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Gabriel v. Jackson National Life Insurance Co.

United States District Court, D. Massachusetts

March 26, 2015



MARK L. WOLF, District Judge.


Judith W. Gabriel brought this action both individually and as executrix of her husband Robert J. Gabriel's estate, to recover a $500, 000 death benefit from Flexible Premium Adjustable Life Insurance Policy No. 82010817 (the "'817 Policy"). The '817 Policy was issued by Valley Forge Life Insurance Company ("Valley Forge"). Valley Forge is the predecessor in interest to Reassure America Life Insurance Company ("Reassure America"), which assumed all obligations relating to the '817 Policy and which was the original defendant in this case. On December 31, 2012, Reassure America merged into Jackson National Life Insurance Company ("Jackson National"), which is the current defendant.

Mrs. Gabriel's husband, Robert J. Gabriel, died on August 27, 2010. Mrs. Gabriel was the beneficiary of the '817 Policy. However, Reassure America denied her claim for the $500, 000 death benefit because, it asserted, the policy had terminated on April 19, 2010, due to Mr. Gabriel's failure to timely pay the required premium.

In her Complaint, the plaintiff alleged that Reassure America breached the '817 Policy by repeatedly overstating the premium payments necessary to keep coverage in force in the Grace Notices that it sent to Mr. Gabriel. She also contended that Reassure America breached the '817 Policy by failing to provide Mr. Gabriel the full 61-day grace period to make payments required under the contract. The plaintiff also asserted that the '817 Policy was subject to the three-month notice requirement of M.G.L. c. 175, § 110B, and that Reassure America failed to comply with that statute. Finally, the plaintiff claimed that Reassure America and the current defendant, Jackson National, engaged in unfair and deceptive business practices, in violation of M.G.L. c. 93A.

On August 20, 2014, at the final pretrial conference, the court ruled that, under both M.G.L. c. 175 § 110B and the terms of the '817 Policy, Mr. Gabriel should have been allowed until May 13, 2010, to make a payment sufficient to continue coverage. Therefore, by terminating the '817 Policy on April 19, 2010, Reassure America violated § 110B and breached the '817 Policy. The court further found that Reassure America breached the '817 Policy each time it overstated the amount that Mr. Gabriel was "required" to pay to keep his coverage in force.

Following that pretrial conference, the parties agreed that summary judgment should enter in favor of the plaintiff on the breach of contract (Count I) and violation of § 110B (Count VIII) claims because, they agreed, Mrs. Gabriel had tendered a payment sufficient to keep the '817 Policy in force on May 5, 2010, and Reassure America would not have accepted any premium payment after April 19, 2010. The parties further agreed that several of the plaintiff's other claims, which presented alternative theories of recovery to the breach of contract claim, should be dismissed without prejudice.

The court is now entering judgment for plaintiff on Counts I and VIII. The court is dismissing Counts II, III, IV, and VI without prejudice.

After these agreements by the parties, the sole remaining unresolved claim was plaintiff's allegation that Reassure America's practices violated Chapter 93A (Count IX). The court began a bench trial on this issue on September 4, 2014. After the conclusion of the trial, the court took the matter under advisement.

Based on the evidence presented at trial, the court finds that Reassure America violated Chapter 93A in two ways. First, the Grace Notices that Reassure America sent to Mr. Gabriel were deceptive in violation of Chapter 93A. Each Grace Notice substantially overstated the amount that Mr. Gabriel was required to pay to keep his coverage in force under the terms of the policy. Most importantly, the deceptive March 15, 2010 Grace Notice and April 2010 Payment Notice each caused David Gabriel to not pay an amount sufficient to keep the policy in force. This resulted in the wrongful termination of Mr. Gabriel's coverage under the '817 Policy.

Second, defendant's misrepresentations constituted a coercive breach of contract, in violation of Chapter 93A. The '817 Policy required Reassure America to send Grace Notices informing Mr. Gabriel of the minimum amount necessary to keep his coverage in force. Instead, each Grace Notice that Reassure America sent threatened Mr. Gabriel with termination of his coverage unless he paid several thousand dollars more than the policy required to maintain coverage.

The court further finds that Reassure America acted in a willful and knowing manner in committing these unfair trade practices. At the time the Grace Notices were sent to Mr. Gabriel, Reassure America employees knew that they were misrepresenting the amount required to continue coverage. In addition, no Reassure America employee ever attempted to determine whether the Grace Notices complied with the terms of the '817 Policy.

The court is awarding Mrs. Gabriel treble damages because of the egregious nature of Reassure America's misconduct. For years, Reassure America used its informational advantage and the threat of cancelling Mr. Gabriel's coverage to extort thousands of dollars in excess premiums from him months before the premiums were due. These misrepresentations were the result of a deliberate choice to change the Grace Notice templates that were used to administer the '817-type policies. Furthermore, the importance of deterring this type of difficult-to-detect misconduct in the future make an award of treble damages most appropriate.

Therefore, the court is ordering the entry of judgment for plaintiff in the amount of $1, 774, 849.32: $1, 500, 000 (three times the actual damages of $500, 000) plus $274, 849.32 (prejudgment interest at the rate required by Massachusetts law on $500, 000 accrued between Mr. Gabriel's death, on August 27, 2010, and the entry of judgment). The court is also awarding the plaintiff all of her reasonable attorneys' fees and costs incurred in connection with this litigation.


A. The Complaint and the Motion to Dismiss

This case was originally brought in Plymouth Superior Court of the Commonwealth of Massachusetts. It was removed to this court based on diversity jurisdiction. See 28 U.S.C. §§ 1332(a), 1446(b). The Complaint asserted a variety of state law claims: (I) breach of contract; (II) breach of the implied covenant of good faith and fair dealing; (III) fraud/deceit; (IV) negligent misrepresentation; (V) quantum meruit/unjust enrichment; (VI) equitable estoppel; (VII) violation of M.G.L. c. 175, § 187; (VIII) violation of M.G.L. c. 175, § 110B; and (IX) violations of M.G.L. c. 93A, §§ 2, 9.

Pursuant to Federal Rule of Civil Procedure 12(b)(6), the defendant moved to dismiss all counts of the Complaint for failure to state a claim upon which relief can be granted. For the reasons described in court on October 15, 2012, the court allowed Defendant's Motion to Dismiss with respect to Count VII, which alleged a violation of M.G.L. c. 175, § 187. The Motion to Dismiss was denied with respect to all other counts. See Oct. 15, 2012 Order.

B. The Cross-Motions for Summary Judgment

Following discovery, both parties moved for summary judgment on all remaining counts. The court held a hearing on these motions on April 18, 2014.

In its motion for summary judgment, the defendant argued for the first time that the plaintiff's claims were preempted by ERISA. At the hearing, the court noted that ERISA preemption is a waivable affirmative defense. See Wolf v. Reliance Std. Life Ins. Co., 731 F.3d 444, 449 (1st Cir. 1995). The court ruled that the defendant had waived this argument by failing to present it earlier in the case, and denied any implicit motion for leave to amend the Answer. First, the court concluded that allowing the defendant to assert a new defense after the close of discovery would be prejudicial to the plaintiff, particularly in view of the additional discovery that would be necessary. See Apr. 18, 2014 Tr. at 13. Second, the court concluded that an amendment would be futile because the insurance plan at issue in this case was not for an "employee." Therefore, the plan fell outside the ambit of ERISA. See id. at 14 (citing Raymond B. Yates, M.D., P.C. Profit Sharing Plan v. Hendon , 541 U.S. 1, 21 (2004)).

The court then addressed the plaintiff's claims. First, the court interpreted the grace period provision of the '817 Policy. See Clark School for Creative Learning, Inc., v. Philadelphia Indem. Ins. Co. , 734 F.3d 51, 55 (1st Cir. 2013) ("The interpretation of an insurance policy is a question of law for the court."). In pertinent part, the '817 Policy provided that:

A grace period of 61 days will be granted for the payment of a premium large enough to cover the monthly deduction. Notice of such premium will be mailed to your last known address.

'817 Policy at 10. The court found that this language was unambiguous and that the Grace Notices under the '817 Policy were required to specify the minimum payment necessary to keep the plan in force. See April 18, 2010 Tr. at 30.

Applying this interpretation to the undisputed facts, the court concluded that the March 15, 2010 Grace Notice did not comply with the terms of the '817 Policy and misrepresented the amount that Mr. Gabriel was required to pay. See April 18, 2010 Tr. at 29-30. Specifically, the court found that although the March 15, 2010 Grace Notice stated that the amount "required" to continue coverage was $10, 852.64, the actual negative cash value of the policy at that time was only $2495.25. Including the mandatory nine-percent "load charge" on any premiums, a payment of $2742.03 would have been sufficient to cover the monthly deduction and continue coverage. Therefore, the court found that Reassure America had breached the contract by demanding payment of an amount that was $8110.61 higher than the amount required by the policy to continue coverage. See id. at 29-30, 47.

The court acknowledged the defendant's motive may have in part been to benefit the policy holder by making him pay more than the minimum required amount in order to ensure that his coverage was not at risk every month. However, the court explained that the contract did not permit such a practice. See id. at 32-33. Therefore, the court found that the contract had been breached and that Reassure America had made misrepresentations to Robert Gabriel. See id. at 47.

The court concluded that there was a genuine dispute of material fact regarding causation, which is an essential element of a breach-of-contract claim. See Amicas v. GMG Health Sys., Ltd., 676 F.3d 227, 231 (1st Cir. 2012) ("[I]f damages are sought causation and the amount of damages must also be proved."). In particular, the court explained that "reasonable jurors could disagree as to whether harm was caused or whether Mr. Gabriel knew he could pay a lower amount and [did not] rely on the [Grace] Notices." See Apr. 18, 2014 Tr. at 47.

The plaintiff also argued that the defendant had breached the contract because it had failed to send the notice at the beginning of the 61-day grace period. The plaintiff asserted that the company instead had a policy of sending the notice 31 days before the end of the grace period. Furthermore, the plaintiff contended that this practice was inconsistent with the policies of other insurance companies. The court explained, however, that the analysis must turn on the terms of the '817 Policy, rather than whether Reassure America's policies comported with prevailing industry practices. See id. at 42. This matter of contract interpretation was not decided at the hearing.

The court also discussed the Chapter 93A claim. The court noted that, even if the rest of the claims could be resolved on summary judgment, the court would have to hear evidence to determine whether multiple damages were appropriate. See id. at 44-45. For this reason, and because of the remaining genuine dispute of material fact concerning causation, the court substantially denied the plaintiff's motion for summary judgment completely. The court allowed the defendant's motion for summary judgment with respect to the unjust enrichment claim (Count V), [1] but denied it with respect to all other claims. The court stated that it was denying the defendant's motion for summary judgment without prejudice with respect to Count VIII (M.G.L. c. 175, § 110B), which would be addressed at the final pretrial conference. See Apr. 23, 2014 Order.

C. August 20, 2014 Final Pretrial Conference

In anticipation of the pretrial conference on August 20, 2014, the parties filed motions in limine. Several of these motions concerned the admissibility of certain evidence at trial. However, the parties' main disagreements concerned the matters of law left unresolved at the April 18, 2014 summary judgment hearing. In particular, the parties disagreed about: (1) whether the '817 Policy was subject to the requirements of M.G.L. c. 175, § 110B; and (2) whether the 61-day grace period provided by the '817 Policy started when Mr. Gabriel received the Grace Notice or at an earlier time.

1. The Application of M.G.L. c. 175, § 110B

The court ruled that M.G.L. c. 175, § 110B applied to the '817 Policy. See August 20, 2014 Tr. at 5, 27. Section 110B establishes requirements for certain premium notices to protect an insurance policy owner from losing his insurance coverage unexpectedly. See Cimon v. Gaffney , 401 F.3d 1, 5 (1st Cir. 2005). Section 110B provides heightened notice requirements for the termination of insurance policies that are: (1) not subject to unilateral cancellation by the insurer; (2) not renewable or continuable with the insurer's consent; and (3) not policies for which the premiums are payable monthly or at shorter intervals. See M.G.L. c. 175, § 110B. It provides that insurance policies subject to its requirements shall not terminate until three months after the due date of the premium amount.

However, § 110B also carves out an exception to the general three-month rule. A policy may terminate or lapse before the end of three months if the insurance company sends a notice: (1) between 10 and 45 days prior to the due date; (2) showing the amount of "such premium"; (3) showing the due date; and (4) containing a "statement as to the lapse in the policy if no payment is made as provided in the policy." See M.G.L. c. 175, § 110B. If the insurance company does not send such notice, the insured has three months from the due date to pay the premium. See id. Simply put, the section "provides that a policy cannot be terminated for nonpayment of a premium until three months after the date on which the premium was due (unless notice was sent in accordance with the statute)." Cimon , 401 F.3d at 5.

The defendant argued that because the '817 Policy contained a "Continuation of Insurance" provision, it fell within § 110B's exception for policies that were "renewable or continuable with [the insurer's] consent." This contention relied on a provision of the '817 Policy that stated:

In the event Planned Periodic Premiums are not paid, insurance coverage under this policy and any benefits provided by rider will be continued in force. Such coverage will continue until the Cash Surrender Value is not sufficient to cover the monthly deduction, except as provided in Section 2: Grace Period.

'817 Policy at 11.

The court found defendant's proposed interpretation of both § 110B and the '817 Policy to be incorrect. It held that the Continuation of Insurance provision did not make the policy "continuable with [the insurer's] consent." See August 20, 2014 Tr. at 12 (citing M.G.L. c. 175, § 110B). Instead, the court ruled that the provision provided that the continuation of coverage would be automatic as long as the policyholder had sufficient funds in his account to cover the required premium. It, therefore, did not provide the defendant with any discretion concerning whether to cancel or continue the policy, as required by § 110B. See id. at 13 (citing Kavanagh v. N.Y. Life. Ins. Co. , 170 F.3d 253, 257 (1st Cir. 1999)).

The court held that Reassure America had violated § 110B by not providing Mr. Gabriel with the required three months to pay before terminating the '817 Policy. See August 20, 2014 Tr. at 14, 41. As the First Circuit stated in Cimon, a policy subject to § 110B cannot be terminated for nonpayment of any premium within three months of the failure to pay, unless the insurance company has given the insured notice of the premium due and its due date within 10 to 45 days of that due date. See 401 F.3d at 5. The court had already determined, at the April 18, 2014 summary judgment hearing, that the March 15, 2010 Grace Notice overstated the amount required to keep the policy in force. Therefore, the court concluded that the defendant did not satisfy the § 110B requirement that the notice specify the actual premium due. Because Reassure America never sent Mr. Gabriel § 110B-compliant notice, the protections of § 110B applied. Accordingly, the court held that Mr. Gabriel should have been given at least three months from February 13, 2010, meaning until May 13, 2010, to make a payment sufficient to keep his policy in force. See August 20, 2014 Tr. at 14, 41.

2. The 61-Day Grace Period

The court next reviewed the '817 Policy to determine when the 61-day grace period should have started. In doing so, the court considered "the actual language of the ['817 Policy], given its plain and ordinary meaning." See August 20, 2014 Tr. at 28 (citing Brazas Sporting Arms, Inc. v. Am. Empire Surplus Lines Ins. Co. , 220 F.3d 1, 4 (1st Cir. 2000)). The court recognized that, "[i]f the meaning of the contract language is unclear, [the court] consider[s] what an objectively reasonable insured, reading the relevant policy language, would expect....'" Id. (quoting Metro. Life Ins. Co. v. Cotter , 984 N.E.2d 835, 844 (Mass. 2013)).

Applying these principles, the court found that Mr. Gabriel was entitled to 61 days' notice, starting at the earliest from the date the Grace Notice was mailed. The court held that a reasonable insured would have expected to have the 61 days to make a sufficient premium payment from the date he was notified of that deficiency. Therefore, because the Grace Notice was mailed on March 15, 2010, Mr. Gabriel should have been given until at least May 15, 2010, to remit payment. See id.

The court also noted that, in light of its ruling regarding the applicability of § 110B, the interpretation of the grace-period provision of the '817 Policy would have no practical effect on the defendant's liability. See id. at 28-29, 32. The plaintiff claimed to have tendered sufficient payment to keep the policy in force on May 5, 2010. See id. at 44. Under either the court's ruling on § 110B or the grace period, Mr. Gabriel should have been given until at least May 13, 2010, to make a payment sufficient to bring his policy out of grace. See id. at 41, 44-45.

D. Developments Following the August 20, 2014 Pretrial Conference

Following the court's rulings on § 110B and the 61-day grace period, the issues for trial were reduced significantly. The primary remaining dispute was whether Mr. Gabriel tendered payment on May 5, 2010, in the form of a check for the full $10, 852.64, and whether the defendant's refusal to accept that payment caused damage to Mr. Gabriel and his estate. See Aug. 20, 2014 Tr. 28. Therefore, the court scheduled a jury trial, to begin on September 2, 2014, to resolve these questions and to hear evidence on the plaintiff's other claims.

Shortly after the pretrial conference on August 20, 2014, the parties reported that in light of the court's rulings on § 110B and the 61-day grace period, there was no remaining genuine dispute of material fact concerning the plaintiff's claims for breach of contract (Count I) or violation of § 110B (Count VIII). Although the defendant reserved its right to appeal the court's legal rulings, it conceded that "it is undisputed that Reassure America would not have accepted a premium payment after April 19, 2010, the date upon which Reassure America maintains that the policy terminated." Defendants' Submission in Advance of August 29, 2010 Pretrial Conference (Docket No. 148) at 2. The parties also did not dispute that Mr. Gabriel tendered such a payment by May 5, 2010. The plaintiff, therefore, requested that the court enter judgment on Count I and Count VIII in her favor. In view of the court's rulings of law, and in the absence of any genuine dispute of material fact, the court is now entering judgment for the plaintiff on Counts I and III.

Following another pretrial conference on August 27, 2014, the parties agreed that the only matter to be resolved at trial was the plaintiff's Chapter 93A claim (Count IX). The parties agreed that resolution of the plaintiff's other remaining claims, which were alternative theories of recovery, would be unnecessary in light of the proposed entry of summary judgment on Counts I and VIII. The plaintiff, therefore, submitted a motion to dismiss Count II (breach of the implied covenant of good faith and fair dealing), Count III (fraud/deceit), Count IV (negligent misrepresentation), and Count VI (equitable estoppel) (Docket No. 163). This motion requests that, if the court's legal rulings are reversed on appeal, the plaintiff be permitted to reinstate these counts, which would relate back to the original filing of the plaintiff's Complaint for purposes of the statute of limitations. The defendant did not oppose this motion. The court is, therefore, allowing it.

In view of the parties' agreement to narrow the issues to be tried to plaintiff's M.G.L. c. 93A claim, the court conducted a bench trial rather than a jury trial.

E. The September 2014 Bench Trial on Chapter 93A

The bench trial on the plaintiff's Chapter 93A claim began on September 4, 2014. The plaintiff called several witnesses. Judith Gabriel testified about her experience with the '817 Policy, particularly following its termination in April 2010. Thomas Melody, the accountant for R.J. Gabriel Construction, testified about his bookkeeping practices at the company. David Gabriel, Robert Gabriel's son and the president of R.J. Gabriel Construction, testified about, among other things, his receipt of the March 15, 2010 Grace Notice and the reason he did not pay the $10, 852.64 that it improperly stated was "required." Donald Sanders, the Vice President of Third-Party Administrator Oversight at Jackson National, testified about Reassure America's practices concerning policy administration and its revisions of Grace Notice templates. Barbara Cowens, who had been employed from 2006 to 2012 as a Senior Vice President at Swiss Re, which owned Reassure America, testified about the company's practices concerning Grace Notices. Finally, the plaintiff called Rochelle Walk, a complaint specialist at Reassure America, who prepared and sent a response to the plaintiff's Chapter 93A demand letter in 2011.

The defendant called one witness, Bradford Meigs, who was the insurance agent for the '817 Policy. Meigs testified about his experience assisting Mr. Gabriel with the policy, including communicating with Reassure America about other Grace Notices and coordinating premium payments.

The trial concluded on September 8, 2014, and the court took the matter under advisement.


With regard to plaintiff's Chapter 93A claim, the court finds the following facts proven by a preponderance of the evidence.

A. The '817 Policy

On September 13, 1985, Robert J. Gabriel became covered under the '817 Policy, which was issued by Valley Forge. This policy provided for a death benefit of $500, 000. Mr. Gabriel also purchased similar coverage under the ...

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