New York Life Insurance Company v. Ortiz et al

Filing 55

MEMORANDUM AND ORDER adopting in part and rejecting in part 36 Report and Recommendations; granting in part and denying in part 14 Motion for Interpleader Relief; granting in part and denying in part 16 Motion for Summary Judgment; with respect to the interest rate issue, any interested party is invited to file amicus curiae briefs within ninety (90) days from the date of this Order. So Ordered by Chief Judge William E. Smith on 9/30/2015. (Jackson, Ryan)

UNITED STATES DISTRICT COURT
FOR THE DISTRICT OF RHODE ISLAND
___________________________________
)
)
)
Plaintiff and
)
Counterclaim Defendant, )
)
v.
)
)
MASSIEL ORTIZ,
)
)
Defendant, Counterclaim )
Plaintiff, and
)
Cross-claim Defendant,
)
)
and
)
)
JULIA KLAH,
)
)
Defendant and
)
Cross-claim Plaintiff.
)
___________________________________)

NEW YORK LIFE INSURANCE COMPANY,

C.A. No. 14-74 S

MEMORANDUM AND ORDER
WILLIAM E. SMITH, Chief Judge.
This is an interpleader action brought by Plaintiff and
Counterclaim

Defendant

New

York

Life

Insurance

Company

(“New

York Life”), seeking to deposit the proceeds of a life insurance
policy into the registry of this Court.
Ortiz,

the

beneficiary

insured’s
under

the

former
policy,

Defendants are Massiel

girlfriend
and

Julia

and
Klah,

the

primary

the

insured’s

mother and the secondary beneficiary under the policy.

New York

Life filed a motion for interpleader relief (ECF No. 14) and a
motion for summary judgment on Ortiz’s counterclaims against it

for breach of contract, breach of the obligation of good faith
and fair dealing, negligence, misrepresentation/omission, badfaith claims settlement practices, unfair or defective consumer
practices, and attorneys’ fees for breach of contract (ECF No.
16.)

Magistrate Judge Patricia A. Sullivan issued a Report &

Recommendation (“R&R”), in which she recommended that the motion
for

summary

judgment

be

granted

and

that

the

motion

interpleader relief be granted in part and denied in part.
25-26, ECF No. 36.)

for
(R&R

New York Life and Ortiz have both filed

objections to aspects of the R&R.

(ECF Nos. 39, 41.)

This Court hereby ADOPTS the aspects of the R&R to which no
timely objection has been lodged. 1

1

Additionally, with respect to

These
aspects
include
Magistrate
Judge
Sullivan’s
recommendations that:
(1) New York Life is entitled to
interpleader relief (R&R 12, ECF No. 36); (2) New York Life’s
request for attorneys’ fees and that costs be denied (id. at 2425); (3) New York Life is entitled to summary judgment on
Ortiz’s counterclaim for unfair and deceptive trade practices
(id. at 20); (4) New York Life is entitled to injunctive relief
under 28 U.S.C. § 1335 (id. at 25); and (5) the provision of the
policy allowing for an additional amount of interest of 10% was
not triggered in this case (id. at 23).
This last aspect
requires brief elaboration.
In a document entitled “Defendant
Massiel Ortiz’s Cross-Objection Regarding Appropriate Interest
Payable Under the Insurance Policy and R.I. Statute,” Ortiz
purports to lodge an objection to this aspect of the R&R.
(Def.’s Resp. to Pl.’s Objection 12-15, ECF No. 43-1.) However,
this document was filed on November 17, 2014 – after the
November 6, 2014 deadline for filing objections to the R&R – and
Ortiz did not address this aspect of the R&R in her timely
objection (ECF No. 41). Therefore, by failing to object to this
aspect of the R&R in a timely fashion, Ortiz has waived her
2

the

aspects

of

the

R&R

to

which

the

parties

have

timely

objected, which this Court reviews de novo, see 28 U.S.C. §
636(b)(1), this Court ADOPTS IN PART and REJECTS IN PART the
R&R.

For the reasons discussed below, this Court ADOPTS the

R&R’s recommendation that New York Life is entitled to summary
judgment on Ortiz’s counterclaims for breach of contract, breach
of the obligation of good faith and fair dealing, negligence,
bad-faith claims settlement practices, and attorneys’ fees for
breach of contract, but REJECTS the R&R’s recommendation that
New

York

Life

is

misrepresentation

entitled

to

summary

counterclaim.

judgment

Accordingly,

New

on
York

Ortiz’s
Life’s

motion for summary judgment is GRANTED IN PART and DENIED IN
PART.

Finally,

this

Court

reserves

ruling

on

the

R&R’s

recommendation that R.I. Gen. Laws § 27-4-26 governs the rate of
interest that New York Life must pay on the policy proceeds
until expiration of the period for supplemental briefing set
forth herein.

New York Life’s motion for interpleader relief is

GRANTED IN PART and DENIED IN PART.
I.

New York Life’s Motion for Summary Judgment
The R&R provides a robust discussion of the factual and

procedural history of this case.

This Court will set forth only

objection, and this Court will not consider it.
72(d)(1).
3

See LR Cv

those

facts

necessary

to

put

Magistrate

Judge

Sullivan’s

treatment of Ortiz’s counterclaims (and Ortiz’s objections to
the

R&R’s

context. 2
G.

consideration

of

the

counterclaims)

into

proper

Less than four months after New York Life issued Shad

Kaydea,

Jr.

a

life

insurance

policy,

his

body

was

found

burning in a cemetery in Cranston, Rhode Island on March 20,
2013.

(Pl.’s Statement of Undisputed Facts (“SUF”) ¶¶ 1-2, 5,

ECF No. 18.)

Police determined that Kaydea was murdered, and an

investigation

ensued.

investigation,
policy.

(Id.

authorities

(Id. at ¶ 6.)

at

¶

5.)

contacted

New

As
York

part
Life

of
about

that
the

Sometime during mid-May 2013, police

informed New York Life that “the family members and beneficiary
[i.e.

Ortiz]

[were]

investigation.

listed

as

people

(Id. at ¶ 12.)

of

interest”

in

the

Police also requested to be

informed if and when New York Life paid the policy proceeds to a
beneficiary.

(Id.)

In January 2014, police informed New York

Life that the homicide investigation was still active and that
no one could be ruled out as a suspect.
Meanwhile,
beneficiary

on

under

April
the

29,

policy

2013,
–

2

(Id. at ¶ 23.)
Ortiz

submitted

–
a

the

claim

primary
for

the

Given the posture of this case, the facts must be viewed
in the light most favorable to Ortiz, the nonmovant, and all
reasonable inferences must be drawn in her favor. See TorrechHernandez v. Gen. Elec. Co., 519 F.3d 41, 46 (1st Cir. 2008).
4

insurance proceeds.

(Id. at ¶ 8.)

Because Kaydea died within

two years of the issuance of the policy, New York Life had the
right to contest the policy.

(Ins. Policy § 7.3, ECF No. 2-2.)

On

Life

May

2,

2013,

New

York

initiated

a

contestability

investigation, and it alerted Ortiz of this investigation in a
letter bearing the same date.

(Pl.’s SUF ¶¶ 9-10, ECF No. 18;

Def.’s Statement of Disputed Facts ¶ 9, ECF No. 25.)
letter

informed

Ortiz

that

this

investigation

obtaining copies of Kaydea’s medical records.
ECF No. 18.)

would

This
involve

(Pl.’s SUF ¶ 10,

Thereafter, New York Life “repeatedly informed”

Ortiz that it needed Kaydea’s medical records to complete the
investigation.

(Ortiz Aff. ¶ 13, ECF No. 21.)

Despite her

efforts to obtain Kaydea’s medical records – which caused Ortiz
to incur considerable attorneys’ fees and expenses and included
an

unsuccessful

attempt

to

be

appointed

Kaydea’s estate – Ortiz was unable to do so.

administrator

of

(Id. at ¶ 16.)

On January 8, 2014, Ortiz’s counsel sent New York Life a
letter in which he argued that, because Kaydea’s death was the
result of a homicide, Kaydea’s medical records were irrelevant
to New York Life’s contestability investigation.

(Excerpts of

New York Life’s Claim File, Part III, at 94, ECF No. 17-3.)
Ortiz’s counsel also requested that Ortiz be informed whether
New York Life had any other reasons, beyond the absence of the
5

medical records, why it had not yet paid the policy proceeds to
Ortiz.

(Id. at 93.)

Shortly after receiving this letter and

confirming with police that no one could be ruled out as a
suspect in the homicide investigation, New York Life concluded
its contestability investigation and determined that the policy
proceeds were payable.
New

York

Life

(Pl.’s SUF ¶¶ 23-24, ECF No. 18.)

filed

this

interpleader

action

in

early

February 2014, claiming that it has a reasonable fear of being
subjected to multiple litigation or liability because Ortiz may
be

an

ineligible

beneficiary

under

Rhode

Island’s

Slayer

Statute, R.I. Gen. Laws § 33-1.1-11(a), in the event that she is
implicated in Kaydea’s murder.

(Compl. ¶¶ 28-30, ECF No. 1.)

In that circumstance, Ortiz, even though the primary beneficiary
under the policy, would not be entitled to the policy proceeds;
instead, Klah, the secondary beneficiary, would be the proper
payee.

See R.I. Gen. Laws § 33-1.1-11(a).

Prior to filing its

complaint, New York Life never informed Ortiz that it believed
that the Slayer Statute might be applicable to this case; the
sole reason given to Ortiz for the refusal to pay her the policy
proceeds was her inability to secure Kaydea’s medical records.
(Def.’s Statement of Additional Undisputed Facts ¶¶ 30-31, ECF
No. 26.)

Ortiz counterclaimed against New York Life, alleging

breach of contract (Count One), breach of the obligation of good
6

faith and fair dealing (Count Two), negligence (Count Three),
“misrepresentation/omission”

(Count

Four),

bad-faith

claims

settlement practices (Count Five), unfair or deceptive consumer
practices (Count Six), and requesting attorneys’ fees for breach
of contract (Count Seven).
A.

(Answer & Countercl., ECF No. 2.)

Counts One, Two, Five, and Seven

Magistrate Judge Sullivan concluded that Counts One, Two,
Five, and Seven were all premised upon New York Life’s failure
to pay Ortiz the proceeds immediately upon receipt of her claim.
(R&R 16, ECF No. 36.)

Relying on Prudential Ins. Co. v. Hovis,

553 F.3d 258 (3d Cir. 2009), Magistrate Judge Sullivan reasoned
that the claims asserted in these counts were inconsistent with
interpleader relief and, therefore, barred as a matter of law.
(R&R 16, ECF No. 36.)

In her objection, Ortiz argues that

Magistrate Judge Sullivan erred because the claims asserted in
these counts “give rise to potential damages in excess of the
death benefit.”

(Def.’s Objection 9, ECF No. 41-1.)

This Court agrees with Magistrate Judge Sullivan that Hovis
mandates the entry of summary judgment in New York Life’s favor
on

Counts

One,

Two,

Five,

and

Seven

inconsistent with interpleader relief.

because

they

are

Under Hovis, 553 F.3d at

259, 265, a valid interpleader action shields the stakeholder –
New

York

Life,

in

this

case

–
7

from

further

liability

to

claimants to the stake – here, the policy proceeds – who have
asserted

counterclaims

against

the

stakeholder

where

(1)

the

stakeholder bears no blame for the existence of the ownership
controversy and (2) the counterclaims are directly related to
the stakeholder’s failure to resolve the underlying dispute in
favor of one of the claimants.

To permit such counterclaims in

these circumstances “would run counter to the very idea behind
the interpleader remedy – namely, that a ‘stakeholder [should]
not [be] obliged at his peril to determine which claimant has
the better claim.’”

Id. at 265 (quoting Bierman v. Marcus, 246

F.2d 200, 202 (3d Cir. 1957)).

As the Third Circuit explained

in Hovis, a stakeholder’s “failure to choose between the adverse
claimants (rather than bringing an interpleader action) cannot
itself be a breach of a legal duty.”

Id. at 265. 3

Magistrate Judge Sullivan correctly applied Hovis to the
claims asserted in Counts One, Two, and Seven, and to all but
one aspect of the claim asserted in Count Five.

There are no

facts indicating that New York Life bears any blame for the
existence

of

the

issue

of

whether

Ortiz

or

Klah

is

the

appropriate beneficiary, and the background allegations of the
3

In her objection, Ortiz does not argue that Hovis was
wrongly decided or should not be followed; instead, Ortiz argues
only that her counterclaims are not within the Hovis rule.
(Def.’s Objection 9, ECF No. 41-1.)
8

counterclaims
concern

New

proceeds. 4

4

and
York

the

allegations

Life’s

failure

contained
to

pay

in
Ortiz

these

counts

the

policy

(See Answer & Countercl. ¶¶ 14, 24, 26, 35, 38-39 49-

There is one slight exception for Count Five.
In that
count, Ortiz alleges that New York Life
engaged in unfair claims settlement practices by,
inter alia, misrepresenting to Ms. Ortiz policy
provisions
relating
to
coverage,
failing
to
acknowledge and act with reasonable promptness to Ms.
Ortiz’s
communications,
failing
to
implement
reasonable standards for the investigation of her
claim, failing to respond to Ms. Ortiz’s claim within
a timely manner, and failing to pay Ms. Ortiz’s claim
in a timely manner.
(Answer & Countercl. ¶ 50, ECF No. 2.)
Save for the
misrepresentation aspect of Count Five, Ortiz’s counterclaim for
each of these alleged unfair claims settlement practices is
precluded by Hovis.
Notwithstanding
Hovis’s
inapplicability
to
the
misrepresentation aspect of Count Five, New York Life is still
entitled to summary judgment on the entirety of that count.
Count Five is purportedly brought under R.I. Gen. Laws § 9-1-33
(see id. at ¶ 51), which provides a cause of action against an
insurer that “wrongfully and in bad faith refuse[s] to pay or
settle a claim . . . , or otherwise wrongfully and in bad faith
refuse[s] to timely perform its obligations under the contract
of insurance.”
R.I. Gen. Laws § 9-1-33(a).
However, because
New York Life seeks to deposit the policy proceeds into the
registry of this Court, there has been no “refus[al] to pay or
settle [Ortiz’s] claim.”
Id.
Moreover, “[b]efore a bad-faith
claim can even be considered, a plaintiff must prove that the
insurer breached its obligation under the insurance contract.”
Lamoureaux v. Merrimack Mut. Fire Ins. Co., 751 A.2d 1290, 1293
(R.I. 2000) (per curiam) (quoting Lewis v. Nationwide Mut. Ins.
Co., 742 A.2d 1207, 1209 (R.I. 2000)). Because New York Life is
entitled to summary judgment on Ortiz’s breach-of-contract
claim, Ortiz’s bad-faith claim must fail.
In her objection to the R&R, Ortiz appears to rely on a
statutory section other than § 9-1-33 for her bad-faith claim;
referring
to
that
claim
as
one
for
“unfair
settlement
practices,” she notes that “[m]isrepresenting to claimants and
9

50, ECF No. 2.)

At bottom, each of these claims “directly

relate[s]” to the interpleader action because they “concern [New
York Life’s] failure to resolve its investigation in [Ortiz’s]
favor and pay out the life insurance proceeds to [her].”

Hovis,

553 F.3d at 259, 264; see also Graziosi v. Metlife Investors USA
Ins. Co., No. 3:11-CV-80 (CAR), 2013 WL 592394, at *1-5 (M.D.
Ga. Feb. 14, 2013) (relying on Hovis to enter summary judgment
in favor of insurer on claims of breach of contract and badfaith

refusal

to

pay

insurance

proceeds

brought

by

the

plaintiff, who was the primary beneficiary and was alleged by
the

family

and

contingent

beneficiary

of

the

insured

to

be

insured relevant facts or policy provisions relating to coverage
at issue,” R.I. Gen. Laws § 27-9.1-4(a)(1), is a prohibited
practice under the Unfair Claims Settlement Practices Act (“the
Act”), id. §§ 27-9.1-1 to 27-9.1-9.
(See Def.’s Objection 11,
ECF No. 41-1.)
However, § 27-9.1-1 provides that “[n]othing
contained in [the Act] shall be construed to create or imply a
private cause of action for violation of this chapter.”
See
Great Am. E&S Ins. Co. v. End Zone Pub & Grill of Narragansett,
Inc., 45 A.3d 571, 575 (R.I. 2012) (holding that there is no
private right of action under the Act); Solomon v. Progressive
Cas. Ins. Co., 685 A.2d 1073, 1075 (R.I. 1996) (mem.) (same).
Although the Rhode Island Supreme Court has stated that,
notwithstanding § 27-9.1-1, the Act “set[s] forth the statutory
obligations imposed upon an insurer with respect to the handling
of claims and . . . evidence of any breach thereof may be
admissible in a civil action alleging bad faith,” Skaling v.
Aetna Ins. Co., 799 A.2d 997, 1012 n.8 (R.I. 2002), the only
bad-faith claim asserted by Ortiz in this action was brought
under R.I. Gen. Laws § 9-1-33(a), and, for reasons already
discussed, that claim must fail.
10

involved in the insured’s death, which would have implicated
Georgia’s Slayer Statute).
Ortiz’s objection to this aspect of the R&R – that Hovis is
inapplicable because the claims give rise to damages in excess
of the death benefit – misapprehends Hovis.

Where, as here, the

claims directly relate to the stakeholder’s failure to resolve
the dispute about the entitlement to the stake in favor of one
of

the

claimants,

counterclaims

Hovis

could

bars

the

potentially

liability in excess of the stake.
(rejecting
subjected

argument
the

that,

insurer

to

counterclaims,
expose

the

even

if

the

stakeholder

to

See Hovis, 553 F.3d at 264-65

because
liability

counterclaims
apart

from

would
its

have

duty

to

account for insurance proceeds, counterclaims were independent
of interpleader action); Amethyst Int’l, Inc. v. Duchess, Civil
Action No. 13-04287(FLW)(LHG), 2014 WL 683670, at *8 (D.N.J.
Feb. 20, 2014) (entering summary judgment under Hovis on claims
against insurer, even though claims sought “recovery in damages
that . . . could arguably be drawn from [insurer’s] own funds,
not

from

because

the

claims

Accordingly,

corpus
were

this

of
not

Court

the

disputed

independent
ADOPTS

11

the

of

insurance

[p]roceeds,”

interpleader

R&R’s

action).

recommendation

with

respect to Counts One, Two, Five, and Seven and GRANTS New York
Life’s motion for summary judgment on these counts. 5
B.

Negligence

Count Three, Ortiz’s counterclaim for negligence, requires
more

nuanced

allegations
distinct

treatment.

of

negligence

claims:

(1)

Close
reveals

negligence

examination
that
in

she

is

“failing

of

Ortiz’s

asserting
to

two

properly

investigate and pay the claim”; and (2) negligence in “demanding
irrelevant
obtain.”

information

that

was

impossible

for

(Answer & Countercl. ¶ 41, ECF No. 2.)

Ms.

Ortiz

to

Although this

Court agrees with Magistrate Judge Sullivan that New York Life
is

entitled

to

summary

judgment

on

each

distinct

claim

of

negligence, the reasons differ with respect to each claim.
The first distinct claim – that New York Life negligently
failed to properly investigate and pay Ortiz’s claim for the
policy proceeds – is barred by Hovis.

Just like Counts One,

Two, Five, and Seven, this component of Count Three directly

5

Magistrate Judge Sullivan also concluded, in the
alternative, that, even if Hovis was inapplicable to Counts One,
Two, and Seven, New York Life was still entitled to summary
judgment on these claims because each count failed to state a
claim.
(R&R 16 n.10, ECF No. 36.)
Because this Court grants
summary judgment for New York Life on these counts on the
grounds that these claims are inconsistent with interpleader
relief under Hovis, this alternative ground for summary judgment
need not be addressed.
12

relates to the interpleader action because it involves New York
Life’s failure to resolve its investigation in Ortiz’s favor and
pay out the policy proceeds to her.

See Hovis, 553 F.3d at 261,

265 (affirming entry of summary judgment on counterclaim against
insurer

for

negligence

in

failing

conduct

change-of-beneficiary

to

promptly

designation);

and

Graziosi,

properly
2013

WL

592394, at *3-5; cf. ReliaStar v. Life Ins. Co. v. Lormand,
Civil Action No. 3:10-CV-540, 2011 WL 900113, at *5 (E.D. Va.
March 11, 2011) (entering summary judgment under Hovis in favor
of insurer on counterclaim for violation of West Virginia Unfair
Claims

Settlement

Practices

Act,

which

was

premised

on

claimant’s allegation that insurer “violated the law by failing
to promptly investigate and act on her claims”).

Therefore,

Hovis entitles New York Life to summary judgment on this portion
of Ortiz’s negligence counterclaim.
The analysis is different for Ortiz’s second distinct claim
of

negligence.

Where

the

claim

against

the

insurer

is

independent from the insurer’s failure to resolve the dispute in
favor of one of the claimants, the claim survives under Hovis.
See Hovis, 553 F.3d at 259, 265.
Life

negligently

demanded

Ortiz’s claim that New York

irrelevant

impossible to obtain is such a claim.

information

that

was

The alleged harm for this

distinct negligence claim is different in kind from the harm
13

Ortiz suffered when New York Life failed to promptly pay the
policy

proceeds;

this

second

component

of

Ortiz’s

negligence

counterclaim seeks to recover for the expenses Ortiz incurred in
attempting to obtain the allegedly irrelevant medical records.
Additionally, the conduct alleged for this component of Count
Three – the demand for irrelevant records – is distinct from and
independent of the negligent conduct of failing to promptly pay
the policy proceeds.
However, even though this component of Ortiz’s negligence
counterclaim is not barred by Hovis, New York Life is still
entitled

to

summary

judgment

on

this

distinct

claim

because

Ortiz has failed to identify any facts that tend to show that
New York Life breached a duty of care owed to Ortiz.

Citing

R.I. Gen. Laws § 27-4-10, 6 Ortiz argues that there is a genuine
issue of material fact as to whether New York Life was justified
in seeking medical records in the first place because Kaydea’s
death was a homicide and the policy did not ask a question for
which a misrepresentation relating to a homicide could be given.
(Def.’s Objection 4-6, ECF No. 41-1.)
6

This Court disagrees.

This statute provides, in pertinent part, that “[n]o
misstatement made in procuring a policy of life insurance shall
be deemed material or render the policy void unless this matter
represented shall have actually contributed to the contingency
or event on which the policy is to become due and payable.”
R.I. Gen. Laws § 27-4-10.
14

Under

the

policy,

New

York

Life

retained

the

right

to

contest the policy if the insured died within two years of the
policy’s issuance.

(Ins. Policy § 7.3, ECF No. 2-2.)

As Ortiz

conceded during oral argument before Magistrate Judge Sullivan
(Hr’g Tr. 52:17-22, ECF No. 40), New York Life was entitled to
initiate a contestability investigation when Kaydea died less
than four months after the policy was issued.
completed

by

Kaydea

asked

whether

the

The application

applicant

had

been

recommended by a medical practitioner to undergo any diagnostic
procedures or tests within the last ninety days and whether the
applicant had been unable to work or attend school for a month,
or

been

admitted

to

a

medical

facility

for

consecutive days, within the last two years.

more

than

(Excerpts of New

York Life’s Claim File, Part I, at 3, ECF No. 17-1.)
Judge

Sullivan

although

an

questions,
terminal

correctly

applicant
the

illness

observed

might

applicant’s
that

that

give

is

negative

medical

would

it

have

five

Magistrate

possible

answers

records
required

might
an

to

that,
these

reveal

a

affirmative

response; furthermore, an applicant with such a terminal illness
might obtain life insurance and subsequently arrange his or her
own death.

(R&R 18, ECF No. 36.)

Upon receipt of a claim for

policy proceeds, an insurer would have no way of knowing whether
such a disqualifying misrepresentation has been made unless it
15

initiates

a

contestability

applicant’s medical records.

investigation

and

obtains

the

Indeed, the contractual right to

contest the policy within the specified contestability period
would mean little if the insurer was not permitted to confirm
that

no

disqualifying

Williston

on

misrepresentations

Contracts

§

49:94

(4th

were

made.

ed.)

Cf.

(“Within

16
the

contestability period, the company is free to contest liability
on its policy, including by bringing an action for rescission of
the policy.”).
Judge

Sullivan

Therefore, this Court agrees with Magistrate
that

New

York

Life

was

entitled

to

request

Kaydea’s medical records as part of its concededly appropriate
contestability investigation.
Ortiz

has

failed

to

articulate

how

New

York

Life

negligently breached a duty owed to Ortiz by reiterating the
request

for

Kaydea’s

entitled to make.

medical

records

that

it

was

initially

The sole argument advanced by Ortiz in this

regard appears to be that a jury may infer from the delay alone
that New York Life was using Ortiz’s inability to obtain the
medical records to stall long enough to find some other reason
to avoid paying her the policy proceeds.
6-8, 11-12, ECF No. 41-1.)

(See Def.’s Objection

But it is an unclear how this “ruse”

theory fits within the negligence rubric or how it tends to show
that

New

York

Life

“negligently[
16

]

demand[ed]

irrelevant

information.”

(Answer & Countercl. ¶ 41, ECF No. 2.)

event,

has

Ortiz

not

marshalled

any

facts

In any

supporting

her

negligent-stalling theory, if such a theory of negligence is
even

cognizable.

For

these

reasons,

this

Court

ADOPTS

Magistrate Judge Sullivan’s recommendation that New York Life be
granted summary judgment on Count Three, and New York Life’s
motion for summary judgment is GRANTED as to that count.
C.

Misrepresentation

Finally, with respect to the misrepresentation or omission
counterclaim asserted in Count Four, Magistrate Judge Sullivan
correctly determined that Hovis was inapplicable.

(R&R 16, ECF

No. 36); see J.G. Wentworth Originations, LLC v. Mobley, Civil
Action No. 11-cv-1406, 2012 WL 4922862, at *8 (D. Md. Oct. 12,
2012)

(concluding

that

counterclaim

misrepresentation was not barred by Hovis).

for

negligent

Additionally, she

recommended that New York Life was entitled to summary judgment
because New York Life was not required to disclose that a policy
beneficiary is a murder suspect and that Ortiz had identified no
facts

showing

that

New

York

Life

misrepresentation or omission.

committed

an

actionable

(R&R 19-20, ECF No. 36.)

In her

objection, Ortiz does not challenge Magistrate Judge Sullivan’s
conclusion
belief

that

that

New

Ortiz

York
may

Life

have

did

been
17

not

need

ineligible

to
for

disclose
the

its

policy

proceeds under R.I. Gen. Laws § 33-1.1-11, but she takes umbrage
with Magistrate Judge Sullivan’s determination that Ortiz failed
to show an actionable misrepresentation.
ECF No. 41-1.)

(Def.’s Objection 10,

After a careful review of the record, this Court

determines that genuine issues of material fact preclude summary
judgment on Ortiz’s misrepresentation claim.
Count

Four

asserts

misrepresentation.

both

intentional

and

negligent

(Answer & Countercl. ¶¶ 43-48, ECF No. 2.)

Under Rhode Island law, there are four elements of the tort of
negligent misrepresentation:
(1) a misrepresentation of a material fact; (2) the
representor must either know of the misrepresentation,
must make the misrepresentation without knowledge as
to
its
truth
or
falsity
or
must
make
the
representation under circumstances in which he [or
she] ought to have known of its falsity; (3) the
representor must intend the representation to induce
another to act on it; and (4) injury must result to
the party acting in justifiable reliance on the
misrepresentation.
Cruz v. DaimlerChrysler Motors Corp., 66 A.3d 446, 453 (R.I.
2013) (quoting Manchester v. Pereira, 926 A.2d 1005, 1012 (R.I.
2007)); see also Zarrella v. Minn. Mut. Life Ins. Co., 824 A.2d
1249,

1257

(R.I.

2003).

The

referred

to

tort
as

fraud

of
or

intentional

misrepresentation,

also

deceit,

has

similar elements.

See Francis v. Am. Bankers Life Assur. Co. of

Fla., 861 A.2d 1040, 1046 (R.I. 2004) (per curiam) (“To recover
18

on

this

claim,

plaintiff

had

the

burden

of

proving

that

defendant ‘in making the statement at issue, knew it to be false
and intended to deceive, thereby inducing [plaintiff] to rely on
the statements to [her] detriment.’”
459

A.2d

81,

84

(R.I.

1983)));

(quoting Katz v. Prete,

see

also

Guilbeault

v.

R.J.

Reynolds Tobacco Co., 84 F. Supp. 2d 263, 268 (D.R.I. 2000);
Halpert v. Rosenthal, 267 A.2d 730, 732-33 (R.I. 1970).
Contrary to New York Life’s assertion that “Ortiz has never
been able to point out a misrepresentation made to her in this
record”

(Pl.’s

Resp.

7,

ECF

No.

44),

Ortiz

avers

in

her

affidavit that “[New York Life] represented to both me and my
attorney

that

the

only

impediment

to

payment

of

the

insurance proceeds was Mr. Kaydea’s medical records.”
Aff. ¶ 25, ECF No. 21.) 7

7

life
(Ortiz

Because New York Life knew as of mid-

To be sure, the record is not entirely clear that this
representation actually occurred.
Immediately after this
averment is made, Ortiz’s affidavit cites, with a see signal,
two exhibits. A review of these exhibits (Exs. B & C to Ortiz
Aff., ECF Nos. 21-3, 21-4) did not reveal the alleged
representation. However, it is unclear whether the above-quoted
sentence merely represents Ortiz’s efforts to editorialize or
summarize the written correspondence contained in the exhibits,
on the one hand, or the cited exhibits are meant only to be
illustrative of New York Life’s statements, on the other hand.
This uncertainty is compounded by paragraph 11 of Ortiz’s
affidavit, which avers, “Based upon the statements made to me by
Tashema Hughes of New York Life, I believed Mr. Kaydea’s medical
records to be the only impediment to New York Life’s payment of
the policy benefits.” (Ortiz Aff. ¶ 11, ECF No. 21.) It is not
clear whether Ortiz formed this belief as a result of the
19

May 2013 that police had not ruled anyone out as a suspect and
that Ortiz was a person of interest (Pl.’s SUF ¶ 12, ECF No.
18), there are genuine issues of material fact as to whether
this representation was false and, if so, whether New York Life
knew or should have known that the representation was false at
the

time

the

statement

was

made.

Additionally,

there

is

a

genuine issue of material fact as to whether this representation
was material; whether a misrepresentation is “likely to affect
the conduct of a reasonable person,” Dudzik v. Leesona Corp.,
473

A.2d

762,

question.

766-67

New

York

(R.I.
Life’s

1984),

is

repeated

a

quintessential

requests

for

jury

Kaydea’s

medical records (see Exs. B & C to Ortiz Aff., ECF Nos. 21-3,
21-4) raise a genuine issue of material fact as to whether New
York Life intended for its representation to induce reliance on
Ortiz’s part.
as

to

whether

Finally, a genuine issue of material fact exists
the

injuries

Ortiz

allegedly

suffered

–

the

expense of hiring an attorney to assist in obtaining the medical
records

(Ortiz

Aff.

¶¶

12,

16,

ECF

No.

21)

–

constituted

written correspondence between Hughes and Ortiz that is included
in Exhibit B to her affidavit or whether Hughes made other oral
or written statements to Ortiz.
For present purposes, these
uncertainties must be resolved in Ortiz’s favor, and her sworn
statement that New York Life told her that the only impediment
to payment was the medical records must be taken as true.
20

justifiable reliance on the representation. 8

Because of the

existence of these genuine issues of material fact, New York
Life is not entitled to summary judgment on Count 4, and this
Court therefore REJECTS the R&R’s treatment of this count.
For
judgment

these
is

reasons,

GRANTED

New

with

York

respect

Life’s
to

motion

Counts

One,

for

summary

Two,

Three,

Five, Six, and Seven, and DENIED with respect to Count Four.
II.

Applicable Interest Rate Issue
Ortiz

and

New

York

Life

applicable to the policy proceeds.

dispute

the

interest

rate

Relying on R.I. Gen. Laws

§ 27-4-26, Ortiz argues that the applicable interest rate is
nine percent per annum. 9

(Def.’s Opp’n to Mot. for Interpleader

Relief 11-12, ECF No. 22.)

New York Life, by contrast, insists

that interest accrues on the policy proceeds at a rate of one
percent.

(Pl.’s Mot. for Interpleader Relief 10-11, ECF No.

8

In
her
objection,
Ortiz
identifies
two
other
misrepresentations made to her by New York Life.
(Def.’s
Objection 10, ECF No. 41-1.)
Because this Court finds that
genuine issues of material fact exist as to the alleged
misrepresentation mentioned above, it need not address these
additional misrepresentations.
9

Section 27-4-26 provides, in pertinent part, that:
An insurer of a life insurance contract . . . shall
pay to the beneficiary . . . interest on the proceeds
at the rate of nine percent (9%) per annum from the
date of the death of an insured . . . in connection
with a death claim on a life insurance policy . . . to
the date of payment and the interest shall be added to
and be a part of the total sum paid.
21

14.)

It contends that the policy specifies this interest rate

and, because the policy was approved by the Interstate Insurance
Product Regulation Commission (“Interstate Commission”) pursuant
to

the

Interstate

Insurance

Product

Regulations

Compact

(“Compact”), see R.I. Gen. Laws §§ 27-2.5-1 to 27-2.5-2, Section
27-4-26 is inapplicable.

(Pl.’s Mot. for Interpleader Relief

10-11,

her

ECF

determined

No.

14.)

that

In

Section

R&R,

27-4-26

Magistrate

controlled,

Judge

Sullivan

concluding

that

Section 27-4-26, a specific statute, prevailed over the Compact,
a conflicting general statute.

(R&R 22-23, ECF No. 36.)

York Life objects to this aspect of the R&R.

New

(Pl.’s Objection

3-10, ECF No. 39.)
This Court declines to decide this issue at this time.

New

York Life’s position that the combination of (1) the Compact,
(2) the applicable uniform standard that has been promulgated by
the Interstate Commission, and (3) the rate set by New York Life
for funds left on deposit mandates that the applicable interest
rate

is

one

percent

has

been

fully

and

capably

briefed

and

argued, both by New York Life and by the National Association of
Insurance

Commissioners,

as

amicus

curiae.

The

Court

fully

understands this position, and a literal reading of the Compact
and the applicable uniform standard appears to support it.

22

On the other hand, there are public-policy considerations
that may cut against New York Life’s argument.

Not only has the

General

state

Assembly

delegated

some

of

the

insurance

commissioner’s regulatory authority to the Interstate Commission
under the Compact, but also the Interstate Commission has, by
promulgating a uniform standard that directs that “[i]nterest
shall accrue at the rate or rates applicable to the policy for
funds

left

Schutter

on

deposit”

Aff.,

ECF

No.

(IIPRC-L-04-I
39-1),

§

3(G)(2)(b),

delegated

some

of

Ex.

A

its

to
own

regulatory authority to the insurance companies who submit life
insurance policies to the Interstate Commission.
General

Assembly

may

have

intended

the

first

Although the
delegation

by

enacting the Compact, it is unclear whether it anticipated the
second
serious
Life’s

delegation,
consumer
position,

and

this

protection
these

second

delegation

concerns.

And,

public-policy

may

unlike

considerations

implicate
New

York

have

not

been adequately briefed.
Compounding matters, although a version of the Compact has
been adopted in forty-three other jurisdictions, see Update on
the Interstate Ins. Compact, Interstate Ins. Prod. Reg. Comm’n,
available

at

http://www.naic.org/documents/protectingthefuture_interstate_ins
urance_compact.pdf (last visited Sept. 30, 2015), the parties
23

have

not

cited

–

and

the

Court

has

not

found

–

any

case

interpreting the Compact, let alone one addressing the issue
presented

by

convinces

the

this
Court

case.
that

This
it

dearth

should

not

of

authority

decide

this

further
question

until after it has received adequate briefing on both sides of
the issue.

Therefore, as set forth below, the Court will invite

supplemental briefing before ruling on the issue.
However, the delay occasioned by supplemental briefing of
the interest rate issue should not prevent New York Life from
depositing the principal amount of the policy proceeds into the
registry of this Court.

Therefore, New York Life is directed to

deposit $250,000.00 into the registry of this Court.
on

which

this

deposit

occurs

shall

constitute

“the

The date
date

of

payment” – either under the policy (see Ins. Policy § 6.1, ECF
No. 2-1) or under R.I. Gen. Laws § 27-4-26 (see Hogan v. Jackson
Nat’l Life Ins. Co., C.A. No. 14-340 S, Order 2-3, ECF No. 16).
Upon deposit of the principal amount, interest will no longer
accrue on the policy (see Ins. Policy § 6.1, ECF No. 2-1; see
also R.I. Gen. Laws § 27-4-26), although New York Life will
still be liable for depositing interest that accrued from the
date of Kaydea’s death until the date of the deposit of the
principal amount once the interest rate issue is resolved by the
Court.
24

III. Conclusion
The Court hereby ADOPTS all aspects of the R&R except with
respect

to

its

treatment

of

New

York

Life’s

entitlement

to

summary judgment on Ortiz’s counterclaim for misrepresentation
and the applicability of Section 27-4-26 to the interest rate on
the

policy

judgment

is

proceeds.
GRANTED

New
with

York

respect

Life’s
to

motion

Counts

for

One,

Two,

summary
Three,

Five, Six, and Seven and DENIED with respect to Count Four.

New

York Life’s motion for interpleader relief is GRANTED in all
respects

except

interest

rate

for

its

issue.

request

New

York

for
Life

attorneys’
is

fees

directed

to

and

the

deposit

$250,000.00 – the principal amount of the policy proceeds – into
the

registry

of

this

Court.

Finally,

with

respect

to

the

interest rate issue, any interested party is invited to file
amicus curiae briefs within ninety (90) days from the date of
this Order.

The clerk is directed to send this Order to the

Office of the Rhode Island Attorney General, the Rhode Island
Association for Justice, for possible filing of an amicus brief
on this issue.
IT IS SO ORDERED.

William E. Smith
Chief Judge
Date: September 30, 2015
25