Anspach v. United of Omaha Life Insurance Company
Filing
91
ORDER denying 46 Motion for Partial Summary Judgment; denying 62 Motion for Summary Judgment; denying as moot 83 Motion for Leave to file a supplemental memorandum. Signed by Chief Judge Jeffrey L. Viken on 3/6/13. (SB)
UNITED STATES DISTRICT COURT
DISTRICT OF SOUTH DAKOTA
WESTERN DIVISION
PRATTHANA ANSPACH,
Plaintiff,
vs.
UNITED OF OMAHA LIFE
INSURANCE COMPANY,
Defendant.
)
)
)
)
)
)
)
)
)
)
CIV. 10-5080-JLV
ORDER
Pending before the court are two motions for summary judgment by
Pratthana Anspach (“Pratthana”). Pratthana alleges United of Omaha Life
Insurance Company (“United”) wrongfully denied her benefits and seeks
damages as a result.
BACKGROUND
Pratthana began working for the Pennington County State’s Attorney’s
Office in February of 2006. (Docket 49-3, Transcript (“TR”), p. 9, lns. 1821). In September of 2008, Pratthana enrolled in a new voluntary term life
insurance plan offered by Pennington County through United. (Docket 48,
¶¶ 7-8). She applied for a $100,000 policy on her own life and a $50,000
life insurance policy on the life of her husband, Christopher Anspach
(“Christopher”). (Dockets 48, ¶¶ 7-8; 52, ¶¶ 7-8). Christopher had
previously been diagnosed with Myasthenia Gravis, a cancer of the thymus
gland, and had recently undergone additional treatment just prior to the
application. (Dockets 48, ¶ 6; 52, ¶ 6). Pratthana paid all premiums due
through a payroll deduction. (Dockets 48, ¶ 11; 52, ¶ 11).
On November 17, 2009, Christopher passed away. (Dockets 48, ¶ 12;
52, ¶ 12). Pratthana provided timely notice of Christopher’s death to United
and requested the payment of benefits in accordance with the policy.
(Dockets 48, ¶ 13; 52, ¶ 13). In a letter dated February 16, 2010, United
stated Christopher was disabled at the time the policy was to take effect.
(Docket 55-1, pp. 1-2). Under the terms of the policy, coverage would not be
operative for a dependent who was disabled on the date the policy was to be
effective. Id. Rather, coverage would become effective when the dependent
was “ ‘able to fully resume all usual and customary duties and activities or
[was] able to work for wage or profit.’ ” Id. at p. 2. As a result, United
concluded the policy was not effective at the time of Christopher’s death. Id.
Pratthana was denied benefits and was told to “contact the master policy
holder with regard to any applicable refund of premiums.” (Docket 49-3,
TR, p. 85, lns. 21-22).
Pratthana appealed United’s initial determination. On September 27,
2010, United denied her appeal. (Docket 55-2). On October 15, 2010,
Pratthana commenced this action alleging breach of contract, equitable
estoppel, promissory estoppel, bad faith, and fraud. (Docket 1). On
November 7, 2012, she amended her complaint and added a claim of unfair
2
trade practices. (Docket 79). Pratthana now moves for summary judgment
on her breach of contract claim. (Dockets 46 & 62).
STANDARD OF REVIEW
Under Fed. R. Civ. P. 56(a), a movant is entitled to summary judgment
if the movant can “show[] 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). Once the moving party has met its burden, the
nonmoving party may not rest on the allegations or denials in the pleadings,
but rather must produce affirmative evidence setting forth specific facts
showing a genuine issue of material fact exists. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 256 (1986). Only disputes over facts that might affect
the outcome of the case under the governing substantive law will properly
preclude summary judgment. Id. at 248. Accordingly, “the mere existence
of some alleged factual dispute between the parties will not defeat an
otherwise properly supported motion for summary judgment; the
requirement is that there be no genuine issue of material fact.” Id. at 247-48
(emphasis in original).
If a dispute about a material fact is genuine, that is, if the evidence is
such that a reasonable jury could return a verdict for the nonmoving party,
then summary judgment is not appropriate. Id. However, the moving party
is entitled to judgment as a matter of law if the nonmoving party failed to
3
“make a sufficient showing on an essential element of her case with respect
to which she has the burden of proof.” Celotex Corp. v. Catrett, 477 U.S.
317, 323 (1986). In such a case, “there can be ‘no genuine issue as to any
material fact,’ since a complete failure of proof concerning an essential
element of the nonmoving party’s case necessarily renders all other facts
immaterial.” Id.
In determining whether summary judgment should issue,
the facts and inferences from those facts must be viewed in the light most
favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith
Radio Corp., 475 U.S. 574, 587-88 (1986). The key inquiry is “whether the
evidence presents a sufficient disagreement to require submission to a jury
or whether it is so one-sided that one party must prevail as a matter of law.”
Anderson, 477 U.S. at 251-52.
DISCUSSION
A.
Applicable Law
The court has jurisdiction over this matter pursuant to 28 U.S.C.
§ 1332, as it is a diversity action. In diversity actions, the court applies the
substantive law of the forum state. See Jordan v. NUCOR Corp., 295 F.3d
828, 834 (8th Cir. 2002). In this case, the forum state is South Dakota.
Accordingly, the court shall apply South Dakota law.
4
B.
Was Christopher Anspach an Insured?
1.
Disability
Before determining whether a breach of the insurance contract
occurred, the court must first determine whether Christopher was an
insured covered by the contract. “Insurance contract interpretation, as well
as statutory construction, are questions of law[.]” Auto-Owners Ins. Co. v.
Hansen Housing, Inc., 604 N.W.2d 504, 509 (S.D. 2000). United contends
Christopher never became an “insured” because he was disabled at the time
the policy was to become effective and was never declared “not disabled”
thereafter. (Docket 53, p. 6). The policy sets forth the conditions under
which coverage may commence. It states:
When Dependent Insurance Begins
When You and the Policyholder share in the cost of Dependent
insurance or, when You pay 100% of the cost of Dependent
insurance, You may request Dependent insurance by properly
completing and signing an enrollment form acceptable to Us and
submitting the form to the Policyholder (who will then submit the
form to Us) within 31 days following the day the Dependent
becomes eligible.
Insurance for a Dependent, other than a child born while You are
insured under this Policy, who is confined
(a)
in a Hospital as an inpatient;
(b)
in any institution or facility other than a Hospital; or
(c)
at home and currently under the care or supervision
of a Physician;
on the day insurance is to begin will not take effect until such
confinement ends or is no longer medically necessary as
determined by Us or an independent medical review arranged by
Us. . . .
5
Insurance for a Dependent who is physically or mentally disabled
to the extent such Dependent is unable to perform all of the usual
and customary duties and activities of a person who is the same
age and sex who is in good health or is not able to engage in any
work or occupation for wage or profit will not take effect until the
Dependent is able to fully resume all usual and customary duties
and activities or is able to work for wage or profit.
An eligible
(a)
(b)
(c)
Dependent will be insured on the latest of the day
You become insured;
You acquire the eligible Dependent; or
You properly complete and sign an enrollment form
acceptable to Us for Dependent insurance and submit
it as described above.
(Docket 70-1, p. 26).
Under the terms of the policy, coverage was to become effective on
October 1, 2008. (Docket 55-1, p. 2). The record reflects Christopher
received a medical retirement, also referred to by the parties as a disability
retirement, from the military in 1991 after his cancer diagnosis. (Docket
49-3, TR, p. 24, lns. 8-22). Christopher was also receiving disability
benefits from the Social Security Administration during the period in
question. (Docket 49-3, TR, p. 101, lns. 11-13). Additionally, United
received a Report of Deceased’s Disability Prior to Death form which was
completed by Christopher’s treating physician, Dr. Robert Vosler. (Docket
55-2, p. 2). United’s letter denying Mrs. Anspach’s appeal summarizes Dr.
Vosler’s statements as follows:
Dr. Vosler indicates that Christopher Anspach had the inability to
walk due to overwhelming cancer. He indicates that he was
chronically disabled for several years prior to seeing Dr. Vosler in
6
1998. This form indicates that Mr. Anspach was totally disabled
to the extent that he was prevented from engaging any occupation
or employment and that this total disability existed continuously
from the date he first became disabled to the date of his death.
Id.
Furthermore, Pratthana had notice of the potential effect of
Christopher’s disability at the time she applied for coverage. The enrollment
form signed by Pratthana provides as follows:
I represent that the information I have provided in this enrollment
form is complete, true and accurate to the best of my knowledge.
I understand that payment of premiums does not ensure my
eligibility for coverage. I understand and agree that I must satisfy
all active work and/or active employment requirements that
pertain to the policy to be eligible for coverage. I understand and
agree that life insurance coverage for my eligible dependent(s) may
be delayed if they are confined (at home, in a hospital, or in any
other institution or facility) or disabled on the date insurance
would otherwise begin, in accordance with the terms of the policy.
Should I decline coverage(s), I understand and accept the Waiver
of Group Insurance provisions that follow.
By signing below, I acknowledge that I understand and agree to
the above statements, and that I have read and understand the
benefit summaries provided to me for each line of coverage.
(Docket 55-3). Based upon these undisputed facts, the court finds
Christopher was disabled as of the effective date of the policy and remained
disabled until the date of his death. As a result, coverage under the policy
did not become effective prior to the date of Christopher’s death.
7
2.
SDCL § 58-15-45
Pratthana contends SDCL § 58-15-45 prohibits United from excluding
coverage for Christopher. South Dakota Codified Laws, § 58-15-45 provides
“[n]o policy of life insurance may be delivered or issued for delivery in this
state if it contains any provision which excludes or restricts liability for
death caused in a certain specified manner or occurring while the insured
has a specified status.”
“Statutory interpretation and application are questions of law.” Block
v. Drake, 681 N.W.2d 460, 463 (S.D. 2004). The South Dakota Supreme
Court provided the following guidance for a court engaged in statutory
construction:
[S]tatutory construction is an exercise to determine legislative
intent. In analyzing statutory language we adhere to two primary
rules of statutory construction. The first rule is that the language
expressed in the statute is the paramount consideration. The
second rule is that if the words and phrases in the statute have
plain meaning and effect, we should simply declare their meaning
and effect and not resort to statutory construction. When we
must, however, resort to statutory construction, the intent of the
legislature is derived from the plain, ordinary and popular
meaning of statutory language.
R.B.O. v. Congregation of Priests of Sacred Heart, Inc., 806 N.W.2d 907, 914
(S.D. 2011) (quoting State Auto Insurance Cos. v. B.N.C., 702 N.W.2d 379,
386 (S.D. 2005)).
Section 58-15-45 prohibits an insurer from limiting liability under a
life insurance policy for an insured who is deemed to be in a specified
8
status. The plain meaning of the word “insured” is “a person whose life,
physical well-being, or property is the subject of insurance: the owner of a
policy of insurance: policyholder[.]” Webster’s Third New International
Dictionary, 1173 (2002). Black’s Law Dictionary defines “insured” as “[a]
person who is covered or protected by an insurance policy.” Black’s Law
Dictionary, 879 (9th ed. 2009). Christopher, however, was not properly the
“subject of insurance,” nor “covered or protected by an insurance policy” as
the policy never became effective. Therefore, Christopher was not an
insured for the purposes of § 58-15-45. As a result, § 58-15-45 does not
prohibit United from determining Christopher’s eligibility for coverage.
Pratthana contends the South Dakota Division of Insurance has
informed United its confined/disabled exclusion violates § 58-15-45.
(Docket 48, ¶ 21). The letter cited by Pratthana in support of this
contention involves the case of Jakobek v. United Omaha Life Insurance
Co., No. CIV 09-1013, 2010 WL 2942014 (D.S.D. July 27, 2010). (Docket
49-4). In Jakobek, United denied benefits under the confinement exclusion.
2010 WL 2942014, *1. Jakobek was previously enrolled for coverage in a
group life insurance plan through his workplace. Id. On January 1, 2007,
United began providing the coverage for all employees who worked at least
full time for 60 days. Id. Jakobek was hospitalized at the time United
became the provider. Jakobek was intermittently hospitalized in January of
9
2007 and thereafter did not return to work. Id. In denying coverage, United
claimed Jakobek was not a full-time employee at the time the policy became
effective, despite the employer’s production of e-mails and cell phone
records verifying Jakobek worked from his hospital room. Id. at *2. The
South Dakota Division of Insurance informed United of its position that the
policy provision delaying the effective date of coverage for an employee who
was confined was in violation of SDCL § 58-15-45. (Docket 49-4). The
district court found there was not a master policy in force between United
and Jakobek’s employer on January 1, 2007, which would have provided for
the issuance of certificates of insurance which, in turn, would have alerted
Jakobek to the coverage exclusions of the policy. See Jakobek, 2010 WL
2942014, *3. The court then, without reference to the South Dakota
Division of Insurance letter, rejected United’s assertions Jakobek was not an
insured for the purposes of SDCL § 58-15-45 and denied United’s motion for
summary judgment. Id.
Jakobek was entitled to coverage because he met the eligibility
requirements, despite United’s assertions to the contrary. Unlike Jakobek,
there is no evidence in the record Christopher was eligible for coverage at
any time from the date of application through the date of his death.
Christopher was disabled at all times and, under the terms of the policy,
would not have been accepted as an insured by United.
10
3.
SDCL § 58-16-35
Pratthana next asserts United cannot deny coverage under SDCL
§ 58-16-35. The statute provides:
A policy of group life insurance shall contain a provision that the
validity of the policy shall not be contested, except for nonpayment
of premiums, after it has been in force for two years from its date
of issue; and that no statement made by any person insured
under the policy relating to the person’s insurability may be used
in contesting the validity of the insurance with respect to which
such statement was made, after such insurance has been in force
prior to the contest for a period of two years during such person’s
lifetime. . . . [nor] unless it is contained in a written instrument
signed by that person.
SDCL § 58-16-35.
United issued a master policy to Pennington County. The master
policy provides as follows:
9.
INCONTESTABLE CLAUSE
The Company will not contest the validity of this Policy after it
has been in force one year, except for nonpayment of premium.
(Docket 70-2, p. 4) (emphasis added).
Under the master policy, United issued certificates of insurance to
Pennington County which were to be delivered to the insureds. Id. The
certificate of insurance provides as follows:
The benefits described in this Certificate are subject to the terms
and conditions of the policy. Benefits are effective only if you and
your dependent(s) are eligible for the insurance, become insured
and remain insured as described in this Certificate.
(Docket 70-1, p. 10.) The certificate further provides:
11
We may use misstatements or omissions in the application of an
Insured Person to contest the validity of insurance, reduce
coverage or deny a claim, but We must first furnish You or Your
beneficiary with a copy of that application. We will not use a
person’s application to contest or reduce insurance which has
been in force for two years or more during that person’s lifetime.
However, if You or Your dependent are not eligible for insurance,
there is no time limit on Our right to contest insurance or deny a
claim.
Id. at p. 48 (emphasis added).
As previously noted, the policy was to become effective on October 1,
2008. (Docket 55-1, p. 2). Christopher passed away on November 17,
2009. (Dockets 48, ¶ 12; 52, ¶ 12). For Pratthana’s claim for insurance to
be viable, the court would have to find two things: (1) United cannot contest
Christopher’s eligibility under South Dakota’s incontestability statute, and
(2) the incontestability term in the master policy controls the insurance
contract.
Unfortunately, South Dakota has not addressed the issue of whether
an insurance company may contest the eligibility of a decedent under this
clause. As the United States Court of Appeals for the Eighth Circuit and the
parties have noted, there is no consensus regarding whether eligibility may
be questioned in light of an incontestability clause. See McDaniel v. Medical
Life Insurance Co., 195 F.3d 999, 1004 (8th Cir. 1999). See also Dockets
62, pp. 7-10; 68, pp. 18-24.
Pratthana urges the court to follow the reasoning set forth in Simpson
v. Phoenix Mutual Life Insurance Company, 247 N.E.2d 655 (Ct. App. NY
12
1969). (Dockets 62, pp. 8-10; 77, pp.18-20). Simpson applied for coverage
in a group life insurance plan. Simpson, 245 N.E.2d at 656. Under the
terms of the plan, employees who worked 30 hours or more were eligible to
enroll. Id. After Simpson passed away, his widow filed a claim for the
proceeds of the policy. Id. The insurance company discovered Simpson did
not work 30 hours per week as required for eligibility under the plan and
Phoenix denied the claim for benefits. Id. Simpson’s widow argued Phoenix
was barred from denying coverage under the policy’s incontestability clause.
Id. The New York Court of Appeals found Phoenix could have discovered at
the time Simpson applied whether he was eligible for coverage but chose not
to do so. Id. at 659. The court reasoned “[i]t is only those risks which could
not be ascertained at the time of contracting which can properly be viewed
as a limitation on the risk of insurance.” Id. at 658. As a result, the court
concluded Phoenix could not contest Simpson’s eligibility under the
incontestability clause. Id. at 658-59.
This court, however, finds the Eighth Circuit’s reasoning in McDaniel
to be more persuasive. In McDaniel, several years after applying for
coverage in a group life insurance plan, McDaniel passed away and his
widow sought the proceeds of the policy. McDaniel, 195 F.3d at 1001. The
insurance company, MedLife, denied the claim contending McDaniel was
never covered by the policy. Id. Though the Eighth Circuit exercised
13
jurisdiction over the matter under the provisions of ERISA, the court looked
to state law for guidance. Id. at 1002. Based upon its review of the
applicable Ohio statute and limited caselaw, the Eighth Circuit concluded
the widow “had the burden of proving [McDaniel] was eligible for life
insurance benefits ‘under the specific language of the policy.’ ” Id. at 1004
(quoting John Hancock Mut. Life Ins. Co. v. Hicks, 183 N.E. 93 (Ohio
1931)).1 In so holding, the Eighth Circuit rejected the reasoning of Simpson
and stated “[i]mplicit in our decision is our belief that the issue of eligibility
relates to the risk assumed by the insurer under the terms of the policy.”
McDaniel, 195 F.3d at 1004.
The court finds the passing of time after the issuance of a policy does
not mandate coverage. Id. As United points out, the statute only applies to
1
Ohio’s incontestability law is similar to South Dakota’s. See Ohio Rev.
Cod. Ann. § 3915.05(C); SDCL § 58-16-35. It provides in pertinent part: “No
policy of life insurance shall be issued or delivered in this state or be issued by
a life insurance company organized under the laws of this state unless such
policy contains:
...
(C)
A provision that the policy and the application therefor, a copy of which
application must be indorsed on the policy shall constitute the entire
contract between the parties and shall be incontestable after it has been
in force during the lifetime of the insured for a period of not more than
two years from its date, except for nonpayment of premiums, except for
violations of the conditions relating to naval or military service in time of
war or to aeronautics, and except at the option of the company, with
respect to provisions relative to benefits in the event of total and
permanent disability and provisions which grant additional insurance
specifically against death by accident or by accidental means[.]” Ohio
Rev. Cod. Ann. § 3915.05(C).
14
instances where the policy has been “in force.” Here, the policy never
became operative. The incontestability statute and clause protect an
insured within the limits of the policy. See Simpson, 247 N.E.2d at 657
(quoting Matter of Metropolitan Life Ins. Co. v. Conway, 169 N.E. 642, 643
(Ct. App. NY 1930)).2 It does not, however, relieve Pratthana of
demonstrating a right to recover. See McDaniel, 195 F.3d at 1004. As it
cannot be shown an effective policy existed, Pratthana is unable to establish
a right to recover.
Having concluded United may contest Christopher’s eligibility, the
court need not reach a determination regarding whether the incontestability
clause in the master policy or the certificate of insurance controls.
Pratthana’s motion for supplemental briefing on this point (Docket 83) is
moot.
CONCLUSION
Having reviewed the undisputed facts, the court concludes
Christopher was disabled at all pertinent times. Under the terms of the
policy, Christopher was not eligible for coverage under the group life
2
In Conway, Chief Judge Cardozo wrote, “[t]he provision that a policy
shall be incontestable after it has been in force during the lifetime of the
isnured for a period of two years is not a mandate as to coverage, a definition of
the hazards to be borne by the insurer. It means only this, that within the
limits of the coverage the policy shall stand, unaffected by any defense that it
was invalid in its inception, or thereafter became invalid by reason of a
condition broken.” 169 N.E. at 642.
15
insurance policy. As a result, the policy did not become effective prior to
Christopher’s passing. The court, therefore, concludes United did not
engage in a breach of contract. Accordingly, it is hereby
ORDERED that plaintiff’s motions for summary judgment (Dockets 46
& 62) are denied.
IT IS FURTHER ORDERED that Pratthana’s motion to file a
supplemental memorandum (Docket 83) is denied as moot.
Dated March 6, 2013.
BY THE COURT:
/s/ Jeffrey L. Viken
JEFFREY L. VIKEN
CHIEF JUDGE
16
Disclaimer: Justia Dockets & Filings provides public litigation records from the federal appellate and district courts. These filings and docket sheets should not be considered findings of fact or liability, nor do they necessarily reflect the view of Justia.
Why Is My Information Online?