PATRICIA MINALDI, District Judge.
Before the court are Cross-Motions for Summary Judgment filed by the Defendant, OM Financial Life Insurance Company ("OM Financial") [Doc. 13], and the Plaintiffs, Holly Jacques Turner and Sean Jacques [Doc. 20]. Both the Plaintiffs and OM Financial filed Oppositions [Docs. 16 and 25, respectively], and the Plaintiffs filed a Reply [Doc. 26].
In this action, the Plaintiffs seek benefits under a life insurance policy issued to their father, Robert T. Jacques, by Fidelity and Guaranty Life Insurance Company, now known as OM Financial Life Insurance Company. Although OM Financial contends that Mr. Jacques' policy lapsed for nonpayment of premiums approximately four months before his death, the Plaintiffs assert that they are nonetheless entitled to benefits under the policy because OM Financial failed to issue a premium notice required by state law.
Mr. Jacques' policy was a "Flexible Premium Adjustable Death Benefit Life Insurance Policy," Number U7B3600.
In the event that the account value became insufficient to cover the monthly deduction, the policy provided for a sixty-one
Mr. Jacques purchased his policy on October 16, 1989.
The Plaintiffs allege that Mr. Jacques was mandatorily evacuated from his home from September 2008 until December 2008 a result of Hurricane Ike.
On October 17, 2008, OM Financial sent a "Grace Period Notice" to Mr. Jacques' home address informing him that the surrender value of his policy was no longer sufficient to cover his monthly deduction. The notice further stated that the policy would lapse if Mr. Jacques did not make a premium payment of $2813.97 before the sixty-one day Grace Period ended December 16, 2008.
Accordingly, OM Financial sent Mr. Jacques a "Notice of Lapse" on December 16, 2008.
On May 10, 2010, the Plaintiffs filed this action seeking full payment of the policy proceeds to them as the named beneficiaries under the policy. They first assert that OM Financial failed to comply with statutory notice requirements for the cancellation of a life insurance policy, and accordingly that the policy was never effectively cancelled. In the alternative, they argue that because Mr. Jacques could not possibly have received the lapse notices sent by OM Financial because he was under mandatory evacuation from Hurricane Ike, the principle of contra non valentem prevented his policy from lapsing. Additionally, the Plaintiffs seek penalty interest under La. R.S. 1811.
Both parties now move for summary judgment on the issue of whether OM Financial properly notified Mr. Jacques of the premium payments required to prevent the lapse of his policy in accordance with Louisiana law. OM Financial further seeks summary judgment on the Plaintiffs' contra non valentem argument.
A court should grant a motion for summary judgment when the pleadings, including the opposing party's affidavits, "show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(c); see also Celotex Corp. v. Catrett, 477 U.S. 317, 323-24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). The party moving for summary judgment is initially responsible for demonstrating the reasons justifying the motion for summary judgment by identifying portions of pleadings and discovery that show the lack of a genuine issue of material fact for trial. Tubacex, Inc. v. M/V Risan, 45 F.3d 951, 954 (5th Cir.1995). The court must deny the moving party's motion for summary judgment if the movant fails to meet this burden. Id.
If the movant satisfies this burden, however, the nonmoving party must "designate specific facts showing that there is a genuine issue for trial." Id. (quoting Celotex, 477 U.S. at 323, 106 S.Ct. 2548). In evaluating motions for summary judgment, the court must view all facts in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). There is no genuine issue for trial, and thus a grant of summary judgment is warranted, when the record as a whole "could not lead a rational finder of fact to find for the non-moving party . . ." Id.
La. R.S. 22:905 requires insurers to send written notice before terminating a life insurance policy for the nonpayment of premiums. It provides, in pertinent part:
The application of La. R.S. 22:905 to flexible premium policies appears to be an issue of first impression.
OM Financial asserts that its September 16, 2008 Premium Due Notice satisfied the statute's requirements in the present case.
The plain language of La. R.S. 22:905, however, requires that the notice reference the specific premium payment necessary to prevent lapse of the policy and state its amount ("No life insurer shall . . . declare forfeited or lapsed any policy ... for non-payment when due of any premium ... unless a written or printed notice stating [t]he amount of
Thus, OM Financial did not declare Mr. Jacques' policy lapsed because he failed to pay the $5000 planned premium referenced in the Premium Due Notice. While it is true that coverage under the policy would have continued until March 16, 2009 if Mr. Jacques had paid his planned premium,
Because OM Financial therefore did not declare Mr. Jacques' policy lapsed for his failure to pay the $5000 planned premium referenced in the September 16, 2008 Premium Due Notice and because the Premium Due Notice failed to inform Mr. Jacques of the amount of premium payment actually required to keep his policy in force, it failed to fulfill the requirements of La. R.S. 22:905. To hold otherwise would undermine the statute's purpose to "give [the insured] a fair chance to meet the payments when due." Lester, 295 F.Supp. at 1216 (citing Boring v. Louisiana State Insurance Company, 154 La. 549, 97 So. 856, 858 (1923)). As previously noted, the payment of planned premiums was not required to maintain coverage under Mr. Jacques' policy, and Mr. Jacques had missed multiple planned premiums in the past. The Premium Due Notice was therefore useless to inform him of the premium payments necessary to prevent the lapse of his policy.
The only notice OM Financial sent to Mr. Jacques effectively informing him of the amount of premium due to prevent the lapse of his policy was the October 17, 2008 Grace Period Notice. That notice, however, was mailed sixty days before the due date of the requested payment, outside of the fifteen to forty-five day time limit set forth in the notice statute.
Because OM Financial therefore failed to comply with La. R.S. 22:905, it did not have the power to declare Mr. Jacques' policy lapsed. Accordingly, Plaintiffs are entitled to recover $350,000, the face amount of the policy, less the amount of premiums necessary to cover monthly deductions through the date of Mr. Jacques' death, April 29, 2009. See Lester, 295 F.Supp. at 1216.
The Plaintiffs additionally seek penalty interest under La. R.S. 22:1811, which states:
Here, OM Financial had reasonable grounds to believe that Mr. Jacques' policy had lapsed. Accordingly, the award of penalty interest is not appropriate in this case. See Vining, 409 So.2d at 1313 (although insurer failed to prove compliance with statutory notice requirements, its denial of death benefits was not without just cause); Ledoux v. Old Republic Life Ins. Co., 233 So.2d 731 (La.App. 3 Cir.1970) (given the novelty and complexity of the legal issues presented, insurer was not arbitrary or capricious in failing to pay the amount claimed).
Because the Court finds that OM Financial's failure to comply with statutory notice requirements prevented Mr. Jacques' policy from lapsing, it need not consider the Plaintiffs' contra non valentem argument.
For the reasons stated herein, the Plaintiffs' motion for summary judgment will be GRANTED IN PART and DENIED IN PART, and the Defendant's motion for summary judgment will be DENIED.
This argument is not persuasive. In Lester, the court found that the insured's policy lapsed both because he failed to pay a premium and because his indebtedness on a loan he had taken out on the policy prevented him from taking advantage of an "automatic premium loan provision" which otherwise would have prevented the policy from lapsing. The court therefore found that a notice informing the insured of the amount of premium due but containing no mention of the loan was insufficient under La. R.S. 22:905, which explicitly states that the required notice must contain the amount of any loan causing the policy to lapse.
The court made no mention of any failure of the notice to inform the insured that his policy would lapse if he failed to make the requested premium payment. In fact, it specifically acknowledged that a 1958 amendment to the statute dispensed of any requirement that insurer warn the insured that nonpayment would result in forfeiture of coverage. See Lester 295 F.Supp. at 1214 n. 4.
Nevertheless, the statute does require that the notice inform the insured of the amount of premium due to prevent lapse of the policy, regardless of whether it explicitly states that nonpayment of that amount will result in lapse. OM Financial's Premium Due Notice failed to do so in this case.
