages 1 and 3 of in both policies (Filing No.
103-14 at CM/ECF pp. 3, 5; Filing No. 104-1 at CM/ECF pp. 3, 5).
In 2009, the Lollytogs shareholders filed suit for breach of contract against
LBL in the United States District Court for the Southern District of New York.4
Annual premiums were ordered paid into escrow while the case was pending. Gindi
died in 2012. In 2013, after the jury returned a verdict in favor of the Lollytogs
shareholders, the court entered a judgment that required LBL to pay a death benefit
of $29 million (the total amount of two the term policies) and that directed the escrow
agent to pay LBL approximately $7.3 million for premiums due during 2009-2012.
In the words of the presiding judge, “[t]he jury handed [the Lollytogs shareholders]
a resounding victory” (Filing No. 113-1, at CM/ECF p. 4).
In the present action, LBL seeks to collect from Wilson the difference between
the $7.3 million premium amount that was determined by the jury and the amount it
otherwise would have received as premium payments under the two term policies.
Wilson meanwhile seeks to collect from LBL the amount of additional commissions
he would have earned if LBL had allowed conversion of the term policies in 2009.
“The court shall grant summary judgment if the movant shows that there is no
genuine dispute as to any material fact and the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A material fact is one that “might affect the
outcome of the suit under the governing law,” and a genuine issue of material fact
exists when “the evidence is such that a reasonable jury could return a verdict for the
nonmoving party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). In
determining whether a genuine issue of material fact exists, the evidence is to be taken
The New York litigation was initiated by Stephen Carb, as Trustee of
Lollytogs, Inc. Trust, but the trust’s successor in interest, G Investor Holdings, LLC,
was later substituted as the plaintiff. For convenience, the litigation will be referred
to as having been brought by the Lollytogs shareholders.
in the light most favorable to the nonmoving party, Adickes v. S.H. Kress & Co., 398
U.S. 144, 157 (1970), and the court must not weigh evidence or make credibility
determinations, Anderson, 477 U.S. at 249.
A. LBL’s Damage Claims
In September 1999, LBL appointed Wilson to sell insurance products pursuant
to a “Special Agent’s Agreement – Appointment” (Filing No 102 (LBL’s statement
of material facts), ¶ 12; Filing No. 103-4). The appointment was made at Wilson’s
request, in connection with his shopping for life insurance for Samuel Gindi (Filing
No. 102, ¶ 12; Filing No. 105 (Wilson’s statement of material facts), ¶ 6).
The special agent’s agreement generally provided that Wilson, while acting as
an independent contractor, was to “solicit applications for the policies of insurance ...
written by LBL ... and ... submit such applications received to LBL,” and to “deliver
policies issued by LBL, collect the first premium therefor, transmit all collections
immediately to LBL, and make every effort to maintain in force all policies issued by
LBL” (Filing No. 102, ¶ 14; Filing No. 103-4, at CM/ECF p. 3). Wilson had only
limited authority to act on behalf of LBL, however, as the special agent’s agreement
Limitation of Authority – You shall not exercise any authority on behalf
of LBL other than expressly conferred by this Agreement. Specifically,
but not in limitation of the foregoing, you shall have no authority on
behalf of LBL to:
Make, alter, or discharge any contract.
Waive or modify any terms, conditions, or limitations of
(Filing No. 103-4, at CM/ECF pp. 4).
The special agent’s agreement provides that it “shall be governed by and
construed according to the laws of the State of Nebraska” (Filing No. 103-4, at
CM/ECF p. 4). The parties are in agreement that Nebraska substantive law applies in
the present action.
LBL claims that Wilson breached the special agent’s agreement because he
“‘modif[ied] terms, conditions, or limitations of [the] polic[ies]’” with “assurances
and representations to Gindi and/or Sutton5 regarding the conversion rights available”
(Filing No. 1-3, ¶¶ 64, 65). Alternatively, LBL claims that Wilson “acted negligently
in misrepresenting and/or failing to clarify the rights and obligations of Lincoln
Benefit, Gindi, and/or Lollytogs [shareholders] both prior to and after the issuance of
the policies” (Filing No. 1-3, ¶ 69).
LBL also claims it “is entitled to common law indemnity/contribution from
Wilson for his wrongful conduct in connection with the sale and procurement of the
policies” (Filing No. 1-3, ¶ 53). Combining elements of its claims for breach of
contract and negligence, LBL alleges that “[i]n the [New York] litigation, Lollytogs
claimed that, after communicating the importance of conversion rights in prospective
policies, Wilson made assurances and representations to Gindi and/or Sutton
concerning the convertible nature of the policies” and that “[t]he assurances and
misrepresentations were false, misleading, and negligent” (Filing No. 1-3, ¶¶ 50, 51).
The court construes LBL’s complaint as seeking indemnity rather than contribution.6
Richard Sutton was Lollytogs’ CEO.
“A party has a claim for indemnification if it pays a common liability that, as
between itself and another party, is altogether the responsibility of the other party.”
United General Title Insurance Company v. Malone, 858 N.W.2d 196, 212-13 (Neb.
2015). “In contrast, a claim for contribution arises when a party has paid more than
its fair share of a common liability that is allocated in some proportion between itself
As an affirmative defense, Wilson alleges that LBL’s claims are barred under
the doctrine of collateral estoppel because it was determined in the New York
litigation “that the policies had conversion rights as a result of Plaintiff Lincoln
Benefit’s actions (a) when the policies were sold [in 1999]; (b) when the policies were
modified by Plaintiff’s officers’ and employees’ statements in the July 13, 2000 fax;
(c) under the doctrine of [promissory] estoppel; and (d) under the doctrine of waiver
....” (Filing No. 17, ¶¶ 90, 94). As discussed in the court’s previous memorandum and
order, the preclusive effect of the judgment that was rendered against LBL must be
evaluated by applying New York law. See Ideker v. PPG Industries, Inc., 788 F.3d
849, 852 (8th Cir. 2015) (in a diversity case, a federal court applies state substantive
law in deciding whether to apply collateral estoppel, giving a judgment preclusive
effect if a court in that state would do so; this rule applies even when the original
judgment is that of another federal court sitting in diversity).
In New York, “collateral estoppel, or issue preclusion, ‘precludes a party from
relitigating in a subsequent action or proceeding an issue raised in a prior action or
proceeding and decided against that party or those in privity.’” MLCFC 2007-9 ACR
Master SPE, LLC v. Camp Waubeeka, LLC, 999 N.Y.S.2d 202, 206 (N.Y.A.D. 3 Dept.
2014) (quoting Weston v. Cornell Univ., 983 N.Y.S.2d 353, 355 (N.Y.A.D. 3 Dept.
2014)). The doctrine applies when “the identical issue was necessarily decided in the
prior action and is determinative in the present action.” JBGR, LLC v. Chicago Title
Ins. Co., 11 N.Y.S.3d 83, 85 (N.Y.A.D. 2 Dept. 2015). “The determination of an issue
of law or fact will not be given preclusive effect unless ‘the issue [was] material to the
first action or proceeding and essential to the decision rendered therein.’” Gadani v.
DeBrino Caulking Associates, Inc., 926 N.Y.S.2d 724, 727 (N.Y.A.D. 3 Dept. 2011)
(quoting Ryan v. New York Tel. Co., 467 N.E.2d 487, 490 (N.Y. 1984)). “Whether
collateral estoppel applies presents a question of law turning on both an identity of
and another party.” Id., at 213. “[T]hose entitled to indemnity are generally free from
personal fault while those entitled to contribution are not.” Downey v. Western
Community College Area, 808 N.W.2d 839, 853 (Neb. 2012).
issue and a full and fair opportunity to litigate that issue in the prior proceeding.”
Hoopes v. Bruno, 513 N.Y.S.2d 301, 302 (N.Y.A.D. 3 Dept. 1987); Claim of
Guimarales, 503 N.E.2d 113, 115 (N.Y. 1986). “The party asserting collateral
estoppel has the burden of establishing ‘identity of the issue, while the opponent must
demonstrate the absence of a full and fair opportunity to litigate.’” Gadani, 926
N.Y.S.2d at 727 (quoting Jeffreys v. Griffin, 801 N.E.2d 404 (N.Y. 2003)).7
The evidence shows that the Lollytogs shareholders alleged in their action
against LBL that “[p]ursuant to the terms of the [two term life insurance] policies,
upon reaching the age of seventy or the end of the level premium period whichever
is earlier,8 the owner of the policy is permitted to convert the subject policies from a
Term Life Policy into a Flexible Premium Adjustable Life Plan or a Whole Life Plan
then sold by [LBL]”; that “[n]otwithstanding the language contained in the subject
policies, these policies were tendered to Gindi when he was seventy-five years old,
effectively making it a contractual impossibility for him to exercise these conversion
rights at the age of seventy as set forth under the terms of the contracts”; that “[LBL]
was fully aware of Gindi’s age at the time when the subject policies were negotiated,
LBL does not contend there was not a full and fair opportunity to litigate any
of the issues identified by Wilson.
Contrary to the Lollytogs shareholders’ allegation, the term policies were not
convertible “upon [the insured] reaching the age of seventy.” Rather, the policies
needed to be converted “[p]rior to ... the first policy anniversary next following the
insured’s seventieth birthday ...” (Filing No. 103-14 at CM/ECF p. 10; Filing No. 1041 at CM/ECF p. 10). “Policy anniversary” is defined as “[t]he anniversary of the issue
date in subsequent years” (Filing No. 103-14 at CM/ECF p. 7; Filing No. 104-1 at
CM/ECF p. 7). “Issue date” is “[t]he date the policy is issued, as shown on Page 3”
of the policy (Filing No. 103-14 at CM/ECF p. 7; Filing No. 104-1 at CM/ECF p. 7).
Arguably, even though Gindi was over 70 years old when the policies were issued, he
had one year from the policies’ issue dates (i.e., until October 1 and November 8,
2000) to exercise the right of conversion. However, neither party argued for this
construction of the conversion language. The Lollytogs shareholders claimed there
was a 10-year period for conversion, while LBL claimed there was none.
agreed to and issued”; that “[n]otwithstanding the fact that Gindi was over seventy
years of age at the time when the policies were issued, on or about July 13, 2000,
[LBL] sent a written communication ... confirming the right of conversion during the
level premium period”; that “[o]n or about February 26, 2003, [LBL] acknowledged
these representations in a written communication but sought to change the terms and
conditions contained in the policies by only honoring the right of conversion if
exercised within the next thirty days from the date of the letter”; and that the Lollytogs
shareholders “refused to accept any such modification of the conversion rights set
forth within the subject policies ...” (Filing No. 107-2 (amended complaint filed in
Stephen Carb as Trustee of Lollytogs, Inc. Trust v. Lincoln Benefit Life Company,
Inc., Case No. 09cv2980, in the United States District Court for the Southern District
of New York), ¶¶ 38, 41-45). As to each of the term life insurance policies, the
shareholders asserted claims for (1) a declaratory judgment requiring LBL to allow
conversion of the policy effective as of 2009, (2) breach of contract based on LBL’s
failure to convert the policy in 2009, and (3) reformation of the policy to provide a
right of conversion (Filing No. 107-2). The reformation claims were dismissed at the
outset of the litigation (SDNY Doc. No. 20), and the declaratory judgment claims
were ordered dismissed prior to trial as being subsumed within the breach of contract
claims (Filing No. 113-2, at CM/ECF pp. 3-5).
LBL states in its most recent brief that “[n]o party in the previous or the present
action ever contended that the language of the policies is ambiguous” (Filing No. 149
at CM/ECF p. 19), but this is not true. The Lollytogs shareholders repeatedly claimed
that the policies’ conversion language was ambiguous.
For example, soon after the New York litigation was filed, LBL moved for its
dismissal, arguing, as it does now, that “by the express terms of the Policies, Plaintiff
never had any right of conversion” (SDNY Doc. No. 12 at CM/ECF p. 7). The
Lollytogs shareholders vigorously disagreed, and argued that “[t]he Policies at Issue
are Subject to more than one Interpretation” (SDNY Doc. No. 14 at CM/ECF p. 19).
They stated in their opposing brief:
Defendant erroneously contends in its motion papers that the
Policies contain “clear and unequivocal provisions.” However, these
express terms, as applied herein, would result in an absurdity. The
Policies confer a right to convert each policy under a heading and
subheading and then underneath these headings, impose an age condition
that occurred long before the contracts ever existed, thereby creating a
right that is a contractual impossibility. Therefore, because the first event
(i.e. Gindi’s 70th birthday) expired long before the subject policies were
issued, the only way to interpret the Policies in a way that renders these
provisions meaningful is to utilize the second event (the end of the level
premium period i.e. 2009) as the end date for the purpose of converting
Moreover, if the policy language is found to be ambiguous as
applied, extrinsic evidence is then used to determine the parties’ actual
intent. If the extrinsic evidence fails to resolve the ambiguity, the policy
provision in question is to be resolved in favor of the insured. See
Handelsman v. Sea Ins. Co., 85 N.Y.2d 96, 101, 623 N.Y.S.2d 750, 752
(1994). As discussed herein, Lincoln and/or its agents, by their own
admissions provide insight and clarification as to the intent of the
parties.... Accordingly, due to the illusory nature of the age condition
when read in conjunction with the remainder of the provisions contained
in the Policies, Plaintiff has sufficiently pled its claim for its breach of
contract and is thus entitled to proceed under this theory.
(SDNY Doc. No. 14 at CM/ECF pp. 20-21).
The New York federal district court denied LBL’s motion to dismiss the
Lollytogs shareholders’ claims for breach of contract and declaratory judgment, but
it granted the motion to dismiss the reformation claim because there was no allegation
of either mutual mistake or fraud. Significantly, the court found that the Lollytogs
shareholders were instead claiming that the contract was ambiguous. The court stated:
“Under New York law, reformation can be granted only in two
circumstances: where there has been a [i] mutual mistake; or [ii]
unilateral mistake coupled with fraudulent concealment by the knowing
party.” Widmar Co., Inc. v. Teachers Ins. & Annuity Ass’n of Am., 870
F. Supp. 524, 535 (S.D.N.Y. 1994) (citing Chimart Assocs. v. Paul, 489
N.E.2d 231, 234 (N.Y. 1986)); see also Brandwein v. Provident Mut.
Life Ins. Co. of Phila., 3 N.Y.2d 491, 496 (N.Y. 1957)....
Plaintiff’s allegations that both parties knew Mr. Gindi’s correct
age when the Policies were entered into, even though the Policies
“permit conversion upon reaching the age of seventy or the end of the
level premium period, whichever is earlier,” (Am. Compl. ¶¶ 66-68,
72-74), do not establish mutual mistake. Rather, they point to a “question
of ambiguity . . . [on] the face of the agreement” that this Court would
have to resolve “[t]o order reformation[.]” Collins v. Harrison-Bode, 303
F.3d 429,435 (2d Cir. 2002) (applying New York law). Because “in the
present case . . . it is impossible to determine what the parties actually
agreed upon absent [findings of fact,] it is therefore impossible to reform
the contract” until the breach of contract claim is adjudicated, Global
Switching Inc. v. Kasver, No. 06 Civ. 412, 2006 WL 1800001, at *14
n.11 (E.D.N.Y. June 28,2006) (citing Koam Produce, Inc. v. DiMare
Homestead, Inc., 213 F. Supp. 2d 314,326 (S.D.N.Y. 2002) (applying
New York law)), and the appropriate “contractual ‘remedy’ is not
‘reformation’ ... but merely an action to enforce the contract.” Lieberman
v. Emimant Mortnaae Co., 436 F. Supp. 2d 357,365 (D. Conn. 2006).
“Plaintiff[ ] also fail[s] to state a claim for unilateral mistake, as the
complaint does not allege fraud[.]” Greater N.Y. Mut. Ins. Co. v. U.S.
Underwriters Ins. Co., 827 N.Y.S.2d 147, 149 (1st Dep’t 2007); (see also
Def. Mem. at 7.)
(SDNY Doc. No. 20 at CM/ECF pp. 10-11).
When LBL later moved for summary judgment, it again argued that “[t]he
express language of the Policies demonstrates that the conversion privilege was not
applicable to Gindi” because he “was seventy-five years old when the Policies were
issued and accepted by Plaintiff” (SDNY Doc. No. 51 at CM/ECF p. 11), and the
Lollytogs shareholders again responded that although “[u]pon reviewing the Subject
Policies when received [in January 2000], uncertainty ensued as to the policies’
conversion right in view of the fact that Gindi was already well over 70 years old,”
they “initially, and logically, believed that the conversion right was governed solely
by the second triggering event – i.e., the date on which the level premium ended in
2009” (SDNY Doc. No. 59 at CM/ECF p. 11). The shareholders then “immediately
contacted Wilson to request clarification and/or confirmation with respect to [their]
conversion rights under the Subject Policies,” and “[i]n turn, Wilson promptly
contacted Lincoln Benefit directly in January 2000 to seek the specific clarification
as requested by Lollytogs” (SDNY Doc. No. 59 at CM/ECF pp. 11-12 (footnote
In denying LBL’s motion for summary judgment on the Lollytogs shareholders’
breach of contract claims, the court specifically found that “[m]aterial questions of
fact exist[ed] as to whether the Policies’ conversion provisions ... applied to the
Insured, who was past his seventieth birthday at the time of the execution of the
Policies” (Filing No. 113-2 at CM/ECF p. 3). More specifically, the court found there
was a genuine dispute regarding, among other things:
The meaning and intent of the language used in the Policies, see
Victoria Select Ins. Co. v. Vrchota Corp., -- F. Supp. 2d --, 2011 WL
1331276 (S.D. Fla. 2011), i.e., whether, under the provisions, the Insured
had conversion privileges up to the level premium period. (Def. 56.1 ¶¶
27, 34; Pl. 56.1 ¶¶ 27, 34); Certain Interested Underwriters at Lloyd’s
London Subscribing to Cert. of Ins. No. 9214 v. Halikoytakis, No. 09
Civ. 1081, 2011 WL 1296816, at *5 (M.D. Fla. Mar. 31, 2011) (“An
insurance policy is ambiguous when its terms are subject to different
reasonable interpretations.”); see also Arriaga v. Fl. Pac. Farms, L.L.C.,
305 F.3d 1228, 1248 (11th Cir. 2002); Universal Underwriters Ins. Co.
v. Steve Hull Chevrolet, Inc., 513 So.2d 218, 219 (Fla. Dist. Ct. App.
1987) (the “terms of the insurance contract . . . are disputed and
reasonably susceptible to more than one construction, [creating] a
genuine issue of material fact regarding the parties’ intent”).
(Filing No. 113-2 at CM/ECF p. 4).9 The court granted LBL’s motion for summary
judgment with respect to the Lollytogs shareholders’ declaratory judgment claim,
however, “[b]ecause the issue of Defendant’s alleged breach, and the parties’
obligations to each other, [would] be resolved in the context of the breach of contract
claims ....” (Filing No. 113-2 at CM/ECF p. 5).
LBL misrepresents the facts of the New York litigation by claiming that “both
Lincoln Benefit and Lollytogs agreed that the subject insurance policies by their terms
did not permit conversion because the insured was over the age of 70 at the time of
issuance,” and that “Lollytogs never argued that the policies by their written terms
provided conversion rights” (Filing No. 149 at CM/ECF pp. 3, 7). As demonstrated
above, the Lollytogs shareholders alleged and consistently argued that while it was “a
contractual impossibility for [Gindi] to exercise these conversion rights at the age of
seventy” (Filing No. 107-2 at CM/ECF p. 7), this meant that he had 10 years under the
language of the policies to convert to whole life insurance.
This theory of the case is also clearly articulated in the final pretrial conference
order, in which the Lollytogs shareholders describe their claims as follows:
Pursuant to the terms of both of the Policies which were delivered
to the insured in January 2000, under the heading “Conversion Right”,
both policies outline the conditions by which the conversion of the
policies could be exercised. Specifically, the Policies provided that the
Subject Policies could be converted at any time prior to the insured
turning age 70 or prior to the expiration of the ten year level term
premium period – whichever came first. Upon examination of the
Policies, Plaintiff was unclear as to the “Right of Conversion” given
Gindi’s age and initially believed that the only logical interpretation of
the provision was to rely upon the second triggering event (the end of the
level premium period i.e. 2009) as the end date for the purpose of
“[T]he parties agreed at oral arguments [on LBL’s motion for summary
judgment] that Florida substantive law appl[ied]” (Filing No. 113-2 at CM/ECF p. 3).
converting the Policies. Any interpretation to the contrary would have
rendered the conversion provisions of the policies to provide an illusory
However, Lollytogs rather than relying on its own interpretation
as it related to the “Right of Conversion” conditions, after receiving the
Policies in January of 2000, Lollytogs, exercising due diligence,
immediately contacted Wilson and requested a clarification and
confirmation with respect to its conversion rights under the Policies. The
existence of conversion rights was confirmed in multiple written
communications from Lincoln.
(a) Plaintiff’s Claims to be Tried
1. Breach of Contract With Regard to Conversion Rights
At all times, Lincoln knew Lollytogs was seeking to purchase life
insurance policies with conversion rights and Lincoln intended to issue
to Lollytogs policies with conversion rights. Moreover, at all times
Lollytogs believed that the Subject Policies were sold with conversion
rights. Further, Lollytogs would not have purchased the Lincoln Benefit
policies had they not offered conversion rights. Upon receiving the life
insurance policies in question, Lollytogs sought to confirm the existence
of conversion rights thereunder by contacting Lincoln’s customer service
department as specifically set forth in the policies. Lincoln responded to
Lollytogs’ pointed inquiries and affirmatively confirmed, by way of the
July 13, 2000 letter to Lollytogs, that the policies sold to Lollytogs had
conversion rights. It is Plaintiff’s position that the inclusion of a ten year
conversion right had always been the intent of the parties and that
Lincoln’s failure to allow the parties to convert constitutes a breach of
To the extent there is a question as to whether Lincoln intended to
initially issue said policies with conversion rights, Stan Shelley, an
officer of Lincoln, at the very least modified the policies sold by Lincoln
so as to abolish the age-related triggering event, an event which had
passed years before the policies were even issued, and provided for
conversion rights of each policy through the entire ten-year level
premium period, as memorialized in the written July 13, 2000 facsimile
transmitted by Lydia Trevino who was acting on behalf of Stan Shelley
and Lincoln with either actual or apparent authority. Florida law
provides that an insurer may dispense with the statutory requirement that
any such modifications must be signed. See Fla. Stat. § 627.460 see also,
Fla. Stat. § 627.452. The policies expressly allow for modification and,
rather than requiring a signature, by Lincoln’s own choosing, the policies
do not require that any written modification be signed by the officer
effectuating the change. However, to the extent the Subject Policies’
modification provision is considered ambiguous, such provision must be
construed in favor of Lollytogs, as the insured, and strictly against the
drafter, Lincoln Benefit.
Additionally, as a matter of equity, Lincoln Benefit should be
found to have waived its right to rely on the age-triggering event and
from claiming that the Subject Policies are ineligible for conversion
because, assuming arguendo that Lincoln had the right to deny
conversion rights, it knowingly and voluntarily relinquished any such
right by at least three separate, affirmative acts: (1) the July 13, 2000
facsimile; (2) the December 16, 2002 e-mail wherein Lincoln
represented that conversion rights did in fact exist through the ten-year
level premium period until 2009; and (3) the August 14, 2007
As a matter of equity, Lincoln Benefit should be estopped from
now relying on the age-triggering event and claiming that the Subject
Policies are ineligible for conversion because Lollytogs reasonably and
detrimentally relied on Lincoln Benefit’s conduct and its July 13, 2000
facsimile as well as the December 16, 2002 e-mail wherein Lincoln
Benefit represented to Lollytogs that conversion rights did in fact exist
through the ten-year level premium period until 2009....
5. Breach of Contract with Regard to the Death Benefit
The Subject Policies provided $29,000,000.00 of insurance on the
life of Gindi. Lincoln breached the Subject Policies when, upon the death
of Gindi, and upon the subsequent submission of a claim for the death
benefit, in accord with the Subject Policies’ provisions, it refused to pay
any portion of the death benefit.
(Filing No. 147 (CD); SDNY Doc. No. 141 at CM/ECF pp. 5-6, 9-11 (footnote
omitted)). At the pretrial conference itself, the Lollytogs shareholders’ attorney also
advised the court that they were claiming the conversion clauses are ambiguous
(SDNY Doc. No. 146 at CM/ECF p. 22).
The jury was instructed in a manner consistent with the Lollytogs shareholders’
theory of the case. The instructions read, in pertinent part:
Breach of Contractual Rights
To establish a claim of breach of contract, Plaintiff must show: (1)
the existence of a contract; (2) Plaintiff’s performance of the contract or
a legal excuse for its nonperformance; (3) a breach of the contract by
Defendant; and (4) monetary damages resulting to Plaintiff from the
breach. Rollins, Inc. v. Butland, 951 So. 2d 860, 876 (Fla. 2d DCA
2006). All of these elements must be proven by Plaintiff by a
preponderance of the evidence. If you find that Plaintiff did not prove the
existence of a contract by a preponderance of the evidence, you must
find for Defendant.
A contract is an agreement establishing the parties’ rights and
duties. In this action, Plaintiff and Defendant agree that they entered into
two enforceable written contracts for term life insurance in 1999. The
parties have been referring to these contracts as the Term Policies. You
must decide: 1) whether, under the Term Policies, Plaintiff had a right of
conversion when the Term Policies were issued; 2) whether the Term
Policies were modified, by subsequent agreement or conduct by the
parties, and if they were modified, how such modification(s) changed the
rights and duties of the parties, if at all. Insurance contracts should be
construed according to their plain meaning and should be enforced
according to their terms. Taurus Holdings, Inc. v. U.S. Fidelity & Guar.
Co., 913 So.2d 528 (Fla. 2005); Fla. Stat. §627.419.
When either party to a contract does not satisfy his or her duties
under the contract, a breach occurs. In this action, Plaintiff asserts four
breach of contract claims against Defendant.
Plaintiff’s First and Second claims are identical except that the
first refers to the $3 Million Term Policy and the second refers to the $26
Million Term Policy. These claims assert that Defendant breached the
Term Policies by failing to convert the subject Term Policies into
Universal Life Policies and seek a “declaration” allowing Plaintiff to
convert the policies to Universal Life Policies provided that Plaintiff
tenders the applicable premiums. First, you must determine whether a
contract existed, whether it was modified and how, and what the
governing terms are, including whether any conversion rights existed.
Then, you must determine whether Defendant breached the contract. To
determine whether a breach occurred, you must first determine whether
Plaintiff was entitled to convert the Term Policies.
Plaintiff’s Third and Fourth Claims are also identical except that
the Third Claim refers to the $3 Million Term Policy and the Fourth
Claim refers to the $26 Million Term Policy. These claims assert that
Defendant breached the Term Policies by denying Plaintiff the death
benefits and seek damages in the amount of the respective death benefits
due under the Term Policies. You must determine whether Defendant
breached the contracts (the Term Policies). Here, Plaintiff seeks
monetary damages on its Third and Fourth Claims in the total amount of
$29 Million, which represents the death benefits under the Term Policies.
If you find that Plaintiff did not perform its obligations under the
subject Term Policies, then you must find for Defendant. If you find that
Plaintiff did not prove a breach of the Term Policies by Defendant by a
preponderance of the evidence, you must find for Defendant. Should
Plaintiff prevail on its breach of contract claims, it is only entitled to
recover monetary damages that will restore it to the same position it
would have been in if Defendant had not breached the contract. Capitol
Environmental Services, Inc. v. Earth Tech, Inc., 25 So.3d 593 (Fla. ld
DCA 2009). If you find that Plaintiff did not prove by a preponderance
of the evidence, that it suffered quantifiable monetary damages as a
result of the alleged breach, you must find for Defendant.
Insurance contracts are construed in accordance with the plain
language of the policy to reflect the intentions of the contracting parties.
Taurus Holdings, Inc. v. U.S. Fidelity & Guar. Co., 913 So.2d 528
(Fla.2005); Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161
(Fla.2003). Both parties concede that the policies allow for modification.
The pertinent policy provision reads as follows: “Only our officers have
authority to change this contract. No agent may do this. Any change
must be written.” Plaintiff contends that, by Defendant’s own choosing,
the policies do not expressly require that any such writing be signed by
the officer effectuating the change. Taurus Holdings, Inc. v. U.S. Fidelity
& Guar. Co., 913 So.2d 528 (Fla.2005); Swire Pac. Holdings, Inc. v.
Zurich Ins. Co., 845 So.2d 161 (Fla.2003); Fla. Stat. §627.452; Fla. Stat.
If you determine that the policies as sold did not provide for
conversion rights, then Plaintiff contends that Stan Shelley, an officer of
Defendant, modified the policies Defendant sold so as to provide for
conversion rights of each policy through the entire ten-year level
premium period, as memorialized in the July 13, 2000 facsimile
transmitted by Lydia Trevino on behalf of Shelley and Defendant.
Plaintiff contends that Stan Shelley, Defendant’s Vice President of
Customer Service, authorized a change to the policies and that such
change was memorialized in the July 13, 2000 facsimile. Plaintiff further
contends that, in transmitting the July 13, 2000 facsimile, Lydia Trevino
was acting on behalf of Stan Shelley with either actual authority or
apparent authority and, consequently, any and all representations made
by Trevino must be imputed to Shelley and ultimately Lincoln Benefit.
Actual authority is authority that is actually granted, whether expressly
or impliedly. Restatement (Second) of Agency §7. A finding of actual
authority requires evidence that the principal acknowledged that the
agent will act for him, that the agent accepted responsibility of
representing the principal in connection with the undertaking and that the
principal retained the right to control the agent’s actions. Villazon v.
Prudential Health Care Plan, Inc., 843 So.2d 842 (Fla.2003);
Restatement (Second) of Agency § 1. Apparent authority is authority
that, though not actually granted, the principal knowingly permits the
agent to exercise or which the principal has apparently delegated to the
agent. Restatement (Second) of Agency §8; Borg-Warner Leasing Div.
of Borg-Warner Acceptance Corp. v. Doyle Elec. Co., 733 F.2d 833
(11th Cir. 1984) (applying Florida law).
If you find that Stan Shelley authorized a change to the policies
and/or that Lydia Trevino was acting on behalf of Stan Shelley with
either actual authority or apparent authority, you must decide that one of
Defendant’s officers authorized a modification of the policies and,
consequently, that the policies at issue were modified to provide for
conversion rights through the entire ten-year level premium period.
Defendant claims that the Term Policies were not and could not
be modified by Lydia Trevino because the clear terms of those Term
Policies permit modification only in writing from an officer of
Defendant, and Lydia Trevino was not an officer. Defendant contends
that the 2000 Trevino fax was a misstatement about the Term Policy, not
Defendant contends that even if the July 2000 Trevino fax
modified the conversion language contained in the Term Policies,
Plaintiff subsequently accepted and acted upon a subsequent offer to
modify the Term Policies--Defendant’s one time, limited offer to permit
Plaintiff to convert the Term Policies from term to whole or universal
life policies as set forth in the February 26, 2003 letter from Stan Shelley
and Vicki Hansen of Defendant. Defendant argues that Plaintiff accepted
Defendant’s 2003 offer by proceeding to convert the Term Policies to
five (5) separate universal life policies in August 2003, and thereafter,
asking Defendant to rescind the new universal life policies and put the
original Term Policies back in force. Thus, Defendant contends that even
if the 2000 Trevino fax modified the Term Policies, the February 26,
2003 letter further modified the Term Policies. As a result, Defendant
argues that its later assertion that Plaintiff did not have a right to convert
the Term Policies was not a breach of the Policies.
Finally, if you cannot determine what the policies require after you
have reviewed all of the relevant evidence, then the law allows that if
you find both of these competing interpretations to be reasonable, the
policy provision is considered ambiguous and must be construed in favor
of the insured, Plaintiff, and strictly against the drafter, Defendant.
Taurus Holdings, Inc. v. U.S. Fidelity & Guar. Co., 913 So.2d 528
(Fla.2005); Swire Pac. Holdings, Inc. v. Zurich Ins. Co., 845 So.2d 161
(Filing No. 148-1 at CM/ECF pp. 9-12).
In returning its verdict, the jury made seven specific “Findings Regarding the
Term Policies,” the first two of which conclusively defeat LBL’s claims that Wilson
is responsible for the judgment that was entered against it:
Did Plaintiff prove by a preponderance of the evidence that the
Plaintiff had the right to convert the Term Policies to whole or
universal life policies at the time the Term Policies were sold in
Did Plaintiff prove by a preponderance of the evidence that the
July 13, 2000 Fax modified the subject Term Policies and gave
Plaintiff the right to convert the Term Policies to whole or
universal life insurance policies through the end of the level
Based upon the law of estoppel as I have charged you, is
Defendant estopped from denying that these policies have
conversion rights based upon its conduct?
Write in the amount due to Lincoln in unpaid premiums:
Did Defendant prove by a preponderance of the evidence that
Plaintiff accepted Defendant’s one time, limited offer to convert
the subject Term Policies to whole or universal life policies by the
February 26, 2003 letter?
Based upon the law of waiver as I have charged you, did
Defendant relinquish any right it had to deny Plaintiff the right to
convert the policies?
Did Plaintiff prove by a preponderance of the evidence that
Defendant breached the contract by failing to pay the Death
Benefit ($29 million)?
(Filing No. 108-4). While the jury’s finding that the policies were modified by the
July 13, 2000 fax might appear inconsistent with its previous finding that the policies
as sold in 1999 provided conversion rights, the Lollytogs shareholders’ attorney
argued to the jury that “question number 1, number 2, number 3 and number 4 should
be answered yes, that there were conversion rights, and that that’s what the evidence
supports” (Filing No. 147 (CD); SDNY Doc. No. 170 at CM/ECF p. 106).
On April 22, 2013, United States District Judge Andrew L. Carter entered a
“Final Order After Trial By Jury,” stating that the jury had returned a verdict as
THE JURY FOUND, that Plaintiff G INVESTORS HOLDING
LLC (“G Investors”) had a right to convert the Term Policies to
whole or universal life policies at the time the Term Policies were
sold in l999;
THE JURY FURTHER FOUND, that the July 13, 2000 Fax
modified the subject Term Policies and gave G Investors the right
to convert the Term Policies to whole or universal life insurance
policies through the end of the level premium periods;
THE JURY FURTHER FOUND, that Defendant LINCOLN
BENEFIT LIFE COMPANY, INC. (“Lincoln”) is estopped from
denying that these policies have conversion rights based upon its
THE JURY FURTHER FOUND, that Lincoln relinquished any
right it had to deny Plaintiff the right to convert the policies;
THE JURY FURTHER FOUND, that G Investors did not accept
Lincoln’s one time, limited offer to convert the subject Term
Policies to whole or universal life policies by the February 26,
THE JURY FURTHER FOUND, that Lincoln breached its
contract with G Investors to pay the Death Benefit[.]
(Filing No. 113-6). Judge Carter found that the $29 million death benefit was due and
owing to the plaintiff, and he directed the clerk of the court to enter a judgment in
favor of the plaintiff for such amount, plus interest; he also ordered that the judgment
provide for the release of $7,309,370 from the escrow account for premium payments
to LBL (Filing No. 113-6). Judgment was entered on April 30, 2013 (Filing No. 1086). No appeal was taken, although LBL did file a post-trial motion that was denied by
Judge Carter on November 5, 2013 (Filing No. 113-1).
“If the jury’s answer to the first question was based on an interpretation of the
policy language, Lincoln Benefit agrees that collateral estoppel would bar the present
claims” (Filing No. 149 at CM/ECF p. 18). LBL argues, however, that “[t]he jury’s
first finding was not an attempt to interpret the policies but resulted solely from
Wilson’s conduct” (Filing No. 149 at CM/ECF p. 19 (emphasis in original)). LBL
claims “Lollytogs’ attorneys convinced the jury that Lollytogs was entitled to rely
on Wilson’s representations at the time of sale” (Filing No. 149 at CM/ECF p. 19).
More particularly, LBL states:
In closing, Lollytogs argued that Lincoln Benefit was bound by those
representations because they were made by him as the company’s agent.
See Tr. 1783 (“We contend that James Wilson, James Wales Wilson”
was an “agent of the insurance company.”). Importantly, there was no
testimony at trial or elsewhere establishing that Lincoln Benefit actually
authorized Wilson to make such a sale. Lollytogs did not need to make
such a showing because it instead contended that Lincoln Benefit was
bound by Wilson’s statements under an agency theory. Lollytogs then
reiterated that the verbal agreement between Lollytogs and Wilson
involved conversion rights:
What we know is that the policy was sold on a handshake.
That is what happens. That is not disputed. At that point in
time there is coverage. The insured thinks the coverage is
what Jim Wilson sold him which is the only thing Jim
Wilson could have sold to him to persuade him to cancel
the Prudential policy, that version.
Tr. 1792. However, when the policy was delivered, it was different than
the handshake deal:
[W]hen the policy comes in, it gets read by Mr. Sultan.
There is no 20-day deadline to pick up a mistake in the
policy. What Mr. Sultan picks up is a mistake in the policy.
If you recall, Mr. Wilson, who I submit you’re going to
find is an agent of the carrier, he testified I sold the policy
with conversion rights. He is not even denying it. They
haven’t fired him. He is still their agent. I sold them with
Tr. 1794. Lollytogs, therefore, argued that if the jury believed the
agreement negotiated by Wilson contained conversion rights in 1999, it
should answer “yes” to the first question on the verdict sheet:
If you find that the original agreement between the parties
as negotiated by Jim Wilson and Ezra Sultan gave us
conversion rights and this premium payment in 1999 in the
contract that they mailed in Exhibits 8 and 9 in evidence do
not accurately reflect the agreement, then we submit to you
plaintiff wins, and you are going to get a jury verdict sheet
at the end of the case. That is the first question.
Ultimately, the jury answered the first question in the affirmative.
Thus, it is undeniable that Lollytogs’ conversion rights did not flow from
the policies as written or from Lincoln Benefit’s conduct, but from
Wilson’s promises at the time of sale.
(Filing No. 149 at CM/ECF pp. 9-11 (footnote omitted)).
If, as LBL contends, the jury’s finding that the Lollytogs shareholders “had the
right to convert the Term Policies to whole or universal life policies at the time the
Term Conversions were sold in 1999” was based upon unauthorized representations
made by Wilson, then the jury failed to follow the court’s instructions regarding the
law of agency, which read as follows:
“Agency” exists where one agrees to act on behalf of another. The
person or company being represented is called the “principal.” The
person or company doing the representing is called the “agent.” A
principal-agent relationship can result in two ways a) through actual
agency or b) through apparent agency. See Ilgen v. Henderson
Properties, Inc., 683 So. 2d 513, 515 (Fla. 2d DCA 1996).
The elements essential to establish an actual agency relationship
are: (1) the principal’s acknowledgement that the agent will act for him;
(2) the agent’s acceptance of the undertaking; and (3) control by the
principal over the actions of the agent. Goldschmidt v. Holman, 571
So.2d 422, 424 n. 5 (Fla. 1990).
The elements essential to establish an apparent agency are: (1)
a representation by the purported principal; (2) reliance on that
representation by a third party; and (3) a change in position by the third
party in reliance upon such representation. Mobil Oil Corp. v. Bransford,
648 So.2d 119, 121 (Fla. 1995). See generally Fojtasek v. NCL
(Bahamas) Ltd., 613 F. Supp. 2d 1351, 1357 (S.D. Fla. 2009).
The communications given and received by such agents within
the scope of the agency relationship are deemed to be as if such
communications were given or received by the principal. Within the
scope of the agency relationship, all of an “agent’s” actions and conduct
are deemed as if done by the principal.10
Ratification occurs when a person with full knowledge of all the
material facts confirms, approves, or sanctions, by affirmative act or
acquiescence, the originally unauthorized act of another. Ratification can
be found to have occurred by implication when a principal fails to
repudiate an agent’s act as soon as it is fully informed of what the agent
LBL conveniently omits the phrase “within the agency relationship” when
quoting this instruction in its brief (Filing No. 149 at CM/ECF p. 19).
A principal cannot accept the benefits of an agent’s unauthorized
conduct and then deny liability or that the agent’s conduct should be
imputed to the principal based on the fact that the conduct was
(Filing No. 148-1 at CM/ECF p. 9 (emphasis supplied)).
Thus, the court instructed the jury that LBL could be held liable for Wilson’s
representations if they were either (1) “within the scope of the agency relationship”
or (2) subsequently ratified. “A jury is presumed to follow its instructions.” Guyton
v. Tyson Foods, Inc., 767 F.3d 754, 762 (8th Cir. 2014) (quoting Weeks v. Angelone,
528 U.S. 225, 234 (2000)).
Even assuming that LBL is correct in arguing that there was no evidence to
support a finding that Wilson was authorized in 1999 to sell the term policies with
conversion rights,11 the jury could still answer “yes” to the first question by finding
that LBL ratified the sales with the July 13, 2000 fax, which confirmed that the
Lollytogs shareholders would “have conversion privileges up to the term of the
policy.” The result is the same in either case:
[I]f the principal authorized the agent’s acts, or otherwise
acquiesced in or ratified such acts, the agent will not be held liable to the
principal for the losses resulting from those acts. See, McNamara v.
Johnston, 522 F.2d 1157, 1165 (7th Cir.1975) (explaining that “as
between agent and principal, an agent cannot be held liable for the use
of the principal’s property in an unlawful manner when it is reasonable
to infer that the principal authorized the agent’s conduct”); Olson v.
Thompson, 273 Minn. 152, 140 N.W.2d 321 (1966) (stating that
although the actions of the agent constituted a tort, the agent is not liable
However, it is immaterial for collateral estoppel purposes whether the jury’s
verdict was supported by the evidence. See City of Arlington, Tex. v. F.C.C., 133 S.
Ct. 1863, 1869 (2013) (“[E]ven an erroneous judgment is entitled to res judicata
to the principal for damages arising from such actions because the agent
was acting in accordance with the principal’s instructions); Gutting v.
Jacobson, 184 Neb. 402, 167 N.W.2d 762 (1969) (stating that an agent
is liable to the principal for violations of the agent’s fiduciary duties, but
that a principal may by acquiescence release the agent from such
liability); Kidd v. Maldonado, 688 P.2d 461 (Utah 1984) (finding that
although the agent completed an earnest money agreement contrary to
the principal-seller’s instructions, the seller ratified the agent’s acts when
the seller read and signed the agreement); Restatement [(Second) of
Agency] § 401, comment d. Cf., Putnam v. DeRosa, 963 F.2d 480 (1st
Cir.1992) (holding that a principal does not have an action against his
agent for indemnification based on the agent’s misrepresentations
because the principal was not “blameless” in the misrepresentations
made to the third parties); Warner v. Reagan Buick, 240 Neb. 668, 483
N.W.2d 764 (1992); City of Wood River v. Geer-Melkus Constr. Co., 233
Neb. 179, 444 N.W.2d 305 (1989) (discussing indemnification actions
and stating that a party seeking indemnification must have been free
from any wrongdoing); Hiway 20 Terminal, Inc. v. Tri-County AgriSupply, Inc., 232 Neb. 763, 443 N.W.2d 872 (1989); Restatement, supra,
§ 411, comments c. and d. (stating that if both the principal and the agent
are aware that the performance of an act is wrongful, ordinarily the agent
is not liable to indemnify the principal for damages arising from the
performance of that act).
Barta v. Kindschuh, 518 N.W.2d 98, 100-01 (Neb. 1994).
Alternatively, the jury made a finding that “the July 13, 2000 Fax modified the
subject Term Policies and gave [the Lollytogs shareholders] the right to convert the
Term Policies to whole or universal life insurance policies through the end of the level
premium periods” (Filing No. 108-4). Wilson played no part in such modification,
other than to seek clarification from LBL regarding the conversion language. The jury
was instructed that “[i]f you find that Stan Shelley authorized a change to the policies
and/or that Lydia Trevino was acting on behalf of Stan Shelley with either actual
authority or apparent authority, you must decide that one of defendant’s officers
authorized a modification of the policies and consequently that the policies at issue
were modified to provide for conversion rights through the entire 10-year-levelpremium period” (Filing No. 148-1 at CM/ECF p. 11).
As a matter of law, the verdict returned by the jury in the New York litigation
precludes LBL from claiming that Wilson is liable for any portion of the money
judgment the Lollytogs shareholders obtained against it. The jury’s first finding was
either based upon a determination that the term policies’ conversion language is
ambiguous, or upon a determination that Wilson was authorized by LBL to sell the
policies with conversion rights and that the policies as delivered did not reflect the
terms of the sale. The jury’s second finding establishes that to the extent Wilson may
have acted without authority, or negligently, LBL ratified the sale of the policies with
conversion rights. LBL’s damage claims against Wilson therefore will be dismissed
B. Wilson’s Damage Claim; LBL’s Declaratory Judgment Claim
Although not discussed by the parties, the special agent’s agreement that was
executed in 1999 provided that Wilson “shall be compensated solely by the Recruiter”
and “[n]o compensation will be paid ... by LBL” (Filing No. 103-4, at CM/ECF p. 4).
The recruiter on the special agent’s agreement was identified as W. James & Co.
(Filing No. 103-4, at CM/ECF p. 2). In 2004, however, Wilson and LBL appear to
have executed an “Agent’s Agreement–Appointment” which was stated to “supersede
all previous agreements between the parties” (Filing No. 103-4, at CM/ECF pp. 5-6).
The recruiter on this agent’s agreement was identified as Freundt & Assoc. (Filing No.
103-4, at CM/ECF p. 5). Wilson claims he is owed commissions because the schedule
of commissions attached to, and incorporated by reference in, the 2004 agent’s
agreement provides that “[i]f a Term plan is exchanged for a universal life or whole
life policy within the first ten years, full first year commissions will be paid on the
premium actually paid by the policy owner up to the target premium reduced by the
conversion allowance, if any” (Filing No. 103-4, at CM/ECF p. 21). Wilson contends
he became entitled to receive commissions after the Lollytogs shareholders notified
LBL in 2007 that they intended to convert the term policies within the 10-year level
LBL denies that it owes commissions because the 2004 agent’s agreement states
that Wilson would be “compensated according to the Schedule of Commissions ... for
premiums received on policies issued by LBL for applications secured under this
Agreement” (Filing No. 103-4, at CM/ECF p. 8). LBL alleges that “Wilson is not
entitled to commissions following the judgment in the underlying litigation because
the term plan was not actually exchanged for universal life or whole life policies, and
Lincoln Benefit did not receive premiums on converted policies” (Filing No. 1-3,
¶ 75). LBL also argues that “neither Wilson nor anyone else submitted an application
to Lincoln Benefit for the purposes of seeking to convert the Policies” (Filing No. 99,
at CM/ECF p. 20). In the alternative, LBL alleges that “Wilson was not entitled to
commissions following the judgment in the underlying litigation because his wrongful
conduct formed the basis for the plaintiff’s claims” and therefore “Wilson was in
material breach of his Agent’s Agreement” (Filing No. 1-3, ¶ 76).
The collateral estoppel doctrine precludes LBL’s defense that Wilson is in
material breach of the agent’s agreement because his “conduct formed the basis for
the [Lollytogs shareholders’] claims” in the New York litigation. On the evidence
presented, however, the court is unable to conclude as a matter of law that Wilson is
entitled to payment of additional commissions. A trial will be required in any event
because Wilson’s motion does not address the amount of damages to which he claims
Wilson is not liable to LBL for the judgment that was entered in favor of the
Lollytogs shareholders in the New York litigation. It remains to be determined
whether LBL is liable to Wilson for commissions he would have earned had LBL not
breached its contractual obligations to the Lollytogs shareholders by refusing to
convert the term life policies to whole or universal life policies.
IT IS ORDERED:
Plaintiff’s motion for oral argument (Filing No. 127) is denied.
Plaintiff’s motion for summary judgment (Filing No. 97) is denied in all
Defendant’s motion for oral argument (Filing No. 128) is denied.
Defendant’s motion for summary judgment (Filing No. 98) is granted in
part and denied in part, as follows:
Plaintiff is precluded from asserting as a defense that Defendant
breached the agent’s contract in connection with the sale of the
term life insurance policies.
Plaintiff’s damage claims (counts I, II, and III of the complaint)
are dismissed with prejudice.
In all other respects, the motion is denied.
This matter is referred to Magistrate Judge Cheryl R. Zwart for further
progression, as appropriate.
DATED this 16th day of December, 2015.
BY THE COURT:
Richard G. Kopf
Senior United States District Judge
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