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Letard v. General American Life Insurance Co.

February 15, 2007

FRANCES XAVIER LETARD, JR., PLAINTIFF,
v.
GENERAL AMERICAN LIFE INSURANCE COMPANY, DEFENDANT.



The opinion of the court was delivered by: Phillips

MEMORANDUM OPINION

This is an insurance coverage case regarding the lapse of three General American individual disability insurance policies formerly held by plaintiff, Frances Xavier Letard, Jr., who is a physician, due to plaintiff's failure to pay the insurance premiums. Defendant General American has moved for summary judgment, stating there are no genuine issues of material fact, and it is entitled to entry of judgment as a matter of law. For the reasons which follow, defendant's motion for summary judgment will be granted, and this action will be dismissed.

Factual Background

On December 8, 2004, Letard filed suit claiming that General American wrongfully terminated his insurance coverage. In his complaint, Letard acknowledged that General American cancelled the policies when he did not pay the premiums due. Letard, however, contends that General American consistently mailed him billing statements for the premiums for the policies; that he relied upon the mailing out of premium notices; but that he did not receive a statement for the premium due in February 2004 from General American. Letard claims that General American "surreptitiously caused the cancellation of the policies in such a way as to attempt thwarting the spirit of the contract between the parties . . . any inaction on his part was proximately caused by the inaction, negligence, and/or fault of General American in failing to forward to him the normal insurance premium statement which General American had been doing for many years, and which had become the normal course of conduct between the parties." In his prayer for relief, Letard does not ask the court to award him monetary damages, but seeks only "specific performance" and an order directing the reinstatement of his disability insurance policies.

General American, on the other hand, points out that the policies specifically provide that "the consideration for this insurance is the application . . . and the payment of the required premiums," and that "you may continue this policy until age 65 by paying each premium as it is due." Thus, General American asserts, Letard's privilege of renewing the policy is contingent upon "paying each premium as it is due." The policies additionally state that they "will not be kept in force after the last day of the term for which the premium is paid except as stated in the grace period provision." Regarding the grace period, the policies declare:

If you do not pay a premium on or before its due date, we will keep this Policy in force and continue coverage for a Grace Period of 31 days beyond that date. If you fail to pay the premium during the Grace Period, this Policy and all coverage will terminate.

It is General American's policy and practice to prepare and send out computer generated invoices to insureds to remind them when payments of disability insurance premiums are due, and to send out computer-generated "list bills" regarding premiums due for more than one policy to insureds such as Letard who have multiple disability insurance policies. General American's address of record for Letard was Plastic Surgery Consultants, Attention Frances Letard Jr., 10265 Kingston Pike Ste C, Knoxville, Tennessee 37922-3277. General American, in the regular course of business, sent list bills to Letard at this address, including a list bill for the premiums due in February 2004.

Under its automated list billing practices and procedures, General American sends out a list bill to an insured approximately 20 days prior to the premium due date. Forty days after the list bill is sent, if payment of the premium has not been received, then General American sends a notice that the grace period is about to expire to the servicing agent for the policies. Thirty-three days after the premium due date, if payment of the premium has not been received, then General American sends a late notice to the insured and to the agent. As demonstrated by General American's backup transaction files, in January 2004, General American generated list bill No. 18421825 for the premiums due on Letard's policies. After the list bill for the policies was generated by computer, the list bill would have been mailed to Letard's address of record. Letard, however, testified that he did not receive the list bill from General American for the premiums due in February 2004.

General American's files reflect that Policy No. 8421825 was issued on January 8, 1987, and lapsed due to nonpayment of premiums on February 8, 2004. On April 14, 2004, General American wrote Letard and advised him that the policy had lapsed because the premium due had not been paid, and that he could apply for reinstatement by completing an application for reinstatement. The letter further advised Letard that after submission of the application for reinstatement, a paramedical exam might be scheduled, and that General American would only consider reinstatement for six months from the date the policy lapsed due to nonpayment. Letard testified that he did not receive General American's April 14, 2004 lapse letter.

Letard's second policy, Policy No. 8424166 was issued on March 1, 1987 and lapsed due to nonpayment of premiums on February 1, 2004. On April 7, 2004, General American wrote plaintiff a letter like the April 14 2004 letter referenced above. Letard, however, testified he did not receive General American's April 7, 2004 lapse letter.

Letard's third policy, Policy No. 8449351 was issued on September 13, 1989, and lapsed due to nonpayment of premiums on February 13, 2004. On April 20, 2004, General American wrote plaintiff a letter similar to the April 7 and 14, 2004 letters referenced above. Again, Letard testified that he did not receive the April 20, 2004 lapse letter.

Regarding reinstatement, the policies provide:

If this Policy terminates for nonpayment of premiums, you may apply to reinstate it. In no event, however, will we reinstate if the unpaid premium is six or more months ...


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