Hegarty v. Transamerica Life Insurance Company

Background

Robert F. Hegarty purchased a direct-recognition life insurance contract in 1989 from General Services Life Insurance Company, which Transamerica Life Insurance Company later succeeded. Hegarty contends that the policy guaranteed increases in cash value, called persistency bonuses, on the twentieth, thirtieth, and fortieth anniversaries of the policy. He alleges that Transamerica repudiated the 30th- and 40th-anniversary bonuses in 2016, asserting claims for breach of contract, unfair and deceptive business practices, and elder abuse. Transamerica denies those allegations and contends that Hegarty’s claims were released by the August 2000 class-action settlement in Oakes v. Bankers United Life Assurance Co.

Judge Chesney had limited discovery, until ruling on Transamerica’s initial summary-judgment motion, to whether the Oakes settlement barred Hegarty’s claims. The parties agreed that Transamerica would file a summary-judgment motion on that limited issue after the discovery dispute was resolved. They also agreed that Hegarty’s waiver and estoppel arguments would not be considered in that motion. The court stated that further discovery could occur later depending on whether the Oakes settlement covered any of Hegarty’s claims.

Court’s analysis

The court applied the discovery rules requiring Hegarty, as the party seeking discovery, to show relevance and proportionality. Evidence is relevant if it tends to make a consequential fact more or less probable, and discovery is not permitted when its burden or expense outweighs its likely benefit.

The court reviewed the Oakes settlement’s release provisions and concluded that they unambiguously covered matters including policy terms, bonuses, persistency bonuses, illustrations, and other policy-crediting information. The court rejected Hegarty’s proposed ambiguities concerning whether persistency bonuses were covered, whether an illustration attached to his policy was a “policy form,” whether “persistency bonuses” included guaranteed bonuses, and whether releasing the claims would improperly alter the insurance policies. The court also rejected Hegarty’s effort to use extrinsic evidence—evidence outside the written agreement—to create an ambiguity in the settlement.

Discovery requests and disposition

The court denied the request to compel documents relating to the Oakes settlement in Request for Production No. 67 because Hegarty had not shown relevance or proportionality in light of the limited discovery scope and the settlement’s unambiguous language.

The court denied the request concerning documents about reducing or eliminating persistency-bonus payments in Request for Production No. 28 because Hegarty had not established relevance or proportionality to whether the Oakes settlement barred his claims.

The court denied the requests in Request for Production Nos. 1, 21, 38, 84, and 85. Those requests sought records concerning reserves, statements provided to state insurance commissioners, surrender charges, and illustrations or procedures involving direct-recognition policies and persistency bonuses. The court found the requests overly broad and disproportionate and concluded that Hegarty’s relevance theory improperly depended on treating the settlement as ambiguous.

The court also denied Request for Production No. 94, which sought deposition transcripts from Helmer v. Transamerica. Hegarty had not shown that the transcripts were relevant or proportional to the needs of this case. The court additionally noted the other reasons presented by Transamerica, including that the deposition involved different policies and policyholders, was taken under a protective order, and was not completed.

Disposition

The court denied Hegarty’s request to compel the discovery at issue. This order resolved a discovery dispute; it did not rule on Transamerica’s anticipated summary-judgment motion or finally decide whether the Oakes settlement barred Hegarty’s claims.