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Barnes v. Security Life of Denver Insurance Co.

United States District Court, D. Colorado

November 21, 2018



          William J. Martínez United States District Judge

         In this action, Plaintiff Robert Barnes (“Barnes”) brings breach of contract and conversion claims against Defendant Security Life of Denver Insurance Company (“SLD”) on behalf of himself and those similarly situated. (ECF No. 1 at 1.) Barnes alleges that SLD failed to comply with the terms of a universal life policy that Barnes purchased from SLD's predecessor in interest. (ECF No. 42 at 1.) Before the Court is a Motion for Leave to Intervene (“Motion”) filed by Jackson National Life Insurance Company (“Jackson”) and Jackson's Motion for Leave to File Supplemental Brief In Support of Its Motion for Leave to Intervene (“Motion to Supplement”). For the reasons set forth below, the Motion is denied and the Motion to Supplement is denied as moot.

         I. BACKGROUND[1]

         Barnes filed suit against SLD challenging the pricing and administration of a universal life insurance policy that he purchased in 1984 (the “Barnes Policy”) from Southland Life Insurance Company (“Southland”), a predecessor of SLD. (ECF No. 1 ¶¶ 1, 11.) In particular, Barnes' claims focus on the implementation of the cost of insurance component of the Barnes Policy. (Id. ¶¶ 24-35.) Effective October 1, 2004, Southland merged with SLD. Barnes and SLD agree that SLD is the effective and liable insurer for the Barnes Policy. (ECF No. 31 at 4.) Barnes seeks to represent a class of those similarly situated who own certain life insurance policies “issued or administered” by SLD or its predecessors in interest. (Id. ¶¶ 4-5.) The scope of the proposed class purports to include policies issued and administered by SLD and its predecessors, some of which SLD administers directly, and some of which have been subject to reinsurance and administration agreements (like the Barnes Policy, as discussed below). (Id. ¶ 42; ECF No. 34 at 4.)

         In July 2002, Southland transferred certain liabilities for certain life insurance policies, including the Barnes Policy, to the Life Insurance Company of Georgia (“LOG”) as a reinsurer. (ECF No. 42-2.) LOG also assumed certain administrative functions for Southland, including authority to set the cost of insurance rates and other charges at issue here. (ECF No. 34 at 6-7.) When Southland and SLD merged in 2004, LOG continued to reinsure and administer certain policies, including the Barnes Policy. (Id. at 3.) In 2005, Jackson acquired LOG and assumed responsibility for the administration and reinsurance of the Barnes Policy and others. (Id.; see ECF No. 42-8 at 2.)

         Under the terms of the operative administrative services agreement, Jackson is responsible for

the establishment and variance of all Non-Guaranteed Elements of the Policies (it being understood that [SLD] shall take into account the recommendations of [Jackson] with respect to the Non-Guaranteed Elements and that [SLD] shall only reject such recommendations in good faith and in light of the intent of the parties and the stated purposes of this Agreement and the Indemnity Reinsurance Agreement).

(ECF No. 42-5 at 13, § 2.2(m)(ii).) In addition, Jackson must adhere to “any other written guidelines and procedures regarding Administrative Services as may reasonably be agreed to by the parties” and “administer and service the Policies in a manner that adheres to . . . the terms and conditions of the Policies.” (ECF No. 42-5 at 15, § 2.6.)

         The administrative services agreement and reinsurance agreement address SLD and Jackson's rights and obligations when faced with litigation over the Jackson-administered policies. Generally, Jackson “shall sue or defend, at its own expense and in the name of [SLD] when necessary . . . any action brought upon a Policy.” (ECF No. 42-5 at 14, §2.3(c).) However, SLD retains “the exclusive right to exercise control of and direction over any claim or litigation involving Retained Liabilities.” (Id.) When SLD makes a timely notice of a third-party claim, Jackson may “assume the defense and control” of the litigation and may, under certain circumstances, settle litigation without the consent of SLD. (ECF No. 42-6 at 42, § 1.) Importantly, however, SLD cannot settle litigation without Jackson's prior written consent. (Id. at 43, § 1(c).) If Jackson exercises its right to assume defense and control of the claim, SLD has the right (but not the obligation) to reasonably participate in (but not control) the defense of claims with its own counsel and at its own expense. (Id. at 42, § 1(b).)

         On April 26, 2018, SLD sent a notice of claim to Jackson informing Jackson of Barnes' claim implicating life insurance policies for which Jackson had assumed responsibility. (ECF No. 44-2.) While the definition of “Policies” in the reinsurance agreement and administrative services agreement includes only certain policies (see ECF No. 42-2 at 10-11; ECF No. 42-5 at 9), SLD's actions make it clear that SLD believes the Barnes Policy is subject to the reinsurance agreement.

         On May 7, 2018, Jackson responded to SLD's letter acknowledging its responsibility to indemnify SLD with respect to the Barnes Policy. (ECF No. 44-3.) In its response, Jackson noted that the complaint also implicated SLD policies for which Jackson had no responsibility or indemnity obligations. (Id.) In support of Jackson's intervention in this action, Jackson's counsel, Waldemar J. Pflepsen, Jr., submitted a declaration stating that SLD has “withheld its consent to Jackson's counsel entering appearances on SLD's behalf in the Action and to Jackson controlling the defense of the Action.” (ECF No. 44-1 at 2, ¶ 5.)

         Jackson filed its Motion on August 1, 2018, and the Motion was fully briefed as of September 5, 2018. (ECF Nos. 34, 42, 44.) On October 29, 2018, Jackson f iled its Motion to Supplement (ECF No. 52), which Barnes opposed (ECF No. 56). Jackson raised two additional facts to supplement its original motion: (1) that someone (identified as Barnes' counsel in the Motion to Supplement, but in fact SLD's counsel) stated during a status conference before U.S. Magistrate Judge S. Kato Crews that discovery in general would be easier were Jackson a party to this action; and (2) Judge Crews' finding that Jackson is “contractually obligated to produce” certain documents. (ECF No. 52-1 at 3-4.) Jackson subsequently filed a notice regarding its Motion to Supplement to clarify that it was SLD's counsel who made the comment regarding Jackson's potential intervention at the status conference. (ECF No. 55.)


         Federal Rule of Civil Procedure 24(a)(2) provides that, on timely motion, the court must permit ...

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