The Lincoln National Life Insurance Company v. L'Archevesque et al, No. 1:2008cv00074 - Document 155 (D.R.I. 2013)
Court Description: OPINION AND ORDER denying 138 Motion to Amend/Correct; denying 139 Motion to Vacate ; denying 140 Motion to Vacate ; denying 141 Motion to Amend/Correct; granting 146 Motion for Final Judgment. So Ordered by Judge William E. Smith on 8/9/13. (Jackson, Ryan)
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UNITED STATES DISTRICT COURT FOR THE DISTRICT OF RHODE ISLAND ___________________________________ ) ) ) ) Plaintiff, ) ) v. ) ) WILMINGTON TRUST COMPANY, ) Co-Trustee of The Paul E. ) L Archevesque Special Revocable ) Trust 2006; JAY L ARCHEVESQUE, ) Co-Trustee of The Paul E. ) L Archevesque Special Revocable ) Trust 2006, ) ) Defendants. ) ___________________________________) THE LINCOLN NATIONAL LIFE INSURANCE COMPANY, C.A. No. 08-74 S OPINION AND ORDER WILLIAM E. SMITH, United States District Judge. The motions before the Court represent the latest in the saga of Paul E. L Archevesque s ( Paul ) life insurance policy (the Policy ) with Lincoln National ( Lincoln National or Plaintiff ). Life Insurance Company Approximately two months after this Court granted partial summary judgment in favor of Lincoln National and declared the Policy void ab initio, Paul passed away. Each Defendant subsequently filed (1) a motion for leave to amend each Defendant s Answer to the Complaint (ECF Nos. 138 & 141); (2) a motion for leave to supplement the record of the case to reflect a claim for death benefits under the Policy made by the Trustees of the Paul E. L Archevesque Special Revocable Trust 2006 (the Trust ) and for the Court to vacate its summary judgment order of October 4, 2012 (the Order, ECF No. 136) (ECF Nos. 139 & 140); and (3) together with Plaintiff, a stipulation for voluntary dismissal of the counts not decided by the Order (ECF No. 145). Plaintiff filed a motion for an entry of final judgment in its favor. I. (ECF No. 146.) Motions for Leave to Amend Answer Defendants seek leave to amend their Answers to the Complaint in order to add a counterclaim of breach of contract against Plaintiff. Defendants allege that they made a valid claim under for benefits the Policy upon Paul s death and Plaintiff breached its contract with the Trust, and the implied covenant of good faith and fair dealing therein, by not paying the benefit upon Paul s death. Defendants motions are governed by Rule 15(a)(2) of the Federal Rules of Civil Procedure, which states that a party may amend a pleading with the court s leave and that leave should be freely given 15(a)(2). 1 1 when justice However, a so court requires. should deny Fed. R. Civ. P. leave to amend in Plaintiff asserts that Defendants must show good cause to receive leave from the Court to amend their answers, in accordance with Rule 16(b) of the Federal Rules of Civil Procedure. However, this standard relates only to motions to amend a court s pre-trial schedule that Rule 16 requires it to adopt. In this case, the Court elected to not include a instances of undue delay, bad faith or dilatory motive on the part of the movant, repeated failure to cure deficiencies by amendments previously allowed, undue prejudice to the opposing party by virtue of allowance of the amendment, [or] futility of amendment. Foman v. Davis, 371 U.S. 178, 182 (1962); see also Correa-Martinez v. Arrillaga-Belendez, 903 F.2d 49, 59 (1st Cir. 1990) ( Where an amendment would be futile or would serve no legitimate purpose, the district court should not needlessly prolong matters. ). In this case, Defendants motions must be denied because leave to amend would be futile. There are no facts that Defendants could plead that would cause Plaintiff to be liable to Defendants for breach of contract or breach of the implied covenant of good faith and fair dealing. Both theories are based on the existence of a contract that was declared void ab initio prior to Paul s death and, thus, is unenforceable. See Smithfield Estates, LLC v. Heirs of Hathaway, C.A. No. PC 20034157, 2012 R.I. Super. LEXIS 35, at *14 (R.I. Super. Ct. Mar. 9, 2012) ( A document found to be void ab initio is null from its very beginning. ); see also United States v. Mardirosian, 602 F.3d 1, 7 (1st Cir. 2010) (stating that a contract that was void ab initio may not be enforced, and the court will treat the deadline for amending the pleadings in its schedule, so the Rule 16(b) standard for amending the schedule is inapplicable. contract as if it had never been made (internal citation and quotation marks omitted)). Defendants argue that the Order did not have the effect of voiding the Policy, but it merely stated that grounds for rescinding the policy existed, and then it was incumbent upon Plaintiff to actually rescind the Policy. Defendants assert that Plaintiff never did rescind the Policy because it never returned the premiums that Defendants paid under the Policy. Therefore, according to Defendants, the Policy is still in effect and the Trust may submit a claim for benefits. The Court was clear in the Order that the Policy was void ab initio. Under misrepresentation without a in an concomitant Rhode insurance Island law, application demonstration of a makes fraud, contract that is issued upon the application. an material voidable, insurance Evora v. Henry, 559 A.2d 1038, 1040 (R.I. 1989) (citing Guardian Life Ins. Co. of Am. v. Tillinghast, 512 A.2d 855 (R.I. 1986); Affleck v. Potomac Ins. Co., 49 R.I. 112, 140 A. 469 (1928); Leonard v. State Mut. Life Assurance Co., 24 R.I. 7, 51 A. 1049 (1902)). A court may void a policy without further action by the insurer. See generally Commonwealth Land Title Ins. Co. v. IDC Props., Inc., 524 F. Supp. 2d 155 (D.R.I. 2007) aff'd, 547 F.3d 15 (1st Cir. 2008). This Court voided the Policy because of omissions in Paul s insurance application regarding his medical history. While the Order references grounds for rescission of the Policy, to the extent there is a difference between the meaning of that term and void ab initio , this Court concluded that the Policy was void ab initio. unequivocally (See Order, ECF No. 136 at 28 ( Accordingly, for the reasons stated above, the Policy is void ab initio because of the material misrepresentations contained on the Application. ).) It would be unfair for the Court to hold Lincoln National responsible for failing to complete rescission of the Policy after the Policy was declared void ab initio. Even if Defendants are correct that the effect of the Order was to hold that the Policy was rescindable, rather than void, Plaintiff s failure to return the premiums paid does not mean that the Policy remains in effect. Defendants rely on Borden v. Paul Revere Life Ins. Co. for the proposition that the general rule is that when an insurer ventures to rescind a policy on the basis of a material misrepresentation in the application, it must first tender to the insured the premiums paid under the policy. continues 935 F.2d 370, 379 (1st Cir. 1991). by explaining that this general However, Borden rule has its exceptions and the return of the premium is not a condition precedent to rescission. Id. Plaintiff had requested a declaratory judgment from the Court regarding whether the return of the premium paid was required in this instance, which request was not a subject Therefore, paid whether under the of the Plaintiff Policy Court s was was summary required an judgment to return outstanding Order. premiums question, and Plaintiff s failure to do so did not mean that the Policy was not rescinded. Defendants further argue that the Policy remains in effect because Plaintiff placed it in suspense . . . pending the resolution of the litigation, whereby no premiums on the Policy would be due. (See Letter to Counsel, Ex. B, ECF No. 139-3.) Defendants provide no case law to support this theory, which contradicts the clear meaning of the letter to which Defendants refer. The letter was clearly designed merely to suspend the collection of premiums Policy was void. until the Court decided whether the It did not amount to an agreement that the Policy would remain in force through the appeal of an order by this Court. When the Court declared the Policy void ab initio, the Policy was no longer in suspense, but was treated as if it had never existed. Because no valid contract existed between Plaintiff and the Trust at the time of Paul s death, amending Defendants Answers to allege would be that a Plaintiff futile failed exercise to that perform would litigation, and leave to amend is denied. under only a contract delay this II. Motions to Reconsider and Vacate the Order The Court can vacate its Order. that [w]hile conceive of no reason to reconsider and The First Circuit Court of Appeals has stated the Federal Rules [of Civil Procedure] do not provide for a motion to reconsider, a district court has the inherent power to reconsider its interlocutory orders, and we encourage it to do so where error is apparent. Fernandez- Vargas v. Pfizer, 522 F.3d 55, 61 n.2 (1st Cir. 2008) (citing Warren v. 2007)). Am. It Bankers is an Ins., 507 F.3d extraordinary 1239, remedy and 1243 (10th should Cir. be used sparingly [u]nless the court has misapprehended some material fact or point of law. 30 (1st Cir. demonstrate Palmer v. Champion Mortg., 465 F.3d 24, 2006). either To that obtain newly relief, the discovered movant must evidence (not previously available) has come to light or that the rendering court committed a manifest error of law. Id. (citing Marie v. Allied Home Mortg. Corp., 402 F.3d 1, 7 n.2 (1st Cir. 2005)). Defendants argue that the facts have changed such that the legal conclusions correct. subsequent submitted articulated in the Order are no longer According to Defendants, the death of Paul, and the claim by the for benefits Trust, entitles under the Defendants before the Policy may be rescinded. Policy to a allegedly jury trial Defendants would then be entitled to benefits under the Policy if the jury determines that Paul s death was caused by something other than the conditions that he omitted from his life insurance application. Defendants point to Rhode Island General Laws § 27-4-10, which provides that no misstatements made in procuring a life insurance policy shall be deemed material or render the policy void unless this matter represented shall have actually contributed to the contingency or event on which the policy is to become due and payable. Under this statute a jury must decide whether the matter misrepresented or omitted from a life insurance application contributed to the insured s death. Gen. Laws § 27-4-10. R.I. Defendants contend that, while the Court may have had jurisdiction during the life of the insured to void the Policy, now that Paul has died, a jury must determine whether grounds to rescind the Policy exist. Defendants arguments fail because, even if Defendants are correct that only a jury can find grounds to rescind a policy if a claimant brings a legal action to enforce it, there can be no action to enforce a claim under this Policy declared void ab initio prior to Paul s death. because it was No policy exists under which Defendants can seek to enforce a claim for benefits resulting from Paul s death. Thus, Defendants are not entitled to a jury trial to determine the materiality of omissions from Paul s life insurance application and the Court need not vacate its prior Order to provide them with one. III. Motions to Supplement Record Defendants also seek to supplement the record of this case to reflect their contention that the Trust submitted a valid claim for benefits under the Policy. Plaintiff does not object to supplementing the record to reflect the fact of Paul s death, but it does object to supplementing the record to reflect that a valid claim for benefits under the Policy was submitted by the Trust. Plaintiff asserts that a specific form must be completed to trigger a valid claim for benefits under the Policy, while Defendants argue that the Policy permits a broader array of documents to trigger a valid claim. Regardless of whether the Policy permits documentation of the insured s Plaintiff, the death other than the record cannot reflect forms that a identified valid claim by for benefits was made under the Policy because no Policy existed at the time of Paul s death. to that time. It was declared void ab initio prior A motion for leave to supplement the record falls within the district court s discretion. See United States v. One Lot of U.S. Currency ($36,634), 103 F.3d 1048, 1050 (1st Cir. 1997). Here, the documents that, according to Defendants, amount to a valid claim for benefits under the Policy would add nothing to the record of this case. They do not amount to a valid claim because no Policy existed at the time they were submitted to Plaintiff. Therefore, Defendants motions to supplement the record are denied. IV. Dismissal of Remaining Claims Each of Plaintiff s claims not subject to the Order is dismissed without prejudice in accordance with the Stipulation of Partial Voluntary ( Stipulation, ECF Dismissal No. 145.) executed Each party by each party. stipulated to the dismissal of these claims in order to facilitate the appeal of the Order. Appeal requires a final disposition that combines in one review all stages of the proceeding that effectively may be reviewed and corrected if and when final judgment results. Cohen v. Beneficial Indus. Loan Corp., 337 U.S. 541, 546 (1949); 28 U.S.C. § 1291. with a final dismisses Therefore, in order to provide the parties decision Plaintiff s that is ripe remaining for appeal, claims, the subject Court to all conditions enumerated in the Stipulation. V. Entry of Final Judgment The dismissal of all claims ends all litigation on the merits and nothing remains for this Court to do in this case but enter final judgment. See Midland States, 489 U.S. 794, 798 (1989). enter for Plaintiff. Asphalt Corp. v. United Therefore, judgment shall VI. Conclusion For the reasons stated above, each Motion for Leave to Amend the Answer is DENIED and each Motion to Supplement the Record and to Reconsider and Vacate Entered October 4, 2012 is DENIED. the Opinion and Order Additionally, the remaining claims are DISMISSED and Plaintiff s Motion for Entry of Final Judgment is GRANTED. IT IS SO ORDERED. /s/ William E. Smith William E. Smith United States District Judge Date: August 9, 2013
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