Salopek v. Zurich Am. Life Ins. Co.

MARCIE SALOPEK, Trustee forTHE SALOPEK FAMILY HERITAGE TRUST Plaintiff, v. ZURICH AMERICAN LIFE INSURANCE COMPANY, Defendant

NO. 18-CV-00339 JAP/CG

UNITED STATES DISTRICT COURT FOR THE DISTRICT OF NEW MEXICO

March 28, 2019

MEMORANDUM OPINION AND ORDER

On March 6, 2018, Plaintiff Marcie Salopek, Trustee for Salopek Family Heritage Trust (Plaintiff) filed a Complaint in New Mexico state court against Defendant Zurich American Life Insurance company (Zurich), alleging Breach of Contract, Bad Faith, Unfair Insurance Practices, Unfair Trade Practices, and Negligence. On April 11, 2018, Zurich removed the case to federal court based on diversity of jurisdiction under 28 U.S.C. § 1332.¹ On April 11, 2018, Zurich answered the Complaint.²

At a hearing on February 26, 2019, the Court heard argument on two motions filed by Plaintiff. The first motion filed on July 7, 2018, asks the Court to permit the Plaintiff to amend the Complaint to add an additional count of civil conspiracy and to join three additional defendants, Ahmed Hashemian, Capital Aspects, LLC, and Luis Miguel Sisniega.³ BecausePlaintiff believes that the joinder of two of the proposed defendants will destroy diversity, Plaintiff also seeks to remand the case to state court. The second motion, filed on September 17, 2018, requests joinder of an another defendant, BGA Insurance.⁴

Zurich responded to both motions,⁵ and Plaintiff replied.⁶

After conducting additional discovery, on January 29, 2019, both parties filed supplemental briefing.⁷ On February 7, 2019, both parties responded to the supplemental briefing.⁸

At the hearing, attorneys Randi McGinn and Jamison Shekter represented Plaintiff. Attorneys Daniel O'Brien, John Jacobus, and Johanna Dennehy represented Zurich. Gregory Biehler entered a special limited appearance on behalf of Ahmad Hashemian.⁹

After considering the arguments in the Plaintiff's Join and Amend Motions, Zurich's Response, Plaintiff's Reply, the supplemental briefing, as well as the testimony and argumentspresented at the hearing, the Court will deny Plaintiff's Join and Amend Motions.

II. FACTS & PROCEDURAL HISTORY

A. Complaint

The following facts are alleged in the Complaint:

In southern New Mexico, the Salopek family runs one of the largest pecan farms in the southwest. At some point, Tony Salopek (Tony) put the pecan farm in a trust which provides that only his male descendants could inherit and control the farm. Tony's three sons, who have both sons and daughters, wanted to correct the unfairness to their daughters. To make their children's inheritance more equitable, in 2015, the three sons created the Salopek Family Heritage Trust (SFHT), an entity from which their daughters could inherit in amounts equal to the males' inheritance in the pecan farm. Insurance policies funded SFHT, including a policy acquired by one of Tony's sons, Mark Salopek (Mr. Salopek).

In 2015, the same year the SFHT was created, Mr. Salopek, age 68, had two fully vested life insurance policies with the John Hancock Life Insurance Company in the amount of fifteen million dollars. For some reason not explained in the briefs, Mr. Salopek decided to acquire new life insurance policies. He filled out applications to replace his John Hancock insurance with a new life insurance policy valued in the same amount.

On August 14, 2015, Mr. Salopek applied for life insurance through Minnesota Life. He used insurance agent Ahmed Hashemian (Hashemian). His application included information that his father, Tony, died at 64 of cirrhosis and his mother died at 72 of pancreatic cancer. Mr. Salopek stated that he drank beer daily and, in the past, had used smokeless tobacco.

After conducting a physical examination and an evaluation of Mr. Salopek's medical records, Minnesota Life rejected Mr. Salopek's application on November 3, 2015. MinnesotaLife stated that it would reconsider the application if Mr. Salopek obtained a complete physical with a prostate screening test and a colonoscopy.

The record indicates that another insurance company, Ameritas, also denied Mr. Salopek's application at some time during this period. However, the record does not state when Ameritas denied his application or why.

According to the Complaint, a Medical Information Bureau (MIB) records information provided by life insurance companies about their rejection of applicants and the reasons for the rejection. All life insurance companies may access that MIB information. Minnesota Life recorded its rejection of Mr. Salopek's application in MIB.

The day after the rejection by Minnesota life, Hashemian, through his agent or employee, Luis Miguel Sisniega (Sisniega), filled out an application to Zurich for life insurance. The application disclosed that Mr. Salopek had been rejected for life insurance by Minnesota Life and by Ameritas. The application had some inconsistencies. On one question in the application Mr. Salopek told Zurich that he was a former smoker but still used chewing tobacco occasionally, while in answer to another question he denied use of any tobacco. Zurich did not require Mr. Salopek to undergo a new examination or blood testing but relied on the August 14, 2015 medical examination conducted for Mr. Salopek's application with Minnesota Life.

On December 28, 2015,¹⁰ Zurich issued a life insurance policy on Mr. Salopek's life in the amount of fifteen million dollars to be paid on his death to SFHT. The annual premium for this policy was to be $405,915.04, which Mr. Salopek paid. Subsequently, Mr. Salopek cancelled his policies with John Hancock.

In January 2016, Mr. Salopek had severe stomach pains for which he went to the hospital.On January 15, 2016, he had exploratory surgery, which resulted in a diagnosis of metastatic colon cancer. He died on August 21, 2016.

The family submitted a claim to Zurich on the life insurance policy. Zurich interviewed Mr. Salopek's widow, Marcie Salopek, on December 20, 2016.

On January 13, 2017, Zurich denied the request for payment of the life insurance policy, which was within the two-year incontestability period. In its letter, Zurich identified three inconsistencies in Mr. Salopek's application:

1. An inconsistency between Mr. Salopek's saying that he used chewing tobacco and "dip now and then" and the "No" that was checked on another page denying other tobacco use.

2. Mr. Salopek's claim in his application that he drank one or two beers a day at the time of the application was inconsistent with representations of his previous alcohol use.

3 Mr. Salopek's failure to disclose the removal of a skin cancer in July 2013, which Zurich stated should have been disclosed in response to a question about "Cancer, tumor, polyp or disorder of the skin or breast."

Zurich indicated that points one and two would have made it decline the risk and did not cite the skin cancer as a reason supporting rescission.

B. Plaintiff's Motion to Transfer

On May 9, 2018, after Zurich had removed the case to federal court, Plaintiff filed a motion asking the Court to permit an intra-district transfer of this case.¹¹ The Motion to Transfer argued that it would be more convenient for all parties if the case were tried in Las Cruces, New Mexico. Zurich opposed the motion, arguing that the trial should remain in Albuquerque, New Mexico.¹² Plaintiff replied.¹³ On August 29, 2018, the Court denied without prejudice the Motionto Transfer.¹⁴

C. Scheduling Order

On June 11, 2018, Magistrate Judge Garza entered a Scheduling Order setting case deadlines.¹⁵ The Scheduling Order gave Plaintiff until July 12, 2018 to add additional parties or amend the pleadings. Plaintiff's First Join and Amend Motion, filed on July 7, 2018, was within the Scheduling Order's deadline, but Plaintiff's Second Join and Amend Motion filed on September 17, 2018 was not.

D. Additional Facts Alleged in the Join and Amend Motions

The Proposed Second Amended Complaint, which incorporates both Join and Amend Motions, asserts the following additional facts and states that they are based on the discovery Plaintiff obtained after filing the Complaint:

1. Sisniega's name appears on the final policy documents as the agent who procured the policy for Mr. Salopek. No other agent name appears.

2. Sisniega was an agent of Zurich based on his contract with Zurich to procure applications. The contract also stipulates that when Sisniega procures policies on behalf of Zurich, he must abide by Zurich's rules.

3. In 2014, Hashemian and Capital Aspects applied to be Zurich agents, but Zurich turned them down based on compliance issues. Hashemian had at least one regulatory sanction in California and a long history of customer complaints for fraud, misrepresentation, and taking advantage of elderly people by selling them products they do not need.

4. Capital Aspects has a sub producer agreement with Sisniega signed on September7, 2009.

5. Zurich did not inform Mr. Salopek that the type of policy Zurich provided was unsuited to his needs because it was tied to the performance of a mutual fund.

6. Zurich used a life insurance brokerage company called BGA Insurance as its agents in processing the policy. BGA Insurance gathered information from Hashemian and not from Mr. Salopek. BGA Insurance is licensed in New Mexico, but is a California business, and worked on behalf of Zurich to obtain life insurance policies in New Mexico. The Salopek family did not know about BGA Insurance until it received discovery in this suit.

7. Zurich and the agents did not do a complete pre-approval underwriting investigation.

8. Although the agents were informed of Mr. Salopek's cancer diagnosis, they did not inform Mr. Salopek of the pre-death provision of his policy, which would have provided him with two million dollars to help in the last months of his life.

III. LEGAL STANDARD

Plaintiff brought this case in state court. Subsequently, based on diversity of citizenship,¹⁶ Zurich properly removed this case to federal court under 28 U.S.C. §§ 1441 and 1446. In...