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Brown v. New York Life Insurance Co.

United States District Court, W.D. Louisiana, Monroe Division

May 28, 2019

JESSE CLARENCE BROWN, JR. ESTATE, ET AL.
v.
NEW YORK LIFE INSURANCE CO., ET AL.

          KAREN L. HAYES JUDGE

          RULING

          PTERRY A. DOUGHTY UNITED STATES DISTRICT JUDGE

         Pending before the Court are Plaintiffs' Motion for Partial Summary Judgment [Doc. No. 79] and Defendant New York Life Insurance Company's (“NY Life”) Motion for Summary Judgment [Doc. No. 83]. Plaintiffs move the Court for partial summary judgment, contending that it is undisputed that the decedent, Jesse Clarence Brown, Sr., was the owner of three NY Life policies and that NY Life has acted in bad faith by failing to timely pay the amounts due to them under the policies. Therefore, Plaintiffs move the Court for attorney's fees and bad faith penalties.

         NY Life moves the Court for dismissal of Plaintiffs' case in its entirety, contending that they failed to raise a genuine issue of material fact that NY Life had an obligation to Plaintiffs, that all their claims are time-barred, and that their fraud claims as to two of the policies are further barred by res judicata.

         For the following reasons, Plaintiffs' Motion for Partial Summary Judgment is DENIED, and NY Life's Motion for Summary Judgment is GRANTED.

         I.FACTS

         Jesse Clarence Brown, Sr. (“Mr. Brown”) purchased multiple life insurance policies from NY Life. First, in 1978, Mr. Brown purchased a whole life NY Life Insurance Policy No. 36 661185. Mr. Brown was to pay recurring premium payments for the remainder of his life, but NY Life's records do not indicate that he did so. Neither NY Life nor Plaintiffs have a copy of this policy.

         Mr. Brown then purchased NY Life Policy No. 62 05 1294, dated November 2, 1984. Mr. Brown was to pay continuing premium payments until his death, but did not do so. As a result of the nonpayment of premium, Policy No. 62 05 1294 lapsed. According to NY Life records, this policy expired February 2, 1994.

         Mr. Brown then purchased Policy No. 44 807 414 (“Policy 414”), dated February 18, 1993. Mr. Brown used the cash value of Policy No. 62 05 1294 to fund the purchase of Policy 414. Together with policy Nos. 36 661185 and 62 05 1294 (“the Policies”), Mr. Brown was to pay recurring premium payments in connection with Policy 414 for the rest of his life.

         Premium payments were made from 1993 through 2001.

In July 1995, a group of life insurance policyholders filed a class action lawsuit against [NY Life] in New York state court [in Willson v. New York Life Insurance Company, et al., Index No. 94/127804 (Sup. Ct. Ny. Co.)]. The allegations of the suit included claims that [NY Life] misled policyholders regarding the nature of their policy benefits. The class of plaintiffs was nationwide and included persons who had purchased certain [NY Life] life insurance policies between January 1, 1982 and December 31, 1994. In August 1995, the parties filed a proposed settlement of the dispute with class-members being afforded until October 31, 1995 to decide whether to participate in the settlement or to opt-out. The notice of the proposed settlement was mailed to policyholders nationwide, including Louisiana policyholders.

McConathy v. Ungar, 33, 368 (La.App. 2 Cir. 8/23/00), 4');">765 So.2d 1214, 1215, writ denied, 2000-2678 (La. 11/17/00), 4 So.2d 982');">774 So.2d 982; see also [Doc. No. 83-4, Exh. B, Affidavit of Robert Rosh (“Rosh Aff.”), ¶¶ 3-19]. There were “nearly three million class members” that NY Life sent court-approved notice of the class action and post-settlement notice by first class mail. See Couvillon v. New York Life Ins. Co., No. CV 6:10-1468, 2012 WL 13054649, at *3 (W.D. La. Jan. 10, 2012). Additionally, notice of the Willson class action and settlement was published in numerous national and local newspapers, including The Wall Street Journal, USA Today, The New York Times, The Times Picayune and The Baton Rouge Advocate. Id. A toll-free telephone number was also established for class members, and this number was included in the notifications. [Doc. No. 83-4, Rosh Aff., ¶ 18].

         Mr. Brown's Policy 62 05 1294 and Policy 414 are included in the Willson class period. Class notices were mailed to Mr. Brown on September 26, 1995, and September 26, 1996, for Policy No. 62 05 1294 and for Policy 414. The notices sent to Mr. Brown were not returned as undeliverable or undelivered. Mr. Brown did not opt-out of the Willson class action. [Doc. No. 83-6, Exh. C, Affidavit of Kevin Welton, ¶¶ 4-5].

         The Willson settlement was approved by the presiding court and resulted in the release of all claims of class members that were or could have been asserted in the lawsuit and further enjoined all class members from prosecuting claims in any forum against NY Life based on the released claims.

         On May 27, 1997, Mr. Brown took out a cash loan in the amount of $5, 300 on the cash value of Policy 414, which NY Life paid to Mr. Brown by check.

         On March 27, 1998, Mr. Brown took out a second cash loan in the amount of $7, 164.00, which NY Life paid to Mr. Brown by check. Between the period of May 27, 1997, and April 24, 2001, funds were loaned on the cash value of Policy 414 towards satisfaction of premium payment obligations. Mr. Brown did not pay into Policy 414 additional funds (beyond premium payments) sufficient to offset the interest accruing on his various loans. As a result, the cash value of the policy was offset by the loan interest.

         The last premium payment was received by NY Life on or about April 24, 2001, and it was paid by paid-up additions.

         Policy 414 provides that “[i]f a premium is not paid by the end of the grace period, this policy will lapse. All insurance will end at the time of the lapse, if the policy has no cash value and no dividend values. If the policy has cash value or dividend values, insurance can be continued only as stated in Options 1 or 2 of the Options Upon Lapse provision, but any insurance or benefits from riders or dividends will end at the time of the lapse.” [Doc. No. 83-3, Bates No. MSJ0079, attached to Exh. A, Affidavit of Laura Matyja (“Matyja Aff.”)]. Policy 414 lapsed on June 19, 2001. On that date, NY Life transmitted a notice to Mr. Brown and to his assignee, Tensas State Bank. The notice provided:

When you purchased your New York life policy in 1993, you enjoyed the benefit of knowing that you made a wise decision for your future. Because we realize how important this life insurance coverage is to you, we are ...

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