Shields v. Provident Life & Accident Ins. Co.

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LINDA I. SHIELDS, Plaintiff/Appellee, v. PROVIDENT LIFE AND ACCIDENT INSURANCE COMPANY, Defendant/Appellant.

No. 1 CA-CV 22-0057

Court of Appeals of Arizona, First Division

November 22, 2022

Not for Publication - Rule 111(c), Rules of the Arizona Supreme Court

Appeal from the Superior Court in Maricopa County No. CV2020-010987 The Honorable Christopher A. Coury, Judge

AFFIRMED.

Burch & Cracchiolo PA, Phoenix By Ralph D. Harris, Daryl Manhart Co-counsel for Plaintiff/Appellee

Dell & Schaefer Chartered, Hollywood, FL By Steven Jay Dell Co-counsel for Plaintiff/Appellee

Gregory L. Denes PC, Juno Beach, FL By Gregory L. Denes Co-counsel for Plaintiff/Appellee

Lewis Roca Rothgerber Christie LLP, Phoenix By Stephen M. Bressler Nicole G. True, Lawrence A. Kasten Counsel for Defendant/Appellant

Judge Randall M. Howe delivered the decision of the court, in which Presiding Judge David D. Weinzweig and Judge D. Steven Williams joined.

MEMORANDUM DECISION

HOWE JUDGE

¶1 Provident Life and Accident Insurance Company ("Provident") appeals the trial court's granting summary judgment to Linda I. Shields. For the following reasons, we affirm.

FACTS AND PROCEDURAL HISTORY

¶2 Shields, a gastroenterologist, applied for an individual disability insurance policy with Provident in 1988. Provident issued the policy on November 16, 1988; the policy's "Effective Date" was December 1, 1988, and the "First Renewal Date" was December 1, 1989. Two years later, she applied for additional coverage. Provident issued an update rider and increased benefit amendment, which explained that an automatic annual increase of monthly benefits would occur each December 1 through 1993. Both documents listed the premium term as "twelve months." The update rider also identified the updated amount for the policy as "New [A]nnual Premium For This Policy." It also stated that "[i]f an [update] increase [d]ate shown does not coincide with a renewal date for this policy, the increase will be effective on the next renewal date." Shields initially paid the premium semi-annually, then quarterly from June 1991 for more than 25 years.

¶3 The policy provided that insureds who become totally disabled before age 60 have lifetime benefits. Insureds who become totally disabled "starting at age 60 but before age 61" may receive benefits until age 65. The policy provided: "'age,' when used before a number such as 'age 65,' means the ending date of the policy term in which you attain that age." The policy defined "policy term" in its "Premiums and Renewals" section:

The first term of this policy starts on the Effective Date . . . It ends on the First Renewal Date also shown. Later terms will be the periods for which you pay renewal premiums when due. All terms will begin and end at 12:01 A.M., Standard Time, at your home. The renewal premium for each term will be due on the day the preceding term ends, subject to the grace period.

The "Grace Period" provided that "if a renewal premium is not paid on or before the date it is due, it may be paid during the next 31 days. During the grace period, the policy will stay in force." The policy will lapse if insureds did not pay the renewal premium before the grace period ends.

¶4 Over the years, Shields developed health issues, including headaches, cervical spine pain, numbness, and spinal stenosis. On June 1, 2017, she became partially disabled as defined under the policy and reduced her working hours. She turned 60 years old on June 4, 2017. On October 9, 2017, she became totally disabled and ceased working altogether. She requested total disability benefits, and Provident accepted her claim. But Provident notified her that her coverage would last only until age 65 because she became totally disabled after she reached policy-defined age 60 on August 31, 2017, its alleged end-date of her policy term.

¶5 Shields sued Provident seeking declaratory relief that the end-date of the policy was December 1, 2017, rather than August 31, 2017, which meant that she was age 59 for purposes of the policy and was entitled to lifetime benefits. She also argued that Provident unilaterally changed her billing to quarterly for her twelve-month premium term, and that Provident never informed her that it was changing the length of her policy term.

¶6 Shields stated that she understood "renewal premium" to mean the renewal term in the policy schedule, which was twelve months. She added that she understood her policy term covered twelve months because her renewal term was always twelve months, as acknowledged in her update rider and increased benefit amendment. She added that Provident never explained that her policy would change once she changed her payment frequency.

¶7 Shields deposed several employees of Provident's parent corporation, Unum. Sheridan Parker, a lead benefit specialist at Unum, testified that the renewal term relates to Shields's specific policy and interpreted Shields's twelve-month renewal term to mean "[t]hat her policy is renewable yearly." She also testified, however, that she did not refer to Shields's twelve-month renewal term in evaluating her claim because it was "irrelevant to [her] decision." She explained that a "premium term" was the "mode of when the premiums are paid": monthly, quarterly, semiannually, or annually. She added that "nothing in the policy changed," including the benefit amount when she moved from semi-annual to quarterly payments. Lynn McGuiness, Unum's lead appeals specialist, testified that she did not know what "renewal term" referred to and would not expect Shields to understand its meaning under the policy. She added that "renewal term" could refer to a "time to pay premiums" and did not know if "premium paying method" differed from "renewal premium."

¶8 Mark Chavez, a claim manager at Unum, drafted an internal document stating that Shields's "annual renewal term date would be 12/01/2017," and her "quarterly renewal term date would be 09/01/2017." Using the annual renewal term date would result in lifetime benefits for Shields, while a quarterly policy term would end her benefits at age 65. Chavez noted that Provident "historically[] used the premium mode to help determine the term dates." He testified that "renewal" meant the "point of time when somebody [could] opt to renew their policy," and "term" meant "when somebody [could] opt to renew the policy."

¶9 Shields moved for summary judgment on four counts in her complaint. On the first count, she argued that a plain and ordinary reading of the policy established that she was policy age 60 on December 1, 2017, because the premium and renewal term was for twelve months, beginning and ending on December 1 each year. Under count two, she argued alternatively that Provident's interpretation created ambiguity with the plain meaning of the policy. Under count three, she argued that any documents purportedly changing the billing frequency of the renewal and premium terms were not approved by a company officer and violated the policy. Under count four, she argued that no later terms became due because Provident waived her premiums after June 1, 2017, and refunded any payments made thereafter. She did not move under the fifth count in her complaint, wherein she argued that she reasonably expected her policy term was for twelve months.

¶10 Provident opposed the motion and itself moved for summary judgment, arguing that Shields's quarterly payments determined the date of her policy term. Her policy terms began December 1, March 1, June 1, and September 1 each year, and ended on November 30, February 28, May 31, and August 31 respectively. Thus, she attained age 60 during the policy term from June 1, 2017, through August 31, 2017. Provident also argued that Shields conflated "policy term," "renewal term," and "premium term," but that the policy's definition of age unambiguously used "policy term." It also argued that officer approval was not necessary to change the billing cycle, that the policy term remained in place even when it waived Shields's premiums, and that Shields's reasonable expectations could only be what the policy unambiguously stated.

¶11 The court granted Shields summary judgment on the first count, rendering the alternative counts moot, and denied Provident's motion. The court found that her policy was a twelve-month term that expired on December 1, 2017. It reasoned that the policy schedule listed the renewal term as twelve months, and a quarterly amount was merely listed under "Other Premium Paying Methods." The policy schedule did not "conspicuously identify that selection of the payment method governed, and potentially limited, the length of future renewal terms." It concluded that "[a]s written, so long as the annual premium was paid when due-irrespective of what method a policy holder selected for payments-the policy was for a twelve-month term." Even when she paid semi-annually, the update rider identified her premium as annual. Further, the update rider and increased benefit amendment both identified the premium term as twelve months. It concluded that Provident's construction of the policy allowed Provident to "reduce the express length of the policy term as stated in the Policy." The trial court added that it would have entered judgment in Shields's favor on her reasonable expectations argument had she moved for summary judgment on that count.

¶12 The court entered a declaratory judgment that Shields was entitled to lifetime disability benefits under the policy because her total disability occurred before policy age 60. The court also awarded Shields $199,050.21 in attorneys' fees and taxable costs. Provident timely appealed.

DISCUSSION

¶13 Provident argues that the trial court erred in...