Opinion
Case No. 3:11-cv-02344
05-24-2013
John Hancock Life Insurance Company, Plaintiff v. The William R. Ufer, Sr., Irrevocable Trust, Defendant
MEMORANDUM OPINION
AND ORDER
INTRODUCTION
Before me is the motion of Plaintiff John Hancock Life Insurance Company for reconsideration of my denial of its motion for summary judgment. (Doc. No. 24). Defendant The William R. Ufer, Sr., Irrevocable Trust has filed a response. (Doc. No. 27). John Hancock filed a reply. (Doc. No. 28). For the reasons stated below, John Hancock's motion is denied.
STANDARD
Rule 54(b) provides that any order or decision, other than a "final judgment" entered as described in the text of the Rule, "that adjudicates fewer than all the claims . . . of fewer than all the parties does not end the action as to any of the claims or parties . . . [and] may be revisited at any time before the entry of a judgment adjudicating all the claims and all the parties' rights and liabilities." Fed. R. Civ. Pro. 54(b). "The major grounds justifying reconsideration of interlocutory orders are an intervening change of controlling law, the availability of new evidence, or the need to correct a clear error or prevent manifest injustice." Reich v. Hall Holding Co., 990 F. Supp. 955, 965 (N.D. Ohio 1998) (citing Petition of U.S. Steel Corp., 479 F.2d 489 (6th Cir. 1973), cert. denied, Fuhrman v. U.S. Steel Corp., 414 U.S. 859 (1973)).
BACKGROUND
John Hancock commenced this litigation on October 31, 2011 with the filing of a complaint seeking a declaratory judgment concerning the parties' rights and obligations under a life insurance policy John Hancock issued to Ufer. (Doc. No. 1). On January 17, 2013, I denied John Hancock's motion for summary judgment after concluding the language that John Hancock used when drafting the contract did not constitute a condition precedent under Ohio law. (Doc. No. 23). John Hancock argues I erred by implying "the language in question was a 'warranty' . . ." because the plain language of the Policy precludes this construction. (Doc. No. 24 at 1). John Hancock concludes "[t]he conditions at issue in this Policy cannot be deemed warranties without doing violence to the plain language of the Policy, as well as to prevailing Ohio precedent." (Id. at 4). In the alternative, John Hancock requests leave to file a renewed summary judgment motion arguing the contested provisions "are some form of warranty . . . ." (Id. at 6).
John Hancock argues that the following language, found in the Declarations section of the life insurance policy application, constitutes conditions precedent to the formation of a binding agreement:
Any life insurance policy issued as a result of this application will be effective on the later of the date the first premium has been paid in full and the date the policy has been delivered, provided that since the date of the application there has been no deterioration in the insurability of the Proposed Life Insured(s), no changes in the lifestyle of the Proposed Life Insured(s), no change in the financial circumstances of the Owner, and nothing has occurred that would require a change to any statement or answer in any part of this application in order to make the statement or answer true and complete as of the date the policy becomes effective.(Doc. No. 17-3 at 5)(emphasis added).
ANALYSIS
John Hancock asserts the "warranty analysis" in Ohio Nat'l Life Assurance Corp. v. Satterfield, 956 N.E.2d 866 (Ohio Ct. App. 2011), and Mumaw v. W. & S. Life Ins. Co., 119 N.E. 132 (Ohio 1917), "has no bearing in this case because the Policy specifies the [provisions] at issue are not warranties." (Doc. No. 24 at 2). John Hancock is correct in its description of the policy language and in its assertion that I improperly left open the possible inference that I concluded the language at issue is a warranty. The Policy states "[a]ll statements made in any application shall, in the absence of fraud, be deemed representations and not warranties." (Doc. No. 17-4 at 34). I did not intend to imply the language at issue is a warranty, and agree, consistent with the policy language, that it instead is a representation.
It is John Hancock's position that "[o]ther than using the phrase 'condition precedent' (which a layperson would not likely understand when applying for a policy), it is difficult to conceive of plainer language to convey the point that this is a condition precedent — the policy will not be formed if those conditions change." (Doc. No. 24 at 2). This argument, however, attempts to re-write the contract John Hancock drafted. John Hancock quite clearly expects laypersons seeking life insurance policies to understand the difference between representations and warranties, as well as numerous other legal terms and concepts throughout its lengthy policy. (See Doc. No. 17-4). It offers no explanation as to why its decision not to include the term "condition precedent" should be treated any differently.
Further, as I noted previously, the Policy is governed by Ohio law, which provides "an insurance policy is a contract whose interpretation is a matter of law." Sharonville v. Am. Emp'rs Ins. Co., 846 N.E.2d 833, 836 (Ohio 2006). The terms of an insurance policy "are to be given their plain and ordinary meaning." Id. The plain and ordinary meaning of the Policy is that the statements Ufer made in obtaining the Policy are representations, not warranties — and plainly not conditions precedent. "The provisions in question do not require that 'some event shall happen,' or 'some act shall be performed' afterwards, in order that the contract shall be in force." Mumaw, 119 N.E. at 136. Additionally, under Ohio law, "[w]hen possible, courts should construe promises in a bilateral contract as mutually dependent and concurrent, rather than one promise as a condition precedent to the other." Kaufman v. Byers, 823 N.E.2d 530, 537 (Ohio Ct. App. 2004); see also Evans, Mechwart, Hambleton & Tilton, Inc. v. Triad Architects, Ltd., 965 N.E.2d 1007, 1014 (Ohio Ct. App. 2011) ("[A]bsent an explicit intent to establish a condition precedent, courts will not interpret a contractual provision in that manner, particularly when a forfeiture will result.").
John Hancock argues the court's decision in Langley v. Federal Kemper Life Assurance Co., No. 01AP-129, 2001 WL 1143019 (Ohio Ct. App. Sept. 28, 2001), affirms that the language John Hancock used here is in fact a condition precedent. It is true that in Langley the decedent agreed the insurance policy for which he applied would not take "effect unless . . . the health and habits of the Proposed Insured remain as stated in this application." Langley, 2001 WL 1143019, at *3. In the same policy, there also was a provision under which "the decedent promise[d] to tell the Company of any change in the health or habits of the Proposed Insured that occurs after completing this application, but before the Policy is delivered to me . . . and the first premium is paid." Id. The Langley court concluded that by failing to fulfill this latter provision, "the decedent failed to comply with the conditions for obtaining insurance under the policy." Id. John Hancock did not include similar language in the Policy. Conversely, and contrary to John Hancock's protestations, the Langley court did not conclude the former provision — often referred to as a "good health" provision — constituted a condition precedent. Instead, the court identified the disputed issue as "whether [the insurance company] could refuse payment on the policy because the decedent failed to comply with the policy terms" and concluded "[b]ecause the decedent's health had changed, [the] plaintiff [was] not entitled to recover[ ]" on the policy. Id. at 4.
John Hancock also points to Abella v. Jackson Nat'l Life Ins. Co., 1998 U.S. App. LEXIS 24687 (6th Cir. 1998), an unpublished table decision, in which the court affirmed a district court conclusion that the insurer was not obliged to pay benefits to the decedent's estate under Ohio Revised Code § 3911.06. Abella, 1998 U.S. App. LEXIS 24687 at *1. The court adopted, for the purpose of its opinion, the plaintiffs' contention "the proper legal standard in this case is the common law of Ohio governing analysis of conditions precedent to the enforceability of an insurance contract." Id. at *11 n.3. The court, however, proceeded to discuss the plaintiff's "obligation to update his answers in the insurance application" in the context of the requirements set forth in O.R.C. § 3911.06, which provides "[n]o answer to any interrogatory made by an applicant in his application for a policy shall bar the right to recover upon any policy issued thereon," unless the insurer carries the burden of proof on five listed elements. Id. at *13-17. While the court uses the term "condition precedent" to describe the plaintiff's obligation to update his responses, the court did not cite to or discuss any Ohio case law concerning conditions precedent. Rather, the court applied § 3911.06, which by its terms applies to false answers to interrogatories in the application, and which Ohio courts have held does not apply when "[t]he stipulation upon which the [insurer] relies is in the policy." Lumpkin v. Metro. Life Ins. Co., 62 N.E.2d 189, 191 (Ohio Ct. App. 1945) (citing Metro. Life Ins. Co. v. Howle, 56 N.E. 908 (1900)).
An argument not raised in this case since John Hancock filed its Complaint. (See Doc. No. 1 at 1, 3; Doc. No. 23 at 2).
As I previously stated, "[t]he language in the Policy which John Hancock used, and to which Ufer agreed, does not mandate the taking of any action or the occurrence of any event; it contemplates only the continued validity of the representations Ufer made." (Doc. No. 23 at 4). In Satterfield,
[t]he life insurance contract at issue . . . provide[d] that "no policy shall be in force unless and until: (1) it is delivered to [Mr. Satterfield]; (2) the first full premium is paid during the lifetime of [Mr. Satterfield]; and (3) the statements and answers in [Mr. Satterfield's] application remain true and complete, without material change, as of the date of the policy delivery." The first two clauses identify "some event [that] shall happen" or "some act [that] shall be performed" and, therefore, are properly characterized as conditions precedent. Mumaw, 97 Ohio St. at 12, 119 N.E. 132. The third clause, however, does not refer to a certain act or event, rather it is an assurance that the state of facts—that is, the truth of Mr. Satterfield's application answers, which the parties supposed to then exist—remained true. See id. We, therefore, conclude, in accordance with Mumaw, that the material-change clause was not a condition precedent but a warranty.Satterfield, 956 N.E.2d at 871 (emphasis added). John Hancock drafted the Policy to classify all of Ufer's statements — including what Satterfield called a "material change clause" — as representations and not warranties.
John Hancock claims "both Mumaw and Satterfield turned on the finding of a warranty, but . . . the Policy at issue in this case specifically disclaims warranties." (Doc. No. 28 at 2). John Hancock appears to assume that by disclaiming warranties, it can turn anything into a condition precedent. It fails to take into account the well-settled concept of a condition precedent as well as the plain language of the contract, which labeled Ufer's statements as representations. As the drafter of the Policy, John Hancock had many options available to it; it chose the option it chose and it cannot now twist the language it chose into something different.
John Hancock alternatively requests that, if I "conclude[ ] that the conditions are some form of warranty" and deny its motion for reconsideration, "at a minimum [I] should permit John Hancock to file a renewed summary judgment motion on that basis." (Doc. No. 24 at 6). Given that "the plain language [of the Policy] provide[s] that the [provisions are] 'not warranties,'" and that I conclude the plain language of the contract provides that the provisions at issue are representations, not warranties or conditions precedent, I cannot conceive of any reason why such briefing would be appropriate. (See also Doc. No. 23 at 2 (noting John Hancock failed to state with particularity in its summary judgment motion the contention it stated in the Complaint "that the Policy was void or voidable and has been validly rescinded . . . based upon the Decedent's provision of materially false information.")).
I find unpersuasive John Hancock's argument "that the resulting impact [of my decision] would generate significant uncertainty among the insurance industry in Ohio in an area of insurance law which had previously been well established . . . ." (Doc. No. 24 at 6). The decisions of the courts in Mumaw and Satterfield are clear: to be properly characterized as a condition precedent, a provision must "identify 'some event [that] shall happen' or 'some act [that] shall be performed' . . . ." Satterfield, 956 N.E.2d at 870 (quoting Mumaw, 119 N.E. at 136).
Further, the decisions in John Hancock Mutual Life Ins. Co. v. Luzio, 176 N.E. 446 (Ohio 1931), and First Nat'l Bank v. Berkshire Life Ins. Co., 199 N.E.2d 863 (Ohio 1964), are not to the contrary. In Luzio, the Supreme Court of Ohio considered whether an agent had authority "to waive material conditions in the policy . . . sold" and discussed the policy's good-health provision in the context of whether an agent could make the insurer liable for a policy sold to a dead person. Luzio, 176 N.E. at 451. In First Nat'l Bank, the Supreme Court of Ohio concluded the affirmative defense of the defendant insurer that the decedent was not in good health at the time the policy was issued was not barred by the doctrine of estoppel. First Nat'l Bank, 199 N.E.2d at 866. The Supreme Court of Ohio did not rule, in either case, on the character of the policy language. John Hancock offers no Ohio authority that calls into question, much less disagrees with, the rulings in Mumaw and Satterfield and so it fails to demonstrate a clear error of law.
John Hancock argues "[t]he Trust does not explain why essentially the same policy language [as at issue here] should be held to be a condition precedent [in Laura Campbell Trust v. John Hancock Life Ins. Co. (U.S.A), 411 F. Supp. 2d 606 (D. Md. 2006)], but not by this Court." (Doc. No. 28 at 2). A district court opinion is "binding only on the parties under principles of res judicata and even the . . . judge who authored [the opinion] is not otherwise obligated, except in service of a seemly consistency, to follow [that opinion] in later cases." Special Situations Fund III, L.P. v. Am. Dental Partners, Inc., 775 F.Supp.2d 227, 239 (D. Mass. 2011); see also Bridgeport Music, Inc. v. Dimension Films, 401 F.3d 647, 650 (6th Cir. 2004) (district court opinions have "no binding precedential value"). Notwithstanding any similarities, Laura Campbell deals with Virginia law rather than Ohio law and does not consider the decisions of Ohio courts, which are binding upon my decision.
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CONCLUSION
For the reasons stated above, John Hancock's motion for reconsideration and its request to file a renewed motion for summary judgment (Doc. No. 24) are denied.
So Ordered.
Jeffrey J. Helmick
United States District Judge