Rose v. Lincoln Benefit Life Company

Background

Lincoln issued John and Jenifer Harris a joint life-insurance policy in 2011. The policy provided a $4 million death benefit after the last surviving insured died. Kathryn Rose, the Harrises’ daughter, was the policy owner and premium payor. The policy allowed flexible premium payments, but it could enter a 61-day grace period and then lapse if sufficient payments were not made.

The policy required Lincoln to send payment-related notices, including a reminder when premiums were due and a notice at least 30 days before coverage lapsed. It also provided that a lapsed policy “may be reinstated” if the policyholders met four conditions, including providing proof that a living insured remained insurable in the same payment class as when the policy was issued.

The plaintiffs alleged that Lincoln failed to send the 2018 premium reminder and grace-period notices. Lincoln said it generated and mailed those notices, but Rose and the insurance agent, Jon Christie, denied receiving them. Lincoln did not receive the required payment, and the policy lapsed in February 2019. The plaintiffs learned of the lapse later in 2019.

The plaintiffs applied for reinstatement in January 2020. After reviewing John Harris’s medical records, Lincoln determined that he was no longer insurable in the original payment class and declined to reinstate the policy. Lincoln later requested additional medical information. The plaintiffs sued for breach of contract based on the notices and the refusal to reinstate, and also asserted unjust enrichment.

Summary-Judgment Standard

Summary judgment is a procedure for deciding claims without a trial when the evidence shows no genuine dispute about an important fact and the moving party is entitled to judgment under the law. The court must view the evidence and reasonable inferences in favor of the party opposing the motion. Here, Lincoln moved for summary judgment on all claims.

Unjust Enrichment

The court granted summary judgment to Lincoln on the unjust-enrichment claim. Minnesota law does not allow equitable relief when a valid contract governs the parties’ rights. Because the dispute concerned the insurance policy and the plaintiffs identified no separate relationship with Lincoln outside that policy, the court concluded that the unjust-enrichment claim failed as a matter of law.

Claims Based on the Notices

The court denied summary judgment on the breach-of-contract claims concerning the notices. The parties agreed that the policy required Lincoln to send a premium reminder and a grace-period notice. The dispute was whether Lincoln actually sent them.

Under Minnesota’s mailbox rule, properly addressed and mailed correspondence is generally presumed to have been received. But when the recipient denies receiving the correspondence, the sender must provide evidence showing both its usual mailing practices and compliance with those practices in the particular case.

The court found that Lincoln presented some evidence of its general mailing process through testimony and records from its contractor, DXC Technologies. Those records showed that documents were generated, included in batches, printed, inserted, and picked up for sorting and delivery. But the court identified important gaps. The policy’s electronic history did not show entries for generating the reminder or grace-period notices, and Lincoln could not explain a gap in that history covering the relevant period. The batch records also did not identify the individual pieces of mail or establish that the relevant batches were properly delivered to the Postal Service. Christie’s statement that he did not receive copies of the grace-period and lapse notices also suggested a possible mailing irregularity. Lincoln provided even less documentary evidence concerning the reminder notice.

Viewing the evidence in the plaintiffs’ favor, the court held that Lincoln had not established as a matter of law that it followed its customary mailing practices. The court therefore declined to apply the mailbox presumption and denied summary judgment on these claims. Because Lincoln had not shown that it mailed the notices as a matter of law, the court did not decide the plaintiffs’ additional argument that Minnesota law required proof of actual receipt.

Claims Based on Reinstatement

The court also denied summary judgment on the breach-of-contract claims concerning reinstatement. It rejected Lincoln’s argument that the phrase “may be reinstated” gave Lincoln absolute discretion to refuse reinstatement even if the plaintiffs met all four policy conditions. Under the court’s reading of Minnesota law and the policy, meeting the specified conditions creates a contractual right to reinstatement.

The court nevertheless held that Lincoln retained some discretion to evaluate the proof of insurability required by the policy. That discretion had to be exercised reasonably and not arbitrarily or capriciously. The court found factual inconsistencies concerning why Lincoln considered John Harris uninsurable, the request that he pay for a CT angiogram, and the underwriting guidelines stating that medical examinations and tests requested with the first reinstatement would be paid for by the company. The evidence also showed that Lincoln’s medical director could not recall which underwriting guidelines he used. These issues prevented the court from deciding as a matter of law that Lincoln properly denied reinstatement.

The court separately interpreted the phrase “any living insured.” It concluded that the phrase means either John or Jenifer Harris could provide proof of insurability for reinstatement. Because Lincoln evaluated only John Harris’s insurability and not Jenifer Harris’s, Lincoln had not shown that it complied with the policy as a matter of law.

Disposition

The court granted Lincoln’s motion for summary judgment as to the unjust-enrichment claim and denied the motion as to all remaining claims. The court also granted Lincoln’s request to evaluate Jenifer Harris’s insurability and ordered the parties to meet and confer about a schedule for producing and evaluating her medical evidence. Any dispute about that process was to be directed to Magistrate Judge Leung, and the parties had to provide the court an update within 30 days.