Lomma v. Ohio Nat'l Life Assurance Corp.

329 F.Supp.3d 78

Nicholas LOMMA, and J.L., a Minor, by Anthony Lomma, Guardian, Plaintiffs,

v.OHIO NATIONAL LIFE ASSURANCE CORPORATION, and Ohio National Life Insurance Company, Defendants.

3:16-CV-2396

United States District Court, M.D. Pennsylvania.

Filed June 28, 2018

Ethan C. Wood, Paul J. LaBelle & Associates, LLC, Moosic, PA, Paul J. LaBelle, Law Offices of Paul J. LaBelle, Scranton, PA, for Plaintiffs.

Luke A. Repici, White and Williams LLP, Philadelphia, PA, for Defendants.

MEMORANDUM OPINION

Robert D. Mariani, United States District Judge

I. INTRODUCTION

This is an insurance action against Defendants Ohio National Life Assurance Corporation and Ohio National Life Insurance Company for life insurance proceeds. Plaintiffs Nicholas Lomma and J.L., a minor, by his guardian, Anthony Lomma, seek to recover $100,000 as beneficiaries of a life insurance policy issued by Defendants on the life of their mother, Lora Marie Lomma, who committed suicide in May of 2009. Defendants have denied payment of full death benefits based on a suicide exclusion in the policy.

On September 6, 2017, the Court granted Defendants' motion to dismiss in part and denied the motion in part, allowing the breach of contract, breach of implied covenant of good faith and fair dealing, and statutory bad faith claims to proceed because Plaintiffs had sufficiently pled ambiguity in the contract language and a reasonable expectation of coverage, and plausibly pled bad faith on the part of Defendants. Doc. 24. Presently before the Court are cross motions for summary judgment by both Plaintiffs and Defendants. Both motions primarily concern the same issue: whether the suicide exclusion precludes Plaintiffs from full coverage under the policy. Docs. 29, 31. For the reasons that follow, Plaintiffs' motion will be granted in part and denied in part, and Defendants' motion will be granted in part and denied in part.

II. STATEMENT OF UNDISPUTED FACTS

Both parties have submitted Statements of Material Facts as to which they submit there is no genuine issue or dispute for trial for their respective motions for summary judgment. Docs. 29, 31. Both parties have also submitted responses to the statements of material facts in their opposition to the opposing party's motion for summary judgment. Docs. 38, 39. The parties base their arguments primarily on Ms. Lomma's policy with Defendants and related policy documents such as the "Notice Regarding Replacement of Life Insurance and Annuities" (the "Notice"), which had already been presented to the Court through Defendant's motion to dismiss. Doc. 4-4. Thus, the factual issues remain substantively the same as those presented at the motion to dismiss stage. The following facts are not reasonably in dispute except as noted.

Ms. Lomma committed suicide on May 24, 2009. Doc. 29 ¶ 6. Plaintiffs, Nicholas Lomma and J.L., the surviving children of Ms. Lomma, bring suit against Defendants for the denial of life insurance benefits. Doc. 1-4 ¶¶ 1-2. In September 1986, Ms. Lomma was issued a life insurance policy (the "Original Policy") by Pennsylvania National Life Insurance Company with a coverage amount of $25,000. Doc. ¶ 29 1. The Original Policy contained a suicide exclusion, which states "SUICIDE: If, within two years from the Issue Date, the Insured, while sane or insane, commits suicide, our liability will be limited to a refund of the premium paid less any Policy Indebtedness and Partial Withdrawals." Doc. 29-2 at 15. In 1994, Defendants Ohio National Life Assurance Corporation and/or Ohio National Life Insurance Company "purchased or otherwise acquired the Original Policy from Pennsylvania National Life Insurance Company." Doc. 29 at ¶ 2. Although this assertion is "denied as stated" by Defendants, they do not deny that the assumption of the policy occurred. Doc. 38 ¶ 2. Instead, they clarify that only Defendant Ohio National Life Assurance Corporation "assumed" the Original Policy, and that Defendant "Ohio National Life Insurance Company was not involved in the transaction." Id. (emphasis added). In support of their "denial", Defendants submitted a 2006 letter from Ohio National Life Assurance Corporation to Ms. Lomma, clarifying "a drafting error" with respect to a formula set forth in the policy as required by the Internal Revenue Code (the "2006 Letter"). Doc. 38-2 at 38. The "drafting error" bears no relevance to the case at hand. Rather, the 2006 Letter is introduced solely for the proposition that Ohio National Life Assurance Corporation is the only Defendant that contracted with Ms. Lomma. Id. (2006 Letter stating "[a]s you know, Ohio National Life Assurance Corporation has been administering your policy since June 30, 1994, when we assumed all obligations and liabilities under your policy as originally issued by Pennsylvania National Life Insurance Company") (emphasis added). However, Defendants do not explain why the distinction between the two Ohio National entities is significant, nor do they base their legal arguments on this distinction. Indeed, Defendants have chosen to jointly file all motion papers to the Court. Further, Defendants repeatedly refer to themselves jointly as "Ohio National" in all motion papers, even though there are two "Ohio National" entities. Thus, the Court finds that it is undisputed that Defendants assumed the Original Policy from Penn National Life Insurance Company in 1994.

On December 4, 1995, Ms. Lomma increased the amount of coverage under the Original Policy with Defendants from $25,000 to $100,000. Doc. 29 ¶ 3. See also Doc. 29-3 at 3 (December 14, 1995 Letter from Defendants, stating that "[u]pon written request ... the stated amount is hereby increased from $25,000 to $100,000 effective December 4, 1995"). On June 6, 2007, Ms. Lomma filed an application for a new life insurance policy with Defendants with a coverage amount of $100,000 (the "Replacement Policy"). Doc. 29 4. See also Doc. 29-4 (Ms. Lomma's application for change of policy).¹ On August 15, 2007, Defendants issued the Replacement Policy to Ms. Lomma with a benefit value of $100,000. Id. ¶ 5. While the amount of insurance coverage stayed the same, the parties dispute whether the beneficiaries changed upon the switch to the Replacement Policy. According to Plaintiffs, the beneficiaries under the Replacement Policy "were identical to those under the Original Policy." Id. However, the documents submitted by the parties reflect a change in the designation of beneficiaries at the time of the policy switch. Compare Doc. 38-2 at 20 (Original Policy designating Anthony Lomma as the primary beneficiary and Ms. Lomma's children as contingency beneficiaries) with Doc. 29-4 at 3 (Application for change of policy listing Nicholas Lomma as the primary beneficiary and J.L. as the contingent beneficiary).

As part of the switch in policy, Defendants provided Ms. Lomma a "Notice Regarding Replacement of Life Insurance and Annuities," which was executed in June, 2007. Doc. 31 at 9; see also Doc. 31-3 at 39. It provides:

You should recognize that a policy that has been in existence for a period of time may have certain advantages to you over a new policy.... Under your existing policy, the period of time during which the issuing company could contest the policy because of a material misrepresentation or omission concerning the medical information requested in your application, or deny coverage for death caused by suicide, may have expired or may expire earlier than it will under the proposed policy.

Id. While the Notice was attached to Defendants' motion to dismiss, the Court declined to consider it then because it was not "undisputedly authentic" nor "integral to Plaintiffs' Complaint, but is instead relevant to Defendants' affirmative defenses. " Doc. 24 at 8 n.5 (emphasis in original). At this stage, however, the Notice is properly before the Court as part of the record, and its validity is undisputed by Plaintiffs. See Doc. 39 ¶ 4 (admitting the language in the Notice but denying its "legal effect imputed by Defendants onto this provision").

Defendants issued the Replacement Policy to Ms. Lomma in August, 2007. Doc. 31-3 at 1-34 (hereinafter the "Replacement Policy"). It contains a definition of "Contract Months and Years," which states: "[t]his contract takes effect on the contract date shown on page 3. Contract months and years are marked from the contract date. The first day of the contract year is the contract date and its anniversaries." Id. at 11. Page 3 of the Replacement Policy contains two dates, neither of which is labeled the "contract date". Instead, page 3 shows a "Policy Date" of August 10, 2007 and an "Issue Date" of August 15, 2007. Id. at 7.

The Replacement Policy, like the Original Policy, contains a suicide exclusion. The two exclusions, however, do not contain the same language. The suicide exclusion in the Replacement Policy provides:

If the insured dies by suicide while sane or insane or by intentional self-destruction while insane, we will not pay any death proceed[s] payable on amounts of insurance which have been in effect for less than 2 years. If the suicide or intentional self-destruction is within the first 2 contract years , we will pay as death proceeds the premiums you paid.

Replacement Policy at 13 (emphasis added). Although the Replacement Policy defines the term "contract years," it does not contain a definition for "amounts or insurance", nor does it provide any guidance on how to determine which "amounts of insurance" have "been in effect for less than 2 years."

Shortly after Ms. Lomma's death, Mr. Lomma filed a claim for death benefits on behalf of his children, the beneficiaries under the Replacement Policy. Doc. 29 7. On August 31, 2009, Defendants informed Mr. Lomma that they would not pay the full benefit value under the policy, but instead, pay "$285.12 plus interest at 4.5%," which represents the "premiums paid on the policy." Doc. 31-3 at 36. The letter explained that Defendants'...