Ross et al. v. John Hancock Life Insurance Co. et al., 1095-11-15 Cncv (Mello, J., Oct. 7, 2016). [The text of this Vermont trial court opinion is unofficial. It has been reformatted from the original. The accuracy of the text and the accompanying data included in the Vermont trial court opinion database is not guaranteed.]
STATE OF VERMONT
SUPERIOR COURT CIVIL DIVISION Chittenden Unit Docket No. 1095-11-15 Cncv
PETER H. ROSS, ET AL., Plaintiffs,
v.
JOHN HANCOCK LIFE INSURANCE COMPANY (USA), ET AL., Defendants.
RULING ON CROSS-MOTIONS FOR SUMMARY JUDGMENT1
This is an action to recover on a “Flexible Premium Adjustable Life Insurance” policy.
Defendant John Hancock Life Insurance Company (U.S.A.) (“John Hancock”) contends that the
policy was no longer in effect at the time of the insured’s death because it had been terminated
for failure to pay premiums. Plaintiffs contend that the termination of the policy was unlawful
and that the policy was therefore still in effect at the time of the insured’s death. Unless
indicated otherwise, the following facts are undisputed.
On April 5, 2004, The Manufacturers Life Insurance Company (U.S.A.) issued life
insurance policy number 59 336 875 (the “Policy”) to the trustee of the Charlotte H. Ross
Irrevocable Life Insurance Trust II. The policy insured the life of Charlotte H. Ross, the mother
of plaintiffs Charles R. Ross, Jr., Peter Ross, and Jacqueline Ross. On January 1, 2005, John
Hancock became the issuer of the Policy as the result of a merger. The face amount of the policy
is $1 million.
1 The cross-motions relate solely to plaintiffs’ claim against defendant John Hancock. On June 29, 2006, the policy was assigned to the plaintiffs, which had the effect of
making the plaintiffs the owners of the Policy. A “Change of Ownership” form (Exhibit A to the
Complaint) by which ownership of the Policy was transferred to the plaintiffs, was delivered to
and accepted by the defendant. The form listed the “[n]ew assigned owners” and their addresses
as follows:
“Charles R. Ross 394 Tyler Bride Road Hinesburg, VT 05461
“Peter Ross 2130 Shelburne Falls Road Hinesburg, VT 05461
“Jacqueline Ross 1328 State Highway 205 Oneonta, NY 13820”
Change of Ownership, p. 3.
John Hancock was required by Vermont’s Department of Insurance to remind policy
owners annually of their right to designate a third party addressee (Defendant’s Exh. 4). On
December 17, 2010, John Hancock mailed to “Charles R. Ross, 394 Tyler Bridge Road,
Hinesburg VT 05461” a letter notifying him of his right to designate a third party designee in
writing (Id.). None of the plaintiffs ever sent John Hancock a writing designating a third party
addressee.2
The Policy contained a flexible premium provision under which a policy owner could
choose when and how frequently to make premium payments. A policy owner could choose to
make monthly, quarterly, semi-annual or annual payments of the amount needed to cover the
2 John Hancock claims that it sent such letters to the plaintiffs annually, but Exhibit 4 is the only such letter provided to the court, and it is addressed only to plaintiff Charles R. Ross.
2 cost of the amount of insurance desired. In other words, there was no fixed premium schedule
for the Policy.
Premium payments were made on the Policy from time to time during the years 2005
through 2009. The last premium payment in the amount of $45,232.64 was made on March 9,
2009. There is no evidence in the record establishing who made these premium payments,
except that they were not made by the plaintiffs. The payments might have been made by the
insured herself (i.e., Charlotte H. Ross) or by the agent who sold her the Policy (Damon K.
Kinzie of Morgan Stanley Smith Barney, LLC, whose business address was 69 Swift Street, 4th
Floor, South Burlington, VT 05403), who also served as a financial advisor.3
The Policy contained a “Policy Termination” provision which stated that the Policy
would go into default “if, at the beginning of any Policy Month, the Net Cash Surrender Value
would go to or below zero after we take the Monthly Deduction that is due for that month”
(Defendant’s Exhibit 1 at JH259). It provided for a grace period of 61 days from the date that
the Policy went into default for the policy owner to pay the overdue premium (Id.). The Policy
provided that it would terminate at “the end of the grace period for which you have not paid the
amount necessary to bring the policy out of default (Id.).” The Policy also stated:
At least 30 days prior to the termination of coverage, we will send a notice to your last known address, specifying the amount you must pay to bring the policy out of default. If we have notice of a policy assignment on file at our Service Office, we will also mail a copy of the notice of the amount due to the assignee on record.
Id. Under the Policy, “‘you’ and ‘your’ refer to the owner of the policy” and “‘[w]e,’ ‘us’ and
3 Plaintiffs allege in their Complaint that they and their mother relied on Damon K. Kinzie to pay the premiums on the Policy when necessary and to keep her and them properly advised of issues relating to the Policy; they also allege that Kinzie in fact made all the premium payments on the Policy through 2009, presumably from Charlotte H. Ross’ funds, and that his employer, Morgan Stanley Smith Barney, is liable to the plaintiffs for allowing the Policy to lapse in 2011 (Complaint, pp. 2–3). In its Answer to the Complaint, John Hancock denies these allegations for lack of sufficient information. Morgan Stanley denies that they are true (see “Morgan Stanley’s Response to John Hancock’s Memorandum on Summary Judgment”).
3 ‘our’ refer to [the insurer]” (Id., at JH 245).
On February 22, 2011, John Hancock mailed out a “Termination Warning Notice”
addressed to “Charles R. Ross, Peter Ross, Jacqueline Ross, 394 Tyler Bride Road, Hinesburg,
VT 05461” (Defendant’s Exh. 3). The notice said, “Your premium payments to date are
insufficient to maintain your coverage beyond February 21, 2011,” and it added “To keep your
valuable insurance in force, you need to submit … [a] minimum payment of $9,790.20 by Apr
23 2011 to continue your coverage until May 21, 2011” (Id.). The “394 Tyler Bridge Road,
Hinesburg, VT” address to which John Hancock mailed the notice was the address of plaintiff
Charles R. Ross, Jr. John Hancock did not mail a copy of its “Termination Warning Notice” to
plaintiff Peter Ross’ address at 2130 Shelburne Falls Road in Hinesburg, Vermont or to plaintiff
Jacqueline Ross’ address at 1328 State Highway 205 in Oneonta, New York.
Plaintiff Charles R. Ross, Jr. did not inform Peter Ross or Jacqueline Ross about the
“Termination Warning Notice,” and neither Peter Ross nor Jacqueline Ross was aware that the
Policy was at risk of terminating unless a premium payment was made by April 23, 2011.
No premium payment was made on the Policy by the deadline of April 23, 2011. On
May 3, 2011, John Hancock issued a “Lapse Termination Notice” addressed to “Charles R. Ross,
Peter Ross, Jacqueline Ross, 394 Tyler Bridge Road, Hinesburg, VT 05461” (Defendant’s
Exhibit 5). The notice said, “We regret to inform you that, effective Apr 23, 2011 your policy
has terminated due to insufficient payments” (Id.). John Hancock did not mail a copy of its
“Lapse Termination Notice” to plaintiff Peter Ross’ address at 2130 Shelburne Falls Road in
Hinesburg, Vermont or to plaintiff Jacqueline Ross’ address at 1328 State Highway 205 in
Oneonta, New York.4
4 John Hancock alleges that “Plaintiffs’ financial adviser, Damon K. Kinzie, also received the Termination Warning Notice and Lapse Termination Notice” (Defendant’s Statement of Undisputed Facts, ¶ 12). However, this
4 Plaintiff Charles R. Ross, Jr. did not inform Peter Ross or Jacqueline Ross about the
“Lapse Termination Notice,” and neither Peter Ross nor Jacqueline Ross learned that the Policy
had terminated until after their mother died.5
The Policy contained a provision under which a policy owner could have his or her
lapsed policy reinstated by submitting a written reinstatement request to the insurer and paying
“a premium equal to the amount that was required to bring the policy out of default immediately
prior to termination” (Defendant’s Exh. 1, at JH259-60). Under the Policy, a request for
reinstatement had to be submitted within five years after the date the Policy terminated, and it
had to be accompanied “with evidence of insurability satisfactory to us on the life insured” (Id.).
Plaintiffs’ mother, the insured Charlotte H. Ross, died on December 13, 2013. She was
87 years old at the time of her death (Defendant’s Exh. 1 at JH252). At the time of Charlotte H.
Ross’ death, plaintiffs Peter Ross and Jacqueline H. Ross believed that the Policy was still in
effect.6 By the time they learned that the Policy had been terminated for non-payment of
premium, it was too late for Peter Ross or Jacqueline Ross to exercise their right to seek
reinstatement of the Policy because, their mother having died, her life was no longer insurable.
allegation is disputed by the plaintiffs and by co-defendant Morgan Stanley Smith Barney, LLC. The notices themselves (i.e., Exhibit 3 nor Exhibit 5) do not on their face show that courtesy copies were sent to Kinzie or to Kinzie’s business address in Burlington, Vermont.
5 Plaintiff Charles R. Ross neither admits nor denies receiving the “Termination Warning Notice” or the “Lapse Termination Notice.” For purposes of this ruling, the court presumes that he received them both.
6 Peter Ross and Jacqueline Ross allege that, had they known in February of 2011 that the policy was at risk of being terminated for lack of a premium payment, they could and would have paid the premium themselves to keep the policy in force because their mother was at that time 85 years of age and in ill health. John Hancock disputes these allegations.
5 DISCUSSION
It is undisputed that by virtue of a merger John Hancock became the issuer of a Policy of
life insurance insuring the life of Charlotte H. Ross. It is also undisputed that plaintiffs became
the owners of the Policy in 2006 and that Charlotte H. Ross died in 2013. John Hancock
contends that it is not liable to the plaintiffs on the Policy, notwithstanding the death of the
insured, because the Policy had been terminated for failure to pay premiums in 2011, and,
therefore, it was no longer in effect at the time of her death. Plaintiffs do not deny the failure to
pay premiums. They contend, rather, that John Hancock’s termination of the policy was
unlawful and that the policy was therefore still in effect at the time of their mother’s death.
As noted above, the Policy stated:
At least 30 days prior to the termination of coverage, we will send a notice to your last known address, specifying the amount you must pay to bring the policy out of default. If we have notice of a policy assignment on file at our Service Office, we will also mail a copy of the notice of the amount due to the assignee on record.
As indicated earlier, the terms “you” and “your” refer to “the owner of the policy.” Here, there
were three owners of the Policy, plaintiffs Charles R. Ross, Jr., Peter Ross and Jacqueline Ross.
Under the plain meaning of the first sentence of this provision, therefore, John Hancock was
required to “send a notice” to each plaintiff’s “last known address” specifying the amount
plaintiffs had to pay to bring the policy out of default prior to terminating coverage. Moreover,
John Hancock had on file notice that the policy had been assigned to the three plaintiffs, and
John Hancock had on file each plaintiff’s mailing address. Therefore, under the plain meaning
of the second sentence of the foregoing Policy provision, John Hancock was required to “also
mail a copy of the notice of the amount due” to each of the three plaintiffs in their capacities as
the assignees of the Policy. John Hancock did mail its “Termination Warning Notice” and
6 “Lapse Termination Notice” to Charles R. Ross, Jr., but it did not mail either notice to Peter
Ross’ address or to Jacqueline Ross’ address. Therefore, John Hancock failed to comply with
termination provisions of the Policy when it terminated the Policy.
Moreover, at the time John Hancock terminated the Policy, Vermont had in effect a
statute stating:
No individual contract for life insurance covering an individual 64 years of age or older, which has been in force for at least one year, shall be cancelled for nonpayment of premium, unless, after expiration of the grace period and at least 21 days prior to the effective date of any such cancellation, the insurer has mailed a notification of such impending cancellation in coverage to the policyholder….
8 V.S.A. § 3742(c).7 John Hancock alleges that a bulletin issued by the Vermont Division of
Insurance informed life insurers that the notice requirement of this statute applied only to
policyholders residing in Vermont. At the time John Hancock sought to terminate the Policy
there were three policyholders, namely, the three plaintiffs, two of whom lived in Vermont and
one of whom (Jacqueline Ross) did not. Under the plain meaning of this statute, therefore, John
Hancock could not effectively cancel the Policy for nonpayment of premium without having
“mailed a notification of such impending cancellation in coverage” to at least the two plaintiffs
who resided in Vermont, namely Charles R. Ross, Jr. and Peter Ross. John Hancock did mail its
notices to Charles R. Ross Jr., but it did not mail either notice to Peter Ross’ address. Therefore,
John Hancock failed to comply with the statute when it terminated the Policy.
John Hancock argues that the act of mailing its notices to Charles R. Ross, Jr. was
sufficient under the Policy and the statute for a number of reasons. First, John Hancock argues
that the Policy expired by its own terms when the plaintiffs failed to pay the required default
7 This statute was repealed in 2015 as part of a revision of Vermont’s nonforfeiture laws for deferred annuities and life insurance policies.
7 premium. (“Defendant’s Opposition to Plaintiffs’ Motion for Partial Summary Judgment and
Cross-Motion for Summary Judgment (“Cross-Motion”), 9-10). In support of this argument
John Hancock relies upon the Policy provisions which state that the Policy goes into default
when the net cash surrender value reaches or drops below zero, and that the Policy terminates at
“the end of the grace period for which we have not received the amount necessary to bring the
policy out of default.” However, the Policy also required that John Hancock send a notice to the
policyholder’s last known address and to “the assignee on record” “[a]t least 30 days prior to
termination of coverage … specifying the amount you must pay to bring to bring the policy out
of default.” Moreover, the applicable statute provides that “[n]o individual contract for life
insurance … shall be cancelled for nonpayment of premium, unless … the insurer has mailed a
notification of such impending cancellation in coverage to the policyholder.” Reading these
provisions together, it is clear that a default alone does not result in a termination of coverage;
termination for nonpayment of premium occurs only after the policyholders and assignees have
been given the required notice and opportunity to “bring the policy out of default.”
Next, John Hancock argues that the notices it mailed to Charles R. Ross, Jr. were
sufficient to terminate the policy because they were addressed to all three plaintiffs “at the
address John Hancock had used for almost five years, without any objection from Plaintiffs”
(Cross-Motion, p. 11). John Hancock further argues in this connection that plaintiffs must be
estopped from denying the sufficiency of the notice because “[a]ll three Plaintiffs knew or should
have known” that for nearly five years John Hancock had been sending all correspondence about
the policy to Charles R. Ross, Jr.’s address, plaintiffs never asked John Hancock to send mail to
additional addresses, and Charles R. Ross, Jr. had since 2006 “accepted a duty of care to act on
behalf of all owners of the policy in receiving correspondence at his address regarding that
8 policy” (Id., pp. 16-17). Therefore, John Hancock contends that plaintiffs “are estopped from
arguing after the fact that notice to the address of record was insufficient” (Id.).
For several reasons John Hancock’s estoppel argument must be rejected. First, John
Hancock has provided the court with no proof of its assertion that, from the time plaintiffs
became the owners of the Policy in 2006 through 2010, it had been addressing all
correspondence about the policy to the three plaintiffs at Charles R. Ross, Jr.’s address. If such
proof existed, it would be in John Hancock’s possession, but John Hancock has not produced it.
The only piece of correspondence that John Hancock has produced, that predates the default and
termination notices, was the letter that John Hancock sent to Charles R. Ross, Jr. on December
17, 2010, notifying him of his right to designate a third party designee in writing (Defendant’s
Exh. 4). That letter was addressed only to Charles R. Ross, Jr.; the names of Peter Ross and
Jacqueline Ross do not appear anywhere on it.
Secondly, John Hancock has provided the court with no evidence that would support a
finding that prior to February of 2011 Peter Ross or Jacqueline Ross knew or had reason to know
that John Hancock was sending notices to them via their brother Charles. To the contrary, the
“Change of Ownership” form by which the Policy was assigned to the plaintiffs listed separate
addresses for each of the three “[n]ew assigned owners,” and there is no evidence in the record
indicating that Peter Ross or Jacqueline Ross ever agreed, orally or in writing, to have notices
sent to them via their brother. In the absence of evidence that they knew John Hancock had been
sending notices to them via their brother or intended to do so in the future, no jury could find that
they had acquiesced in that decision or given John Hancock reason to believe they had
acquiesced.
9 Lastly, John Hancock has come forward with no evidence that would support a finding
that Peter Ross or Jacqueline Ross intentionally did or said anything that would have given John
Hancock reason to believe that it could mail their default and termination notices to their brother,
and not to them. On this record there is no basis for estopping the plaintiffs from denying the
sufficiency of termination notice. In re Landry, 2015 VT 6, ¶ 17, 198 Vt. 565 (“[T]he four
criteria for the proper application of the equitable estoppel doctrine . . . we summarize as
follows: ‘(a) the party to be estopped must know the facts; (2) the party to be estopped must
intend that its conduct shall be acted upon [by the party asserting estoppel] . . . ; (3) the party
asserting estoppel must be ignorant of the true facts; and (4) the party asserting estoppel must
detrimentally rely on the conduct of the party to be estopped’” (citations omitted)).
Next, John Hancock contends that it had no obligation under Vermont’s statute, 8 V.S.A.
§ 3741(c), to send notice to all three plaintiffs at their individual addresses because the statute
required notice to be sent to “the policyholder,” not “policyholders” (Cross-Motion, pp. 11–13).
Therefore, John Hancock argues that notice to one policy holder was sufficient to satisfy the
statute.8 In addition, John Hancock points out that a bulletin from Vermont’s Insurance Division
informed insurers that the statute’s notice requirement only applied to a policyholder in the State
of Vermont; thus, under the statute John Hancock had no duty to send a notice to Jacqueline
Ross, who resides in New York State (Id.).
The contention that section 3641(c) allowed John Hancock to send its termination notice
to just one of the plaintiffs is without merit. When construing the meaning of a statute, “[w]ords
8 John Hancock does not make the same argument with respect to the termination provision of the Policy, even though that provision also refers to “the owner of the policy” and “the assignee on record.” Such a contention would be without merit, in any event. The Policy expressly contemplated the possibility of multiple owners (see the “Joint Owner” provision of the Policy, Exhibit 1 at JH258), and if the parties had intended that notice could be sent to just one of multiple owners it would have provided for notice to “an owner of the policy” and “an assignee on record,” not “the owner” and “the assignee.”
10 importing the singular number may extend and be applied to more than one person or thing . . . .”
1 V.S.A. § 175; see also E. R. Wiggins Builders Supplies, Inc. v. Smith, 121 Vt. 143, 146 (1959)
(“In statutory construction words used in a singular number may include the plural and the plural
the singular, except where a contrary intention plainly appears.”). The legislature’s clear intent
in enacting 8 V.S.A. § 3671(c) was to protect policyholders from an unintended loss of life
insurance coverage, and the mechanism the legislature chose for protecting that important
interest was by requiring life insurers to mail policyholders written “notification of such
impending cancellation.” This clear legislative intent would be defeated if the statute were
interpreted to allow termination notices to be sent to only one policyholder, in cases where the
policy has multiple owners. John Hancock appears to have tacitly acknowledged this when it
addressed its default and termination notices to all three plaintiffs, despite mailing them to just
one of the plaintiffs’ addresses. Therefore, John Hancock violated the statute when it mailed its
notices to just one address. See Couch on Insurance 3d. (West 2016 Rev. Ed.) § 32:22 (“An
insurer is required to prove that all of the requirements of the applicable statute setting forth the
procedure for valid cancellation of insurance policy have been complied with since any defect in
that process results in ineffective cancellation of policy.”).
Having concluded that the statute required termination notices to be mailed to all
policyholders, the court need not address John Hancock’s contention that the statute did not
apply to plaintiff Jacqueline Ross because she resided outside of Vermont. It is undisputed that
plaintiff Peter Ross was a Vermont resident. Therefore, John Hancock’s failure to mail its
termination notice to him was in and of itself enough to invalidate its termination of the policy,
even if the statute were interpreted not to have also required notice to be mailed to Jacqueline
Ross.
11 John Hancock next argues that the notices it sent to Charles R. Ross, Jr.’s address were
sufficient because “notice to one co-owner, is notice to each of them” (Cross-Motion, pp. 13-14).
In support of this argument John Hancock contends that it acted reasonably in assuming that
Charles R. Ross, Jr. would pass on its notices to his siblings, Paul Ross and Jacqueline Ross,
because, as a co-owner of the Policy with his siblings, Charles R. Ross, Jr. had a fiduciary
obligation to notify them that the Policy was in default and that payment was needed (Id).
These contentions are also without merit. The general rule is that “[n]otice to one of
several persons holding an ownership interest under the policy is insufficient, at least where the
multiple ownership is known to the insurer.” Couch on Insurance 3d. (West 2016 Rev. Ed.)
§ 31:22. Here, John Hancock clearly knew that all three plaintiffs were owners of the Policy,
and John Hancock had each plaintiff’s mailing address on record. Moreover, for the reasons
already noted above, the Policy itself required that the termination notice be sent to all three
plaintiffs and the applicable statute required the notice be sent to at least two of the plaintiffs. If
plaintiff Charles R. Ross, Jr. violated an fiduciary duty, it was a duty he owed to his siblings, not
to John Hancock.
Next, John Hancock contends that it complied with its notice requirements because, in
addition to sending its notices to Charles R. Ross, Jr., “John Hancock also sent a copy of the
Warning Notice to Plaintiffs’ agent, Mr. Kinzie, who, according to Plaintiffs, was responsible for
making the [premium] payment” (Cross-Motion, p. 11). In support of this contention, John
Hancock relies on the “general rule, ‘the knowledge of an agent acting within the scope of his
authority is chargeable to the principal, regardless of whether that knowledge is actually
communicated’” (Id., p. 15). Plaintiffs and Morgan Stanley Smith Barney deny John Hancock’s
claim that notice was sent to Mr. Kinzie.
12 Plaintiffs are entitled to summary judgment in their favor, despite John Hancock’s
disputed claim that notice was sent to Mr. Kinzie. First, the court notes that John Hancock has
provided the court with no proof of its assertion that copies of its default and termination notices
were sent to Mr. Kinzie. If there were any evidence supporting the claim, it would be in John
Hancock’s possession, but no such evidence has been forthcoming. The affidavit of Brian
Latcham, which John Hancock filed in opposition to plaintiff’s motion for summary judgment
and in support of its cross-motion, makes no mention of any notice having been sent to Mr.
Kinzie. Moreover, the notices themselves (Defendant’s Exhibits 3 and 5) do not on their face
show that courtesy copies were sent to Mr. Kinzie or to his business address in Burlington,
Vermont. Therefore, John Hancock’s assertion is unsupported by any testimony or document in
the record before the court.
Secondly, neither the Policy nor the applicable statute states that a termination notice may
be sent to an owner’s agent; to the contrary, they require notice to be sent to the owners of the
Policy. Thirdly, John Hancock has come forward with no admissible evidence that the plaintiffs
authorized Mr. Kinzie to receive termination notices on their behalf or that he ever agreed to bear
that responsibility. Lastly, John Hancock’s theory that Mr. Kinzie was plaintiffs’ agent for
purposes of receiving default and termination notices on their behalf is inconsistent with
Vermont law. See Rocque v. Co-Operative Fire Ins. Assoc., 140 Vt. 321, 326–27 (1981)
(“Absent special facts not present here, it is generally well settled that once a policy has been
procured as requested, the relationship terminates and no further duty is owed the insured by the
insurance agent in respect to such insurance.”).
Finally, John Hancock argues that its notices to Charles R. Ross, Jr. substantially
complied with the statutory notice requirement, and that substantial compliance with a statutory
13 notice requirement is sufficient to cancel a policy for nonpayment of premiums (Cross-Motion,
pp. 15-16). John Hancock has not cited to any decision of the Vermont Supreme Court holding
that substantial compliance, as opposed to strict compliance, with a statutory notice requirement
is sufficient when an insurer seeks to terminate an insurance policy. Further, John Hancock’s
contention appears to be inconsistent with the general rule noted above that “[a]n insurer is
required to prove that all of the requirements of the applicable statute setting forth the procedure
for valid cancellation of insurance policy have been complied with since any defect in that
process results in ineffective cancellation of policy.” Couch on Insurance 3d. § 32:22. John
Hancock has cited to Vermont Supreme Court decisions holding the opposite, namely that
substantial compliance with a policy notice requirement by an insured who is seeking coverage,
is sufficient. See Putney School, Inc. v. Schaaf, 157 Vt. 396, 404–05 (1991) (“The rule in
Vermont is that substantial compliance with notice requirements will suffice.”) (citing Stonewall
Insurance Co. v. Moorby, 130 Vt. 562, 566–67 (1972) (insurance policy provisions are liberally
construed in favor of the insured, and substantial rather than strict compliance will suffice)); see
also Towns v. Northern Security Insurance Co., 2008 VT 98, ¶ 43, 184 Vt. 322 (reaffirming the
rule that substantial compliance with contractual notice requirement by insureds is sufficient and
adding that an insurer must prove that it was prejudiced by delayed notice before it may be
relieved from contractual duties). These decisions, allowing substantial compliance by insureds
with policy notice requirements, do not support a conclusion that substantial compliance by
insurers with statutory notice requirements is sufficient.
John Hancock does cite to a federal court decision holding that, under New York law, a
minor mistake does not necessarily void a termination notice for nonpayment of a life insurance
premium. Stein v. American General Life Insurance Co., 34 F. Supp. 3d 224, 232 (E.D.N.Y.
14 2014). Stein would not support John Hancock’s contention, even if this court recognized a rule
allowing substantial compliance by insurers with Vermont’s statutory notice requirement. In
Stein the insurer’s termination notice was sent and received by the policyholder; the only
deficiency was that the notice misstated by one day the amount of time the policyholder had
within which to cure the default. Id. (“In this case, it is ‘scarcely possible to imagine any injury
resulting from’ Defendant’s alleged mistake in requiring payment ‘prior to July 20, 2009’ rather
than by midnight on that date.”). The noncompliance in this case was much more serious than
the noncompliance in Stein.
The court does not need to determine whether Vermont law allows substantial
compliance, or requires strict compliance, with 8 V.S.A. § 3742(c) by insurers seeking to
terminate life insurance policies for nonpayment of premium. Even if substantial performance
were enough under Vermont law, John Hancock’s termination notice in this case failed to
substantially comply with the statutory notice requirement as a matter of law. To send notice to
one owner, when notice to two or possibly three owners was required, is hardly a “minor
mistake.” It deprived at least one owner, Peter Ross, of any opportunity to save the policy from
termination by taking steps to pay the required premium.
ORDER
For all the foregoing reasons, Plaintiffs’ motion for summary judgment is GRANTED and
Defendant’s cross-motion for summary judgement is DENIED.
SO ORDERED this 7th day of October, 2016.
______________________ Robert A. Mello Superior Court Judge