Principal National Life Insurance Company v. Donna Rothenberg, No. 22-1114 (8th Cir. 2023)
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Dr. Robert P. Rothenberg (Rob) tragically suffered a fatal heart attack prior to paying the initial premium on his term life insurance policy issued by Principal National Life Insurance Company (Principal). Principal filed this action in the district court, seeking a declaratory judgment that Appellant— the policy’s intended beneficiary—was not owed death benefits in light of the nonpayment. Appellant filed a counterclaim, asserting claims against Principal for breach of contract, vexatious denial of proceeds, and negligence, as well as claims against Appellee, the couple’s insurance broker and financial planner, for negligence. After the parties filed cross-motions for summary judgment, the district court granted summary judgment in favor of Principal and Appellee, finding, in part, that the policy was not in effect at the time of Rob’s death. Appellant appealed, arguing that the district court erred in concluding (1) that the Policy was not in effect at the time of Rob’s death and (2) that, assuming the Policy was not in effect, neither Principal nor Appellee were negligent because neither owed a duty to Appellant.
The Eighth Circuit affirmed. The court explained that Appellant did not pay the initial premium until after Rob’s death, at which time he was not in a similar state of health as when he applied for the policy. Moreover, any “privileges and rights” Rob (or Appellant) had to retroactively effectuate the Policy were terminated at Rob’s death pursuant to the Policy’s termination provision. Second, Rob’s signature on the EFT Form alone did not render the Policy effective on April 26, 2019, or earlier.
Court Description: [Shepherd, Author, with Gruender and Benton, Circuit Judges] Civil case - Insurance. The initial premium on an insurance policy had not been paid prior to the insured's death, and the policy's unambiguous langage dictates that it was not in effect and Principal was not liable for coverage; as a result, the district court did not err in dismissing defendant's vexatious-denial-of-proceeds claim; neither Principal nor its agent owed defendant a duty as the third-party beneficiary of an ineffective insurance policy; the agent did not owe defendant any duty to secure gap coverage for her deceased husband.
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