Williams v. Nat'l W. Life Ins. Co.

279 Cal.Rptr.3d 620

65 Cal.App.5th 436

Barney Thomas WILLIAMS, Plaintiff and Appellant,

v.NATIONAL WESTERN LIFE INSURANCE COMPANY, Defendant and Appellant.

C090436

Court of Appeal, Third District, California.

Filed June 11, 2021

Majors & Fox, Frank J. Fox, San Diego; Law Offices of Mary A. Lehman and Mary A. Lehman, Coronado, for Plaintiff and Appellant.

Hinshaw & Culbertson, Edward F. Donohue, Peter L. Isola, San Francisco; Davis Wright Tremaine and Spencer Persson, Los Angeles, for Defendant and Appellant.

RAYE, P. J.

National Western Life Insurance Company (NWL) appeals from a jury verdict holding the company liable for negligence and elder abuse arising from an NWL annuity sold to Barney Thomas Williams by Victor Pantaleoni, an independent agent. In 2016, Pantaleoni sold a $100,000 NWL annuity to Williams, who had contacted Pantaleoni to revise a living trust after the death of Williams’ wife. When Williams returned the annuity to NWL during a 30-day "free look" period, Pantaleoni wrote a letter over Williams’ signature for NWL to reissue a new annuity. In 2017, when Williams cancelled the second annuity, NWL charged a $14,949.91 surrender penalty.

The jury awarded Williams damages against NWL, including punitive damages, totaling almost $3 million.

We will reverse.

I. FACTUAL AND PROCEDURAL BACKGROUND

A. Pretrial Proceedings

In December 2017, Williams filed a complaint alleging claims for elder financial abuse, negligence per se, and breach of fiduciary duty against Pantaleoni.¹ Williams alleged that he contacted American Family Legal Services to update a trust and estate plan after the death of his wife. Williams received a call from Pantaleoni to set up an appointment in Williams’ home. Pantaleoni identified himself as a paralegal with the company.

At the meeting in Williams’ home, Pantaleoni provided Williams with a business card stating Pantaleoni was a CSA (Certified Senior Advisor) and "Managing Partner and Paralegal" with American Family Legal Services. Pantaleoni obtained Williams’ trust documents and a $360 fee to update them. One week later Pantaleoni returned and obtained Williams’ signature on blank documents and a blank check, which Pantaleoni filled in in the amount of $100,000 and used to purchase an annuity from NWL for Williams.

When Pantaleoni delivered the annuity, Williams decided he did not want it and returned it to NWL during a 30-day free look period. Two weeks later Pantaleoni returned with more blank documents for Williams to sign, including documents that retracted the cancellation of the annuity. When the premium was not refunded, Williams sought the assistance of a financial advisor who wrote to NWL to cancel the annuity. Because the 30-day free look period had passed, NWL refunded the premium but charged a surrender penalty.

In February 2018, Pantaleoni answered the complaint.

In May 2018, Williams amended the complaint to add NWL in place of a Doe defendant.

In July 2018, NWL demurred to the complaint. The trial court sustained the demurrer with leave to amend. The court adopted its tentative ruling that (1) the elder abuse cause of action had not alleged facts that NWL knew Pantaleoni's conduct was likely to be harmful to Williams, as required by Welfare and Institutions Code section 15610.310, subdivision (b), and (2) the negligence per se cause of action alleged that a series of Insurance Code provisions were violated but no facts regarding how defendants violated them, including a statutory provision prohibiting misrepresentations of the terms or benefits of a proposed policy where NWL was not alleged to have made misrepresentations to Williams. "Further, the exact duty owed by NWL to Plaintiff is unclear in the pleadings."

In August 2018, Williams filed a first amended complaint. The amended complaint alleged, inter alia, that: (1) NWL knew of the DOI action against Pantaleoni and his restricted license because these were matters of public record; (2) NWL knew that Pantaleoni had filed bankruptcy three times in the last six years and was still in bankruptcy at the time of the transactions at issue; (3) NWL knew or should have known that Pantaleoni did not have errors and omissions insurance coverage, contrary to NWL policy; (4) NWL knew or should have known that Pantaleoni operated " ‘living trust mills’ "² to gain access to seniors and sell annuity products, which NWL knew was unlawful, and that Pantaleoni was selling insurance products using a company named Sierra Legal Services; (5) NWL knew that Pantaleoni would earn a $9,500 commission from the sale of an annuity based on a 13-year surrender period, which was inappropriate for someone Williams age; and (6) Williams’ April 5, 2017 letter instructing NWL to cancel the annuity complained about Pantaleoni's misconduct, but NWL did not investigate or terminate Pantaleoni and charged a surrender penalty of $14,949.91.

In addition, Williams alleged that in April 2016 he sent a mispunctuated, misspelled handwritten note to NWL to return the first annuity, but the handwriting of the letter Pantaleoni forged to complete the application for the second annuity contrasted starkly with the first note, which Williams asserted "was a HUGE red flag of Mr. Pantaleoni's financial abuse of Plaintiff."

In September 2018, NWL demurred to the amended complaint. The trial court overruled the demurrer, stating that (1) as to the elder abuse cause of action, the amended complaint alleged the likelihood of harm to Williams in that (a) his life expectancy was less than the surrender term of the annuity, or (b) NWL possibly had notice of problems with the annuity because it received two notes in different handwriting purportedly from Williams, and (2) as to the negligence per se cause of action, the court took judicial notice of the DOI's opinion that there was a private right of action under Insurance Code section 785³ and found that Williams presented "at least one theory" that NWL knew that Pantaleoni was wrongly using a legal services company to sell insurance products.

In November 2018, NWL answered the first amended complaint.

In February 2019, the trial court granted Williams’ unopposed motion for leave to file a second amended complaint, which substituted a fraud claim for the breach of fiduciary claim against Pantaleoni.

B. The Trial

1. Plaintiff's Case

a. Barney Williams

Williams testified that his wife of 46 years, Barbara, passed away in 2015. Barbara was an ex-bookkeeper who took care of paying the bills. The couple saved on average $3,000 per year.

In February 2016, Williams called the office that had prepared a trust for him, seeking someone to make changes to the trust because of his wife's death. Pantaleoni came to Williams’ house. Williams said he wanted to remove his stepdaughter, Merrily Lee, from the trust and give her $25,000 of the trust benefits, with the remainder going to a homeless shelter, the Jesus Center. Williams gave Pantaleoni a check for $360 paid to American Family Legal Services for changes to the trust. Williams signed the check and Pantaleoni filled in the rest, including the words "TRUST UPDATE" on the memo line.

Pantaleoni asked Williams questions about his finances. Williams said that he had approximately $80,000 invested with a broker and $114,000 in the bank, $8,000 in checking and $106,000 in savings. Williams showed Pantaleoni the brokerage and bank statements. Pantaleoni worked on the trust papers and confirmed for Williams that the changes he requested had been made. Williams let Pantaleoni take the trust documents with him when he left.

A week later Pantaleoni came back for another meeting. At Pantaleoni's suggestion, Williams signed a paper to transfer $100,000 from his savings to his checking account and the two of them went to the bank to complete the transfer. Back at Williams’ house, Pantaleoni asked for a check. Williams signed a blank check that Pantaleoni filled in. Williams knew the check was to be in the amount of $100,000. Williams did not know what the check was to be used for. Pantaleoni assured Williams his money was safe. Pantaleoni took the check with him and some other blank documents that Williams signed. Williams thought the documents had something to do with the trust. Pantaleoni did not give Williams copies.

The documents Williams signed included an NWL annuity application, a withdrawal benefit rider and a suitability questionnaire. The suitability questionnaire stated that Williams’ annual income was $24,000. Williams did not tell Pantaleoni his annual income was $24,000; his actual income was approximately $16,000 per year. A box checked on the questionnaire indicated that Williams’ approximate net worth after purchase of the annuity ranged from $50,000 to $99,999, but a blank for his liquid net worth after purchase was filled in with the amount of $120,000. Williams signed and initialed but did not fill out these documents. Williams did not understand what he was signing; he thought it had something to do with the trust. Pantaleoni never told or notified Williams that Pantaleoni was an insurance agent or selling insurance products.

Williams received a bank statement in the middle of the following week. From the statement, Williams learned for the first time that the $100,000 check was made out to an insurance company.

Pantaleoni came back to deliver the annuity and Williams signed a delivery receipt. Williams read on the first page of the policy that he could return the annuity within 30 days. Williams wanted to send the annuity back because there was a 15 percent surrender penalty if the money was withdrawn within the first year, and a bit less each year thereafter for seven years. Williams did not think that in his medical condition he would survive for the surrender period. Williams sent the policy back with a handwritten note that he had received the policy and wanted to return it. The note stated: "I-WITH-LIKE-TO-RETURN-IT." (Sic .)

A few days later Williams heard from Pantaleoni, inquiring...