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Reassure America Life Insurance Co. v. Midwest Resources

February 7, 2012

REASSURE AMERICA LIFE INSURANCE CO.
v.
MIDWEST RESOURCES, LTD.



The opinion of the court was delivered by: William H. Yohn Jr., J

MEMORANDUM

Presently before the Court is a Motion for Judgment on the Pleadings filed by defendant Midwest Resources, LTD. Because issues of material fact remain regarding the salient contentions, the motion will be denied.

I. Facts and Procedural History

On November 6, 2000, Samuel Miller applied for a $1,000,000 term life insurance policy through plaintiff. (Compl. ¶ 7). On December 8, 2000, plaintiff issued a life insurance policy to Mr. Miller for $500,000 with a ten year term. (Compl. ¶ 19). This insurance policy contained a contestable clause that allowed plaintiff to contest the validity of the policy for any misrepresentation or non-disclosure of material fact in the application in the absence of fraud only for the two years subsequent to the issuance of the policy. (Compl., Exh. A, pg. 4).

On May 7, 2001, Mr. Miller entered into an agreement of sale with defendant for the insurance policy, assigning all rights to the policy to defendant in return for $12,155. (Compl. ¶ 21). On May 16, 2001, Mr. Miller and his wife executed releases and consents to change the beneficiary of the insurance policy, assigning all rights under the policy to defendant. (Compl. ¶¶ 22-23). On June 20, 2001, Mr. Miller submitted a change of owner and beneficiary form to plaintiff changing the owner and beneficiary of the policy to defendant. (Compl. ¶ 24).

Mr. Miller died on January 13, 2009. (Compl. ¶ 25). On February 26, 2009, defendant submitted a claim for benefits under the insurance policy. (Compl. ¶ 26). On October 30, 2009, plaintiff filed this declaratory judgment action in the Montgomery County Court of Common Pleas, seeking a ruling on its obligation to pay under the policy. In the complaint, plaintiff alleges "that the Miller policy is void or voidable, due to a lack of insurable interest at inception, as it was procured for the ultimate benefit of persons with no legally cognizable interest in the life of Mr. Miller, but who nevertheless sought to gamble on his life." (Compl. ¶ 1). The action was removed to this Court shortly thereafter. Defendant filed the instant motion on October 24, 2011, seeking a judgment on the pleadings that either plaintiff's suit was time barred by the applicable statute of limitations, or was barred pursuant to the contestable clause in the policy.

II. Standard

"After the pleadings are closed--but early enough not to delay trial--a party may move for judgment on the pleadings." Fed. R. Civ. P. 12(c). As with a motion to dismiss under Rule 12(b)(6), a court must accept as true the facts alleged in the pleadings and view any inferences to be drawn therefrom in the light most favorable to the plaintiff. Mele v. Fed. Reserve Bank of New York, 359 F.3d 251, 253 (3d Cir. 2004). Such a motion should only be granted if the moving party has established that there is no material issue of fact to resolve and that it is entitled to judgment in its favor as a matter of law. Id.

III. Discussion

Defendant asserts two theories to support its contention that it is entitled to judgment on the pleadings. First, defendant alleges that plaintiff's suit is barred by the applicable statute of limitations*fn1 since: (1) plaintiff was put on notice that the policy was sold to defendant on June 20, 2001, when Mr. Miller submitted to plaintiff the change of owner and beneficiary form; and (2) plaintiff did not file this suit until over eight years later on October 30, 2009, placing it outside of any applicable statute of limitation periods.

Second, defendant maintains that the contestable clause of the policy bars the suit since plaintiff did not contest the transfer of the policy to defendant within the first two years of the policy, even though it had notice of the sale on June 20, 2001, eighteen months before the end of the contestable period. I conclude that factual issues permeate both of these arguments. Therefore, judgment on the pleadings would be inappropriate.

A. The Statute of Limitations Defense

Defendant's first assertion is that plaintiff's claim is barred by the statute of limitations.

I find that there is an issue of material fact regarding when plaintiff should have been put on notice that the policy may have been procured without an insurable interest. While typically the statute of limitations begins to run as soon as a right to institute a suit arises, the statute will be tolled until the plaintiff knows or reasonably should know that he has been injured and that his injury has been caused by another party's conduct. Haugh v. Allstate Ins. Co., 322 F.3d 227, 231 (3d Cir. 2003). Defendant claims that plaintiff was put on notice of the possibility that the transaction was void or voidable on June 20, 2001, when it received the change of ...


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