Jaunich v. State Farm Life Ins. Co.

569 F.Supp.3d 912

John E. JAUNICH, individually and on behalf of all others similarly situated, Plaintiff,

v.STATE FARM LIFE INSURANCE COMPANY, Defendant.

Civ. No. 20-1567 (PAM/JFD)

United States District Court, D. Minnesota.

Signed November 1, 2021

John J. Schirger, Pro Hac Vice, Joseph Feierabend, Pro Hac Vice, Matthew W. Lytle, Pro Hac Vice, Miller Schirger, LLC, Norman E. Siegel, Pro Hac Vice, Ethan M. Lange, Pro Hac Vice, Lindsay Todd Perkins, Pro Hac Vice, Stueve Siegel Hanson LLP, Kansas City, MO, John A. Yanchunis, Pro Hac Vice, Morgan & Morgan Complex Litigation Group, Tampa, FL, Karen Hanson Riebel, Kate M. Baxter-Kauf, Maureen Kane Berg, Lockridge Grindal Nauen P.L.L.P., Minneapolis, MN, for Plaintiff.

Deborah L. Stein, Pro Hac Vice, Los Angeles, CA, Jeremy Root, Pro Hac Vice, Stinson, Jefferson City, MO, Kristin Andrea Linsley, Pro Hac Vice, Gibson, Dunn & Crutcher LLP, San Francisco, CA, Todd A. Noteboom, Stinson LLP, Minneapolis, MN, for Defendant.

MEMORANDUM AND ORDER

Paul A. Magnuson, United States District Court Judge This matter is before the Court on Defendant's Motions for Summary Judgment and to Exclude Expert Testimony, and Plaintiff's Motion to Certify the Class. For the following reasons, Defendant's Motions are denied, and Plaintiff's Motion is granted.

BACKGROUND

Plaintiff John Jaunich purchased a $50,000 flexible-premium adjustable whole life insurance policy from Defendant State Farm on December 7, 1995. (Policy (Docket No. 1-1) at 3.) Along with a death benefit, the policy includes a savings component, called an "Account Value." (Witt Decl. (Docket No. 56) ¶ 18.) The money in the Account Value is the insured's property, which State Farm holds in trust. (Policy at 9.) The policy's terms allow State Farm to access the Account Value only to withdraw funds to pay the premiums and cover a "premium expense charge" and "Monthly Deduction." (Witt Decl. ¶ 18.) The Monthly Deduction includes the cost of insurance ("COI"), the monthly charges for any riders, and the monthly expense charge. (Policy at 9.)

The policy states that State Farm may calculate the monthly COI rates using the insured's age, sex, applicable rate class, and projected changes in mortality. (Policy at 10.) Jaunich alleges that State Farm used other undisclosed factors to calculate the COI, which resulted in increased withdrawal amounts. (Compl. ¶¶ 38-39.) He claims that State Farm never made him aware of any other factors used in calculating the COI amount. (Id. ¶¶ 44-45.) Thus, Jaunich alleges that State Farm deducted more COI fees than the policy allowed.

The Court granted State Farm's Motion to dismiss Jaunich's conversion and declaratory-relief claims in November 2020. State Farm moves for summary judgment as to Jaunich's two remaining breach-of-contract claims.

DISCUSSION

A. Summary Judgment

Summary judgment is proper if there are no disputed issues of material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). The Court must view the evidence and inferences that "may be reasonably drawn from the evidence in the light most favorable to the nonmoving party." Enter. Bank v. Magna Bank of Mo., 92 F.3d 743, 747 (8th Cir. 1996). The moving party bears the burden of showing that there is no genuine issue of material fact and that it is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986). A party opposing a properly supported motion for summary judgment may not rest on mere allegations or denials, but must set forth specific facts in the record showing that there is a genuine issue for trial. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 256, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). A dispute is genuine if the evidence could cause a reasonable jury to return a verdict for either party.

Paine v. Jefferson Nat'l Life Ins. Co., 594 F.3d 989, 992 (8th Cir. 2010).

Minnesota courts interpret an insurance policy, like all contracts, to "give effect to the intentions of the parties as reflected in the terms" of the policy. Midwest Family Mut. Ins. Co. v. Wolters, 831 N.W.2d 628, 636 (Minn. 2013) (citation and quotation omitted). If the policy language is clear and unambiguous, its plain meaning must be enforced. Travelers Indem. Co. v. Bloomington Steel & Supply Co., 718 N.W.2d 888, 894 (Minn. 2006). But if the policy language is ambiguous—in that it is susceptible to two or more reasonable interpretations—the policy is to be construed against the insurer who drafted it and in favor of the insured. Id.

1. COI Charge

State Farm moves for summary judgment as to Jaunich's claim regarding the COI policy provision, which states that the monthly COI is "based on the Insured's age on the policy anniversary, sex, and applicable rate class." (Policy at 10.) Jaunich alleges that State Farm improperly included undisclosed factors in its COI rates, in breach of the policy. State Farm asserts that there was no such breach because the only reasonable interpretation of this provision is that "applicable rate class" refers to the rate assigned to each individual insured after the underwriting process—rather than a rate developed before the policy was issued. State Farm insists that it did not breach the policy as a matter of law because it only used policyholders’ "applicable rate class," plus the other listed factors, in calculating COI.

But the Eighth Circuit found that this provision was

at least ambiguous because a person of ordinary intelligence purchasing an insurance policy would not read the provision and understand that where the policy states that the COI fees will be calculated ‘based on’ listed mortality factors that the insurer would also be free to incorporate other, unlisted factors into this calculation.

Vogt v. State Farm Life Ins. Co., 963 F.3d 753, 763-64 (8th Cir. 2020).

State Farm argues that the Court need not be limited by Vogt, because this lawsuit centers on the meaning of "applicable rate class," rather than the meaning of "based on." To support this argument, State Farm makes much of a footnote in another case examining this insurance policy, which found that "the primary issue in Vogt ... was the meaning of the phrase ‘based on.’ Neither the district court nor the Eighth Circuit in Vogt meaningfully considered the meaning of the phrase ‘applicable rate class.’ " Bally v. State Farm Life Ins. Co., ––– F. Supp. 3d –––– n.6, 2021 WL 1668004, at *6 n.6 (N.D. Cal. Apr. 28, 2021). For the purposes of this Motion, any such distinction is immaterial, because the substance of Jaunich's claim does not hang solely on either phrase, but on whether State Farm improperly used undisclosed factors in calculating the COI under the policy.

Further, State Farm argues that context supports its interpretation of the policy because industry standards and state regulators agree that an insured's age, sex, and applicable rate class refer to the personal characteristics used to determine an insured's COI under the policy. But the standard for interpreting an insurance policy is how a reasonable lay person, not an industry expert, would interpret the policy. See Wilson v. Am. Red Cross, 112 F. Supp. 2d 850, 854 (D. Minn. 2000) (Erickson, M.J.). This argument fails.

As the Eighth Circuit found, that "several courts have examined the issue in very similar circumstances and have reached differing conclusions" evinces that the COI provision is ambiguous. Vogt, 963 F.3d at 764 (8th Cir. 2020). Therefore, State Farm's interpretation of the policy is obviously not the only reasonable one, and Jaunich has raised genuine issues of fact as to whether the policy is ambiguous and whether State Farm breached it. State Farm's Motion for Summary Judgment is denied as to Jaunich's COI claim.¹

2. Expense Charge

State Farm also moves for summary judgment as to Jaunich's other breach-of-contract claim, which alleges that State Farm improperly loaded expenses into the COI, in breach of the policy. The at-issue policy provisions state that the "monthly expense charge is $5.00" and that "[a] premium expense charge of 5% is deducted from each premium paid." (Policy at 3.) Jaunich argues that the only reasonable interpretation is that State Farm is not authorized to deduct more than the $5.00 expense charge and the 5% premium expense charge from the Account Value for expenses.²

There is no dispute that State Farm deducted $5.00 from the Account Value as a monthly expense; thus, the $5.00 deduction complied with the policy. Therefore, the issue is whether the 5% monthly premium expense breached the policy's terms. Jaunich's expense claim is contingent on his COI-charge claim because the premium amount varies by the COI—if State Farm breached the policy regarding the COI-charge claim, then it likely breached the policy regarding the 5% monthly expense premium. State Farm fails to establish that there is no material fact in dispute as to the expense-charge provision, and summary judgment is denied as to this claim.³

3. Statute of Limitations

In Minnesota, the statute of limitations for a breach-of-contract claim is six years. Minn. Stat. § 541.05, subd. 1(1). State Farm argues that because Jaunich purchased his policy in 1995, the statute of limitations for his claims has lapsed. An argument that the statute of limitations bars a claim succeeds only if there are no disputed facts as to when the claim arose or whether any equitable doctrines might toll the limitations period. State Farm has the burden to "show undisputed facts establishing that the plaintiff's claims are time-barred." Fair Isaac Corp. v. Fed. Ins. Co., No. 16cv1054, 2021 WL 1111052, at *2 (D. Minn. Mar. 23, 2021) (Wright, J.) (citing Lackawanna Chapter of Ry. & Locomotive Hist. Soc'y, Inc. v. St. Louis Cnty., 606 F.3d 886, 888 (8th Cir. 2010) ). State Farm has not met this burden.

The facts supporting Jaunich's breach-of-contract claim are essentially the same facts that could support the application...