MINNEAPOLIS PERSONAL INJURY ATTORNEY  
attorney Michael E. Douglas Attorney at Law
  Personal Injury Attorney
  St. Paul Workers Compensation Lawyer work comp attorney
 > About Me
   :: My Commitment
   :: Our Community
   
 > Legal Practice Areas
  twin cities comsumer lawPersonal Injury
   :: Traffic Accidents
   :: Medical Malpractice
   :: Social Security Disability
   :: Premises Liability
   :: Wrongful Death
   :: Dog Bite
   :: Back/Spinal/Neck Injuries
   :: Whiplash
   :: Defective Medical Devices
   :: Defective Drugs
  Minnesota Personal InjuryWorkers Compensation
  St. Paul personal injuryConsumer Law
   :: Debt Collection
   :: Repossessions
   :: Foreclosures
   :: Loan, Credit, Banking
   :: Arbitration Agreements
   :: Deception and Fraud
   :: Auto Fraud / Lemon Law
   :: Warranties
   :: Predatory Lending
   
 > Contact Us
   :: Contact Us
 

Law Offices of Michael E. Douglas
P.O. Box 251551
Woodbury, Minnesota 55125-6551
   

 Saint Paul Lawyer
 
 mdouglas@injurylawtwincities.com

 

Jefferson-Pilot Life Ins. Co. v. Marietta Campbell Ins. Group, LLC: US District Court : CIVIL PROCEDURE | INSURANCE - no using one 'mirror' suit to end-run other; utmost good faith duty regarding life insurance application; agent collusion Questions of fact

UNITED STATES DISTRICT COURT
DISTRICT OF MINNESOTA
Jefferson-Pilot Life Insurance
Company, a North Carolina
corporation,
Plaintiff,
MEMORANDUM OPINION
v. AND ORDER
Civ. No. 07-1359 ADM/RLE
Marietta Campbell Insurance Group,
LLC, a Minnesota limited liability
corporation, and Tom Campbell, as
executor of the Estate of Marietta
Campbell,
Defendants.
Marietta Campbell Insurance Group,
LLC,
Plaintiff,
v. Civ. No. 07-4534 ADM/RLE
Jefferson-Pilot Life Insurance Co.,
Defendant.
______________________________________________________________________________
Stephen C. Baker, Esq., and James S. Bainbridge, Esq., Drinker Biddle & Reath LLP,
Philadelphia, PA, and Shane H. Anderson, Esq., Mackall, Crouse & Moore, PLC, Minneapolis,
MN, argued on behalf of Jefferson-Pilot Life Insurance Co.
Robert J. King., Esq., and Ronald L. Haskvitz, Esq., Lommen, Abdo, Cole, King & Stageberg,
P.A., Minneapolis, MN, argued on behalf of Marietta Campbell Insurance Group, LLC, and Tom
Campbell, as executor of the Estate of Marietta Campbell.
______________________________________________________________________________
1 On a motion for summary judgment, the Court views the evidence in the light most
favorable to the nonmoving party. Ludwig v. Anderson, 54 F.3d 465, 470 (8th Cir. 1995).
2 Hereinafter, all docket references are to Civil No. 07-1359 unless otherwise specified.
2
I. INTRODUCTION
On May 15, 2008, the undersigned United States District Judge heard argument on
Marietta Campbell Insurance Group, LLC (MCIG), and Tom Campbells Motion for Summary
Judgment [Civ. No. 07-1359 Docket No. 64; Civ. No. 07-4534 Docket No. 40], and on Jefferson-
Pilot Life Insurance Co.s (Jefferson-Pilot) Objection [Civ. No. 07-1359 Docket No. 80; Civ.
No. 07-4534 Docket No. 55] to Chief Magistrate Judge Raymond L. Ericksons April 10, 2008,
Order [Civ. No. 07-1359 Docket No. 75; Civ. No. 07-4534 Docket No. 54]. For the reasons set
forth below, MCIG and Tom Campbells Motion is denied and Jefferson-Pilots Objection is
overruled.
II. BACKGROUND1
A. Marietta Campbells Life Insurance Policies
1. The Purchase of Million of Insurance on the Life of Marietta Campbell
This dispute arises from Jefferson-Pilots rescission of an insurance policy on the life of
Marietta Campbell because of alleged misrepresentations in her application for insurance.
Marietta Campbell, her husband Paul, and their sons Tom, Bill, and Greg, owned a farming
business known as Tri-Campbell Farms, a trucking business known as Tri-Campbell, LLC, and a
produce brokerage company known as Tri-Campbell, Inc. (collectively, the Tri-Campbell
Entities). T. Campbell Dep. (Anderson Aff. [Docket No. 74])2 at 7-8. The Tri-Campbell
Entities operate in North Dakota. By the spring of 2005, Paul and Marietta Campbell were no
3
longer actively involved in managing the Tri-Campbell Entities. Marietta Campbell turned
seventy-nine years old in July 2005. Anderson Aff. Ex. 67 at JP200044.
In the years preceding 2005, Tom and Bill Campbell discussed purchasing life insurance
on their mothers life. T. Campbell Dep. at 9-10. The purpose of the life insurance would be to
benefit Tri-Campbell Farms. Id. at 61. Tom and Bill Campbell discussed life insurance with
Clay Swanson, a long-time friend who ran a farming operation with his brothers Blake and Bart
Swanson. Id. at 9-10. Clay Swanson arranged for Tom and Bill Campbell to contact Michael J.
Antonello (Antonello), an insurance agent in Minnesota. C. Swanson Dep. (Anderson Aff. Ex.
6; King Aff. [Docket No. 77] Ex. G) at 20. Antonello had previously assisted Clay Swanson and
his brothers in obtaining life insurance policies on their mothers life, and selling the policies to
outside investors. Id. at 17-18. The proceeds from the sale of the policies went to a limited
liability companythe Wilma Swanson, LLCthe Swanson brothers had established with
Antonellos assistance. Id.
In the spring of 2005, Tom Campbell began discussions with Antonello about obtaining
life insurance on Marietta Campbell. Antonello Dep. (Haskvitz Aff. [Docket No. 67] Ex. 2;
Anderson Aff. Exs. 1-2; King Aff. Ex. E) at 32. Jefferson-Pilot had contractually authorized
Antonello to act as Jefferson-Pilots agent in soliciting life insurance applications. Anderson
Aff. Ex. 23. Antonello had similar contracts with other life insurance companies. After talking
with Tom Campbell, Antonello sent the Campbells a preliminary inquiry form for information
about Marietta Campbell. Haskvitz Aff. Ex. 5. Tom Campbell faxed the completed form to
Antonello on June 2, 2005. Id.; T. Campbell Dep. at 25.
4
Tom Campbell and Antonello initially discussed obtaining a total of million in
benefits payable on Marietta Campbells death. T. Campbell Dep. at 61; Antonello Dep. at 35.
In June 2005, Antonello sent the Campbells applications for life insurance from various
companies. Antonello Dep. at 32. On June 27, 2005, Marietta Campbell signed and dated blank
applications for life insurance from Jefferson-Pilot, American General Life Insurance Company
(AIG), Hartford Life and Annuity Insurance Company (Hartford), and Allianz Life
Insurance Company of North America (Allianz). Haskvitz Aff. Ex. 7; Anderson Aff. Exs. 28,
86; Antonello Dep. at 42. Tom Campbell sent the signed applications to Antonellos office.
Sometime between June 27, 2005, and July 13, 2005, Antonello spoke by phone with
Tom Campbell and Marietta Campbell to elicit the information necessary to complete the life
insurance applications. T. Campbell Dep. at 29-30. By July 13, 2005, Antonello and Matthew
Schafer (Schafer), who was Antonellos assistant, completed the Jefferson-Pilot and AIG
applications. Antonello Dep. at 42; Schafer Dep. at 9, 123.
The Jefferson-Pilot application on the life of Marietta Campbell, as completed by
Antonello and Schafer, sought million in life insurance, and listed Marietta Campbell as the
owner of the policy and her estate as the sole beneficiary. Haskvitz Aff. Ex. 6 at JP000003-
000004. Question sixty of the application asked: Do you have any applications pending with
any other life insurance company now? Id. at JP000005. Schafer checked the box for yes
and explained: Also Applied American General Life. Id. Question sixty-three of the
Jefferson-Pilot application asked: Have you been involved in any discussion about the possible
sale or assignment of this policy to a life settlement, viatical or other secondary market
3 Hartford initially rejected the application because Antonello did not hold an appropriate
appointment to solicit applications on behalf of Hartford. Anderson Aff. Ex. 30. Antonello
obtained the necessary appointment and submitted a new application signed and dated by
Marietta Campbell on September 29, 2005. Anderson Aff. Ex. 31.
5
provider. Id. Schafer checked the box for no. Id.
The AIG life insurance application, as completed by Antonello and Schaffer, also sought
million in life insurance and listed Marietta Campbell as the owner of the policy and her
estate as the sole beneficiary. Haskvitz Aff. Ex. 7 at TC0089. In response to a question about
other pending applications, Schafer wrote: Also applying Jefferson Pilot ,000,000. Id. at
TC0090.
On July 13, 2005, Antonellos office faxed Marietta Campbells Jefferson-Pilot life
insurance application to Jefferson-Pilots service office. Haskvitz Aff. Ex. 6. That same day or
the next day, Antonellos office sent Marietta Campbells AIG life insurance application to
AIGs service office. Anderson Aff. Ex. 55 at 4. AIG performed its underwriting process and
issued a million policy to Marietta Campbell on August 17, 2005. Id. at 5. Jefferson-Pilot
performed its underwriting process and issued a million life insurance policy to Marietta
Campbell on September 7, 2005. Haskvitz Aff. Ex. 13 at JP000088.
Meanwhile, unbeknownst to Jefferson-Pilot and AIG, Antonello and Schafer submitted
additional life insurance applications for Marietta Campbell. Tom Campbell knew of the
additional applications. T. Campbell Dep. at 80. By August 18, 2005, Antonellos office
submitted Marietta Campbells Allianz and Hartford life insurance applications,3 both dated June
27, 2005, to Allianzs and Hartfords respective service offices. Anderson Aff. Ex. 30; Haskvitz
Aff. Ex. 9 at 4-5. Marietta Campbells Allianz and Hartford applications each sought a .5
6
million death benefit. Anderson Aff. Ex. 28 at 7, Ex. 29 at 4. Neither the Allianz nor the
Hartford application fully disclosed the life insurance applications Marietta Campbell had
submitted to other insurers. Anderson Aff. Exs. 28-29. Allianz issued a .5 million life
insurance policy to Marietta Campbell on September 24, 2005. Haskvitz Aff. Ex. 9 at 5.
Hartford issued a .5 million life insurance policy to Marietta Campbell on October 3, 2005.
Id. at 6.
In September 2005, Antonello submitted a fifth life insurance application, signed and
dated by Marietta Campbell on September 8, 2005, to Lincoln Benefit Life Insurance Companys
(Lincoln Benefit) service office. Anderson Aff. Ex. 32. Marietta Campbells Lincoln Benefit
application sought million in death benefits. Id. at 2. In response to a question about life
insurance applications pending with other companies, Lincoln Benefit application referred to the
AIG application but did not disclose the Jefferson-Pilot, Allianz, or Hartford applications. Id.
Lincoln Benefit approved the application and issued a million life insurance policy to
Marietta Campbell. Anderson Aff. Ex. 9 at 5. Thus, Marietta Campbell had five life insurance
policies providing a total of million in death benefits.
2. The Campbells and the Swansons Establish Limited Liability Companies to
Fund the Life Insurance Policies
Meanwhile, in June 2005, Marietta Campbell, the Campbell brothers, and the Swanson
brothers decided, based on Antonellos advice, to establish limited liability companies to pay for
and receive the death benefits from Marietta Campbells life insurance policies. T. Campbell
Dep. at 59-60, 77-78. Marietta Campbell agreed to whatever her sons proposed and was only
nominally involved in the decision making. Id. at 23-24. MCIG was established on August 11,
2005, to fund and benefit from Marietta Campbells Jefferson-Pilot and AIG policies. Anderson
7
Aff. Ex. 13. An August 12, 2005, Member Control Agreement reflects that Marietta Campbell
was initially the sole member of MCIG. Id. On August 13, 2005, MCIG issued 4,950 shares to
Tom Campbell and 4,950 shares to Clay Swanson, leaving Marietta Campbell with 100 shares.
Id. Exs. 11-12. In exchange, Tom Campbell and Clay Swanson each agreed to contribute
6,870 to MCIG. Id. Ex. 11. On September 2, 2005, Tom Campbell deposited 8,435 into
MCIGs bank account, and Blake Swanson, Clay Swanson, and Bart Swanson each contributed
,145 into MCIGs bank account. Id. Ex. 9 at 4. Tom Campbell drafted a check for 4,990
from MCIGs bank account to pay the first Jefferson-Pilot life insurance premium. Id. Ex. 18.
In August or September 2005, Marietta Campbell and Associates (MCA), a limited
liability company, was established to invest in Marietta Campbells Allianz, Hartford, and
Lincoln Benefit policies. The Swanson brothers contributed 3,000 and Antonello contributed
3,000 to MCA. Id. Ex. 9 at 4. The Campbell brothers did not contribute to MCA because
they did not want to spend more money to purchase life insurance policies. T. Campbell Dep. at
77. Although the Campbells did not contribute to MCA, Marietta and Tom Campbell were given
ten percent of MCAs shares. Id. at 79.
3. Marietta Campbell Dies; Antonello Changes the Beneficiary of the Jefferson-
Pilot Policy to MCIG
On April 2, 2006, Marietta Campbell died from an intracerebral hematoma. Anderson
Aff. Ex. 54. Although the Campbells, the Swansons, and Antonello had planned to designate
MCIG and MCA as the beneficiaries of the respective life insurance policies those entities had
funded, the necessary paperwork was not submitted before Marietta Campbells sudden death.
Antonello Dep. at 130. However, Antonello had in his file a blank change of beneficiary form
that Marietta Campbell had signed and dated on August 31, 2005. Id. After Marietta
8
Campbells death, Antonello filled in the form to reflect that MCIG would be the new
beneficiary of the Jefferson-Pilot policy. Anderson Aff. Ex. 19. On April 3, 2006, Antonello
sent the completed form to Jefferson-Pilot by overnight mail. Id. Ex. 49. Unaware that Marietta
Campbell had died, a Jefferson-Pilot employee sent a fax to Marietta Campbell notifying her that
the date on the form was too old and that she needed to complete the field describing the new
beneficiarys relationship to the insured. Id. Ex. 20. Antonello altered the form to falsely reflect
that Marietta Campbell signed it on March 30, 2006, and to falsely reflect that Marietta
Campbell owned one-hundred percent of MCIG. Id. Ex. 20. On April 12, 2006, Jefferson-Pilot
approved the updated change-of-beneficiary request. Id. Ex. 53.
4. Jefferson-Pilot Performs a Contestable Claim Review and Rescinds Marietta
Campbells Policy
On May 1, 2006, Tom Campbell completed and submitted a form to Jefferson-Pilot
reflecting that Marietta Campbell had died and claiming death benefits for Marietta Campbell
Ins. Grp. LLC / Tom Campbell. Id. Ex. 54. When an insured dies within two years of the
issuance of a life insurance policy, Jefferson-Pilot performs an investigation to determine
whether the insured provided accurate information on the application for life insurance. Tart
Dep. (Anderson Aff. Ex. 7; King Aff. Ex. B) at 9-10. Kenneth Elder (Elder), a Jefferson-Pilot
employee, investigated the facts surrounding Marietta Campbells policy. Elder Dep. (Haskvitz
Aff. Ex. 11; Anderson Aff. Ex. 4) at 26-27. In mid-2006, the Minnesota Department of
Commerce contacted Jefferson-Pilot and other life insurance companies regarding other
instances in which Antonello knowingly submitted life insurance applications that did not
disclose that the applicant had other pending applications. Id. at 25-26. Elder then began
communicating with other life insurance companies and learned of Marietta Campbells Allianz,
4 On January 3, 2007, Jefferson-Pilot terminated Antonellos contract as a result of
material misrepresentation on applications regarding other insurance in force or pending at the
time of application. Anderson Aff. Ex. 24.
9
Hartford, and Lincoln Benefit life insurance policies. Anderson Aff. Exs. 39, 41, 43.
On October 4, 2006, Elder and Lydia Tart (Tart), the senior manager of Jefferson-
Pilots Life Claims Department, participated in a conference call with employees from Hartford,
AIG, Allianz, and Lincoln Benefit, who were also investigating Antonellos conduct and
Marietta Campbells life insurance policies. Id. Ex. 43. During the call, Allianz, Hartford,
Lincoln Benefit, and AIG stated they would rescind their respective life insurance policies issued
to Marietta Campbell based on her failure to fully disclose her pending life insurance
applications. Id. Ex. 43. Tart and Elder stated that Jefferson-Pilot was still deciding whether to
rescind Marietta Campbells life insurance policy. Id. Ex. 43. Hartford, AIG, Allianz, and
Lincoln Benefit also stated they would terminate their respective agent contracts with Antonello.
Id. Ex. 43. Tart and Elder stated they would recommend that Jefferson-Pilot terminate
Antonellos agent contract. Id. Ex. 43.4
On October 6, 2006, Tart presented the findings of Elders investigation to John Valickus
(Valickus) in Jefferson-Pilots Underwriting Department. Id. Ex. 36. On October 19, 2006,
Valickus wrote on an internal contestable claim review form that [b]ased on true net worth of
,000,000 (+), income, and total line to be placed of ,000,000, we would have declined the
coverage [for Marietta Campbell] noting theres no financial need for this amount. Id. Ex. 36.
On October 27, 2006, an attorney in Jefferson-Pilots legal department concluded that [b]ased
on [Valickuss] response, the misrepresentations were material. They also appear to be made
with the intent to deceive, since most of the apps. were taken the same day. Under ND law, the
10
misreps are a valid basis for rescission. Id. Ex. 36.
In a letter of November 16, 2006, Tart informed Tom Campbell that Jefferson-Pilot was
rescinding the life insurance policy issued to Marietta Campbell. King Aff. Ex. D. Referring to
Question Sixty of the Jefferson-Pilot application, Tart explained that [t]he information
regarding pending applications with other Companies was not fully disclosed on our application.
Had we been advised of the pending applications . . . we would have declined the coverage. Id.
Ex. D. Tart enclosed a check for 8,440, which represented the 4,990 initial premium plus
,450 in interest. Id. Ex. D.
In a letter of November 30, 2006, MCIG and Tom Campbells former counsel disputed
Jefferson-Pilots decision to rescind Marietta Campbells policy. Anderson Aff. Ex. 38. Noting
that MCIG and Tom Campbell had voluntarily rescinded the Allianz, Hartford, and Lincoln
Benefit policies, the letter asserted that Jefferson-Pilots unwillingness to pay on the basis of
subsequent applications for policies which have been voluntarily rescinded is wholly untenable.
Your agent may have known of issues in these policy applications, but the Campbells did not.
Id. Ex. 38. Jefferson-Pilot did not change its decision to rescind Marietta Campbells life
insurance policy.
B. Procedural History
On February 27, 2007, Jefferson-Pilot filed a Complaint [Docket No. 1] against MCIG
and Tom Campbell, as executor of Marietta Campbells estate. Jefferson-Pilots Complaint
sought a declaratory judgment that Marietta Campbells life insurance policy is void and
rescinded due to material misrepresentations in her application. Jefferson-Pilots action was
docketed as Civil No. 07-1359 and was assigned to the undersigned Judge. For convenience,
11
Civil No. 07-1359 will be referred to as the Minnesota Action. Discovery in the Minnesota
Action has been referred to Chief Magistrate Judge Erickson. On June 19, 2007, Magistrate
Judge Erickson set an October 1, 2007, deadline for the parties to amend their pleadings. June
19, 2007, Order [Docket No. 10].
On February 26, 2007, MCIG served a Complaint [Civ. No. 07-4534 Docket No. 15-4]
on Jefferson-Pilot by delivering the complaint to the North Dakota Department of Insurance for
service on Jefferson-Pilot. Admission of Service [Civil No. 07-4534 Docket No. 15-5]. MCIGs
complaint bears a North Dakota state court caption. However, MCIG never filed the complaint
in state court. On March 16, 2007, Jefferson-Pilot removed the unfiled action to the United
States District Court for the District of North Dakota. On October 26, 2007, United States
District Judge Ralph R. Erickson granted Jefferson-Pilots motion to transfer MCIGs action to
this District. [Civ. No. 07-4534 Docket No. 16]. The action was docketed in this District as
Civil No. 07-4534 and the matter was initially assigned to Judge Richard H. Kyle. For
convenience, Civil No. 07-4534 is referred to as the North Dakota Action.
On November 16, 2007, Jefferson-Pilot and MCIG submitted a joint letter requesting that
the Minnesota Action and the North Dakota Action be assigned to the same judge because they
are mirror images of each other. Nov. 16, 2007, Letter [Docket No. 17]. Jefferson-Pilot and
MCIG stated that if the cases were assigned to the same judge, Jefferson-Pilot and MCIG will
ask that the cases then be consolidated for discovery and trial. Id. On November 20, 2007, the
North Dakota Action was reassigned to the undersigned Judge. Nov. 20, 2007, Order [Docket
No. 18]. However, the parties did not request that the cases be consolidated.
Over the next two months, the parties litigated the Minnesota Action while the North
12
Dakota Action was dormant. From November 20, 2007, to January 10, 2008, the parties did not
make any substantive filings in the North Dakota action. Jefferson-Pilot had not filed an answer.
On January 10, 2008, Magistrate Judge Erickson ordered counsel for MCIG to notify Jefferson-
Pilot that it must file an answer or it would risk a default judgment. January 10, 2008, Order
[Civ. No. 07-4534 Docket No. 20]. On January 11, 2008, Jefferson-Pilot filed an Answer [Civil
No. 07-4534 Docket No. 21] that did not assert any counterclaims.
Meanwhile, on January 2, 2008, Jefferson-Pilot moved to modify Magistrate Judge
Ericksons Pretrial Order in the Minnesota Action. Jefferson-Pilots Mot. to Modify Pretrial
Order [Docket No. 25]. On January 28, 2008, Judge Erickson extended the deadline for expert
disclosures but denied Jefferson-Pilots request to extend the deadline for amending the
pleadings as untimely. Jan. 28, 2008, Order [Docket No. 32]. Jefferson-Pilot apparently sought
leave to assert a claim that Marietta Campbells policy was void ab initio because Marietta
Campbell applied for the insurance at the behest of parties who lacked an insurable interest in
her life. Judge Erickson determined that Jefferson-Pilot had not shown good cause for extending
the deadline to amend the pleadings because Jefferson-Pilot had possession of discovery
materials supporting its lack-of-insurable-interest theory before the October 1, 2007, deadline.
Id. at 7-8.
Jefferson-Pilot did not appeal the denial of its motion to amend its Complaint in the
Minnesota Action. Instead, on February 4, 2008, Jefferson-Pilot filed an Amended Answer With
Counterclaim [Civ. No. 07-4534 Docket No. 23] in the North Dakota Action. Jefferson-Pilots
counterclaim asserted the lack-of-insurable-interest theory that Judge Erickson had denied
Jefferson-Pilot leave to assert in the Minnesota Action. Jefferson-Pilots Am. Answer 43-44.
13
On March 4, 2008, MCIG and Tom Campbell filed a motion [Docket No. 58] to strike
Jefferson-Pilots Amended Answer in the North Dakota Action and to consolidate the Minnesota
and North Dakota Actions. MCIG argued that the Pretrial Order in the Minnesota Action should
govern the North Dakota Action, and therefore Jefferson-Pilots Amended Answer was untimely.
On April 10, 2008, Judge Erickson granted MCIGs motion to strike Jefferson-Pilots Amended
Answer and to consolidate the Minnesota and North Dakota Actions.
III. DISCUSSION
A. Jefferson-Pilots Appeal from the April 10, 2008, Order
Jefferson-Pilot has timely objected to the April 10, 2008, Order striking Jefferson-Pilots
Amended Answer in the North Dakota Action. Jefferson-Pilot does not oppose any other portion
of the April 10, 2008, Order. If a party objects to a magistrate judges order on a non-dispositive
pretrial matter, the district judge must consider the objections and modify or set aside any part
of the order that is clearly erroneous or contrary to law. Fed. R. Civ. P. 72(a).
Judge Erickson struck Jefferson-Pilots Amended Answer in the North Dakota Action
after finding that Jefferson-Pilot was circumventing his January 28, 2008, Order in the
Minnesota Action denying Jefferson-Pilot leave to assert new claims. Jefferson-Pilot argues this
decision was clearly erroneous and contrary to law because it is inconsistent with Federal Rule
of Civil Procedure 15(a)(1)(B). Rule 15(a)(1)(B) provides that [a] party may amend its
pleading once as a matter of course within 20 days after serving the pleading if a responsive
pleading is not allowed and the action is not yet on the trial calendar. Because Jefferson-Pilot
electronically filed its January 11, 2008, Answer in the North Dakota Action, three additional
days are added to the twenty-day period established by Rule 15(a)(1)(B). Fed. R. Civ. P. 6(e).
14
Therefore, under normal circumstances, Jefferson-Pilots February 4, 2008, Amended Answer
would be accepted as a matter of course.
However, the Court agrees with Judge Erickson that Jefferson-Pilots Amended Answer
in the North Dakota Action should be stricken. Jefferson-Pilots Amended Answer in the North
Dakota Action is an attempt to circumvent the January 28, 2008, Order denying Jefferson-Pilot
leave to amend its Complaint in the Minnesota Action. Jefferson-Pilot and MCIG represented to
this Court in November 2007 that once the cases were before the same judge, the parties would
move to consolidate the actions for discovery and trial. Although the parties neglected to move
for consolidation, it is clear that from November 20, 2007, until February 4, 2008, the two
actions were substantively identical and the parties were litigating the claims in both actions
following the pretrial scheduling order in the Minnesota Action. Based on this Courts inherent
power to manage its docket, M.S. v. Wermers, 557 F.2d 170, 175 (8th Cir. 1977), and on the
parties representation that they would move to consolidate the two actions once they were
before the same judge, the Court finds that the two actions should have been consolidated soon
after the November 20, 2007, Order reassigning the North Dakota Action. Therefore, Judge
Erickson correctly determined that the pretrial scheduling order in the Minnesota Action
prevented Jefferson-Pilot from asserting new counterclaims in the mirror image North Dakota
action. Further, the Court agrees with Judge Ericksons determination that Jefferson-Pilot failed
to demonstrate good cause for extending the deadline for amending the pleadings. Accordingly,
Jefferson-Pilots objection is overruled.
15
B. MCIG and Tom Campbells Motion for Summary Judgment
1. Standard of Review
Federal Rule of Civil Procedure 56(c) provides that summary judgment shall issue if the
pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no
genuine issue as to any material fact and that the movant is entitled to judgment as a matter of
law. Fed. R. Civ. P. 56(c); see Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S.
574, 587 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 252 (1986); Celotex Corp. v.
Catrett, 477 U.S. 317, 323 (1986). On a motion for summary judgment, the Court views the
evidence in the light most favorable to the nonmoving party. Ludwig, 54 F.3d at 470. The
nonmoving party may not rest on mere allegations or denials, but must demonstrate on the
record the existence of specific facts which create a genuine issue for trial. Krenik v. County of
Le Sueur, 47 F.3d 953, 957 (8th Cir. 1995).
2. Alleged Misrepresentations
a. Pending Applications
The parties agree that North Dakota law applies. Under North Dakota law, an insurer can
rescind an insurance policy if the insured made a material misrepresentation on the insurance
application. N.D. Cent. Code 26.1-29-25. Jefferson-Pilot argues Marietta Campbells life
insurance application included a material misrepresentation because she failed to disclose the
Allianz and Hartford applications in response to question sixty, which inquired about any
applications pending with any other life insurance company now. The parties dispute the
meaning of the term pending. Jefferson-Pilot argues an application is pending when a
proposed insured signs the application and submits it to an insurance agent with the intent that
16
the insurance agent later complete and submit the application to the insurance companys service
office. Jefferson-Pilots Mem. of Law in Oppn to Summ. J. [Docket 73] at 24. Thus, under
Jefferson-Pilots definition, Marietta Campbells four life insurance applications were pending
on June 27, 2005, if Marietta Campbell intended that Antonello would complete and submit
them to the life insurance companies. Jefferson-Pilot argues there is a genuine issue of material
fact regarding Marietta Campbells intent and therefore there is a genuine issue of material fact
regarding whether Marietta Campbells answer to question sixty was a material
misrepresentation.
MCIG and Tom Campbell argue that a life insurance application is pending if it is
awaiting decision. MCIG and Tom Campbells Mem. in Supp. of Summ. J. [Docket No. 66] at
13. Under this definition, the Jefferson-Pilot and AIG applications did not become pending
until July 13, 2005, when Antonello submitted them to Jefferson-Pilots and AIGs respective
service offices. The Allianz and Hartford applications were not pending on July 13, 2005,
because Antonello had not submitted them. Thus, MCIG and Tom Campbell argue that when
Marietta Campbells Jefferson-Pilot application was submitted to Jefferson-Pilots service office
on July 13, 2005, the application fully disclosed all applications pending with any other life
insurance company now. Alternatively, MCIG and Tom Campbell assert that if the term
pending in question sixty is ambiguous, it should be construed against Jefferson-Pilot because
Jefferson-Pilot drafted the application. See Martin v. Allianz Life Ins. Co. of N. Am., 573
N.W.2d 823, 825 (N.D. 1998) (noting that insurance policies are contracts of adhesion, and we
resolve ambiguities in favor of the insured).
Although the parties dispute the meaning of pending in question sixty, the Court finds
17
it is unnecessary to define the precise meaning of the term. Jefferson-Pilot argues that if other,
undisclosed policies were submitted during Jefferson-Pilots underwriting process, those
applications should have been disclosed. Jefferson-Pilots Mem. in Oppn to Summ. J at 24
n.9. Although Jefferson-Pilot did not cite any legal authority for this proposition, it is well
settled under the common law doctrine of uberrimae fidei that as a matter of utmost good faith
and fair dealing, if an applicant for insurance discovers facts that make portions of his
application no longer true while the company deliberates, he must make full disclosure of the
newly discovered facts. PHL Variable Ins. Co. v. Fulbright McNeill, Inc., 519 F.3d 825, 829
(8th Cir. 2008). Federal courts apply the doctrine of uberrimae fidei in the absence of state law
to the contrary. Id. at 829 n.3 (citing Stipcich v. Metro. Life Ins. Co., 277 U.S. 311, 316 (1928)).
The necessity for complying with [the duty of utmost good faith] is not dispensed with by the
failure of the insurer to stipulate in the policy for such disclosure. Stipcich, 277 U.S. at 318.
There do not appear to be any North Dakota statutes or case law inconsistent with the
doctrine of uberrimae fidei. Therefore, the doctrine applies, and Marietta Campbells
representations in her Jefferson-Pilot application were continuing until Jefferson-Pilot issued the
policy on September 7, 2005. Accordingly, Marietta Campbell was required to update her
answer to question sixty of the Jefferson-Pilot application if other life insurance applications
became pending while Jefferson-Pilot was considering her application. Under MCIG and Tom
Campbells definition of pending, the Allianz and Hartford applications were pending on
August 18, 2005, when Antonello submitted them to Allianzs and Hartfords respective service
offices. Therefore, Marietta Campbell had a duty of utmost good faith to disclose the Allianz
and Hartford applications to Jefferson-Pilot. Marietta Campbells failure to do so was a material
5 The parties do not dispute that a misrepresentation in response to question sixty would
be a material misrepresentation.
18
misrepresentation.5 Consequently, Jefferson-Pilot can assert the misrepresentation as a basis for
rescinding Marietta Campbells policy and denying MCIG and Tom Campbells claim for death
benefits.
b. Discussions Regarding Selling the Jefferson-Pilot Policy to a Life
Settlement, Viatical, or Other Secondary Market Provider
Jefferson-Pilot also argues that the answer to question sixty-three in Marietta Campbells
Jefferson-Pilot application was a material misrepresentation. Question sixty-three asked: Have
you been involved in any discussion about the possible sale of this policy to a life settlement,
viatical or other secondary market provider? Haskvitz Aff. Ex. 6. at JP000005. Marietta
Campbells application answer was no. Id.
The terms life settlement, viatical or other secondary market provider are not defined in
Jefferson-Pilots application form, and the parties have not provided the Court with definitions of
these terms. The Eleventh Circuit has described viatical settlements as follows:
A viatical settlement is a transaction in which a terminally ill insured sells the
benefits of his life insurance policy to a third party in return for a lump-sum cash
payment equal to a percentage of the policys face value. The purchaser of the
viatical settlement realizes a profit if, when the insured dies, the policy benefits
paid are greater than the purchase price, adjusted for time value. Thus, in
purchasing a viatical settlement, it is of paramount importance that an accurate
determination be made of the insureds expected date of death. If the insured
lives longer than expected, the purchaser of the policy will realize a reduced
return, or may lose money on the investment.
S.E.C. v. Mut. Benefits Corp., 408 F.3d 737, 738 (11th Cir. 2005). Thus a viatical settlement
provider buys life insurance policies from terminally ill insureds. A life settlement provider
buys life insurance policies from insureds who are not terminally ill. S.E.C. v. Mut. Benefits
19
Corp., 323 F. Supp. 2d 1337, 1338 n.2 (S.D. Fla. 2004).
In support of its argument that Marietta Campbell should have answered yes to
question sixty-three, Jefferson-Pilot cites the following colloquy from Tom Campbells
deposition:
Q: Did you and Clay [Swanson] intend to sell any of your mothers life insurance
policies?
A: We discussed it but didnt really know what we were going to do.
Q: And nothing final had been resolved and your mother then died?
A: Correct.
T. Campbell Dep. at 93. However, this testimony does not demonstrate a genuine issue of
material fact because Tom Campbell was not asked when he had the discussions about selling
Marietta Campbells policies. It appears from the context of the questioning that the discussions
between Tom Campbell and Clay Swanson occurred after Jefferson-Pilot issued a life insurance
policy to Marietta Campbell. Jefferson-Pilot has not presented sufficient evidence that the
discussions occurred before it issued Marietta Campbells life insurance policy. Therefore,
Jefferson-Pilot cannot rely on Marietta Campbells answer to question sixty-three as a basis for
rescinding her policy.
3. Agency
MCIG and Tom Campbell argue that even if Marietta Campbells answer to question
sixty about pending applications was a misrepresentation, knowledge of the misrepresentation is
imputed to Jefferson-Pilot because Antonello, Jefferson-Pilots agent, and Schafer, who acted
under Antonellos supervision, supplied the answers to Marietta Campbells Jefferson-Pilot
application. The parties agree that under North Dakota law, an insurance agents knowledge is
20
imputed to the insurer unless the insured and the insurance agent acted in bad faith or colluded
against the insurer. See Leisen v. St. Paul Fire & Marine Ins. Co., 127 N.W. 837, 844 (N.D.
1910) (noting that an insured cannot benefit from the imputation rule [i]f there is any collusion
between him and the insurance companys agent).
Jefferson-Pilot argues there is a genuine issue of material fact regarding whether the
imputation rule applies. Jefferson-Pilot first contends there is a genuine issue of material fact
regarding whether Antonello was its agent. Jefferson-Pilot asserts that Antonello violated his
agency contract by not witnessing Marietta Campbell sign her application, soliciting investors
for interests in pools of life insurance policies, and omitting material information on Marietta
Campbells application. Jefferson-Pilots Mem. in Oppn to Summ. J. at 31 Jefferson-Pilots
attempt to disclaim its principal-agency relationship with Antonello is without merit. Under
North Dakota law,
An insurance producer who sells, solicits, or negotiates an application for
insurance of any kind is, in any controversy between the insured or the insureds
beneficiary and the insurer, regarded as representing the insurer and not the
insured or the insureds beneficiary. An insurance producer may not act as an
agent of an insurer unless the insurance producer becomes an appointed insurance
producer of that insurer. This section does not affect the apparent authority of an
agent.
N.D. Cent. Code 26.01-26-06. It is undisputed that Antonello held the necessary appointment
to act as Jefferson-Pilots agent in soliciting applications. Therefore, Jefferson-Pilot has no basis
to argue that Antonello lacked actual or apparent authority to act as its agent.
Jefferson-Pilot also argues there is a genuine issue of material fact regarding whether
Antonello and Marietta Campbell colluded against Jefferson-Pilot. Jefferson-Pilot asserts that
Mr. Antonello was not simply an agent of Jefferson-Pilot dealing at arms-length with [Marietta
21
Campbell]; he was actively participating on the behalf of the Swansons and the Campbells to
secure the [Jefferson-Pilot] Policy, and other life insurance policies, pursuant to joint venture
investments in such insurance policies. Jefferson-Pilots Mem. in Oppn to Summ. J. at 34. In
particular, Jefferson-Pilot refers to Antonellos 3,000 contribution to MCA to help fund
Marietta Campbells Allianz, Hartford, and Lincoln Benefit policies.
The Court finds there is a genuine issue of material fact as to whether the Campbells
colluded with Antonello in failing to disclose the Allianz and Hartford applications to Jefferson-
Pilot. A jury could draw two opposing inferences from the facts. On the one hand, a jury could
infer that the Campbells acted in good faith and relied on Antonello to notify Jefferson-Pilot in
August 2005 that Marietta Campbells answer to question sixty was no longer accurate. On the
other hand, a jury could infer collusion between the Campbells and Antonello based on the fact
that the concealment of pending life insurance applications allowed the Campbells, the
Swansons, and Antonello to invest in, and potentially profit from, life insurance policies that
would not otherwise have been issued. Because genuine issues of material fact exist, MCIG and
Tom Campbells Motion for Summary Judgment is denied.
22
IV. CONCLUSION
Based upon the foregoing, and all the files, records, and proceedings herein, IT IS
HEREBY ORDERED that:
1. Jefferson-Pilots Objection [Civ. No. 07-1359 Docket No. 80; Civ. No. 07-4534
Docket No. 55] to Chief Magistrate Judge Raymond L. Ericksons April 10, 2008,
Order [Civ. No. 07-1359 Docket No. 75; Civ. No. 07-4534 Docket No. 54] is
OVERRULED;
2. Marietta Campbell Insurance Group, LLC and Tom Campbells Motion for
Summary Judgment [Civ. No. 07-1359 Docket No. 64; Civ. No. 07-4534 Docket
No. 40] is DENIED; and
3. The Clerk is directed to consolidate Civil Nos. 07-1359 and 07-4534 pursuant to
Chief Magistrate Judge Ericksons April 10, 2008, Order. The consolidated
actions shall proceed under Civil No. 07-1359.
BY THE COURT:
s/Ann D. Montgomery
ANN D. MONTGOMERY
U.S. DISTRICT JUDGE
Dated: August 12, 2008.
 

 
 
 

  What day were you injured?

  / /


  What caused your injuries?
Traffic/Bicycle Accident
Work-Related Injury
Wrongful Death
Dog Bite
Slip and Fall
Other:


  How have your injuries affected

  your life?

 


  What kinds of medical care
  professionals have you seen?

 


  What has your treatment cost?

 

  Is Insurance Involved?
My insurance may cover
        this.

Someone else's insurance
        may cover this.

I already filed a claim.
I rejected a settlement
        offer.

I accepted a settlement
        offer.

  Were there any witnesses?
Bystanders Witnessed This.
Police Responded and Filed
        a Police Report

Police Responded but Did
        Not File a Police Report


 

 

          By visiting this page or clicking the
  "submit" button above, you agree
  that you have read and accept this   "disclaimer".
 
Copyright © Michael E. Douglas, Attorney at Law, Saint Paul MN. All Rights Reserved.
Minnesota Law Firm representing Personal Injury, Car / Auto Accident, Workers Compensation, Medical Malpractice, Social Security Disability claims.
Dedicated to Injured Workers, Victims of Negligence, Car Accidents, Victims of Fraud, and those in need of legal assistance.