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Denney v. The Guardian Life Insurance Company of America

United States District Court, D. Nebraska

March 27, 2017

MELANIE F. DENNEY, Plaintiff,
v.
THE GUARDIAN LIFE INSURANCE COMPANY OF AMERICA, Defendant.

          MEMORANDUM OPINION

          LYLE E. STROM, Senior Judge United States District Court

         This matter is before the Court on cross-motions for summary judgment (Filing No. 20 and Filing No. 23). On November 7, 2016, Melanie F. Denney (“plaintiff”) filed a motion for summary judgment (Filing No. 23). On the same day, The Guardian Life Insurance Company of America (“Guardian”) also filed a motion for summary judgment (Filing No. 20). On February 7, 2017, the parties filed a joint motion to vacate the final progression order under the belief that no genuine dispute as to any material fact exists, and this case may be disposed of as a matter of law. See Filing No. 35. On the same date, Magistrate Judge Zwart issued an order setting aside case progression deadlines and cancelling trial and pretrial conference settings (Filing No. 36). Upon review of the record and relevant law, the Court finds as follows.

         BACKGROUND

         Beginning in 2007, the Northwest High School, District 82 (“School District”) began self-administering a group insurance policy provided by Guardian which included life insurance (Filing No. 21 at 6-7). “[T]he School District generated its own monthly billing statements to Guardian and paid the premiums, submitted enrollment forms to Guardian, and prepared and transmitted censuses to Guardian listing the members of the plan.” (Id. at 7-8).

         On August 1, 2003, plaintiff's husband, Doyle E. Denney (“Decedent”), was hired by the School District as an administrator (Filing No. 1-1 at 1). On August 20, 2003, Decedent requested coverage under a life insurance policy (“Policy”) with Guardian as the insurer (Filing No. 22-3 at 6). Decedent elected the maximum amount of insurance valued at $150, 000. Id. On June 30, 2010, after nearly seven years, Decedent retired from the District (Id. at 8). Decedent indicated that he wished to continue his life insurance policy with Guardian following retirement (Filing No. 25 at 5). The School District “mistakenly told Mr. Denney that he was a ‘qualified retiree' under the Plan.” (Filing No. 21 at 8). After retirement, Decedent continued to pay his insurance premium annually (Filing No. 25 at 5). The 2010/11 census submitted by the School District to Guardian listed the Decedent as a retiree with a life insurance amount of $150, 000 (Filing No. 22-3 at 12). On August 24, 2015, Decedent died and a claim on the life insurance policy was submitted to Guardian (Id. at 8).

         By letter dated November 9, 2015, Guardian informed plaintiff that the claimed benefit was not payable (Filing No. 22-5 at 1). Guardian asserted that the claim was denied because Decedent's “coverage terminated June 30, 2010 when he no longer met the definition of a full time employee and did not qualify as a retiree under the terms of this plan.” (Id. at 2). In order to be covered under the insurance plan, the individual must fall within one of three classifications: (1) administrators; (2) all other eligible employees; or (3) retirees who are at least age 55, with at least 10 years of service (Filing No. 24-1 at 5). Guardian denied the claim because Decedent did not meet the 10-year service requirement and did not “convert his group life insurance policy to an individual life insurance policy.” (Filing No. 22-5 at 2).

         On March 16, 2016, plaintiff filed a complaint in the District Court of Lancaster County, Nebraska, asserting breach of contract and bad faith (Filing No. 1-1 at 3). On April 15, 2016, Guardian removed the case to this Court pursuant to 28 U.S.C. § 1441 (Filing No. 1). On November 7, 2016, both parties moved for summary judgment (Filing No. 20; Filing No. 25).

         STANDARD OF REVIEW

         Summary judgment is proper if the movant shows that there is no genuine dispute as to any material fact and that the movant is entitled to a judgment as a matter of law. See Fed. R. Civ. P. 56(a). Both parties assert that no genuine dispute as to any material fact exists precluding the case from being disposed of on summary judgment (Filing 35). After review of the record, the Court agrees. Plaintiff's claims hinge on the interpretation and application of an insurance policy to the undisputed circumstances surrounding Decedent's employment, enrollment in life insurance, and retirement. “An insurance policy is a contract and its terms provide the scope of the policy's coverage.” Sweem v. American Fidelity Life Assur. Co., 739 N.W.2d 442, 447 (Neb. 2007). “The interpretation of a contract and whether the contract is ambiguous are questions of law.” Timberlake v. Douglas County, 865 N.W.2d 788, 793 (Neb. 2015). Accordingly, this case will be disposed of as a matter of law.

         DISCUSSION

         Plaintiff brings two causes of action against Guardian: (1) breach of contract and (2) bad faith (Filing No. 1-1 at 3; see also Filing No. 8 at 3). The general issue before the Court is whether or not Guardian is liable under the terms of the Policy. More specifically, plaintiff argues that the incontestability clauses in the Policy preclude “Guardian from asserting . . . that Denney was never entitled to receive life insurance.” (Filing No. 25 at 19).

         I. Breach of Contract Claim

         Under Nebraska law, a court interpreting an insurance policy must first determine if the policy is ambiguous. Hillabrand v. American Family Mut. Ins. Co., 713 N.W.2d 494, 498 (Neb. 2006). When interpreting the meaning of a contract, “[a] court must consider a contract as a whole and, if possible, give effect to every part of the contract.” Brozek v. Brozek, 874 N.W.2d 17, 28 (Neb. 2016). Provisions of an insurance policy that terminate the policy at the termination of employment are enforceable. Palmer v. Capitol Life Ins. Co. of Denver Colo., 61 N.W.2d 396, 400 (Neb. 1953).

         Upon review of the Policy and the terms contained within it, the Court finds that no ambiguity exists and will construe the Policy in accordance with its plain and ordinary meaning. See Hillabrand, 713 N.W.2d at 494. Among others, the Policy contains provisions regarding eligibility, termination, and incontestability. See Filing No. 24-1.[1] In order to be eligible for life insurance, an employee must be a member of an “eligible class” (Id. at 28). The “eligible classes” are: ...


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