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Leavitt v. John Hancock Life Insurance Co.

February 23, 2007

CAROL LEAVITT, PLAINTIFF,
v.
JOHN HANCOCK LIFE INSURANCE COMPANY, DEFENDANT/THIRD-PARTY PLAINTIFF,
v.
ALVINA C. SAKOFF, THIRD-PARTY DEFENDANT.



The opinion of the court was delivered by: Judge Rebecca R. Pallmeyer

MEMORANDUM OPINION AND ORDER

Carol Leavitt ("Plaintiff"), an Illinois resident, is suing John Hancock Life Insurance Company ("Defendant"), a Massachusetts company, to recover money Plaintiff claims she is owed as a third-party beneficiary to a life insurance policy issued by Defendant to Plaintiff's friend, Edward A. Sakoff ("Edward"). Plaintiff had been entitled to $150,000 under Edward's life insurance policy; before his death, however, Edward altered his policy to limit Plaintiff's share of the proceeds to $50,000. Plaintiff claims to have loaned Edward money in reliance on her understanding that she was entitled to $150,000 under the policy and would be notified by Defendant of any changes to her beneficiary status; Plaintiff claims that Defendant confirmed this understanding orally and in writing even after Edward altered his life insurance policy to reduce the amount of money to which Plaintiff was entitled. Plaintiff now sues Defendant for breach of contract as a result of Defendant's failure to notify Plaintiff of changes to the life insurance policy. She claims to have suffered $100,000 in damages. Both parties have moved for summary judgment. For the reasons set forth below, both motions are denied.*fn1

FACTUAL BACKGROUND*fn2

1. January 5, 1999 Life Insurance Policy

On January 5, 1999, Defendant issued and delivered a life insurance policy (# UL 00 254 993) (the "Policy") to Edward Sakoff; Edward was the owner of the Policy and the "insured" under the Policy. (Def. LR 56.1 Stmt. ¶¶ 6, 8; 1/5/99 Policy, Ex. 5 to Def. LR 56.1 Stmt.) The Policy was for $250,000 and stated, in relevant part, that upon the death of the insured, Defendant would pay the death benefit to the beneficiary, assuming the death occurred while the Policy was in force. (Def. LR 56.1 Stmt. ¶ 7; 1/5/99 Policy at JH0001.) The Policy, together with the written application for the Policy, constituted "the entire contract between the applicant and [John Hancock]," but "additional written applications for policy changes . . . [could] be submitted to [John Hancock] after issue and if accepted by [John Hancock] such additional applications [would] become part of the policy." (Def. LR 56.1 Stmt. ¶ 6; 1/5/99 Policy at JH0014.)

The Policy confirmed that its owner had the absolute "power to exercise all rights and privileges," including the right to change the Policy's beneficiaries, "without the consent of any other person unless [the owner] provide[d] otherwise by written notice." (Def. LR 56.1 Stmt. ¶¶ 9, 11; 1/5/99 Policy at JH0012.) The Policy stated that the owner and the beneficiaries are those individuals identified in the application, unless the owner changes them or they are otherwise changed pursuant to language in Section 15 that is not relevant here. (Def. LR 56.1 Stmt. ¶ 10, 1/5/99 Policy at JH0012.) If the owner changes the owner or beneficiary by written notice, a change or revocation does not take effect unless John Hancock acknowledges receipt of the notice; such a change becomes effective as of the date of the insured's written notice. (Def. LR 56.1 Stmt. ¶ 12; 1/5/99 Policy at JH 0012.) The Policy also states that "[c]hanges in this policy may be made only by agreement between you and [John Hancock]. Only the President, Vice President, the Secretary, or an Assistant Secretary of the Company has authority to waive or agree to change in any respect any of the conditions or provisions of the policy, or to extend credit or to make an agreement for [John Hancock]." (Def. Supp. LR 56.1 Stmt. ¶ 8; 1/5/99 Policy at JH0014.)

2. Beneficiaries to Edward Sakoff's Life Insurance Policy

As of January 5, 1999, the sole beneficiary of Edward's life insurance policy with Defendant was his wife, Alvina C. Sakoff ("Alvina"). (Def. LR 56.1 Stmt. ¶ 9, 1/5/99 Policy at JH0003, 27.) On February 2, 1999, Edward signed a Change of Beneficiary Form designating Alvina and Plaintiff as the two primary beneficiaries; Edward designated on this form that in the event of his death, Alvina was to receive $100,000 and Plaintiff was to receive $150,000. (Def. LR 56.1 Stmt. ¶ 13; Pl. LR 56.1 Stmt. ¶ 7; 2/22/99 Change of Beneficiary Form at JH 0024-25, Ex. 5 to Def. LR 56.1 Stmt.) The form specified that "[t]he exercise of any rights and privileges under any policy to which this designation applies does not require notice to, nor the consent of, any revocable beneficiary." (Def. LR 56.1 Stmt. ¶ 13; 2/22/99 Form at JH0025.) When Defendant received Edward's February 2, 1999 Change of Beneficiary Form, it requested that Edward submit a corrected form because Edward had worded his designation incorrectly. (Def LR 56.1 Stmt. ¶ 14; 3/9/99 Letter at JH0128-29, Ex. 8 to Def. LR 56.1 Stmt.) Edward signed a corrected Change of Beneficiary Form on March 20, 1999, which provided that, upon his death, Alvina was to receive "$100,000 of the proceeds or the entire proceeds if less than $100,000 with the balance of proceeds if any to [Plaintiff]." (Def. LR 56.1 Stmt. ¶ 15; Pl. LR 56.1 Stmt. ¶ 8; 3/20/99 Change of Beneficiary Form at JH0022, Ex. 5 to Def. LR 56.1 Stmt.) This form also provided that Edward's exercise of his right to change beneficiaries "does not require notice to, nor the consent of, any revocable beneficiary." (Def. LR 56.1 Stmt. ¶ 15, 3/20/99 Form at JH0023.) Defendant sent Edward a letter on March 30, 1999, acknowledging Defendant's receipt of the March 20, 1999 form. (Def. LR 56.1 Stmt. ¶ 16; 3/30 99 Letter at JH0118, Ex. 9 to Def. LR 56.1 Stmt.)

It is undisputed that Plaintiff, who was formerly in the advertising business, had made numerous investment loans to Edward, who was Plaintiff's friend and client. (Pl. LR 56.1 Stmt. ¶¶ 6, 9; Pl. Dep. at 20-21, Ex. 8 to Pl. LR 56.1 Stmt.; Promissory Notes, Ex. 9 to Pl. LR 56.1 Stmt.) Plaintiff testified that Edward initially designated her as a beneficiary to a life insurance policy he had with a company other than John Hancock as early as the late 1970's, when Plaintiff first started to loan Edward money; according to Plaintiff, Edward later designated her as a beneficiary on the Policy with John Hancock "because it was cheaper to do it that way instead of to have a separate policy" for Plaintiff and his wife. (Pl. Dep. at 22-23.) When Edward initially made Plaintiff a beneficiary under the Policy with John Hancock in 1999, Plaintiff claims to have called Defendant to verify that she was a beneficiary. (Pl. LR 56.1 Stmt. ¶ 11; Pl. Dep. at 28-30, 51.) Plaintiff testified that, in this conversation, someone in Defendant's life insurance department confirmed that she was the beneficiary of the Policy in the amount of $150,000 and that she would be notified of any changes to the Policy. (Pl. Dep. at 29.) Plaintiff took no notes on the conversation, and did not remember the name of the person with whom she spoke or the month in which the conversation occurred. (Def. Supp. LR 56.1 Stmt. ¶¶ 23-25; Pl. Dep. at 28-30.)*fn3

Edward signed another Change of Beneficiary Form on October 21, 2000. This form directed that Alvina was to receive $200,000 at his death and Plaintiff was to receive $50,000; this Change of Beneficiary Form, like the earlier one, also contained language stating that the change did not require notice to, or the consent of, revocable beneficiaries. (Def. LR 56.1 Stmt. ¶ 17; 10/21/00 Change of Beneficiary Form at JH0020-21, Ex. 5 to Def. LR 56.1 Stmt.) Edward declined to elect that either Alvina or Plaintiff was an irrevocable beneficiary. (Def. LR 56.1 Stmt. ¶ 17; 10/21/00 Form at JH0021.) Upon receiving Edward's October 21, 2000 Change of Beneficiary Form, Defendant requested by letter that Edward submit a corrected form and specify the designations in percentages, rather than dollar amounts. (Def. LR 56.1 Stmt. ¶ 18; 10/27/00 Letter, Ex. 10 to Def. LR 56.1 Stmt. at JH0113.) Edward complied and, on November 3, 2000, he signed another Change of Beneficiary Form. (Def. LR 56.1 Stmt. ¶ 19; 11/3/00 Change of Beneficiary Form at JH0018-19, Ex. 5 to Def. LR 56.1 Stmt.) In this form, Edward provided that, upon his death, Alvina was to receive 80% of the proceeds, or $200,000, and Plaintiff was to receive 20% of the proceeds, or $50,000. (Def. LR 56.1 Stmt. ¶ 19; 11/3/00 Form at JH0018.) As before, this form indicated that notice to or consent from revocable beneficiaries was not required to change beneficiaries; Edward did not elect to make Alvina or Plaintiff an irrevocable beneficiary. (Def. LR 56.1 Stmt. ¶¶ 19-20; 11/3/00 Form at JH0019.) Indeed, Alvina and Plaintiff were revocable beneficiaries at all times the Policy was in effect. (Def. LR 56.1 Stmt. ¶ 25.)

The November 3, 2000 form further provided that "[t]his designation replaces all previous beneficiary designations and optional methods of settlement, which are hereby revoked" and reserved Edward's right to make future changes to the Policy's beneficiaries. (Id. ¶ 22; 11/3/00 Form at JH0019.) On November 13, 2000, Defendant sent Edward a letter acknowledging the November 3, 2000 Change of Beneficiary Form and stating that the beneficiaries had been updated. (Def. LR 56.1 Stmt. ¶ 23; 11/13/00 Letter, Ex. 11 to Def. LR 56.1 Stmt.) Plaintiff was not advised of the changes made in the November 3, 2000 Change of Beneficiary Form. (Pl. LR 56.1 Stmt. ¶ 12; Pl. Dep. at 60-64.)*fn4 Edward made no further changes to the Policy's beneficiaries after November 3, 2000. (Def. LR 56.1 Stmt. ¶ 24; 9/12/02 Letter at JH0214-25, Ex. 12 to Def. LR 56.1 Stmt.; Affidavit of Sherly Rubin ¶¶ 4-5, Ex. 6 to Def. LR 56.1 Stmt.)

3. 2002 Events

Pursuant to a promissory note dated April 3, 2002, Edward was to repay Plaintiff for a $100,507 loan on July 1, 2002. (Pl. LR 56.1 Stmt. ¶ 13; Def. Supp. LR 56.1 Stmt. ¶ 26; Pl. Dep. at 14.) At some point after April 3, 2002, Edward asked Plaintiff to extend the due date of the loan by three months because Edward was undergoing open-heart surgery and would need additional time to pay Plaintiff back. (Pl. LR 56.1 Stmt. ¶ 13; Pl. Dep. at 15.) Plaintiff agreed to extend the date for payment; after granting Edward the extension, the promissory note previously due in the amount of $100,507 on July 1, 2002 became due on October 1, 2002 in the amount, including additional interest, of $105,532. (Ex. 9 to Pl. LR 56.1 Stmt.)

Before agreeing to the extension, however, Plaintiff asked for proof that Edward's life insurance policy, with Plaintiff as a beneficiary, was in effect at the time. (Pl. LR 56.1 Stmt. ¶ 13; Pl. Dep. at 15.) Edward provided to Plaintiff a June 26, 2002 letter written on Defendant's letterhead and sent from the "Contract/LDS Services" department. (6/26/02 Letter, Ex. 11 to Pl. LR 56.1 Stmt.) The letter was addressed to Edward and signed by Elvis Downes, a John Hancock Contract Assistant; the letter stated that there had been no change to the Policy's beneficiaries since the inception of the Policy and that the Policy remained in force with the following designees: Alvina Sakoff ($100,000) and Plaintiff ($150,000). (Pl. LR 56.1 Stmt. ¶¶ 14, 18; 6/26/02 Letter.) Defendant does not dispute that this letter contained incorrect information about Plaintiff's benefits under the Policy as of June 26, 2002. (Def. LR 56.1 Resp. ¶ 23.)

Downes testified that, before issuing such a letter, he would customarily check the status of the file to ensure that the information provided on the status of a policy was correct. (Pl. LR 56.1 Stmt. ¶ 19; Downes Dep. at 13, Ex. 12 to Pl. LR 56.1 Stmt.) In order to check the status of a policy, Downes had access to two of Defendant's electronic databases and could also request a physical file. (Pl. LR 56.1 Stmt. ¶ 20; Downes Dep. at 14.) It is not clear whether, after Defendant acknowledged Edward's November 2000 Change of Beneficiary Form, such information would have been contained in at least one of these three databases. While Plaintiff claims that is the case, (Pl. LR 56.1 Stmt. ¶ 22), Downes' testimony supports only that it is possible for one system to contain information that never makes it into other systems. (Def. LR 56.1 Resp. ¶ 22; Downes Dep. at 17-18.) That possibility does not require the conclusion that at least one of the systems would have contained the updated beneficiary information submitted in Edward's November 2000 Change ...


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