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Messina v. The Lincoln National Life Insurance Co.

United States District Court, D. Rhode Island

September 9, 2019

FRANK C. MESSINA, in his capacity as Trustee of the Owen B. Gilman Irrevocable Life Insurance Trust dated March 15, 1994
v.
THE LINCOLN NATIONAL LIFE INSURANCE COMPANY

          REPORT AND RECOMMENDATION

          LINCOLN D. ALMOND UNITED STATES MAGISTRATE JUDGE

         Pending before me for a report and recommendation (28 U.S.C. § 636(b)(1)(B)) are the parties' Cross-motions for Summary Judgment. (ECF Doc. Nos. 15 and 17). For the following reasons, I recommend that Plaintiff's Motion (ECF No. 17) be GRANTED in part as to Counts I and V and Defendant's Motion (ECF No. 15) be GRANTED in part as to Counts II, III and IV.

         I. Background

         Plaintiff Frank C. Messina, C.P.A., is the Trustee of the Irrevocable Life Insurance Trust Agreement of Dr. Owen B. Gilman dated March 15, 1994. The Gilman Trust is the Owner and Beneficiary of the Flexible Adjustable Life Insurance Policy Number 2118069 issued by Defendant Lincoln National Life Insurance Company's predecessor-in-interest, Chubb Life Insurance Co. of America. The Policy is a policy of universal life insurance which provides both life insurance and a savings element. (ECF Doc. No. 16 at ¶¶ 9-11). It allows the policyholder to use accumulated savings or value, if sufficient, to pay premiums. Id.

         Dr. Gilman passed away on October 16, 2015 at the age of seventy-seven. Dr. Gilman's widow, Mrs. Katherine E. Gilman, is the sole beneficiary of the Trust that owns the Policy.

         Plaintiff, as Trustee, has made a claim against Defendant for payment of the Death Benefit Proceeds under the Policy. Defendant has denied the claim and contends that the Policy terminated without value on October 8, 2015, prior to Dr. Gilman's death, due to nonpayment of a premium due on August 1, 2015. (See ECF Doc. Nos. 16-12, 16-13 and 16-14).

         II. Facts

         The following undisputed facts are gleaned from the parties' Local Rule CV 56(a) Statements. (ECF Doc. Nos. 16, 19, 20 and 22).

         1. Plaintiff and Dr. Owen B. Gilman applied for a policy of life insurance from Chubb Life Insurance Company (“Chubb”) on or about March 21, 1994.

         2. According to the Application, Dr. Gilman was to be the insured, and the Owen B. Gilman Irrevocable Life Insurance Trust dated March 15, 1994 (the “Trust”), was to be the owner of the Policy.

         3. At all relevant times, Plaintiff was the sole Trustee of the Trust and a Fiduciary to the Trust's beneficiaries.

         4. The Application, signed by both Plaintiff and Dr. Gilman, identifies Dr. Gilman's “Home Address” as “88 Cooper Road, Warwick, RI 02886.” 5. The Application also includes a business address for Dr. Gilman's employer, Medical and Renal Associates. As to billing, the Application under mailing address provides “to Trustee see 5. above.” Item 5 identifies the Proposed Owner as Plaintiff in his capacity as Trustee. Although requested, no address is provided for Plaintiff.

         6. By signing the Application, both applicants certified under penalties of perjury:

I HAVE READ, or have had read to me, the complete application. All statements and answers in this application are full, complete and true to the best of my knowledge and belief. I UNDERSTAND that any false statements or misrepresentations may result in the loss of coverage under the policy.

         7. Jefferson Pilot Financial (“Jefferson Pilot”) acquired Chubb in 1997, and Lincoln acquired Jefferson Pilot's life insurance business in 2006.

         8. Chubb, Lincoln's predecessor-in-interest, accepted the Application and issued Flexible Premium Adjustable Life Insurance Policy Number 2118069 (the “Policy”) on June 6, 1994.

         9. The Policy is a policy of universal life insurance, which is a kind of hybrid between term and whole life insurance.

         10. Universal life insurance offers the flexibility of low-cost protection, like term life insurance, as well as a savings element, like whole life.

         11. Universal life insurance typically provides that the death benefit, savings component and premiums can be reviewed and altered as a policyholder's circumstances change. For example, universal life insurance allows the policyholder to use the accumulated savings to pay premiums. Depending upon the policy's accumulated value, the policyholder may use that value to skip one or more premium payments, or the policyholder may opt to make direct premium payments instead and leave the savings component to potentially grow over time. As long as the minimum cost of the insurance is covered, either through paid premiums or accumulated value, the insurance will stay in effect. However, if the minimum cost of the insurance is not paid, either through premiums or accumulated value, the insurance will lapse.

         12. In relevant part, the Policy states as to termination for nonpayment:

Grace Period - During the first three policy years and subject to the Minimum Premiums Provision, the policy enters the Grace Period if the cumulative premiums paid less any partial Withdrawals and policy debt on a monthly anniversary day is not sufficient to cover the Minimum Premium requirements for the month following such monthly anniversary day. A grace period of 61 days shall be allowed for the payment of a premium sufficient to cover the Minimum Premium requirements.
For the fourth policy year and thereafter, the policy enters the Grace Period if the Accumulated Value less any debt on a monthly anniversary day is not enough to cover the monthly deduction for the month following such monthly anniversary day. A grace period of 61 days shall be allowed for the payment of a premium sufficient to cover the monthly deduction. The monthly deduction is defined in the Policy Values section.
If the premium is not paid within the Grace Period, this policy will terminate without value. This policy will not terminate until 31 days after a notice of such premium is mailed to the last known address of the Owner.
If the Insured dies during the Grace Period, the Company will deduct any overdue premium which is applicable to the Grace Period from the proceeds of the policy.
Policy Lapse - If the premium is not paid within the Grace Period, this policy will lapse or terminate without value. However coverage will not end until 31 days after we have mailed a premium notice to you, and any assignee of record, at the last known address.

         13. In the event of a lapse, the Policy also provides for reinstatement as follows:

Reinstatement - Reinstatement is the restoration of the policy after it has lapsed so following reinstatement the policy will have been put back inforce [sic] as if it had never lapsed.
If this policy lapses or terminates as provided in the Grace Period subsection, we will reinstate the policy if we receive: (1) Your written request for reinstatement within five years after the end of the Grace Period and before the Maturity Date; (2) satisfactory proof the Insured is living and insurable at the original rating class; (3) payment of all cumulative Minimum Premiums required to date if the policy entered the Grace Period within the first three policy years or a payment of a premium sufficient to keep the policy inforce [sic] for two months if the policy entered the Grace Period in policy year four or later; and (4) payment or reinstatement of any debt against the policy which existed on the date of termination.
The effective date of a reinstated policy or reinstatement date is the date we approve the application for reinstatement. The Accumulated Value of the policy on the reinstatement date shall be the Accumulated Value on the date of termination plus the premium received to reinstate the policy. Any surrender charges in effect on reinstatement shall be as defined in the Cash Value subsection of the Policy Values section based on the original policy date and duration.

         14. Following Chubb's issuance of the Policy, Dr. Gilman and his wife made initial premium payments on the Policy by personal checks of $6, 000 on June 3, 1994; $24, 000 on November 15, 1994; and $21, 218 on January 18, 1995.

         15. Each of these checks bear the Gilman's “88 Cooper Road” address but no separate address for the Trust.

         16. On April 13, 1995, Chubb mailed the Trust an annual premium notice at the “88 Cooper Road” address.

         17. In addition to requesting the planned annual premium of $6, 000, which was due May 1, 1995, the April 13, 1995 notice explicitly asks the recipient to “SEND NAME & ADDRESS CHANGES AND ALL OTHER CORRESPONDENCE” to a specific Chubb address.

         18. The April 13, 1995 notice goes on to say, under a heading that says, “PLEASE READ:”

If your coverage is a universal life plan, we are simply reminding you of your current planned premium. Universal life premium payments may be paid in any amount or at any time (subject to certain policy limitations). However, variations from your planned payments may affect this coverage. Therefore, a periodic review of the planned premium amount with your Chubb Life America representative, should assure the premiums are sufficient to keep this coverage inforce [sic] and attain your financial goals.

         19. In discovery, Plaintiff admitted receiving the April 13, 1995 premium notice from the Gilmans in 1995. At that time, the Gilmans also gave Plaintiff a $6, 000 check to pay the ...


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