Jaunich v. State Farm Life Insurance Company

Background

John E. Jaunich purchased a whole-life insurance policy from State Farm Life Insurance Company. The policy included a death benefit and an account value that belonged to the insured and was held by State Farm in trust. The policy allowed State Farm to withdraw money from the account value to pay premiums and a monthly deduction. The monthly deduction included the cost of insurance, charges for riders, and a monthly expense charge.

Jaunich alleged that State Farm used undisclosed factors to calculate the cost-of-insurance rates, increasing the amounts withdrawn from policyholders’ account values. He also claimed that State Farm improperly included expenses in the cost-of-insurance charge even though the policy stated that the monthly expense charge was $5.00. The court had previously dismissed Jaunich’s conversion and declaratory-relief claims, denied State Farm’s earlier summary-judgment and expert-evidence motions, and certified a class.

Summary judgment on the contract claims

Summary judgment is appropriate when there is no genuine dispute about a fact that could affect the result and the moving party is entitled to judgment under the law.

For the cost-of-insurance claim, the court held that the policy language was at least ambiguous about whether the insurance-cost rates could include non-mortality profit and expense amounts. Because Jaunich’s interpretation was reasonable, Minnesota law required the ambiguity in this insurance contract to be interpreted against State Farm, the drafter. The court also relied on an Eighth Circuit decision holding that the phrase “based on” in a similar State Farm policy was ambiguous. Because State Farm did not identify a material factual dispute about whether it breached the cost-of-insurance provision, the court granted Jaunich’s motion on that claim.

For the expense claim, the court held that Jaunich’s interpretation of the policy was reasonable: the policy’s statement that “the monthly expense charge is $5.00” prohibited State Farm from including expense amounts in the cost-of-insurance rates. The court therefore granted Jaunich’s motion on that claim as well.

Damages

Jaunich asked the court to adopt the $23,315,887.21 damages calculation from an earlier related proceeding and award that amount based on issue preclusion, a doctrine that can prevent a party from relitigating an issue already decided. The court denied this part of Jaunich’s motion. It found that the earlier appellate decision only held that a reasonable jury could accept the damages methodology; it did not establish that the methodology involved no genuinely disputed facts in this case. The court therefore did not award damages at summary judgment.

Statute of limitations

Jaunich sought to extend Minnesota’s six-year limitations period for breach-of-contract claims by showing fraudulent concealment—intentional and affirmative concealment of facts establishing the claim. The court denied this request. It held that Jaunich had not presented evidence showing that State Farm concealed the alleged breach, that he failed to discover it, and that he diligently tried to discover it. The court stated that any claim arising before July 2014 was time-barred.

Expert-evidence motions

Jaunich moved to exclude testimony from State Farm’s insurance-industry experts. Because the court granted summary judgment on Jaunich’s breach-of-contract claims, it denied that motion as moot, meaning the court did not need to decide whether the testimony was admissible.

State Farm moved to exclude testimony and a declaration from Jaunich’s damages expert, Scott Witt, arguing that his opinions and damages model were unreliable. The court found that Witt’s qualifications and prior experience supported admitting his testimony and concluded that State Farm’s criticisms were better addressed through cross-examination than exclusion. It denied State Farm’s expert-evidence motion.

Disposition

The court ordered that Jaunich’s motion for summary judgment was granted in part and denied in part; Jaunich’s motion to exclude expert testimony was denied as moot; and State Farm’s motion to exclude expert testimony was denied.