Banner Life Insurance Company v. Holland et al

Filing 18

DEFAULT JUDGMENT in favor of Banner Life Insurance Company against William B. Holland. Signed by District Judge Martin Reidinger on 7/20/2018. (khm)

IN THE UNITED STATES DISTRICT COURT
FOR THE WESTERN DISTRICT OF NORTH CAROLINA
ASHEVILLE DIVISION
CIVIL CASE NO. 1:17-cv-00237-MR-DLH

BANNER LIFE INSURANCE
COMPANY,

)
)
)
Plaintiff,
)
)
vs.
)
)
WILLIAM B. HOLLAND,
)
)
Defendant.
)
_______________________________ )

DEFAULT JUDGMENT

THIS MATTER is before the Court on the Plaintiff’s Motion for Default
Judgment [Doc. 13].
I.

PROCEDURAL BACKGROUND
This case arises out of a life insurance policy issued by the Plaintiff

Banner Life Insurance Company (“Banner Life”). By the present action,
Banner Life seeks a declaratory judgment that the policy is void due to
misstatements and omissions made by the insured on a reinstatement
application. [Doc. 1]. Alternatively, Banner Life seeks a declaration that the
acceptance by the designated beneficiary, William Holland (“Holland”), of a
check in the amount of the paid premiums constituted an accord and

satisfaction of any claim that the beneficiary might have had against Banner
Life. [Id.].
Banner Life served Holland with a Summons and a copy of the
Complaint on September 11, 2017. [Doc. 5]. On September 26, 2017,
Holland’s lawyer filed an unopposed Motion for Extension of Time to File
Defensive Pleadings to Plaintiff’s Complaint. [Doc. 4]. The Court granted
the motion three days later, extending Holland’s time to respond to the
Complaint to and including October 23, 2017. [Doc. 6].
Holland, however, never filed a response to the Complaint.

On

February 15, 2018, Banner Life moved for the entry of default against
Holland. [Doc. 10]. On March 2, 2018, the Clerk of Court entered a default
against Holland. [Doc. 12].1 Banner Life now seeks a default judgment
against Holland. [Doc. 13].
II.

STANDARD OF REVIEW
Rule 55 of the Federal Rules of Civil Procedure provides for the entry

of a default when “a party against whom a judgment for affirmative relief is
sought has failed to plead or otherwise defend.” Fed. R. Civ. P. 55(a). Once

Banner Life also named the Personal Representative of the Insured’s estate as a
defendant. Banner Life represents, however, that no estate has ever been opened for
the Insured, and therefore, there was no personal representative upon whom process
could be served. In light of these circumstances, Banner Life voluntarily dismissed the
Insured’s estate without prejudice pursuant to Fed. R. Civ. P. 41. [Doc. 11].
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a defendant has been defaulted, the plaintiff may then seek a default
judgment. If the plaintiff’s claim is for a sum certain or can be made certain
by computation, the Clerk of Court may enter the default judgment. Fed. R.
Civ. P. 55(b)(1). In all other cases, the plaintiff must apply to the Court for a
default judgment. Fed. R. Civ. P. 55(b)(2).
“The defendant, by his default, admits the plaintiff's well-pleaded
allegations of fact . . . .” Ryan v. Homecomings Fin. Network, 253 F.3d 778,
780 (4th Cir. 2001) (quoting Nishimatsu Constr. Co., Ltd. v. Houston Nat'l
Bank, 515 F.2d 1200, 1206 (5th Cir. 1975)). A defendant, however, “is not
held . . . to admit conclusions of law.” Ryan, 253 F.3d at 780 (quoting
Nishimatsu, 515 F.2d at 1206). The Court therefore must determine whether
the

facts

as

alleged

state

a

claim.

GlobalSantaFe

Corp.

v.

Globalsantafe.com, 250 F. Supp. 2d 610, 612 n.3 (E.D. Va. 2003).
III.

PLAINTIFF’S FACTUAL ALLEGATIONS
The well-pleaded factual allegations of the Plaintiff’s Complaint having

been deemed admitted by virtue of the Defendant’s default, the following is
a summary of the relevant facts.

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On or about November 18, 2008, Banner Life issued a $500,000, 30year, term life insurance policy to the Insured,2 insuring the Insured’s life (the
“Policy”). [Doc. 1 at ¶ 10]. The Policy was issued at Banner Life’s “preferred
plus non-tobacco” rate. [Id. at ¶ 11]. The Policy later lapsed and was
terminated as a result of the Insured’s failure to pay the premium due by April
30, 2016, in a timely manner. [Id. at ¶ 14].
Desiring to reinstate the Policy, the Insured submitted an Application
for Reinstatement to Banner Life (the “Reinstatement Application”). [Id. at ¶
15]. The Reinstatement Application asked the Insured to provide certain
information and answer a series of questions about his health during the time
period between the submission of the original application for insurance and
the submission of the Reinstatement Application. [Id. at ¶ 17]. The Insured
completed the Reinstatement Application and submitted it to Banner Life.
[Id. at ¶ 22]. After receiving the Reinstatement Application, Banner Life
conducted a standard prescription search to see if any medicines had been
prescribed for the Insured. [Id. at ¶ 23]. The investigation revealed that the
Insured had been prescribed a medication that he had not disclosed on the
Reinstatement Application, so Banner Life requested that the Insured update

Because the Complaint alleges information contained in the Insured’s medical records,
including descriptions of the Insured’s medical diagnosis, condition, and treatment, the
Complaint uses the pseudonym “John Doe” rather than the Insured’s actual name.
2

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the application by providing certain additional information. [Id. at ¶ 25]. The
Insured revised the Reinstatement Application and re-submitted it to Banner
Life. [Id. at ¶¶ 26-30].
On the basis of the Insured’s representations in the Reinstatement
Application and in reliance on the Insured being completely candid, honest,
and open in disclosing information in response to the questions on the
application, Banner Life reinstated the Policy, with its “preferred plus nontobacco” rate. [Id. at ¶ 31]. Banner Life sent the Insured a letter on August
4, 2016, advising him that the Policy had been reinstated. [Id. at ¶ 32].
The Insured committed suicide on December 22, 2016, less than five
months after Banner Life reinstated the Policy. [Id. at ¶ 34]. The day the
Insured committed suicide, Holland, who was the Policy’s beneficiary,
contacted Banner Life to ask how he could make a claim for death benefits
under the Policy. [Id. at ¶ 35]. As the Insured had died within two years of
the date on which the Policy was reinstated, Banner Life, as authorized by
N.C. Gen. Stat. § 58-58-1703 and the express terms of the Reinstatement

N.C. Gen Stat. § 58-58-170 provides as follows: “A reinstated policy of life insurance or
annuity contract may be contested on account of fraud or misrepresentation of facts
material to the reinstatement only for the same period following reinstatement and with
the same conditions and exceptions as the policy provides with respect to contestability
after original issuance. The reinstatement application shall be deemed to be a part of the
policy whether or not attached thereto.”
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5

Application and the Policy, conducted a routine contestability investigation.
[Id. at ¶ 36].
The Insured’s medical records were gathered as a part of Banner Life’s
contestability investigation. [Id. at ¶ 37]. Those records revealed treatments,
medications, and medical conditions that the Insured had failed to disclose
in response to questions on the Reinstatement Application. [Id. at ¶ 38].
Among the matters the Insured failed to fully and truthfully disclose were a
history of depression, including an attempted suicide and hospitalization in
May 2012, a suicide risk assessment, and a subsequent diagnosis and
treatment for depression. [Id. at ¶ 38(d), (f), (h), (j); ¶ 40]. Had the Insured
fully and truthfully disclosed this information, Banner Life would not have
reinstated the Policy, because the Insured would not have been insurable
under Banner Life’s underwriting guidelines at a preferred plus non-tobacco
rating.

[Id. at ¶ 40].

Thus, based on the facts revealed during its

investigation, Banner Life concluded the Policy was void due to the Insured’s
misrepresentations. [Id. at ¶ 41].
On July 18, 2017, Banner Life sent a letter to Holland, explaining that,
based on the Insured’s material misrepresentations on the Reinstatement
Application, the Policy was void and rescinded. [Id. at ¶ 42]. The letter
advised Holland that Banner Life was denying his claim for death benefits
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under the Policy. [Id.]. Banner Life also enclosed a check for $3,654.42,
and advised Holland in the letter that the check represented the amount of
all premiums paid under the Policy, with interest. [Id.].
On July 19, 2017, Holland e-mailed Banner Life and asked if depositing
the check waived “any appeal rights” or any “right to seek judicial action.”
[Id. at ¶ 43]. A short time later, a Banner Life claims supervisor replied to
Holland’s e-mail that, “[i]f you negotiate the check, Banner Life’s position will
be that you have agreed that the Policy is rescinded. We suggest that you
also seek legal counsel regarding the question.” [Id. at ¶ 44]. Holland
deposited the check. [Id. at ¶ 45]. He replied to Banner Life’s e-mail the next
day, writing that he had already deposited the check by the time he received
Banner Life’s e-mail. [Id.]. Since depositing the check however, Holland has
not refunded any part of the amount tendered to him in the check. [Doc. 14
at ¶ 7].
Banner Life filed this lawsuit on August 29, 2017, seeking a declaratory
judgment declaring that Banner Life has no further obligations under the
Policy because the Policy was terminated, the reinstatement of the Policy
was null and void ab initio, and the Policy was and is rescinded and is null
and void due to the Insured’s misrepresentations on the Reinstatement
Application. [Doc. 1 at ¶¶ 56-57, 59; Prayer for Relief at ¶ 1]. Alternatively,
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Banner Life seeks a declaratory judgment that there has been an accord and
satisfaction as between Holland and the company due to Holland’s
acceptance of the check in the amount of premiums paid by the Insured.
[Doc. 1 at ¶¶ 58; Prayer for Relief at ¶ 1].
IV.

DISCUSSION
Here, the undisputed facts, as established by the Plaintiff’s Complaint

and the Declarations of Jana Knowles and Thomas G. Hooper, demonstrate
that the Defendant William B. Holland was properly served in this action, and
that he is neither a minor nor incompetent.

Although Holland retained

counsel and sought an extension of time to respond to the Complaint,
Holland never sought to defend this action. Accordingly, the entry of default
was appropriate.
The Defendant is deemed to have admitted the allegation set forth in
the Complaint by virtue of his default. Based thereon it is established that
Banner Life tendered a check to Holland in the amount of premiums paid on
the Policy, and that Holland accepted that check.4 Under North Carolina law,
“[w]hen two parties disagree about an amount owed, and the debtor tenders
a check to the creditor as full payment, the creditor’s negotiation of the check

4

Since it is deemed admitted that Defendant received and deposited the check, it is a
reasonable inference that the check was made payable to Defendant.
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constitutes an accord and satisfaction as a matter of law.” J.F. Wilkerson
Contracting Co. v. Sellers Mfg. Co., 73 N.C. App. 620, 622, 327 S.E.2d 34,
35 (1985); see also Sharpe v. Nationwide Mut’l Fire Ins. Co., 62 N.C. App.
564, 566, 302 S.E.2d 893, 894 (“The cashing of a check tendered in full
payment of a disputed claim establishes an accord and satisfaction as a
matter of law.”), cert. denied, 309 N.C. 823, 310 S.E.2d 353 (1983). “In such
case, the claim is extinguished, regardless of any disclaimers which may be
communicated by the payee.” Sharpe, 62 N.C. App. at 566, 302 S.E.2d at
894. “[C]ashing a check known to be offered as an accord and satisfaction
establishes, as a matter of law, the payee intended to accept the offer even
though he previously voiced reservations about the amount of the
settlement.” Zanone v. RJR Nabisco, Inc., 120 N.C. App. 768, 773, 463
S.E.2d 584, 588 (1995), disc. review denied, 342 N.C. 666, 467 S.E.2d 738
(1996). For all of these reasons, the Court concludes that Banner Life is
entitled to a default judgment against the Defendant.5
IT IS, THEREFORE, ORDERED, ADJUDGED, AND DECREED that
the Plaintiff’s Motion for Default Judgment [Doc. 13] is GRANTED, and a
default judgment is hereby against Defendant William B. Holland.

5

Because the Court concludes that there has been an accord and satisfaction, the Court
need not address Banner Life’s alternative claim that the Policy is void due to
misstatements and omissions made by the Insured on the Reinstatement Application.
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IT IS FURTHER DECLARED that there has been an accord and
satisfaction of any claim that Holland might have had against Banner Life
under the Policy and therefore, Banner Life has no further obligations to
Holland under the Policy, including, but not limited to, any obligation to pay
the Policy’s death benefit to Holland.
Signed: July 20, 2018

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