On October 22, 2018, the Appeals Court ruled that MassMutual’s customary and usual practice of notifying an insured’s broker of the lapsing of an insured’s life insurance policy did not vitiate the policy’s cancellation. In this case, Jeffrey Dickerson v. MassMutual Life Insurance Co., the Appeals Court held that the notice terms of a life insurance policy were not affected by MassMutual’s failing to follow its custom and practice of giving the insureds’ insurance broker notice of his client’s neglect to pay her premium.
While this decision relates to life insurance, its implications relating to policy notice requirements on any coverage cancellations, lapses, or policy modifications apply to all producers, agencies, and insurers marketing any insurance product.
Conversion of term-rider to stand-alone policy leads to claim of no notice
From August 21, 2001, until early 2013, Jeannine Dickerson (“Mrs. Dickerson”) had coverage with MassMutual under a $250,000 other-insured rider on a life insurance policy (“the 2001 policy”) owned by her husband, Jeffrey Dickerson (“Mr. Dickerson”). In early 2013, Mrs. Dickerson, with the assistance of her broker converted her term insurance rider to a $250,000 stand-alone policy (“the 2013 policy”).
On March 12, 2013, Mrs. Dickerson paid the first premium on the 2013 policy with a $693.94 check from the Dickersons’ joint checking account. Mr. Dickerson’s wife was to make quarterly premium payments to keep the policy in force. The policy provided a death benefit if the insured died while the policy was in force, but would terminate without value if MassMutual did not receive payment of the required amount by the end of a grace period. The policy stated: “We will send a written notification to you if the policy enters the Grace Period.”
Between May 17, 2013, and February 17, 2014, MassMutual mailed Mrs. Dickerson invoices for quarterly premiums of $693.94. Mrs. Dickerson did not pay these invoices and deductions were made from her policy’s account value to keep her policy in force.
While covered by the 2013 policy, Mrs. Dickerson suffered from some serious medical conditions that required her hospitalized and with which she had difficulty coping. The Dickersons remained married during this time, but Mr. Dickerson moved out of the home with the couple’s children and Mrs. Dickerson resided there alone, receiving mail for the policy at her post office box.
On September 7, 2014, Mrs. Dickerson died unexpectedly at the age of 56. Mrs. Dickerson had not retrieved or examined her mail regularly, and, at the time of her death, she had a significant accumulation of unopened mail at both her home and in her post office box.
When Mr. Dickerson made a claim through his family’s insurance broker on the policy covering his wife, MassMutual’s denied the claim because it had canceled Mrs. Dickerson’s policy for non-payment on July 21, 2014, forty-eight days before her death on September 7, 2014.
Mr. Dickerson claims MassMutual failed to notify the family’s insurance broker of the lapse
Bryan Becotte (“Mr. Becotte”), was the broker for the Dickersons’ life insurance policies with MassMutual. Mr. Becotte was an independent broker working for Baystate Financial Services and represented his clients’ interests in their transactions with MassMutual and other insurers. He was not an employee of MassMutual.
Mrs. Dickerson was the bill payer for the 2001 and 2013 policies because Mr. Dickerson traveled extensively for his job. With her continuing health concerns, there were several times over Mrs. Dickerson’s thirteen years with MassMutual coverage when the Dickersons missed payments.
MassMutual had a standard operating procedure of notifying brokers and agents through email of their clients’ missed payments, grace periods, and coverage terminations. In the Dickersons’ case, before the 2013 policy conversion, MassMutual would notify Mr. Becotte of Mrs. Dickerson’s failure to make payments and the Dickersons would bring their payments up to date after being called or even visited by Mr. Becotte.
After the 2013 conversion, however, when Mrs. Dickerson missed five payments on her policy, she was sent two grace notices and one lapse/termination notice. MassMutual never notified Mr. Becotte. It did notify its agency division of one such notice, but its agency division never forwarded that email to Mr. Becotte.
Mr. Becotte submitted four different requests to MassMutual for reinstatement based on the failure of MassMutual to notify him or Mr. Dickerson of the late payments and impending cancellation of Mrs. Dickerson’s policy. However, MassMutual refused to reconsider, stating that it had complied with the policy’s notice requirements, and that was all that it was legally required to do under the circumstances.
Superior court judge rules notice to broker not required under the policy
Mr. Dickerson filed a six-count complaint in the Superior Court alleging MassMutual (i) breached its contract, (ii) was estopped to deny coverage based upon implied promise on notice, (iii) had made intentional misrepresentations, (iv) had made negligent misrepresentations, (v) violations of Mass. Gen. Laws c. 93A and 176D, and (vi) seeking a declaratory judgment that MassMutual had not validly canceled Mrs. Dickerson’s policy.
On cross-motions for summary judgment, the Superior Court granted MassMutual ’s motion for summary judgment, and Mr. Dickerson appealed the denial of his claim to the Appeals Court.
Appeals Court rules failure to follow the practice of notifying broker did not invalidate policy cancellation
On appeal, Mr. Dickerson argued that the Superior Court judge had erred in allowing summary judgment in favor of MassMutual because the undisputed facts established that MassMutual breached its obligation to provide notice to him and his broker that the policy was entering a grace period.
For its part, MassMutual argued the insurance contract was unambiguous in its notification requirements for payments due, the grace period, and termination. The insurance contract was between MassMutual and Mrs. Dickerson and did not contain any provisions requiring MassMutual to provide notifications to any third party. Thus, MassMutual had fulfilled all the policy’s requirements by mailing all required notices to Mrs. Dickerson’s address of record.
Mr. Dickerson, for his part, claimed that the MassMutual promise in the policy to provide notice to “you” referred, not only to his wife but also to Mr. Dickerson and his family’s insurance broker who had signed the application (converting the policy into a stand-alone one) as “soliciting agent.” He based this argument on the fact that the term “you” was undefined in the policy.
In support of his argument that “you” also refers to the broker, Mr. Dickerson argued to the Court that by custom and usage, MassMutual’s practice of notifying insureds’ brokers of their clients’ late payments became incorporated into the policy.
Under Massachusetts law, courts may use evidence of an insurer’s “custom and practice” as an aid in policy interpretation, but not to contradict or vary the terms of a policy.
The Appeals Court ruled that MassMutual’s obligation under the policy to notify “you” (i.e., the owner), could not reasonably be construed as an obligation to notify the insured’s broker. To the Court, any incorporation of a past practice of notifying the insured’s broker into the policy would vary the explicit terms of the policy. Also, the Court noted the policy itself states that “[t]he entire contract consists of the policy, which includes the application and any rider(s) and endorsement(s) the policy has.”
Since neither the policy nor the application or any riders or endorsements to the policy provided for notice to the Dickerson’s broker, the Court ruled the Superior Court had correctly rejected Mr. Dickerson’s argument and ruled in favor of MassMutual on the breach of contract claim.
The Appeals Court judges found, as had the Superior Court, that Mr. Dickerson’s remaining claims were dependent on the validity of the breach of his contract claim or upon some misrepresentation by MassMutual which Mr. Dickerson had failed to establish.
Thus, the Appeals Court found no error in the Superior Court decision denying Mr. Dickerson’s claim and dismissed his appeal.
Mr. Dickerson has twenty days to request further appellate review by the Supreme Judicial Court
The Massachusetts Appeals Court is an intermediate appellate court. The ultimate judicial authority resides with the Supreme Judicial Court. Parties dissatisfied with an Appeal Court’s decision may apply for further appellate review. However, the allowance of any further appeal is discretionary with the Supreme Judicial Court.
Under the Massachusetts Rules of Appellate Procedure, Mr. Dickerson has until November 12, 2018, to apply to the Supreme Judicial Court for further appellate review.
Agency Checklists will keep you posted
Agency Checklists will monitor this case and keeps its readers posted as to any further developments if Mr. Dickerson files for further appellate review by the Supreme Judicial Court.