Opinion
C.A. No. N17C-05-254 FWW
11-30-2020
THE OLGA J. NOWAK IRREVOCABLE TRUST, Plaintiff, v. VOYA FINANCIAL, INC. AND SECURITY LIFE OF DENVER INSURANCE COMPANY, Defendants.
R. Bruce McNew, Esquire, Cooch and Taylor, P.A., The Nemours Building, 1007 N. Orange Street #1120, P.O. Box 1680, Wilmington, Delaware 19899, Attorney for Plaintiff The Olga J. Nowak Irrevocable Trust. Tiffany Geyer Lydon, Esquire, Ashby & Geddes, 500 Delaware Avenue, 8th Floor, P.O. Box 1150, Wilmington, Delaware 19899, Attorney for Defendants Security Life of Denver Insurance Company and Voya Financial, Inc. David T. McDowell & Avi Moshenberg, Esquires, McDowell & Hetherington LLP, 1001 Fannin, Suite 2700, Houston, Texas 77002, Of Counsel for Defendants Security Life of Denver Insurance Company and Voya Financial, Inc.
Upon Defendant Security Life of Denver Insurance Company's Motion for Summary Judgment on Plaintiff's Claims
GRANTED. Upon Defendant Voya Financial, Inc.'s Motion for Summary Judgment on Plaintiff's Claims
GRANTED. Upon Defendants Voya Financial, Inc.'s and Security Life of Denver Insurance Company's Motion for Summary Judgment on Affirmative Defense of Limitations
MOOT. Upon Plaintiff The Olga J. Nowak Irrevocable Trust's Motion for Summary Judgment
DENIED. Upon Plaintiff The Olga Nowak Irrevocable Trust's Motion for Summary Judgment as to Affirmative Defenses
DENIED as MOOT MEMORANDUM OPINION AND ORDER R. Bruce McNew, Esquire, Cooch and Taylor, P.A., The Nemours Building, 1007 N. Orange Street #1120, P.O. Box 1680, Wilmington, Delaware 19899, Attorney for Plaintiff The Olga J. Nowak Irrevocable Trust. Tiffany Geyer Lydon, Esquire, Ashby & Geddes, 500 Delaware Avenue, 8th Floor, P.O. Box 1150, Wilmington, Delaware 19899, Attorney for Defendants Security Life of Denver Insurance Company and Voya Financial, Inc. David T. McDowell & Avi Moshenberg, Esquires, McDowell & Hetherington LLP, 1001 Fannin, Suite 2700, Houston, Texas 77002, Of Counsel for Defendants Security Life of Denver Insurance Company and Voya Financial, Inc. WHARTON, J.
I. INTRODUCTION
Plaintiff, The Olga J. Nowak Irrevocable Trust (the "Trust"), filed an action against its life insurance carrier, Security Life of Denver Insurance Company ("SLD"), and SLD's parent company, Voya Financial, Inc. ("Voya"), on May 18, 2017. The Trust alleged Breach of Contract, Bad Faith Breach of Contract, Violation of Delaware Consumer Fraud Act ("DCFA"), Reformation Based Upon Mutual Mistake, Reformation Based Upon Mistake Coupled with Inequitable Conduct, Unconscionability, and Unjust Enrichment. The Breach of Contract claim—the primary claim—alleged that SLD breached the Insurance Policy (the "Policy") by failing to pay the outstanding amount due under the Policy after the insured's death. SLD and Voya denied the Trust's allegations and asserted numerous affirmative defenses.
Compl., D.I. 1.
Second Amend. Compl. ("SAC"), D.I. 55. Due to a typographical error the SAC was incorrectly captioned "Amended Complaint."
The Policy is found at A-1 - A-29 of the Appendix to the Trust's motions, D.I. 151 and at 738-766 of the Appendix to Defendants Exhibits, D.I. 154. For ease of reference, hereinafter, the Court will refer to the Policy by its page numbers and not by reference to page numbers of the appendices.
Id.
Defs.' Ans. to Pl.'s Second Am. Compl., D.I. 60 & D.I. 61.
Before the Court are (a) the Trust's Motion for Summary Judgment, (b) the Trust's Motion for Summary Judgment as to Affirmative Defenses, (c) Voya's Motion for Summary Judgment on Plaintiff's Claims, (d) SLD's Motion for Summary Judgment on Plaintiff's Claims, and (e) Voya and SLD's (collectively, the "Defendants") joint Motion for Summary Judgment on Affirmative Defense of Limitations. Setting aside the two motions dealing with affirmative defenses, the other three motions all involve, in one way or another, an interpretation of the language of the Policy relating to how much the Trust is entitled to receive upon the death of the insured, Olga J. Nowak. Both SLD and Voya argue that the Death Benefit payable to the Trust should the insured reach attained age 100 is the Policy's Surrender Value, or approximately $330,000. The Trust contends that the Death Benefit is the Policy's face value of $4 million. The Court concludes that a fair reading of the Policy's language makes it clear that the Defendants are correct. Because the insured reached attained age 100, the Death Benefit payable to the Trust is the Surrender Value. Accordingly, after considering the various motions and cross-motions, SLD's Motion for Summary Judgment on Plaintiff's Claims is GRANTED. Voya's Motion for Summary Judgment on Plaintiff's Claims is GRANTED to the extent it incorporates SLD's arguments and authorities. The Court does not address Voya's agency claims in light of its ruling on SLD's Motion for Summary Judgment. Defendants' Motion for Summary Judgment on Affirmative Defenses is MOOT. The Trust's Motion for Summary Judgment is DENIED. The Trust's Motion for Summary Judgment as to Affirmative Defenses is DENIED as MOOT.
Pl.'s Mot. for Summ. J., D.I. 146.
Pl.'s Mot. for Summ. J. as to Aff. Defs., D.I. 147.
Def. Voya's Mot. for Summ. J., D.I. 152.
Def. SLD's Mot. for Summ. J., D.I. 153.
Defs.' Mot. for Summ. J. on Aff. Def of Limitations, D.I. 154.
"Attained age" is a defined term in the Policy. There is no dispute that the insured had reached attained age 100 when she died.
II. FACTUAL AND PROCEDURAL HISTORY
The Trust, through its trustee Robert J. Nowak ("Mr. Nowak" or the "Trustee"), purchased the Policy to insure the life of his mother, Olga J. Nowak ("Mrs. Nowak" or the "insured"), with the assistance of insurance brokers Mark Wilcock ("Wilcock") and Ed Wetherell (Wetherell). One of Wilcock's then-existing clients referred Mr. Nowak to Wilcock. Wilcock provided financial advice to Mr. Nowak who also sought advice from Marlin Anderson, a Certified Public Accountant, and a financial analytics firm called Legacy Analytics.
SAC, at ¶ 3, D.I. 55.
App. to Defs.' Mots. for Summ. J., at 330 (Trans. of Mr. Nowak's 2/3/2020 Dep.), D.I. 154.
On August 2, 1999, after reviewing multiple insurance contracts from various insurance companies, Mr. Nowak, as Trustee, signed an application for the Policy issued by Southland Life Insurance Company ("Southland"). Both Wilcock and Wetherell facilitated the issuance of the Policy by Southland to the Trust. The Policy, signed by an executive officer of Southland at that time, was issued from Southland's Georgia office and dated February 21, 1999. Mr. Nowak did not fully read the Policy before signing it. In 2004, Southland merged into SLD, a wholly owned subsidiary of Internationale-Nederland Group of The Hague ("ING"), and in 2014, ING was rebranded as Voya.
Id. at 325; see also id at 767-772. (The Application for Life Insurance was witnessed and signed in McLean, Virginia.).
Defs.' Mot. for Summ. J. on Aff. Def. of Limitations at 1, D.I. 154.
Policy at 1.
App. to Defs.' Mots. for Summ. J., at 339-340 (Mr. Nowak's 2/3/2020 Dep.), D.I. 154.
SAC, at ¶ 2, D.I. 55.
After the delivery of the Policy in 1999, the Trust received periodic illustrations from Southland until Southland's merger into SLD and thereafter received periodic illustrations from SLD. These illustrations purport to show the value of the Death Benefit—the benefit payable to the Trust at the insured's death—at specific age intervals. Initially, the illustrations reflect a Death Benefit of $4 million available at age 100. Later, however, some illustrations provided from 2004 to 2009, reflect a $4 million Death Benefit available until age 110. Defendants explain the difference in the illustrations as being a result of an administration system conversion when Southland merged with SLD in 2004. The Trust does not accept this explanation. In the 2010 illustration, SLD corrected this purported error.
App. to Defs.' Mots. For Summ. J. at 474-505, DS.I. 154.
Id. at 188-195 (Fisk Dep.).
Id.
In 2010, Mr. Nowak discussed the Policy with another financial advisor and came to the understanding that the Trust would receive the Death Benefit of $4 million if his mother died before attained age 100 and the Surrender Value if his mother passed away at attained age 100 or thereafter. Mr. Nowak contacted Wilcock and eventually SLD for clarification. Although Wilcock thought differently, SLD confirmed Mr. Nowak's understanding that the Trust would receive a Death Benefit of $4 million if his mother died before attained age 100 and the Surrender Value if she died at attained age 100 or thereafter. In 2011, after consulting with his other financial advisor, Mr. Nowak contacted Wilcock and sought to reduce the premiums on the Policy to the minimum amount necessary to keep the Policy intact.
Id. at 344-345 (Feb. 3, 2020 Mr. Nowak Dep.).
The Policy terms initially required annual premiums of roughly $247,740. The Trust has paid total premiums of $3,222,760. In 2011, prior to adjusting the annual premium payments, the Surrender Value was $1,268,102.43. Because Mr. Nowak reduced the Trust's annual premium payments, the Surrender Value decreased accordingly and now amounts to $336,242.
On May 18, 2017, the Trust filed its Complaint and later filed an Amended Complaint on September 6, 2017. Both Voya and SLD filed Answers and Affirmative Defenses to the Amended Complaint. On July 30, 2019, this Court granted the Trust's Motion to Amend the Complaint. On July 30, 2019, the Trust filed its Second Amended Complaint ("SAC"). On August 19, 2019, both SLD and Voya filed their respective Answers and Affirmative Defenses to the SAC.
The Trust filed a Motion for Summary Judgment on its claims and a second Motion for Summary Judgment as to SLD's and Voya's Affirmative Defenses. Voya and SLD each moved for summary judgment on the Trust's claims. In addition, SLD and Voya jointly move for summary judgment on the affirmative defense of limitations.
III. STANDARD OF REVIEW
Superior Court Civil Rule 56(c) provides that summary judgment is appropriate if, when "there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." The moving party initially bears the burden of demonstrating that the undisputed facts support its claims or defenses. If the moving party meets its burden, the burden shifts to the non-moving party to show that there are material issues of fact the ultimate fact-finder must resolve. When considering a motion for summary judgment, the Court's function is to examine the record, including "the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any," in the light most favorable to the non-moving party to determine whether genuine issues of material fact exist "but not to decide such issues." Summary judgment will only be appropriate if the Court finds there is no genuine issue of material fact. When material facts are in dispute, or "it seems desirable to inquire more thoroughly into the facts, to clarify the application of the law to the circumstances," summary judgment will not be appropriate." However, when the facts permit a reasonable person to draw but one inference, the question becomes one for decision as a matter of law. Where the parties have filed cross motions for summary judgment and have not argued that there is an issue of material fact to the disposition of either motion, the Court will treat the motions as a stipulation for decision on the merits based on the record submitted with the motions.
Super. Ct. Civ. R. 56(c); Buckley v. State Farm Mut. Auto. Ins. Co., 139 A.3d 845, 847 (Del. Super. Ct. 2015), aff'd, 140 A.3d 431 (Del. 2016) (quoting Moore v. Sizemore, 405 A.2d 679, 680 (Del. 1979)).
Sizemore, 405 A.2d at 681.
Brzoska v. Olson, 668 A.2d 1355, 1364 (Del. 1995).
Super. Ct. Civ. R. 56(c); Merrill v. Crothall-Am., Inc., 606 A.2d 96, 99-100 (Del. 1992).
Ebersole v. Lowengrub, 180 A.2d 467, 468-60, (Del. 1962) (citing Knapp v. Kinsey, 249 F.2d 797 (6th Cir. 1957)).
Wooten v. Kiger, 226 A.2d 238, 239 (Del. 1967).
Super. Ct. Civ. R. 56(h).
IV. THE CROSS MOTIONS FOR SUMMARY JUDGMENT
In total, there are five motions for summary judgment pending before the Court. Each motion is opposed, and in each case, the moving party has replied to the opposition. In three of those motions, the moving party seeks summary judgment, or partial summary judgment on the SAC. The other two motions deal with the Defendants' affirmative defenses. Because they address the same basic issues, there is considerable overlap in the motions, the oppositions, and the replies filed by the parties. Below, the Court consolidates and summarizes the parties' contentions on the motions seeking summary judgment on the SAC.
A. The Defendants' Contentions
In its Motion for Summary Judgment, which Voya joins, SLD argues that it did not breach the Policy, the Policy cannot be reformed, the Trust's statutory claims fail, and the equitable claims should be dismissed. SLD states that the Trust's claim that the $4 million remains payable after attained age 100 ignores the Policy's Continuation Beyond Attained Age 100 sub-section." According to the Defendants, the only one fair and reasonable interpretation of the Policy language is that after the insured reaches attained age 100, only the Policy's Surrender Value is owed. In other words, after the insured reaches attained age 100, the Policy redefines the Death Benefit as the Surrender Value. Therefore, because the insured died after attained age 100, the Trust is entitled to the Policy's Surrender Value. The Trusts' bad faith breach of contract claim fails because there was no breach of the contract. But, even if there was a breach of the contract, the Defendants' interpretation of the contract is reasonable, precluding a bad faith claim.
Def. Voya's, Mot. For Summ. J., at 1, D.I. 152.
Def. SLD's Mot. For Summ. J., at 5, D.I. 153.
Id. at 8.
Id. at 9.
Id. at 11.
Id. at 6.
Id. at 7.
Id. at 5.
Id.
Id.
The Defendants further argue that the Trust's statutory claims fail because the DCFA does not apply to insurance cases, and the Delaware Insurance Code provides no private right of action. In addition, Defendants argue the Trust's claim under 18 Del. C. § 2304(9), which bars non-insurers from using a name that deceptively implies that they are insurers, does not apply since SLD is an insurer and Voya's name does not imply that it is an insurer. Further, even if the Trust could bring a statutory claim, it would fail since the "misrepresentations" are contract terms, and any alleged misrepresentation occurred after the Policy was purchased.
Id. at 9, 10.
Id.
Id. at 11.
Finally, Defendants contend that the equitable claims fail and should be dismissed. The unjust enrichment claim is unavailable because there is a contract between the parties governing their relationship. The unconscionability claim fails because the contract aligns with the business practices of the industry.
Id.
Id.
Id. at 12.
In its motion, Voya makes the additional argument that it is not a party to the interactions giving rise to the Trust's claims. For that reason, the Trust has no legitimate claim against it.
Def. Voya's Mot. for Summ. J., at 2, D.I. 152.
Id.
B. The Trust's Contentions
The Trust moves for summary judgment against SLD for Breach of Contract (Count I) and against SLD and Voya for Consumer Fraud (Counts III, VIII, and IX.) The Trust contends that "[t]he Policy unambiguously provides for a $4 million death benefit upon death, without age limitation[.]" The Surrender Value only applies upon the surrender of the policy. In the Trust's view, nothing in the Policy terminates the Face Amount or Death Benefit at 100. Instead the Continuation Beyond Attained Age 100 Clause confers a benefit to the Trust by allowing it to surrender the Policy for $4 million after 100 without waiting for the insured's death. The Trust argues in the alternative that even if any language could be reasonably read to say the Face Amount is unavailable after age 100, it is entitled to judgment because, either such language a provision is void as against public policy, or under the doctrine of contra proferentem, the ambiguity is construed against SLD. As to liability under the Consumer Fraud Statute, the Trust argues that Defendants utilized misleading illustrations to explicitly or implicitly state the $4 million death benefit is payable upon death, regardless of age, while having no intention of paying that amount after attained age 100.
Pl.'s Mot. for Summ. J., D.I. 146. The numbering of the counts in the SAC is confusing. Due to a typographical error in the SAC (also subject to a typo in its caption) the three last counts of the SAC are labeled Count VIII. Perhaps this accounts for what appears to be an error in the Motion for Summary Judgment. The Motion seeks summary judgment as to "Counts VIII, IX, and X (Consumer Fraud.)" In fact, the consumer fraud counts are Counts III, VIII, and IX.
Id. at 6.
Id. at 7.
Id.
Id.
Id. at 8.
Id. at 9, 10.
The Trust opposes SLD's and Voya's Motions for Summary Judgment on Plaintiff's Claims. To the extent the Defendants' motions seek summary judgment in their favor on the Breach of Contract claim, the Trust argues that its interpretation of the Policy as explained in its Motion for Summary Judgment is the correct one. With respect to the consumer fraud counts, the Trust argues that the DCFA applies because the fraud is distinct from the breach of the contract itself - it was inducing the payment of $3.2 million in premiums as part of the ongoing purchase of insurance. The Trust also argues that summary judgment is precluded on the reformation counts (Counts IV, V, and X). A jury could find the Policy and/or the use of illustrations unconscionable (Count VI), and the unjust enrichment count (Count VII) survives because it is based on the separate wrong of collecting $3.2 million in premiums while representing through illustrations that the $4 million Death Benefit would be paid at death.
Pl.'s Opp. to SLD's Mot. Summ. J. on Pl.'s Claims, D.I.169; Pl.'s Opp to Voya's Mot. for Summ. J. against Pl.'s Claims, D.I. 168.
Id., D.I. 169 at 11.
Id. at 11, 12.
C. Discussion
When interpreting a contract, the Court will give priority to the parties' intentions as reflected in the four corners of the agreement. "In upholding the intentions of the parties, a court must construe the agreement as a whole, giving effect to all provisions therein." However, the meaning inferred from a particular provision cannot control the meaning of the entire agreement if such an inference conflicts with the agreement's overall scheme or plan. "Contract terms themselves will be controlling when they establish the parties' common meaning so that a reasonable person in the position of either party would have no expectations inconsistent with the contract language." Further, the Court will interpret clear and unambiguous terms according to their ordinary meaning. "A contract is not rendered ambiguous simply because the parties do not agree upon its proper construction." Rather, an ambiguity exists "[w]hen the provisions in controversy are fairly susceptible of different interpretations or may have two or more different meanings." Where a contract is ambiguous, "the interpreting court must look beyond the language of the contract to ascertain the parties' intentions."
Paul v. Deloitte & Touche, LLP, 974 A.2d 140, 145 (Del. 2009).
E.I. du Pont de Nemours and Co., Inc. v. Shell Oil Co., 498 A.2d 1108, 1113 (Del. 1985).
See id.
Eagle Indus., Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 (Del. 1997).
Paul, 974 A.2d at 145 (citing Lorillard Tobacco Co. v. Am. Legacy Found., 903 A.2d 728, 739 (Del. 2006); Rhone-Poulenc Basic Chem. Co. v. Am. Motorists Ins. Co., 616 A.2d 1192, 1195 (Del. 1992)).
Rhone-Poulenc Basic Chems. Co., 616 A.2d at 1195.
Eagle Indus., 702 A.2d at 1232.
Id.
1. Breach of Contract (Count I).
The Policy admits of only one interpretation - after attained age 100, the Death Benefit becomes the Surrender Value. That interpretation stems from the clear language of the contract on page 16 under the heading Continuation Beyond Attained Age 100. The Policy continues if the insured is living beyond attained age 100, but in that circumstance, "The Death Benefit any time will be the Surrender Value." This provision is not concealed. The reader only needs to follow the plain language of the Policy to discover it. Death Benefits are defined on page 7 of the Policy as "the amount applicable in determination of Death Benefit Proceeds payable on the insured's death. See Death Benefit revision on page 15." (Emphasis added.). On page 8 of the Policy, Death Benefit Proceeds are defined to mean "the amount payable to the Beneficiary at the insured's death if this policy is in force. See the Policy Proceeds provision on page 15." (Emphasis added.) The reader has now been directed twice to page 15. Obviously, any reader interested in ascertaining what proceeds will be paid to the beneficiary at the insured's death must follow the Policy's directions to page 15. There, the reader will encounter the capitalized and bolded "POLICY PROCEEDS" section. Concerning the "Death" event before age 100, according to the "Proceeds Payable at Death Prior to Attained Age 100" clause on page 15, the Policy provides the following language:
Proceeds Payable at Death Prior to Attained Age 100
We will pay the Death Benefit Proceeds of this Policy to the Beneficiary on receipt of proof that the Insured died while this Policy was in force. These Proceeds will equal:
1. the Death Benefit; plus
2. any amounts payable for any benefits provided by rider; minus
On the same page, the Policy contains the following language:3. any Monthly Deductions due in the grace period; minus
4. any Debt.
Death Benefit
The Death Benefit equals the larger of:
1. the Face Amount; or
2. a multiple of the Accumulation Value on the date of death.
These two subsections, read in conjunction, mean that, prior to attained age 100, the insurer will pay the larger of the Face Amount or a multiple of the Accumulation Value on the date of death. Concerning a "Death" event after age 100, according to the "Continuation Beyond Attained Age 100" clause on page 16, the Policy provides the following language:
Continuation Beyond Attained Age 100
The Policy will be continued beyond Attained Age 100, if at Attained Age 100 the Insured is living and this Policy is in force. During such continuance, the following applies to your Policy:
Thus, the Policy redefines the "Death Benefit" to equal the "Surrender Value," should the insured remain alive and the Policy still be active after the insured reaches attained age 100.1. The Death Benefit at any time will be the Surrender Value.
2. The Surrender Value at any time will be the Surrender Value at Attained Age 100 increased with interest in the same manner as prior to Attained Age 100 less any Debt and withdrawals occurring after Attained Age 100.
3. No further Monthly Deductions will apply.
4. No more premiums may be paid.
In their Response to Plaintiff's Motion for Summary Judgment, Defendants point out other provisions and terms of the Policy and associated documents consistent with the Court's interpretation of the Policy. The Policy Schedule lists the insured age at the time the Policy was issued as 83. It lists the years of Life Insurance benefits as 17. It separately lists the years of benefit of a Hardship Rider, and an Accelerated Benefit Rider as 17 as well. The Policy Summary admonishes the reader to "check the Schedule ... to be sure it reflects the type and amount of insurance you requested." The illustration the Trustee signed when the Trust applied for the Policy shows the $4 million net Death Benefit only through year 17 of the Policy and to the insured's age of 100. Consistent with the Policy Summary, the application documents reflect that the two policy riders provide coverage for only 17 years. Finally, the Statement of Policy Cost and Benefit clearly spells out that the Policy "Matures at Age 100" and shows the $4 million Death Benefit payable only through age 100.
D.I. 165.
Policy at 4.
Id. at 6.
Id.
Id. at 7.
App. to Pl.'s Mot. for Summ. J. at 39, D.I. 146.
Id. at 37.
Id. at 32.
The Breach of Contract claim alleges that a breach occurred when the Defendants failed to pay a $4 million Death Benefit after proper notice and evidence of the insured's death. "Under Delaware law, the elements of a breach of contract claim are: (1) a contractual obligation; (2) a breach of that obligation; and (3) resulting damages." The contractual obligation is unambiguous. If the insured died before attained age 100, Defendants were obligated to pay a Death Benefit of $4 million to the Trust. However, if the insured died after attained age 100, Defendants were obliged to pay only the Surrender Value to the Trust. Therefore, Defendants' obligation, since the insured died after attained age 100, is to pay the "Surrender Value" upon surrender of the Policy. Defendants state that "[t]he Surrender Value has not been paid because the Trust never claimed those benefits. When it does, SLD agrees that the Surrender Value will be owed, along with any applicable interest." The Defendants have not breached the contract. When the Trust "surrenders" the Policy, Defendants will pay the Trust the Surrender Value along with any applicable interest.
Interim Healthcare, Inc. v. Spherion Corp., 884 A.2d 513, 548 (Del. Super. Ct. 2005).
Defs.' Resp. to Pl.'s Mot. for Summ. J., at 3 n.2, D.I. 165.
2. Bad Faith Breach of Contract (Count II).
Although all of the allegations in the previous 38 paragraphs of the SAC are repeated and re-alleged in Count II, in the Bad Faith Breach of Contract claim, only two of the five paragraphs of the count allege specific acts of bad faith. They allege:
Defendants' failure and refusal to honor their contractual obligations to pay the $4 million death benefit to Plaintiff is unreasonable and without justification as it ignores (i) the unambiguous language on the cover page of the policy and the Death Benefit section of the [Policy], making it unmistakably clear that the $4 million death benefit would be payable 'at Insured's death,' (ii) the clear and unambiguous understanding of the parties and (iii) a decade of illustrations provided by Defendants representing such benefit would be paid, regardless of the age of Mrs. Nowak's death.Alternatively, the Trust contends that, if the Policy is interpreted as Defendants contend, then Defendants are violating applicable Delaware insurance regulations that prohibit insurers from providing misleading illustrations and prohibits "any provision in any life insurance contract which provides for 'any mode of settlement at maturity of the policy of less than the amount insured.'" These claims are replicated in the Trust's DCFA counts and are discussed in connection with those claims.
SAC, at ¶ 41, D.I. 55.
Id. at ¶ 42.
In Tackett v. State Farm, the Delaware Supreme Court reasoned that an insured's claim against an insurer for unfair denial or delay in claim payments constituted a claim for bad faith breach of contract. Tackett held that a bad faith claim can stem from an insurer's failure to investigate, pay, process a claim, or delay payment. The Delaware Supreme Court has clarified that the parameters of a bad faith action are expressly limited to those circumstances. Specifically, a bad faith breach of contract occurs when a party in a contractual relationship engages in "arbitrary or unreasonable conduct which has the effect of preventing the other party to the contract from receiving the fruits of the bargain." Further, a bad faith claim can occur when a party otherwise frustrates the "overarching purpose of the contract by taking advantage of their position to control implementation of the agreement's terms."
Tackett v. State Farm Fire and Cas. Ins. Co., 653 A.2d 254 (Del. 1995).
Id.
See Dunlap v. State Farm Fire and Cas. Co., 878 A.2d 434, 440 (Del. 2005).
Id. at 442 (citing to Wilgus v. Salt Pond Inv. Co., 498 A.2d 151, 159 (Del. Ch. 1985), construing Restatement § 205) (internal citations omitted).
Id. (citing to Breakaway Solutions, Inc. v. Morgan Stanley & Co., 2004 WL 1949300, at *12 (Del. Ch. Aug. 27, 2004.) (internal citations omitted)).
The Court finds that no breach of the contract occurred. If a breach has not occurred, it follows that a bad faith breach also has not occurred. Further, because the Court has concluded that the Defendants' interpretation of the contract is correct, it is reasonable, foreclosing a bad faith claim. The "misleading illustrations," however regrettable they may have been, do not give rise to a bad faith breach of contract. They neither prevented the Trust from receiving the benefit of its bargain, nor frustrated the overarching purpose of the contract. 3. The Delaware Consumer Fraud Act Claims (Counts III, VIII, and IX).
Count III of the SAC alleges, "Defendants' acts and omissions, including but not limited to sending materially misleading illustrations, were unfair, deceptive, oppressive, immoral and unscrupulous" and induced the Trust to make $3 million in premium payments in order to keep the Policy in force and pay the Death Benefit beyond attained age 100. Accordingly, the Trust contends that "Defendants' acts and omissions deceived the Trust [...] and constituted a violation of the [DCFA]." It makes additional consumer fraud claim in Counts VIII and IX. In Count VIII, the Trust alleges that the Defendants' interpretation of the Policy puts it in violation of the DCFA because it mandates settling an insurance policy for less that the insured amount in violation of Delaware law. Count IX the Trust alleges that Voya's role in the Trust's dealings (or lack of dealings) with SLD was deceptive and violated 18 Del. C. § 2304(9) which prohibits using any name which deceptively implies a person who is not an insurer is an insurer. The Trust has moved for summary judgment on all three of its consumer fraud claims.
SAC at ¶¶ 44-50, D.I. 55.
Id.
Id. at ¶¶ 71-75.
Id. at ¶¶ 76-79.
Pl.'s Mot. for Summ. J., D.I. 146.
In its Motion for Summary Judgment, SLD argues that the claims in Counts III and VIII fail because the DCFA does not apply to insurance cases. Count IX, which alleges that the Defendants violated the DCFA by engaging in illegal conduct proscribed by 18 Del. C. § 2304(9), fails because no private right of action exists under that section or the DCFA. Further, SLD asserts that even if the trust could bring the statutory claims, no violation occurred because "misrepresentations" are contract terms and there is no statutory violation for "misrepresenting" contract terms. Finally, because the DCFA only protects consumers in the procurement of merchandise, the "misleading" illustrations, which were delivered post-purchase, are not actionable.
Def. SLD's Mot. for Summ. J. at 9, D.I. 153.
Id. at 9.
Id. at 10.
Id. at 11.
The Delaware General Assembly enacted the DCFA in order "to protect consumers and legitimate business enterprises from unfair or deceptive merchandising practices in the conduct of any trade or commerce in part or wholly within this State." Under the DCFA, a private cause of action is available to victims of consumer fraud. The DFCA, 6 Del. C. § 2513, states that:
(a) The act, use or employment by any person of any deception, fraud, false pretense, false promise,
misrepresentation, or the concealment, suppression, or omission of any material fact with intent that others rely upon such concealment, suppression or omission, in connection with the sale, lease or advertisement of any merchandise, whether or not any person has in fact been misled, deceived or damaged thereby, is an unlawful practice.
(b) This section shall not apply:
(3) To matters subject to the jurisdiction of Public service Commission or the Insurance Commissioner of this State.
The Defendants rely on § 2513(b)(3)'s exclusion of matters subject to the jurisdiction of the Insurance Commissioner to preclude the Trust's consumer fraud claims. The most recent Delaware Supreme Court case addressing whether the DCFA permits a private right of action against an insurance company is Price v. State Farm Mut. Auto. Ins. Co. In Price, the Delaware Supreme Court affirmed the Superior Court "on the basis of and for the reasons set forth in its decision dated March 15, 2013." The Superior Court found the DCFA inapplicable to "this private, non-administrative action." The Superior Court went on, assuming that the DFCA was applicable, and further assuming that the insurance coverage at issue was "merchandise" under the statute, and concluded that § 2513(a) only applied to deceptive conduct in connection with the "purchase" of insurance. The DCFA "protects consumers who are deceived while purchasing insurance; it does not protect customers who have purchased merchandise and are seeking to receive a benefit of that purchase."
2013 WL 5178520 (Del. 2013) aff'g 2013 WL 1213292 at *10 (Del. Super. Ct. Mar. 15, 2015).
Id.
2013 WL 1213292 at *10 (Del. Super. Ct. March 15, 2013).
Id. at *11.
Id.
The United States District Court for the District of Delaware observed that the Delaware Supreme Court's decision in Price holding that §2513(a) did not give rise to a private cause of action against insurance companies was contrary to a previous line of cases. Just as the Superior Court did, the District Court continued, assuming the applicability of the DCFA. And, just as the Superior Court did, it held that "Post-sale representations not connected with the sale or advertisement of merchandise do not fall within the purview of the DCFA." In a second case, the District again concluded that Price controlled and that § 2513(a) did not give rise to a private cause of action for complaints against insurance companies. The District Court then determined that even if the DCFA applied, the defendant failed to state a claim because the fraudulent conduct alleged did not occur "as part of the sale, lease, or advertisement of the insurance policy."
Christiana Care Health Services, Inc. v. PMSLIC Ins. Co. 2015 WL 6675537 at *7 (D. Del. Nov. 2, 2015).
Id.
Benson v. Amguard Ins. Co., 2017 WL 2672078 at *4 (D. Del. Jun. 21, 2017).
Id.
Following the analytical pattern established by the Superior Court and the District Court, this Court holds that §2513(a) does not confer a private cause of action against insurance companies. Next, the Court will assume that the DCFA does apply. Even making that assumption, the claim under Count III fails. That claim relies on the "misleading" illustrations. Those "misleading" illustrations all occurred after the sale of the Policy and cannot support a claim under the DCFA.
Nonetheless, in Count VIII, the Trust alleges that the Defendants' interpretation of the Policy mandates settling the Policy for less than the insured amount in violation of Delaware law (18 Del. C. § 2827), giving rise to a claim under § 2513. The Trust further alleges that that the illustrations were provided to induce the Trust to make additional premium payments, not required by contract, for the purpose of keeping the policy in force and obtaining the benefits illustrated. The Trust contends that each such illustration and each such additional premium was a sale in connection with the sale of the Policy. Thus, the Trust concludes, each illustration/sale is subject to the provisions of the DCFA.
SAC at ¶ 73, D.I. 55.
Id. at ¶ 74.
Id.
Id.
There are at least two problems with this claim under the DCFA. First, the Court has held that there is no private right of action under the DCFA against insurance companies. Second, the sale of the Policy did not occur in Delaware. It occurred in Virginia. The Court fails to understand why contracting parties in Virginia would consult Delaware law to ascertain the Policy's compliance with that law when the Policy was to be issued in Virginia. The Court finds no support for the Trust's proposition that each premium payment constituted a separate sale within the meaning of the DCFA, and concludes they were not.
In Count IX, the Trust asserts the Defendants' denial that Voya (or its predecessor ING) was involved in any way in Defendants' dealings with the Trust while permitting SLD to communicate with the Trust using Voya's and ING's names without either having any responsibility for what was said in their names was deceptive, misleading and violated 18 Del. C. § 2304(9). Therefore, the Trust contends that each illustration and each communication violated the DCFA.
Id. at ¶¶ 77, 78.
Id. at ¶ 79.
This claim fails for familiar reasons. First, neither the DCFA, nor 18 Del. C. § 2304(9) provides a private right of action against insurance companies. Second, the claim relates to illustrations and communications occurring after the sale of the Policy, and thus, is not actionable under the DCFA. Third, there was no violation of 18 Del. C. § 2304(9). That section prohibits anyone not an insurer from assuming or using any name which "deceptively implies or suggests that it is an insurer." SLD is an insurer and Voya's name does not imply that it one.
V. THE CONTRACT REFORMATION COUNTS (COUNTS IV, V, AND X)
"Generally, reformation is an equitable remedy that may be granted only by a Court exercising equitable powers." "A court of law, under its common law jurisdiction, has no power to offer such relief." Unless otherwise authorized by statute, or a Delaware Superior Court Judge is designated by the Delaware Supreme Court to sit in the Court of Chancery to hear and decide equitable issues, the Delaware Superior Court has no ability to grant reformation. Accordingly, since neither circumstance applies in this matter, this Court must decline the Trust's request to reform the Policy as set out in its claims for Reformation Based on Mutual Mistake (Count V), Reformation Based on Mistake Coupled with Inequitable Conduct (Count V), and Breach of Reformed Contract (Count X).
Travelers Indem. Co. v. N. Am. Philips Corp., 1992 WL 210560, at *2 (Del. Ch. Aug. 26, 1992); see also 1 J. Pomeroy, Equity Jurisprudence § 110, at 142 (1941); see also 66 Am. Jur. 2d Reform of Inst. § 94 (1973).
Id.
Id.; but see also Monsanto Co. v. Aetna Cas. & Sur. Co., 1989 WL 997183 (Del. Super. Ct. 1989). In that case, a Superior Court Judge was designated as a vice-chancellor, in part to prevent defendants from raising equitable counterclaims in order to defeat the Superior Court's jurisdiction. This case presents no such risk.
In any event, the claims are without merit. Count IV, Reformation Due to Mutual Mistake fails because, at a minimum, the Defendants were not mistaken as to the Policy's terms. Cerberus Int'l Ltd v. Apollo Mgmt., L.P., 794 SA.2d 1141, 11521-52 (Del. 2002). Count V, Reformation Based on Mistake Coupled with Inequitable Conduct, fails because any unilateral "mistake" on the Trust's part arose only as a result of the "misleading" illustrations and not when the Policy was issued. Moreover, there is no reason to believe that SLD was aware of the Trust's alleged mistaken understanding. Count X, Breach of Reformed Contract, is derivative of Counts IV and V and cannot stand on its own.
VI. UNCONSCIONSIBILITY (COUNT VI)
The Trust alleges that if, by the Policy's terms, the Death Benefit becomes the Surrender Value once the insured reaches attained age 100, the Policy is unconscionable and must be enforced in a manner so as to avoid that unconscionable result. The Trust asserts that the Defendants took advantage of their superior bargaining power to craft a "complex and confusing Policy that hid clauses disadvantageous to [the Trust] in a mass of fine print, deceptive descriptions, and/or in places which are inconspicuous to the party signing the contract." The Trust argues that it makes no economic sense to convert the $4 million Death Benefit and to the $330,000 Surrender Value simply on the basis that the insured lived too long.
SAC, at ¶¶ 60-66, D.I. 55.
Id.
Id.
In its Motion for Summary Judgment, SLD argues that the equitable claim of unconscionability fails because there is no basis to find the contract unconscionable simply because the Death Benefit changed from the face amount to the Surrender Value at age 100—a term explicit in a Policy that the Trust shopped for and chose in a free market.
Def. SLD's Mot for Summ. J. at 12, D.I. 153..
"Unconscionability is a concept that is used sparingly." "[T]he notion that a court can and will review contracts for fairness is apt for good reason to strike us as dangerous, subjecting negotiated bargains to the loosely constrained review of the judicial process." Accordingly, "courts have evoked this doctrine with extreme reluctance and only when all of the facts suggest a level of unfairness that is unconscionable."
Ketler v. PFPA, LLC, 132 A.3d 746, 748, 2016 WL 192599, at *2 (Del. 2016).
Ryan v. Weiner, 610 A.3d 1377, 1381 (Del. Ch. 1992).
Id.
"Although technically limited in scope to sales of goods, Delaware decisions have applied [6 Del. C.] Section 2-302 more broadly." It states as follows:
James v. National Financial, LLC, 132 A.3d 799, 814 (Del. Ch. 2016) (see, e.g., Reserves Mgmt., LLC v. Am. Acq. Prop. I, LLC, 86 A.3d 1119, 2014 WL 823407, at *9 (Del. 2014) (ORDER) (testing whether amendment to restrictive covenants on land was unconscionable using § 2-302); Worldwide Ins. Gp. v. Klopp, 603 A.2d 788, 790 (Del. 1992) (holding that features of an insurance contract could be "unconscionable within the meaning of § 2-302).
(1) If the court as a matter of law finds the contract or any clause of the contract to have been unconscionable at the
time it was made the court may refuse to enforce the contract, or it may enforce the remainder of the contract without the unconscionable clause, or it may so limit the application of any unconscionable clause as to avoid any unconscionable result."It is generally held that the unconscionability test involves the question of whether [a contractual] provision amounts to the taking of an unfair advantage by one party over the other." Furthermore, "[w]hether a contract is unconscionable is determined at the time it was made." "[T]here must be an absence of meaningful choice and contract terms unreasonably favorable to one of the parties."
(2) When it is claimed or appears to the court that the contract or any clause thereof may be unconscionable the parties shall be afforded a reasonable opportunity to present evidence as to its commercial setting, purpose and effect to aid the court in making the determination.
J.A. Jones Const. Co. v. City of Dover, 372 A.2d 540, 552 (Del. Super. Ct. 1977).
James v. National Financial, LLC, at 814 (citing to Lecates v. Hertrich Pontiac Buick Co., 515 A.2d 163, 173 (Del. Super. Ct. 1986)).
Ketler, 2016 WL 192599 at *2 (citing Tulowitzki v. Atl. Richfield Co., 396 A.2d 956, 960 (Del. 1978)).
At the time the Trust entered into the Policy, the Trust had consulted with advisors and retained a ten (10) day opportunity to review the contract before it became binding. There can be no deprivation of meaningful choice if a party can walk away from the contract. Further, aside from the two brokers, Legacy Analytics advised the Trust. The Trust claims it did not understand the true arrangement it entered into at the Policy's inception; however, the Trust was given ample time to read the contract and consult with advisors. "The failure to read a document before signing it does not enable one to ignore the obligations imposed by that document on the ground that they did not read the contract or that the contents of the contract were not known to the party." There is no evidence that the Defendants retained some unfair advantage over the Trust when the Policy was executed.
Id.
Moore v. O'Connor, 2006 WL 2442027, at *4 n.26 (Del. Super. Ct. Aug. 23, 2006) (citing 17A Am. Jur. 2d Contracts § 210).
VI. UNJUST ENRICHMENT (COUNT VII)
In Count VII of the SAC, Trust alleges that the Defendants have been unjustly enriched through the receipt of more than $3 million in premiums pursuant to a Policy where the beneficiary would receive only about $330,000 if the insured died after attained age 100.
SAC at ¶69, D.I. 55.
In its Motion for Summary Judgment, SLD argues that there is no basis for an unjust enrichment claim because a contract exists that governs the relationship between the parties.
Pl. SLD's Mot. for Summ. J. at 11, 12, D.I. 153.
"Unjust enrichment is 'the unjust retention of a benefit to the loss of another, or the retention of money or property to another against the fundamental principles of justice or equity and good conscience.'" "A claim for unjust enrichment is not available if there is a contract that governs the relationship between parties that gives rise to the unjust enrichment claim." Therefore, "[w]hen the complaint alleges an express, enforceable contract that controls the parties' relationship ... a claim for unjust enrichment will be dismissed." Here, the Policy controls the parties' relationship. Thus, this claim fails.
Kuroda v. SPJS Holdings, LLC, 971 A.2d 872, 891 (Del. Ch. 2009) (citing to Schock v. Nash, 732 A.2d 217, 232 (Del. 1999), which quotes Fleer Corp. v. Topps Chewing Gum, Inc., 539 A.2d 1060, 1062 (Del. 1988)).
Id.
Bakerman v. Sidney Frank Importing Co., 2006 WL 3927242, at * 18 (Del. Ch. Oct. 10, 2006) (revised Oct. 16, 2006); In re Lear Corp. S'holder Litig., 967 A.2d 640, 657 n.72 (Del. Ch. 2008); MetCap Sec. LLC v. Pearl Senior Care, Inc., 2007 WL 1498989, at *5 n.41 (Del. Ch. May 16, 2007).
VI. CONCLUSION
Therefore, for the reasons set forth above, Security Life of Denver Insurance Company's Motion for Summary Judgment on Plaintiff's Claims is GRANTED. Voya Financial Inc.'s Motion for Summary Judgment on Plaintiff's Claims is GRANTED to the extent it incorporates the arguments and authorities supporting Security Life of Denver Insurance Company's Motion for Summary Judgment on Plaintiff's Claims. Defendants' Motion for Summary Judgment on Affirmative Defenses is MOOT. Finally, the Trust's Motions for Summary Judgment—as to Counts I, III, VIII and IX, and as to Affirmative Defenses—are DENIED.
As noted, Plaintiff's Motion for Summary Judgment mislabels the consumer fraud counts as Counts VIII, IX, and X.
IT IS SO ORDERED.
/s/_________
Ferris W. Wharton, J.