Lindenberg v. Jackson National Life Insurance

Citations: 98 F. Supp. 3d 934; 2014 U.S. Dist. LEXIS 183532; 2014 WL 8578944Docket: No. 2:13-cv-02657-JPM-cgc

Court: District Court, W.D. Tennessee; December 10, 2014; Federal District Court

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The Court has partially granted and partially denied Defendant Jackson National Life Insurance Company's Motion for Summary Judgment concerning a life insurance policy issued to Decedent Thomas A. Lindenberg. The policy, effective January 23, 2002, insured Decedent's life for $350,000, designating his ex-wife, Tamarin Lindenberg, as the primary beneficiary. Following their divorce in 2005, Tamarin remained the beneficiary, while the Marital Dissolution Agreement mandated that she pay premiums for the policy and that Decedent maintain a separate policy for their children, naming them as irrevocable beneficiaries.

Decedent died on January 22, 2013, after a period of disability during which Tamarin provided significant support. The plaintiffs confirmed that premiums for the policy were paid. They submitted insurance forms and the Marital Dissolution Agreement to the Defendant on February 2, 2013, and sent a demand letter for funds on March 11, 2013. The Defendant responded on March 22, 2013, stating there was "insufficient basis" to pay the claim and outlining several conditions for proceeding, including the need for waivers from other potential claimants and court-appointed guardians for the minor children.

As of the complaint’s filing, the Defendant had not paid the insurance benefits, despite Tamarin’s requests for necessary documents. The plaintiffs are seeking recovery of the death benefit and additional damages.

Tamarin Lindenberg informed the Defendant of her inability to leave New Jersey to establish guardianships in Tennessee. The Defendant withheld payment of the death benefit to the Plaintiffs due to competing claims. The Defendant stated that without a commitment from the Plaintiff, waivers could not be drafted. On May 19, 2014, the Court ordered the Defendant to pay the death benefit to Tamarin Lindenberg, which the Defendant subsequently complied with.

The procedural background indicates that Plaintiffs filed their Complaint in the Circuit Court of Shelby County, Tennessee, on July 19, 2013, leading to the case being removed to the United States District Court for the Western District of Tennessee on August 23, 2013. The Defendant answered the Complaint and filed a Third-Party Complaint for Interpleader against Mary Angela Lindenberg and a Counterclaim against Tamarin Lindenberg, seeking a court determination on the rightful recipient of the death benefit. 

On September 23, 2013, Tamarin Lindenberg and Mary Angela Lindenberg Williams moved to dismiss the Defendant's Counterclaim and Third-Party Complaint. A Joint Motion to appoint guardians ad litem was granted by the Court on December 9, 2013. The Court subsequently granted the motion to dismiss on May 19, 2014, ordering the Defendant to disburse $350,000 plus interest to Tamarin Lindenberg. 

On August 21, 2014, the Defendant filed a Motion to Dismiss the Plaintiffs’ claims for punitive damages and common law bad faith, which was partially granted on November 25, 2014, dismissing the bad faith claim. A second order on December 9, 2014, denied the motion to dismiss the punitive damages claims. The Defendant filed a Motion for Summary Judgment on October 15, 2014, with opposing responses filed by the Plaintiffs and a subsequent reply from the Defendant. The legal standard for summary judgment is outlined, stating that it shall be granted when there is no genuine dispute regarding material facts.

A genuine dispute over material facts exists if a reasonable jury could rule in favor of the nonmoving party. If the nonmoving party fails to adequately demonstrate an essential element of their case, the moving party is entitled to judgment as a matter of law, making summary judgment appropriate. The moving party must initially show the absence of any genuine issue of material fact; if successful, the burden shifts to the nonmoving party to present specific facts indicating a triable issue. Both parties must reference particular materials in the record to demonstrate whether a fact is genuinely disputed. The moving party can argue the absence of evidence supporting the nonmoving party's case. Courts are not obligated to scour the entire record for evidence; they only need to consider cited materials and may draw reasonable inferences in favor of the nonmoving party. The crux of the matter is whether sufficient disagreement exists to warrant jury submission or if one party is entitled to prevail as a matter of law. A mere scintilla of evidence is inadequate to oppose summary judgment; the nonmoving party must provide sufficient evidence for a reasonable jury to rule in their favor.

Defendant Jackson National Life Insurance Company seeks summary judgment on claims of statutory bad faith and punitive damages, as well as dismissal of breach of contract and statutory bad faith claims from Zachary Lindenberg and Sophie Lindenberg. According to the Tennessee Bad Faith Statute, insurers may be held liable for bad faith if they refuse to pay a loss within sixty days after a demand by the policyholder, with potential damages not exceeding 25% of the loss amount if the refusal is found to be in bad faith.

A Plaintiff pursuing a claim under the Bad Faith Statute must demonstrate that the failure to pay resulted in additional expenses, losses, or injuries, including attorney fees. To succeed, the Plaintiff must establish four elements: 1) the insurance policy was due and payable, 2) a formal demand for payment was made, 3) the insured waited 60 days post-demand before filing suit (unless payment was refused earlier), and 4) the refusal to pay was not in good faith. The parties agree that a demand letter was sent on March 11, 2013, and payment was made to Tamarin Lindenberg on May 19, 2014, after the demand. The Defendant does not dispute that the Policy was due and payable; therefore, the key issue is whether the Plaintiffs' evidence of the Defendant's bad faith refusal is adequate to challenge a summary judgment. 

The Defendant argues for summary judgment, asserting that the Plaintiffs cannot prove that Jackson lacked a legitimate basis for withholding payment. The Defendant provides three justifications: 1) ambiguities in the Marital Dissolution Agreement (MDA) justified not disbursing proceeds immediately, 2) a legitimate basis existed for not thoroughly reviewing Tennessee law prior to withholding payment, and 3) sufficient grounds existed for refusing to provide waivers to Ms. Lindenberg. 

While acknowledging Tamarin Lindenberg as the primary beneficiary, the Defendant contends that ambiguities in the MDA suggest potential multiple liabilities. The Defendant acted to protect the rights of all potential claimants. The MDA allegedly did not specify the insurance policies involved, preventing the Defendant from confirming which policy was referenced. Conversely, the Plaintiffs argue that the Defendant's claim of ambiguity is unfounded, asserting that the MDA is clear and that Ms. Lindenberg did not waive her rights to the policy. They cite prior court determinations, testimony, and expert evidence supporting their position. Additionally, they claim the Defendant neglected to consider information from the agent who procured the policy.

Plaintiffs argue that if Defendant had valid reasons for refusing to pay Ms. Lindenberg, it had two months after receiving proof of Mr. Lindenberg’s death to investigate and either pay the beneficiary or interplead the funds. The Court finds the Marital Dissolution Agreement (MDA) unambiguous regarding the life insurance policies, stating that Mr. Lindenberg was required to maintain $450,000 in life insurance with the children as irrevocable primary beneficiaries until the youngest child turned 22. Since the policy in question did not name the children as beneficiaries, it is not covered under the MDA's "Life Insurance" section, which specifically mandates coverage for the children.

The Court recognizes a potential question about whether Mr. Lindenberg complied fully with the MDA when the policy became due. Citing Holt v. Holt, the Court notes that a beneficiary has a vested right to any life insurance policy that meets the divorce decree's requirements. Whether Defendant acted in good faith by withholding the death benefit from Tamarin Lindenberg, given limited knowledge of Mr. Lindenberg’s other policies, is a jury question. The jury may determine that Defendant’s additional procedural requirements were unnecessary and constituted a breach of contract or bad faith.

The MDA does not grant any insurance benefits to Mr. Lindenberg’s adult child, Mary Angela Lindenberg, making it a jury question whether requiring a waiver from her amounted to breach of contract and bad faith. Furthermore, the MDA’s “Debts” section, which discusses premium payments for certain life insurance policies, does not address the rightful beneficiaries of those policies, undermining Defendant’s arguments regarding the distribution of benefits.

The premiums for the Policy were paid, making the relevance of the MDA's "Debts" section limited in determining Tamarin Lindenberg's status as the rightful beneficiary. The Defendant's claim that the insurance policies referenced in the MDA lack clarity due to the absence of specific policy numbers or issuance dates does not warrant dismissal of the Plaintiffs' bad faith claims on summary judgment. 

The Defendant argues it did not conduct a comprehensive review of Tennessee law regarding the MDA's effect on the Policy designation due to uncertainties, including the Lindenbergs' residence at the time of Mr. Lindenberg's death, the location where the application was signed, and where the Policy was issued. These uncertainties led the Defendant to present Tamarin Lindenberg with a broad overview of state law possibilities to safeguard the rights of potential claimants and minimize its own liability. The Defendant contends that conflicting laws in New Jersey and Tennessee regarding beneficiary designations post-divorce necessitated this cautious approach. 

In response to the Plaintiffs' assertion that the Defendant's confusion about the applicable state law is merely a pretext, the Plaintiffs argue that Tennessee law should govern the Policy's interpretation, citing Tenn. Code Ann. 56-7-102, which mandates that insurance contracts issued to Tennessee residents be construed under Tennessee law. The Plaintiffs assert that both Mr. and Ms. Lindenberg were residents of Tennessee at all relevant times, supported by evidence of their residence at 611 Duck Call Cove, Memphis, Tennessee. They also invoke the Lex Loci Contractus doctrine to argue that Tennessee law applies since the Policy was negotiated, delivered, and paid for in Tennessee. Furthermore, they contest the Defendant's assertion that Mr. Lindenberg signed the Policy in Indiana, clarifying that it was actually signed by the agent, Wade Frederick, in Fort Wayne, Indiana.

Plaintiffs argue that Tennessee law governs the policy based on a "most significant relationships" analysis and contend that Defendant waived any claim regarding applicable state law by failing to communicate confusion over it in any correspondence, including the March 22, 2013 denial letter. They assert that JNL did not inquire about the terms of Ms. Lindenberg’s employment contract during claim handling, and this information was only revealed after litigation commenced. Additionally, Plaintiffs note that JNL corresponded with Tamarin Lindenberg at her Memphis, Tennessee address without mentioning any confusion about the application of Tennessee law as stipulated in the Policy. 

Plaintiffs further argue that Defendant did not raise the issue of conflict of laws earlier in the proceedings, including when it paid the death benefit under a court order. They assert that the question of whether Defendant's failure to adequately review Tennessee case law constitutes a breach of contract and statutory bad faith is a factual issue for a jury. Plaintiffs present evidence indicating they maintained residence in Tennessee, including that correspondence was sent to their Tennessee address, the Policy was signed in Tennessee, and Defendant did not inquire about Ms. Lindenberg’s New Jersey position or inform her of any confusion regarding her residence.

Regarding the waivers, Plaintiffs claim bad faith from Defendant for not providing a waiver for Mary Angela Lindenberg while claiming a well-reasoned basis for this failure. Defendant contends it needed clarity on how Ms. Lindenberg wanted the proceeds paid, which she allegedly did not provide despite multiple requests. Plaintiffs dispute this argument, asserting that Defendant either stated Tamarin had waived her rights to the death benefit or that benefits were designated for minor children. They also claim that a delay in providing waivers was due to Nate Maas's workload and that requiring signed waivers before disbursing benefits was in bad faith, as such a requirement is not found in JNL’s Policy.

Under the Policy, JNL was required to disburse the death benefit to Ms. Lindenberg within two months after receiving Mr. Lindenberg’s death certificate, which it failed to do. Plaintiffs have presented sufficient evidence indicating Defendant breached the contract and acted in statutory bad faith, including communications that misrepresented Ms. Lindenberg's beneficiary status and cited procedural delays without basis in the Policy. Consequently, the Court denied Defendant’s Motion for Summary Judgment regarding Ms. Lindenberg’s bad faith claim.

Defendant seeks to dismiss claims from Zachary and Sophie Lindenberg, asserting they lack legal standing as they are not parties to the Policy and have waived any interests through their guardian ad litem. Plaintiffs counter that they are entitled to recovery as third-party beneficiaries, citing a precedent where minors were awarded damages. However, Tennessee law distinguishes between intended and incidental beneficiaries, allowing only intended beneficiaries to pursue breach of contract claims. The Court found that Zachary and Sophie are incidental beneficiaries, as Plaintiffs did not demonstrate any clear intent within the contract to benefit them. As such, the claims for breach of contract and statutory bad faith by Zachary and Sophie Lindenberg were dismissed.

Plaintiffs fail to demonstrate that they possess proof that the promisor’s performance would discharge a duty owed to Zachary and Sophie Lindenberg. Their main argument centers on the claim that Defendant’s refusal to pay the death benefit caused them damages, including the inability to hold a proper funeral for their father and being sent to live with unfamiliar families due to their mother needing to work out of state. The court distinguishes this case from Wilson, where a minor plaintiff was allowed to assert a breach of contract claim because they were an intended beneficiary of a credit life policy directly tied to their needs. In this instance, the Court of Appeals in Ferguson supports the view that Zachary and Sophie are not third-party beneficiaries of the insurance policy, as they have not obtained a judgment against the insured and, therefore, are merely incidental beneficiaries without the standing to sue the insurance company. Their guardians waived any rights to the insurance proceeds, further solidifying their status as incidental beneficiaries. Consequently, the Court dismisses all claims from Zachary and Sophie but clarifies that this dismissal does not affect Tamarin Lindenberg’s claims.

Regarding punitive damages, Defendant seeks dismissal based on the assertion that the record lacks sufficient facts to warrant such an award. They argue that Tennessee’s Bad Faith statute precludes punitive damages, a claim previously rejected by the Court. Additionally, Defendant contends that Plaintiffs cannot meet the stringent burden of proof necessary for punitive damages under Tennessee law, which requires showing that the breach was not only intentional but also motivated by ill will or constituted a gross deviation from standard care. Defendant maintains that they have consistently acknowledged their obligation to pay the proceeds and have been ready to do so once assured against multiple liabilities.

Defendants argue that their actions were not reckless, claiming Jackson's actions were based on legitimate grounds and lacked the egregious conduct necessary for punitive damages. Courts typically do not grant punitive damages in breach of contract cases unless there are severe wrongs. However, Plaintiffs have presented sufficient evidence to preclude summary judgment. This includes evidence that the Defendant imposed extra-contractual demands on Tamarin Lindenberg despite established law, was aware of Plaintiffs' financial difficulties, ignored the sales agent's opinion regarding the Policy, and concealed the reason for denial related to confusion over Lindenberg’s state of residence. As a result, the Court denies Defendant's Motion for Summary Judgment regarding punitive damages. Additionally, the Court grants Jackson National Life Insurance Company's Motion for Summary Judgment concerning claims from Zachary Lindenberg and SML, while denying it for all other claims.