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Haynes v. Transamerica Corp.

United States District Court, D. Colorado

November 19, 2018

GARY L. HAYNES, for and on behalf of the Insurance Trust of trustee Marjorie Unger, Plaintiff,
v.
TRANSAMERICA CORPORATION, a member of Aegon Group, doing business as Transamerica Life Insurance Company, Defendant.

          ORDER

          KRISTEN L. MIX UNITED STATES MAGISTRATE JUDGE

         This matter is before the Court on Defendant's Motion for Summary Judgment [#84][1] (the “Motion”). Plaintiff filed a Response [#91] in opposition to the Motion, and Defendant filed a Reply [#92]. The Court has reviewed the Motion, the Response, the Reply, the attached exhibits, entire case file, and the applicable law, and is sufficiently advised in the premises. For the reasons set forth below, the Motion [#84] is GRANTED.[2]

         I. Summary of the Case [3]

         Plaintiff, as trustee of an insurance trust (the “Trust”) established by Marjorie Ann Unger (“Ms. Unger”), asserts three claims seeking damages from Defendant, the insurer: (1) breach of contract, (2) common law bad faith, and (3) unjust enrichment. See Am. Compl. [#42].

         Defendant issued Ms. Unger a universal life insurance policy (the “Policy”) on October 8, 1985. Def.'s Ex. A, Individual Life Insurance Policy [#84-1]. The purpose of obtaining the Policy was to utilize the death benefits to pay anticipated capital gains taxes associated with her estate. Def.'s Ex. B, Depo. of Gary Haynes [#84-2] at 46-47. Not long after obtaining the Policy, it was transferred into the Trust. Def.'s Ex. C, Insurance Trust Agreement [#84-3]. In 1996, the Trust requested and received a maximum loan against the Policy. Def.'s Ex. D, Request for Policy Loan [#84-4]. Under the terms of the Policy, the policyholder could obtain a loan secured by its gross/cash value and the Policy would continue in effect so long as the gross/cash value minus the loan amount exceeded the monthly deduction due. Def.'s Ex A. [#84-1] at 9-10. The Policy also provides:

Continuation of Insurance - - Between premium payments, this policy is automatically continued at the same face amount and with any additional benefits provided by rider, subject to the Grace Period provision and as explained in the Monthly Deduction section. . . .
Grace Period for Paying Premiums - - If (1) the gross value minus any loan is less than the monthly deduction due, . . . we will notify you that a premium sufficient to keep this policy in force must be received within the grace period of 31 days from the date of the notice or this policy will lapse. . . .
Termination of Insurance - - This policy will terminate on . . . the date of lapse.
Lapse means termination of the policy due to insufficient premium or gross value.

Id. at 7-8.

         Over the following twenty years, the loan was not repaid. Def.'s Ex. B [#84-2] at 55. The loan was subject to annual advance interest of 7.4%. Def.'s Ex. A [#84-1] at 3. Plaintiff understood that interest continued to accrue on the loan and that it affected the net cash value of the Policy. Def.'s Ex. B [#84-2] at 66. In 2009, Defendant began to issue grace period notices to Plaintiff because the gross/cash value of the Policy minus the increasing loan balance became less than the monthly deduction due and, therefore, an additional premium was required to prevent the Policy from lapsing. Def.'s Ex. E, Notices of Payment Due [#84-5] (dated February 9, 2009; September 8, 2010; February 8, 2011; April 8, 2011; October 10, 2011; October 8, 2013; April 8, 2014; June 9, 2014; August 8, 2014; October 8, 2014; February 9, 2015; April 8, 2015; June 8, 2015; August 10, 2015). The letters all substantively included the following information:

         Your policy has entered its grace period and is in danger of lapsing.

In order to prevent your policy from lapsing, we must receive a minimum payment of $[sum required] by [31 days after notice]. If the minimum payment is not received by [31 days after notice], your policy will lapse . . . . A payment of a lesser amount will not prevent your policy from lapsing.

Id. The Trust timely paid at least the minimum amount required in response to these grace period notices to prevent lapse. Def.'s Ex. B [#84-2] at 135-36. These required premiums were in addition to periodic semi-annual premium notices that Defendant systematically provided to the Trust consistent with the terms of the Policy. Def.'s Ex. A [#84-1] at 3; Notice of Premium Due [#84-6] (dated October 8, 2011, and April 8, 2012). In other words, the semi-annual premium amount and grace period notices are wholly unrelated under the terms of the Policy. Def.'s Ex. A [#84-1] at 3, 8; Def.'s Ex. L, Depo. of Abigail Reihle-Hames [#84-12] at 27-28, 70.

         Specifically, the uncontested time line of notice and payment events from 2011 to 2015 is as follows:

         On February 8, 2011, Defendant sent Plaintiff a grace period notice suggesting a payment of $4, 639.29 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $2, 705.63. Pl.'s Ex. 20 [#91-9]. On February 22, 2011, Defendant received a $4, 639.29 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 2.

         On April 4, 2011, Defendant received at $13, 227.69 premium payment from Plaintiff. Id.

         On August 8, 2011, Defendant sent Plaintiff a notice that it would “set the amount of your regularly scheduled premium billing at $13, 365, 37, effective 10/08/2011.” Pl.'s Ex. 9 [#91-6]. No. payment was requested at that time. See id.

         On October 10, 2011, Defendant sent Plaintiff a grace period notice suggesting a payment of $4, 411.27 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $2, 311.41. Pl.'s Ex. 22 [#91-10]. On November 1, 2011, Defendant received a $13, 365.37 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 2.

         On April 10, 2012, Defendant received a $13, 365.37 premium payment from Plaintiff. Id.

         On October 15, 2012, Defendant received a $13, 365.34 premium payment from Plaintiff. Id. at 3.

         On April 8, 2013, Defendant received at $6, 500.00 premium payment from Plaintiff. Id.

         On August 8, 2013, Defendant sent Plaintiff a notice that it would “set the amount of your regularly scheduled premium billing at $15, 742.16, effective 10/08/2013.” Pl.'s Ex. 13 [#91-8]. No. payment was requested at that time. See id.

         On October 8, 2013, Defendant sent Plaintiff a grace period notice suggesting a payment of $5, 551.35 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $3, 100.76. Pl.'s Ex. 23 [#91-11]. On October 16, 2013, Defendant received a $6, 500.00 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 3.

         On December 3, 2013, Defendant received a $9, 242.16 premium payment from Plaintiff. Id.

         On April 8, 2014, Defendant sent Plaintiff a grace period notice suggesting a payment of $6, 196.74 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $3, 746.14. Pl.'s Ex. 25 [#91-12]. On April 22, 2014, Defendant received a $6, 196.74 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 3.

         On June 9, 2014, Defendant sent Plaintiff a grace period notice suggesting a payment of $5, 470.23 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $3, 019.64. Pl.'s Ex. 27 [#91-13]. On June 23, 2014, Defendant received a $5, 470.23 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 3.

         On August 8, 2014, Defendant sent Plaintiff a grace period notice suggesting a payment of $5, 472.14 to provide sufficient value to cover three monthly deductions, but requiring a minimum payment of $3, 021.55. Pl.'s Ex. 28 [#91-14]. On August 25, 2014, Defendant received a $5, 472.14 premium payment from Plaintiff. Pl.'s Ex. 12 [#91-7] at 3.

         On October 8, 2014, Defendant sent Plaintiff a grace period notice requiring a minimum payment of $3, 208.79. Pl.'s Ex. 29 [#91-15]. On November 3, 2014, Defendant received a $10, 000.00 ...


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